Court File and Parties
Court of Appeal for Ontario Date: 2021-07-29 Docket: C68444
Judges: Feldman, Harvison Young and Thorburn JJ.A.
Between: Connie McMaster-Pereira, Applicant (Respondent)
And: Michael Pereira, Respondent (Appellant)
Counsel: Gary S. Joseph and Julia McArthur, for the appellant Paul J. Daffern, for the respondent
Heard: April 16, 2021 by video conference
On appeal from the order of Justice Peter A. Douglas of the Superior Court of Justice, dated June 12, 2020, and from the costs order, dated August 21, 2020.
Harvison Young J.A.:
[1] This is an appeal by the appellant father from an order requiring him to pay child support and securing his child support obligations against his interests in certain property and corporations and from a related costs order. The central issues before the trial judge were the determination of the father’s income from 2014 to 2019, and the effect of changes in the residences of the children over that period on the support amounts.
[2] The trial judge found that the father had failed to disclose his true income, and moreover, had taken various steps to conceal his income. The trial judge imputed income, determined the quantum of ongoing child support, awarded retroactive child support and, in light of the father’s efforts to avoid paying support, imposed a charging order against his home and his interests in companies of which he was a shareholder.
[3] For the following reasons I would dismiss the appeal.
A. Facts and Decision Below
[4] The parties were married in 2001, and they are the parents of four children ranging in age from 9 to 20. They separated in 2011 and divorced in 2013. The father operated a trucking and related businesses.
[5] In May 2013, the parties executed minutes of settlement which became the final order of Graham J. in July 2013 (the “Graham Order”). The Graham Order dealt with issues of support, custody and access. Salient provisions, for the purposes of this appeal, included the father’s obligation to pay support in the amount of $3,000 per month based on the father’s imputed income of $109,000 per annum and the mother’s imputed income of $6,000 per annum, with a provision that the mother could not seek an increase in child support unless she could show a “positive material change” in the father’s income, or he failed to pay the $3000 per month. The minutes of settlement provided that $637 per month was spousal support, but that the entire monthly amount of $3,000 would be characterized as child support. The Graham Order also provided that the parties were to provide updated income disclosure to each other annually.
[6] In July 2017, the mother commenced a motion to change seeking a retroactive increase of the amount of child support paid by the father from April 2014 onward. The father responded with his own motion to change, dated September 2017, which requested not only a dismissal of the mother’s motion, but also a change to the parenting arrangements. The parties engaged in alternative dispute resolution and as a result, the issues for trial were identified as (1) the income of the father; (2) the amount of child support; and (3) the parenting arrangements for their youngest child.
[7] The central issue in this appeal is the trial judge’s determination of the father’s income between 2014 and 2017. The appellant also challenges the charging order and the costs order.
[8] The trial judge found that the father’s income for the years between 2014 and 2019 was $454,037, $322,940, $478,562, $442,337, $345,848, and $457,631 respectively. For the purposes of calculating child support, the trial judge used a three-year average to soften the dramatic fluctuations in the father’s income. At the outset, the trial judge noted that the mother was credible and reliable, but that he had concerns with the father’s evidence, and accordingly ascribed more weight to the mother’s evidence unless there was reliable evidence to support the father’s position. The father had not only failed to disclose his true income to the mother, but he had gone to considerable lengths to conceal the true amount of the income that he had that was actually available for the support purposes.
[9] The trial judge determined the father’s income by considering: documentary evidence; the evidence of an expert retained by the father to prepare an analysis of his 2016 and 2017 income; the evidence of an expert retained by the mother qualified in bookkeeping, tax preparation, and identifying expenses; and evidence regarding his employment benefits (use of vehicle and credit card), cash income, income-splitting with his girlfriend, and lifestyle and assets. The mother’s income for the years between 2014 and 2019 was $33,086, $33,359, $22,353, $30,409, $37,988, and $52,098 respectively. This was based on her income tax returns and other employment documentation.
[10] The trial judge determined that there had been obvious changes in circumstances, both in respect of care and control of the children and in respect of the parties’ respective incomes. As a result, there were changes in circumstances within the meaning of s. 17(4) of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) and s. 14 of the Federal Child Support Guidelines, S.O.R./97-175 (“CSG”) that justified considering changes to the Graham Order.
