Court File and Parties

Court File No.: FO-12-56944-E000 A1

Date: 2014-09-08

Ontario Court of Justice 47 Sheppard Avenue East Toronto, Ontario M2N 5N1

Between: Director, Family Responsibility Office, for the benefit of Maria Arruda, Applicant

And: Paolo Arruda, Respondent, payor

Before: Justice Robert J. Spence

Heard: 7 August 2014

Reasons for Judgment released: 8 September 2014

Counsel:

• Ms. Caroline Brett, for the applicant, director
• Mr. A. Welman, for the respondent, payor

Nature of the Proceeding

[1] This is a default hearing brought at the instance of the Director of the Family Responsibility Office ("FRO") seeking an order that the arrears of support owed by the payor be fixed in the amount of $199,427 as at July 30, 2014, as well as an order that the payor pay the arrears in full forthwith or, in default, that he be incarcerated for 150 days or until the arrears are sooner paid and, further, an order that ongoing support be paid, in default of which the payor be incarcerated for a specific period of time for each default. Alternatively, FRO seeks an order for an immediate lump sum payment in the amount of $50,000 as well as continuing lump sums until the arrears are paid in full, as well as an order for the payment of ongoing support, or incarceration in default.

[2] The payor argues that he does not have the capacity to pay and that the court should exercise one of its alternative powers under section 41(10) of the Family Responsibility and Support Arrears Enforcement Act ("Act"), more specifically, that the payor should be ordered to bring a motion to change the support order, pursuant to section 41(10)(d) of the Act.

[3] The payor acknowledges that the arrears as alleged by the FRO are correct; so that the only issue to be decided is the appropriate remedy to be ordered by the court.

Background of Legal Proceedings

[4] On March 24, 2010 Justice June Maresca made a final default order imputing income to the payor in the amount of $120,000 per year, and ordered him to pay child support to the mother, for two children, in the amount of $1,644 per month, and spousal support to the mother in the amount of $2,000 per month.

[5] For approximately the next two years following the making of Justice Maresca's order, the payor did not make a single voluntary payment, so that by early 2013, the support arrears had accumulated to approximately $200,000.

[6] In July 2013, the payor brought a motion to change Justice Maresca's support order.

[7] On March 27, 2014, the matter came before Justice James Nevins who endorsed the motion to change record as follows:

Respondent payor has not complied in any way with the consent disclosure order of January 2014 and on further review of the file he behaved in the exact same manner in 2008 and 2010 when the original orders were made. There is no reason to believe respondent will ever provide the disclosure agreed to in January 2014. Respondent's motion to change is struck. Further, respondent is prohibited from bringing any further motions in this court to vary support until disclosure order of January 27, 2014 is substantially complied with.

[8] In the meantime FRO had issued a Notice of default hearing, and was awaiting the outcome of the payor's motion to change before proceeding with that default hearing. On the same day that he struck the payor's motion to change, Justice Nevins endorsed the following in the FRO enforcement proceeding record:

Payor's motion to change has today been struck and dismissed, he not having complied with production order of January 27, 2014. . . . Payor has similarly not provided ANY material or disclosure on this proceeding. This default proceeding is adjourned to the next day for payor to produce the material referred to in the order of January 27, 2014, by 7 April. Further, payor is to pay the sum of $50,000 to FRO by cash, certified cheque or money order by 7 April 2014, in default 60 days in jail.

[9] On the next return date of April 10, 2014 Justice Nevins noted that the payor had persisted in his failure to make the ordered production. Further, the payor had failed to pay the ordered sum of $50,000, apart from a single $400 payment. Accordingly, Justice Nevins ordered the payor to be immediately incarcerated for 60 days or until the sum of $49,600 was sooner paid.

[10] Within 24 hours following Justice Nevins' committal order, the payor paid the sum of $49,600 and was released from jail.

[11] The payor then retained counsel, and the matter next came before me on the morning of July 29, 2014, for the default hearing to proceed. The payor's counsel sought an adjournment of the proceedings, which was opposed by FRO. Following submissions on the issue of the contested adjournment, I ruled that I would be prepared to grant a brief adjournment, but only on condition that the payor re-appear in court at 2:00 p.m., the same day, with $5,000 to be paid to FRO, failing which the default hearing would proceed that same afternoon.

[12] At 2:00 p.m. the parties re-appeared before me. Counsel for FRO advised that the payor had given her $5,000. On that basis I adjourned the default hearing to August 7, 2014, for the default hearing to proceed.

[13] On August 7, 2014, the parties appeared and the default hearing proceeded by way of a trial with oral evidence.

The Payor's Evidence at the Default Hearing

[14] The payor was born in Portugal 50 years ago. He came to Canada when he was 15 years old. He has continuously worked as a "framer" in the housing construction industry. He said that the most he has ever earned was about $120,000 in 2008. However, when his marriage came to an end in 2008 he became depressed; and this depression negatively impacted his ability to work and to earn an income at the same level as he earned in 2008.

[15] He had earlier formed a company called "Lusitania", which was a sole proprietorship. It was under the umbrella of Lusitania that the payor carried on his self-employed work as a framer. After 2008, the payor said he had no "energy" and the company just "fell apart". Because of his depression, he said "my head wasn't working properly".

[16] He stopped paying his union dues in 2009.

[17] He filed a letter dated April 2, 2014 from a company called MJM, which stated that the payor was at that time working as an employee of MJM, earning $11 per hour.

[18] Payor stated that the impediment to earning more money than this minimal wage amount is the fact that he is no longer a union member. It would cost him $500 to re-join the union. If he did re-join the union he would be able to "clear at least $50,000 to $60,000 per year".

