Court File and Parties

Court File No.: Brampton 341-13 Date: 2013-12-18 Ontario Court of Justice

Between: Cherry-Ann Collins-Mark, Applicant

— And —

Fitzpatrick Mark, Respondent

Before: Justice S.R. Clark

Motion to Change re: Child Support

Heard on: December 9, 2013 Ruling released on: December 18, 2013

Counsel:

• Mr. G. Schnall, Duty Counsel for the applicant Cherry-Ann Collins-Mark
• Mr. D. Brizan for the respondent Fitzpatrick Mark

CLARK, J.:

1:0 INTRODUCTION

[1] The respondent father, Fitzpatrick Mark (the father) brings a motion to change (dated December 5, 2012) the final order of Justice Zuker, dated September 22, 2010 regarding child support.

[2] The subject order provides that he is to pay child support to the applicant mother, Cherry-Ann Collins-Mark (the mother) on behalf of the child, Shanyah Mark, a girl, born December 18, 1998, presently age 15, in the amount of $415.00 per month on imputed annual income of $45,000.00, commencing September 1, 2010.

[3] His position, in essence, is that he was never served with the original application, and was not aware of the date when the final order was made.

[4] In any event, he contends that he has never earned annual income in the amount imputed to him. He is self-employed in the construction/renovation business. His financial disclosure and income tax returns show his gross income for the relevant years as $20,154.00 in 2010; $24,200.50 in 2011; and $25,268.00 in 2012.

[5] Accordingly, he is seeking a retroactive reduction of child support to the date of the final order. Furthermore, on an ongoing basis, quantum of child support should also be adjusted.

[6] The position of the mother, on the other hand, is that he was, indeed served, and merely chose to ignore responding to the Court process. In any event, he has been "hiding" his income and conducting his business affairs by putting his contracts and banking transactions in the name of his current partner. Furthermore, his financial disclosure is incomplete, and does not accurately reflect his true income. He has not provided sufficient detail to enable her, or the Court, to evaluate the legitimacy and reasonableness of his business expenses. Accordingly, the motion to change should be dismissed.

[7] The parties have also raised in their respective materials, a position regarding custody and access. The father is seeking joint custody of Shanyah. The present order provides that the mother has sole custody.

[8] The other issue is access. The father always had it, but did not take advantage of it. In any event, the parties agreed, and a temporary order was made on November 22, 2013 that the father shall have access to Shanyah on alternate weekends from Saturday at 12 p.m. until Sunday at 6 p.m. The parties would now like this to be a final order.

2:0 THE ISSUES

[9] The main issues in this motion are as follows:

1. Should the order be changed to joint custody?
2. Should there be a change in the access schedule?
3. Regarding child support:
   • (a) has the father satisfied the onus that he was not served or had no knowledge of the original order?
   • (b) should the Court draw an adverse inference against the father for filing incomplete financial disclosure?
   • (c) has the father been intentionally under-employed?
   • (d) should the Court reduce or otherwise vary the child support quantum retroactively?
   • (e) should the Court vary the quantum of ongoing child support?

3:0 HISTORY OF THE COURT PROCEEDINGS IN THIS JURISDICTION

[10] This matter was traversed from the Ontario Court of Justice, Toronto North, by order of Justice Sherr dated January 2nd, 2013.

[11] This order also required the father to serve and file a sworn financial statement within 30 days, which, incidentally, was not complied with.

[12] This Court first became involved in the matter on May 28, 2013. At this time, the father advised that he had no credit cards, and did not keep a bank account. Furthermore, he had not filed income tax returns since 2006.

[13] This Court, therefore, made an order on May 28, 2013, that he serve and file not only a financial statement, but income tax returns and notices of assessment for the years 2010, 2011, and 2012 as well as a current income statement, on or before July 15, 2013.

[14] When the matter returned on August 29, 2013, the father was now represented by counsel. He had at least now filed a financial statement, and income statement from employment, as well as a 2012 tax return summary. The Court made a temporary order at this time, requiring him to file notices of assessment and reassessment for the same tax years.