[11] With respect to prospective child support, the trial judge ordered that the father pay set-off support in the amount of $6,671 per month from July 2020 onward based on an income of $415,272, which was a three-year average of the father’s 2017-2019 income. This amount included child support for the eldest child, who despite being over 18 years of age, qualified as a child of the marriage.
[12] The trial judge also allowed the mother’s claim for retroactive child support. The father was required to pay retroactive child support for the period from August 2016 to June 2020 in the amount of $222,484 at the rate of at least $3,708 per month.
[13] The trial judge ordered that the father’s child support obligations be secured against the father’s house, as well as against any interest in corporations of which he was a shareholder. He based this on his conclusion that the father had demonstrated that he “cannot be trusted” to fulfill his obligations to the children, as he has failed to pay child support commensurate with his actual income and has concealed sources of income. Finally, the trial judge ordered a parenting arrangement of equally shared parenting time on a week-about schedule for the youngest child.
[14] In a separate costs endorsement, the trial judge ordered the father to pay $204,913.81 in costs to the mother.
B. Discussion
[15] The appellant father raises a number of issues on this appeal:
- Did the trial judge err in his imputation of the appellant’s income for the purposes of his ongoing child support obligations?
- Did the trial judge err in finding that support arrears were payable, or did he err in the determination of the quantum?
- Did the trial judge act without jurisdiction in making the charging order?
- If the appellant is unsuccessful on the appeal, should he be granted leave to appeal the costs order on the basis that the amount was not proportionate to the issues determined by the court?
(1) Imputation of income for ongoing child support
[16] While the appellant father acknowledges that many of the trial judge’s conclusions are based on findings of fact and credibility which are entitled to a high level of deference from this court, he argues that the trial judge erred in law in imputing income to him for the purposes of determining his ongoing or “go-forward” child support obligations by declining to rely on his most current income information. The appellant submits that he had given up his income from other sources and that his $180,000 salary amount was the amount that should have determined his ongoing income for child support purposes. The reason that this amount should have been used, according to the appellant, is because s. 16 of the CSG should be read in conjunction with s. 2(3) of the CSG which provides that where, for the purposes of the CSG, any amount is determined on the basis of specified information, the most current information must be used.
[17] I do not accept this argument. The trial judge did not accept the father’s evidence that a salary of $180,000 per year from his new employment with Premier Concrete Pumping beginning in September 2019 accurately represented his current income and that he had no other sources of income. His decision to reject this evidence must be viewed in the context of the findings of fact that he made with respect to the father’s income, which included that the father had refused to provide full disclosure or interfered with others providing disclosure of his financial information, for example in relation to his cash income, his work benefits, income-splitting with his girlfriend, and his ownership of assets. While the father claimed that he left his previous job and now earned an income of $180,000, the trial judge determined that he had not offered a sufficient explanation for doing so. As he stated at para. 210 of his reasons:
In his evidence [the father] said he changed jobs to PCP because he “wanted a T4 job”. He says his income is now $180,000 per year. He has not satisfactorily explained why he would leave an employment/self-employment arrangement that was generating a very generous income, in favour of one generating much reduced income.
[18] Moreover, the trial judge did not believe the father’s evidence that he no longer had any cash income after September 2019 and concluded that he likely still had cash income that remained undisclosed and undeclared, given the father’s readiness to withhold full disclosure and actively deceive the mother and the court.
[19] In short, the trial judge only resorted to imputing income to the father after rejecting the father’s evidence that a salary of $180,000 per year was a true representation of the father’s go-forward income. That was a finding that was well grounded in the record and for that reason, the trial judge was entitled to consider the father’s previous three-year average of his income as the basis for the go-forward child support calculations. I see no reversible error that could justify interfering with the trial judge’s conclusions on this point.
[20] Alternatively, the appellant father argues that even if the trial judge appropriately imputed income, he misapprehended the evidence in calculating the appellant’s go-forward income by inadvertently grossing up certain amounts. Misapprehensions of evidence do not typically involve questions of law: R. v. Morrissey (1995), 97 C.C.C. (3d) 193 (Ont. C.A.), at p. 218. Where a misapprehension of evidence is palpable, in that it is obvious, plain to see, or clear, and overriding, in that the misapprehension goes to the root of the challenged finding of fact or very core of the outcome of the case, appellate intervention is justified: Waxman v. Waxman, at paras. 296-97, leave to appeal refused, [2004] S.C.C.A. No. 291; Carmichael v. GlaxoSmithKline Inc., 2020 ONCA 447, 151 O.R. (3d) 609, at para. 125, leave to appeal refused, [2020] S.C.C.A. No. 409.
[21] In the DivorceMate calculations for 2019 attached to the trial judge’s reasons, an auto gross up was applied to the expert’s calculation of the father’s spending for that year, his personal use of two work trucks, his personal use of a work credit card, and his cash income, all classified as “other non-taxable income”. An auto gross up was not applied to his girlfriend’s income, classified as “diverted income”. The trial judge did not err in determining which figures should be grossed up, and the application of auto gross up was consistent with the trial judge’s determinations. There were no palpable and overriding errors in the trial judge’s calculations and gross up of these figures warranting appellate intervention.
(2) Retroactive child support
[22] After this appeal was heard, the Supreme Court of Canada released Colucci v. Colucci, 2021 SCC 24. Although Colucci directly addressed a payor’s request that his arrears be rescinded and that child support be retroactively decreased, the decision also set out a revised approach for cases where a recipient applies to retroactively increase child support. The parties were invited to and did make submissions on the relevance of Colucci to this appeal, and I have considered them.
[23] In summary, the revised approach in Colucci requires first that the recipient establish a past material change in circumstances. Once that has been established, a presumption arises in favour of retroactively increasing child support to the date the recipient gave the payor effective notice of the request for an increase, up to three years before formal notice of the application to vary. Effective notice requires only that the recipient broached the subject of a potential increase with the payor. If there was no effective notice, child support should generally be increased back to the date of formal notice. Due to the presumption that is triggered by establishing a past material change in circumstances, the factors in D.B.S. v. S.R.G., 2006 SCC 37, [2006] 2 S.C.R. 231 are no longer necessary in determining whether child support should be retroactively increased. However, they are still relevant in guiding the court’s exercise of discretion to depart from the presumptive date of retroactivity where the result would be otherwise unfair. Finally, once the court has determined that support should be retroactively increased to a particular date, the increase must be quantified in accordance with the CSG: Colucci, at paras. 6, 71-73 and 114.
[24] One of the principles underpinning this approach to the variation of child support is adequate, accurate, and timely financial disclosure: Colucci, at paras. 32, 48-54. The child support regime is a system that creates informational asymmetry and is tied to the payor’s income, and it would be unfair and contrary to the child’s best interests to require the recipient to police the payor’s ongoing compliance with their obligations: at para. 49. As the court emphasized, at para. 50:
This is why frank disclosure of income information by the payor lies at the foundation of the child support regime. In Roberts v. Roberts, 2015 ONCA 450, 65 R.F.L. (7th) 6, the Court of Appeal described the duty to disclose financial information as “[t]he most basic obligation in family law”. A payor’s failure to make timely, proactive and full disclosure undermines the policies underlying the family law regime and “the processes that have been carefully designed to achieve those policy goals”. Without proper disclosure, the system simply cannot function and the objective of establishing a fair standard of support for children that ensures they benefit from the means of both parents will be out of reach. [Citations omitted.]
[25] The appellant father submits that the trial judge erred in law in finding that he owed retroactive child support to the mother. He argues that there was no material change in circumstances. Alternatively, even if retroactive support was appropriate, he submits that the trial judge erred in his determination of the father’s past income and thereby erred in calculating the quantum of retroactive support owed. He claims that the trial judge made reviewable errors and misapprehended the evidence on his income. He also asks this court to reduce his monthly retroactive support payments to $1,000 per month, due to his high debt load.
[26] I do not agree that the trial judge made any error in granting a retroactive increase in child support or in determining the quantum. While the trial judge did not have the benefit of the reasons in Colucci, his conclusion was consistent with the revised approach to applications for retroactive increases in child support.
[27] First, after an extensive analysis, the trial judge determined the father’s income for the period between 2014 and 2019, and he found that there had been changes in circumstances that justified considering changes to the Graham Order. He also noted that the Graham Order was predicated on the father’s income of $109,000, but that even the father himself submitted that his income was significantly higher for every year that followed. I would not disturb these findings.
[28] There was no misapprehension of evidence or other reviewable error regarding the father’s past income. It is important to note that the trial judge arrived at the amounts of the father’s income for the years from 2014 to 2019 through an exhaustive and meticulous analysis of the evidence before him. In the course of this analysis, he made numerous findings that the father used an array of tactics to avoid disclosing his real income, including income-splitting with his girlfriend, not taking formal ownership of a vehicle to conceal the asset from the court’s scrutiny, withholding information about cash income, and failing to disclose personal benefits that were obtained through the use of a vehicle and credit card associated with his employment.