[15] On November 22, 2013, the Court conducted a settlement conference on the motion to change. The father advised that he did not have bank statements for the years 2010 through 2012, and only opened one on September 21, 2013. The Court pointed out that his financial disclosure was still deficient. He undertook to file full income tax returns for the relevant years. This has now been done.

[16] On December 9, 2013, the Court heard further oral submissions from the parties and reserved the ruling.

4:0 THE POSITIONS OF THE PARTIES

4:1 The Father

[17] Mr. Brizan, counsel for the father, asks the Court to consider the following points:

1. He acknowledges that he has the onus to demonstrate, on a balance of probabilities, that there has been a material change in circumstances.

2. The father has provided all the necessary financial disclosure ordered by the Court.

3. Plainly and simply, he does not earn $45,000.00 per year, and never did.

4. In response to the Court's concern that the father's net reported income over the last 3 years is barely more than minimum wage, counsel submits that many individuals who are self-employed as renovators perform work that is seasonal in nature. It should also be noted that the father does not collect any form of social assistance when not working.

5. The Court should not draw the inference that the father is intentionally under-employed.

6. In response to the Court's query about whether an adverse interest ought to be drawn for failure to provide full and detailed financial disclosure, the Court should not. The father has filed a financial statement showing that approximately 50% of his monthly income goes to basic needs expenses. As an example, although his monthly rent is only $400.00, this is his portion of a shared expense with his current partner.

7. The father orally stated to the Court that his business has never been in the name of his current partner.

8. The father also explained that some of the invoices he provided as part of his financial disclosure show purchases, by both credit card and cash from various supply companies such as Home Depot and Walker's Plumbing. He would often make arrangements with his clients to have them buy the materials using their credit cards. He explained that he kept copies of these invoices, knowing he was required to keep them for purposes of preparing his annual income statement.

9. The father may not be the most sophisticated businessman, and may have had difficulties in not using standard or conventional business methods, however, his income is still reflective of his true financial position. Counsel submits, therefore, that there is sufficient documentary evidence to demonstrate that there is a material change in circumstances.

10. The father should not be penalized for the inefficient way he has run his business to date. He clearly acknowledges and recognizes that he has the legal obligation to support his child. Incidentally, he is also supporting a 5 year old child with his current partner.

11. Although there may be some gaps in the financial disclosure, and some inconclusive information, the father should still be entitled to fair consideration by the Court.

12. The Court should, therefore, rescind, or otherwise vary the quantum of child support retroactive to the date of the original order in accordance with the income tax returns and other financial documentation filed. Additionally, the Court should determine ongoing child support on the same basis. The father anticipates that his gross income for 2013 will be $22,000.00.

4:2 The Mother

[18] Duty counsel, Mr. Schnall, on behalf of the mother, asks the Court to consider the following points:

1. He queries how it is the defendant has copies of receipts for supplies that he seems to so meticulously keep as part of his records, and yet he did not look after other matters such as annual filings of income tax returns, and didn't even have a bank account, much less his own credit card.

2. His financial disclosure is not only inconclusive, but imprecise. He has not filed, for example, copies of any contracts for specific or individual jobs he has performed.

3. He has merely filed a series of receipts for building and renovation expenses, without itemizing or cataloguing which job or jobs they relate to. This is not the responsibility of the mother to sort this out, but his.

4. When considering the merits of the father's motion to change, therefore, the Court must be satisfied that he has discharged the onus in two ways. First, that there has been a material change in circumstances. Second, even if he has met this onus, he has not demonstrated that the Court should adjust, reduce, vary or rescind any of the arrears.

5. The mother should not have to speculate, or fill in the blanks, so to speak, as to what the defendant's financial disclosure and figures all mean.

6. The Court must be left with considerable lack of clarity as to what may be legitimate expenses. Quite frankly, the father is the only one who can provide the necessary and accurate information, and he has not done so.