[29] The father’s failure to disclose the benefits received from his employment caused the father’s own expert, who was retained to prepare an analysis of the father’s 2016 and 2017 income, to withdraw his opinion. The trial judge made credibility findings against the father, observing that in his testimony, the father was non-responsive, evasive, contradictory, confused regarding his accounts, and ill-informed of his personal finances. The trial judge concluded that he would treat the father’s evidence with considerable caution and give it reduced weight in light of his concerns. It was open to the trial judge to weigh and accept or reject the evidence of the father and other witnesses, and to draw adverse inferences against the father given his incomplete disclosure, to determine the father’s income. The trial judge also noted that he was not confident that he had the full picture as to the father’s asset holdings, stating that “[w]ith his demonstrated readiness to withhold evidence regarding his finances, it is more likely than not that there are assets yet to be revealed.” The trial judge’s findings of fact were carefully grounded in the record before him, and the assumptions he made and inferences he drew were reasonable.
[30] Second, as a material change in circumstances is established, the presumption to retroactively increase child support to the date the recipient gave the payor effective notice is triggered. The mother first made her request for financial disclosure in July 2016, which was within three years of the mother giving formal notice of an application to vary in July 2017. The trial judge concluded that the appropriate date of retroactivity was August 1, 2016, the first day of the first month following notice to the father. The appellant does not appeal the finding on the appropriate date of retroactivity and agrees that this conclusion is supported in light of Colucci.
[31] Third, the trial judge proceeded to the issue of quantum and found that the father owed $222,484, based on his detailed and specific calculations of the father’s past income. The trial judge then turned to consider the impact of the burden of this sum upon the father, concluding that if stretched over a period of 5 years at an additional $3,708 per month, the father could manage this with his significant income. As noted above, the trial judge did not make any reviewable errors in his determination of the father’s past income, and I see no errors in his calculation of the quantum of retroactive support payable.
[32] As the appellant points out, Colucci does support the use of creative payment options in the context of a request for rescission of arrears and proven payor hardship. The point, however, is that payment over time is preferable to rescission, not that there is any automatic entitlement to any particular terms of payment. I see no basis to justify interfering with the trial judge’s discretion in setting the terms of payment at $3,708 per month, especially in light of his findings that the father’s claims of hardship lacked the support of credible and reliable evidence on his financial circumstances and that the father’s income was consistent with a payor of substantial means who could afford the payment terms as ordered.
[33] In addition, relevant to both the first and second grounds of appeal on determining the father’s current and past income, the trial judge had invited the parties to address any errors in his calculations in their costs submissions. The appellant had the opportunity at that time to address any alleged errors relating to the determination of his income, such as whether certain amounts should have been grossed up, and the resulting quantum of retroactive child support. The appellant did not do so. In sum, I see no errors in the trial judge’s determination that retroactive child support was payable or in the quantum ordered.
(3) Charging order
[34] The appellant submits that the trial judge had no jurisdiction to make a charging order to secure the appellant’s child support obligations, in part, because the mother did not plead that security for support should be made by way of charging order. The appellant further argues that the criteria to be considered by the court in exercising discretion to grant a charging order are limited to those cited in Reid v. Catalano, at para. 138, and that a charging order is not justified in these circumstances. The factors listed in Reid are as follows:
i) where a party has a history of dissipation of assets, that is, unable to handle money; ii) where the party is likely to leave the jurisdiction and become, in effect, an absconding debtor; iii) where the party has, in the past, refused to honour a support obligation, whether it came by court order or contract or has refused to provide support at all; iv) where the party has a poor employment history, or has indicated that he or she, will leave their employment.
[35] There is no merit to this argument. In accordance with s. 15.1(4) of the Divorce Act, the court “may impose terms, conditions or restrictions in connection with the [child support] order or interim [child support] order as it thinks fit and just.” Section 12 of the CSG adds that the court may require that the amount payable under the child support order be paid or secured, or paid and secured, in the manner specified in the order.