7. Having regard to the nature of his business as a self-employed construction/renovator, anecdotally, at least, this type of work continues to attract attention, in that it is easy to avoid showing full and complete income, as well as what are legitimate expenses.

8. The Court should consider, in the particular circumstances of this case, that the father has been conducting his business in a manner which continues to draw such suspicion, having regard to the fact that he has no credit cards; has conducted much of his business on a cash basis; and he has not provided a full list of expenses or invoices.

9. In the result, he has not prepared or filed an appropriate, accurate, or complete paper trail. The Court, therefore, is not in a position to make a proper determination as to whether he is spending more than he is earning. None of the invoices are itemized to particular jobs.

10. The father, alone, has made the task for the Court more difficult than normal or usual.

11. Although it is certainly open to the father to conduct his business affairs in this manner, he must also realize that he does so at his peril.

12. In the final analysis, the Court must be left with too many gaps to be in a position to conclude that the father has met the necessary onus.

13. The Court should also take into consideration the fact that he resides with another partner and that his expenses are shared, suggesting he would have more disposable income to pay both the arrears and ongoing child support.

14. It should also be noted that the subject child is now almost 15 years old and that these are years in which more money to support her will be required.

15. Finally, the Court should consider that the father's reported income seems to have decreased over the last 3 years. One queries why he continues to run a business which has not been profitable?

5:0 ANALYSIS

5:1 Issue 1 - Should the order be changed to grant sole custody of the child to the father?

[19] The position of changing joint custody was not put forward in any meaningful or forceful way by him. It is completely unrealistic that custody be changed. The father has come nowhere close to demonstrating a material change in circumstances. Therefore, sole custody will remain with the mother.

5:2 Issue 2 - Should there be a change in the access schedule?

[20] As indicated, the parties wish the temporary order made on November 22, 2013 to now be made final. The Court agrees.

5:3 Issue 3 – Child Support

5:3(a) Has the father satisfied the onus that he was not served or had no knowledge of the original order?

[21] He has not met the onus to demonstrate that this was so. There was only his say so, which, quite frankly, is an all-too-familiar refrain, often advanced on such motions. The Court does not believe him. Justice Zuker's order would not have been made unless service on the father had been established.

5:3(b) Should the Court draw an adverse inference against the father for filing incomplete financial disclosure?

[22] Quite obviously, the father's income is the foundation on which Federal Child Support Guidelines (the Guidelines) sets out the monthly amount of basic child support.

[23] Accordingly, the Court must be satisfied that the financial information is accurate and current.

[24] Part of this analysis requires the Court to properly determine, on a principled basis, the father's earning capacity in light of whether he is under-employed, unreasonably deducting expenses from income, or is hiding income from proper scrutiny.

[25] Additionally, the Court is also called upon to determine whether he is seeking to avoid payment of child support by diverting income, or not making full financial disclosure.

[26] Sections 16 to 20 of the Guidelines define how income is to be determined. One of the factors is whether any expenses, deductions or other payments necessary to earn the self-employment income were reasonable in the circumstances.

[27] The calculation of income under these sections can be exceedingly complex. The problems are compounded by the fact that accounting procedures which may be applicable under the Income Tax Act, are not necessarily the same as those considered under the Guidelines.

[28] Judicial determination of the income of a wage-earner is relatively straightforward, because there is usually only one source of income. Income tax returns are likely to provide the best evidence.

[29] However, where an individual is self-employed, the net income reported on the income tax returns is not necessarily a true reflection of this.

[30] Additional income, therefore, may be imputed pursuant to s.19 of the Guidelines.

[31] Additionally, sub-rule 13(6) of the Family Law Rules (the Rules) provides that a party who serves and files a financial statement shall make full and frank disclosure of their financial situation; and attach any documents to prove the income that the financial statement requires. Sub-rule (17) relates to failure to obey orders to file statements or give information.

[32] In the circumstances of this case, the Court finds that the father has not so much wilfully failed to comply with Court orders for disclosure, but rather has provided inadequate information on his own motion to change.

[33] Furthermore, the lack of precision and detail in his statement of income and inadequate explanation regarding expenses has prevented the mother, and the Court, from fairly assessing and responding to his request for relief.

[34] The mother should not be burdened with the uncertainty associated with the father's financial information. He has not fully met his disclosure obligations. Furthermore, the Court finds that he has been less than diligent in producing the necessary documentation, despite the able representation, and no doubt, encouragement from his counsel.

[35] In the result, the Court finds that the father's failure to make full and frank disclosure of his financial situation, despite being asked over a number of months, engages the drawing of a negative inference.

[36] The specific lingering concerns include the following:

• What product or service does the father actually provide?
• Where does the business operate from? Why did he not have a bank account relating to his business transactions until September 2013?
• Why does he not have a credit card?
• How do customers usually pay for the product or service (i.e. cash versus cheque or credit card which can be tracked)?
• Do the types of expenses incurred by the business make sense?
• Does the business pay for its expenses with cash? This may suggest the existence of cash revenues.
• Is an accountant or bookkeeper involved to cross-check the records prepared by the father?

5:3(c) Has the father been intentionally under-employed?

[37] The Court is regularly called upon to impute income to support payors, generally on the basis that they are either unemployed or under-employed. There are a number of principles which must be considered. First, payors must not arrange their financial affairs so as to prefer their own interests over those of their children. A payor will engage in blameworthy conduct if he consciously chooses to ignore his responsibilities.

[38] Imputing income does not incorporate a requirement for proof of bad faith. However, "intentionally" in this context clarifies that the provision does not apply to situations beyond one's control.

[39] Where one is under-employed, the Court may still exercise its discretion not to impute income where the payor establishes the reasonableness of his decision.

[40] However, a payor will not be excused from his child support obligation in furtherance of unrealistic or unproductive career aspirations, interests, or fledgling self-employment businesses.

[41] As a practical matter, it is not always easy to determine when a payor is a victim of unfortunate financial circumstances, or the author of them.

[42] For many self-employed individuals, Guideline analysis is difficult, in part, because the filing of financial disclosure is done through a self-audited system. In other words, individuals are largely unsophisticated and may or may not have an accountant or bookkeeper preparing their returns. Accordingly, they will often make their own "executive" decisions as to what expenses relate to their business and their corresponding ability to earn income.

[43] Judicial discretion, in an effort to determine income, is perhaps more of an art than a science. Of course, the Court should respect the right of self-employed individuals to run their business as they see fit, but may nevertheless question whether particular expenses could otherwise have been used for child support.

[44] Section 19 of the Guidelines sets out 9 specific examples of circumstances when a Court might consider imputing income. The list is not exhaustive, however.

[45] The initial onus is on the support recipient (the mother) to prove that the father is intentionally under-employed, voluntarily. However, once that onus has been met, it shifts to him to establish a valid reason.

[46] It should be noted that section 19 of the Guidelines is not an invitation to the Court to arbitrarily select an amount as imputed income. Rather, the Court's discretion must be based on evidence. The Court should consider the payor's age, education, experience, skills and health, as well as the availability of job opportunities, the number of hours that could be worked in light of other obligations, and what hourly rate could be reasonably expected.

[47] The Court must also be careful not to impute income merely to punish a payor. Rather, the Court should impute only the amount of income the father could reasonably be expected to earn in the circumstances.

[48] In the circumstances of the present case, the Court queries whether the father has taken all steps necessary to maximize his income and earning potential.

[49] Another factor to consider is that despite disappointing earnings over a number of years, for whatever reason, the father has persisted in this type of work. One would think that when faced with unprofitable work, he would at least try to earn some additional income from other part-time work, or choose another trade.

[50] The operative word in the analysis, however, is "reasonableness". There are some cases where there is an obvious motive to avoid paying support, such as situations where there may be health issues, or other obstacles which a payor can use to hide behind or downplay his true motive. There are other cases where a payor is simply indifferent, or too self-centred and does not view his lack of ambition as an intention to avoid paying support.