[36] In imposing a charging order, the trial judge noted that s. 12 of the CSG “permits me to require that the amount payable ‘be paid and secured in the manner specified in the order’.” He accurately observed that considerable latitude is afforded to judges in crafting appropriate security, and he stated that it was clear that the father had significant undeclared cash income and other undisclosed sources of income and benefits. The trial judge concluded that he had concerns regarding whether the father could be trusted to fulfill his child support obligations, given the father’s previous conduct, at paras. 309-10:
There are reasons to be concerned about the [father]’s intentions regarding satisfaction of the child support obligations I am imposing upon him. He has demonstrated he cannot be trusted to ensure his children receive the child support to which they are entitled. He did this by failing to pay support at a level commensurate with his actual income. He actively concealed sources of income by failing to disclose personal expenses paid by his income sources. He concealed his beneficial ownership of the Mercedes Benz vehicle. He encouraged Ms. Sciacca to withhold relevant disclosure from his own lawyer.
In short, the [father] cannot be trusted to fulfil his obligations to the children.
[37] I see no error in the trial judge’s determination that the circumstances of this case, including the father’s conduct, justified the imposition of a charging order. There is a broad discretion pursuant to s. 15.1(4) of the Divorce Act accorded to trial judges to impose charging orders in appropriate cases, and s. 12 of the CSG expressly provides a court with this authority: see Katz v. Katz, 2014 ONCA 606, 377 D.L.R. (4th) 264, at para. 71. Moreover, the factors that may be considered are not limited to those set out in Reid.
[38] The appellant father also initially argued that the charging order was overbroad because it included corporations in which he did not have an interest. However, in oral submissions before this court, counsel indicated that this argument would not be pursued because it was clear that the charging order only covered corporations in which the appellant was a shareholder, which could be easily recognized.
(4) Costs order
[39] In the event that the appeal is not successful, the appellant father also seeks leave to appeal the trial judge’s costs order. He alleges that the trial judge erred in failing to apply the principles of proportionality and reasonableness.
[40] To succeed on an application for leave to appeal a costs award, strong grounds on which this court could find that the trial judge erred in exercising their discretion must be shown: Hobbs v. Hobbs, 2008 ONCA 598, 54 R.F.L. (6th) 1, at para. 32. A court should only set aside a costs award on appeal if the trial judge has made an error in principle or if the costs award is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.
[41] I see no error in the trial judge’s exercise of discretion in his disposition of costs. In ordering the father to pay around $205,000 in costs, enforceable as support, the trial judge noted that the mother was undoubtedly the successful party and presumably entitled to costs. He examined her bill of costs, concluded that some portion of the mother’s claim for costs was duplicative and excessive, and reduced the amount significantly. While her bill of costs appeared to be excessive, the trial judge observed that the father’s conduct in relation to disclosure contributed significantly to the time expended by the mother’s counsel.
[42] The trial judge determined that the appropriate approach was to allow partial indemnity costs in a greater amount than otherwise proportionate on a motion to change. The mother incurred additional expense in having to pursue the truth about the father’s income, the trial was 11 days long and focused almost entirely on his income, and the unusually high amount of costs was justified in light of the circumstances and the father’s unreasonable conduct. He also again referred to his findings about the father’s income suggesting “a much greater ability to afford this burden than that which he urges upon me in his submissions.” The trial judge stated that:
Relieving him of even some of this burden would be incompatible with the objectives of costs as set out in Serra v. Serra, 2009 ONCA 395, [2009] O.J. No.1905 (Ont. C.A.), a failure to recognize the impact of [the father]’s unreasonable conduct upon [the mother] and an opportunity missed to discourage litigants from engaging in conduct that drives litigation inexorably forward without apparent regard to the consequences.
[43] The costs award was proportionate and reasonable in light of the issues at trial, the length of the trial, and the conduct of the father. The trial judge’s findings of fact thoroughly document the father’s conduct in not only failing to proactively disclose his income over the years, but in actively attempting to mask or hide it. This greatly contributed to the time expended by counsel. As the appellant father has failed to demonstrate strong grounds, I would deny leave to appeal the costs award.
C. Disposition
[44] I would dismiss the appeal and deny leave to appeal costs. As agreed by the parties, costs of the appeal in the amount of $15,000, inclusive of disbursements and HST, will be payable to the successful party, the respondent mother.
Released: July 29, 2021 “K.F.” “A. Harvison Young J.A.” “I agree K. Feldman J.A.” “I agree J.A. Thorburn J.A.”