[51] Self-employed individuals do have the onus of clearly demonstrating the basis for their assertions about gross and net income. Where disclosure is inadequate, any inferences to be drawn should favour the party confronted with the challenge of having to make sense of financial disclosure by the other party. Therefore, if a payor fails to provide the necessary financial disclosure, he has effectively deprived the mother, and the Court, of an opportunity to test his assertions about his gross and net business income.

[52] In all the circumstances, the Court finds that the father has been under-employed.

5:3(d) Should the Court reduce or otherwise vary the child support quantum retroactively?

[53] The Court is prepared to impute income to the father, but not to the extent of the amount in the original order. Notwithstanding his failure to provide full financial disclosure, the Court must still have an evidentiary basis on which to make a finding. It is clear from his last 3 income tax returns that annual income of $45,000.00 was unrealistic, and perhaps even arbitrary. What often happens when a payor does not respond to the Court process and the matter proceeds on an uncontested basis, income is often imputed on an "inflated" basis, on a somewhat speculative or "wishful" evidentiary foundation. This might well have been the case here. To be fair, however, the Court did not ask the mother about the facts or circumstances behind this fixed figure.

[54] It would appear that the father's average income over the last 3 years has been in the range of $25,000.00, gross. This is a far cry from $45,000.00.

[55] Taking into account the inability to assess the legitimacy of the business expenses, and also considering the element of grossing up the father's income, which is a step taken to ensure consistency of treatment where a party is found to have arranged his affairs to pay less tax on income, the Court finds that a more realistic income, net of expenses, should have been $35,000.00 per annum.

[56] Accordingly, the Court is prepared to vary the quantum of child support back to the date of the original order to reflect $35,000.00 and the corresponding table amount for one child.

5:3(e) Should the Court vary the quantum of ongoing child support?

[57] For substantially the same reasons set out above, ongoing child support will also be the table amount on $35,000.00, commencing January 1, 2014.

6:0 ORDER

[58] The Court makes the following final order:

1. The final order of Justice M. Zuker, dated September 22, 2010, is confirmed as it relates to the applicant mother, Cherry-Ann Collins-Mark, having sole custody of the child, Shanyah Mark, born December 18, 1998.

2. The father, Fitzpatrick Mark, shall have access to the said child, on alternate weekends from Saturday at 12 p.m. until Sunday at 6 p.m., and as further agreed.

3. The final order of Justice Zuker, dated September 22, 2010, is otherwise varied as follows:

   (a) The respondent father, Fitzpatrick Mark, shall retroactively pay child support to the applicant mother, Cherry-Ann Collins-Mark, for the child, Shanyah Mark, born December 18, 1998, in the amount of $325.00 per month, on imputed annual income of $35,000.00, commencing September 1, 2010 up to and including December 31, 2013. The Family Responsibility Office shall make all the necessary adjustments.

   (b) The said father shall pay child support to the said mother on behalf of the said child on an ongoing basis in the amount of $325.00 per month on imputed annual income of $35,000.00, commencing January 1, 2014 and on the first of each month thereafter.

4. The parties shall exchange financial disclosure annually, including copies of income tax returns, notices of assessment and notices of reassessment, if applicable, on or before June 1 of each year commencing in 2014. Additionally, the father shall provide a full sworn financial statement and full statement of income should he remain self-employed, setting out all the particulars of the sources of his income, and a full breakdown of his business expenses, on or before July 1st of each year, commencing in 2014.

5. The said applicant mother, Cherry-Ann Collins-Mark, shall be at liberty to apply for and obtain a passport and other travel documents and to travel outside of the country with the said child, Shanyah Mark, without the consent or approval of the said respondent father, Fitzpatrick Mark. In the event that access is in any way impacted as a result of the mother travelling with the said child, arrangements will be made between the parties for make-up access, either prior to travelling or upon return.

Released: December 18, 2013

Justice S.R. Clark