[19] Notwithstanding the aforesaid letter, the payor says he is now working and is being paid $33 per hour.

[20] He also filed a letter from Magacon Construction dated August 6, 2014, which states that he had gross earnings of $4,444 for 2013 and, for 2014, his gross earnings are $6,372.

[21] Despite the fact that he said he earns $33 per hour, he says he cannot afford to buy the tools necessary to work as a self-employed framer. He did not say how much the tools would cost.

[22] He says he lives in his sister's basement and his sole assets consist of $800 in the bank and "some tools".

The Court-Ordered Payments of $49,600 and $5,000

[23] As I noted earlier, within 24 hours following Justice Nevins' order that the payor be committed to jail until he paid the sum of $49,600, the payor says the money "showed up". How did that happen?

[24] The payor filed a photocopy of two certified cheques, one for $15,000 and the other for $19,600.

[25] The first cheque, according to the payor, came from a "friend" by the name of "John", with whom the payor had previously worked in the housing construction industry. Was this a loan? Was it a gift? Did the payor provide any security for these funds? None of these questions were answered by the payor.

[26] The second cheque, in the amount of $19,600 also came from a friend, by the name of Mark Benniger who, according to the payor, owns some restaurants. Again, none of the questions I posited in the preceding paragraph were answered by the payor.

[27] The final balance of $15,000 (to make up the total of $49,600) came from some mysterious source which the payor says he knew nothing about at the time and, as at the date of this hearing, he continued to know nothing about. He was unable to provide the court with any information about the source of that $15,000 payment.

[28] As to the $5,000 payment which I ordered on July 29, 2014, which the payor obtained within a space of a couple of hours following his appearance before me on that same morning, the payor offered the following explanation:

• He obtained $1,000 from the bank;
• He managed to secure a loan of $2,500 from a restaurant; and
• The balance of $1,500 was paid by his sister.

[29] And he managed to accomplish all of this within the space of two, possibly three hours, at most.

The Law

[30] The relevant portions of the Act dealing with default hearings are contained in section 41 of the Act, as follows:

Presumptions at hearing

(9) At the default hearing, unless the contrary is shown, the payor shall be presumed to have the ability to pay the arrears and to make subsequent payments under the order, and the statement of arrears prepared and served by the Director shall be presumed to be correct as to arrears accruing while the order is filed in the Director's office. 2005, c. 16, s. 24.

Powers of court

(10) The court may, unless it is satisfied that the payor is unable for valid reasons to pay the arrears or to make subsequent payments under the order, order that the payor,

(a) pay all or part of the arrears by such periodic or lump sum payments as the court considers just, but an order for partial payment does not rescind any unpaid arrears;

(b) discharge the arrears in full by a specified date;

(c) comply with the order to the extent of the payor's ability to pay;

(d) make a motion to change the support order;

(e) provide security in such form as the court directs for the arrears and subsequent payment;

(f) report periodically to the court, the Director or a person specified in the order;

(g) provide to the court, the Director or a person specified in the order particulars of any future change of address or employment as soon as they occur;

(h) be imprisoned continuously or intermittently until the period specified in the order, which shall not be more than 180 days, has expired, or until the arrears are paid, whichever is sooner; and

(i) on default in any payment ordered under this subsection, be imprisoned continuously or intermittently until the period specified in the order, which shall not be more than 180 days, has expired, or until the payment is made, whichever is sooner. 2005, c. 16, s. 24; 2014, c. 7, Sched. 10, s. 11 (1).

[31] Because the payor has acknowledged the accuracy of the arrears set out in the FRO statement of arrears, the question for the court to decide is whether he has a "valid reason" for not paying those arrears; and if no valid reason exists, then what should be the appropriate order under section 41(10) of the Act.

[32] In Hargreaves v. Hargreaves, Justice Paddy A. Hardman dealt with the meaning of "valid reason". At paragraph 13 of her reasons for judgment, she stated:

The test of a "valid reason" is quite properly "an event over which the debtor has no control which renders him totally without assets or income with which to meet his obligations".

Discussion

[33] On the evidence before me, it is impossible to conclude either that the payor has "no control" over his circumstances, or that he has been rendered "totally without assets or income with which to meet his obligations". I come to this conclusion for the following reasons:

1. The payor claimed that after 2008 his business faltered significantly because he fell into a significant depression. And yet he filed no evidence that he had a medical incapacity which prevented him from working to his 2008 income-earning capacity, the year in which he earned $120,000. Nor did he file evidence that he had even consulted with a health care professional in respect of that alleged depression.

2. He stated that his income is so minimal because he is not a member of the union. It would cost him $500 to re-join the union and, additionally he would need to put forward a person to vouch for him as part of the re-joining process. He said he cannot acquire the $500 and yet he managed to find $49,600 within 24 hours back in April 2014, and he found a further $5,000 on July 29, 2014, on about two or three hours' notice. His excuse that he cannot afford the $500 makes absolutely no sense in the circumstances. Furthermore, if his friend "John", who the payor says worked with him in the housing construction industry and who so willingly gave the payor $15,000 on 24 hours' notice actually exists, surely he would be more than happy to vouch for the payor.

3. The payor's evidence as to his expressed impecuniosity is entirely without credibility, for the following reasons:

   a. He would have the court believe that despite his impecuniosity, despite his claimed lack of any assets whatsoever, two friends would come forward on a moment's notice and pay $34,600 toward his ordered support, so that he could be released from prison. And the payor would assert this position at trial on his bare statement alone, without producing his friends for examination and cross-examination, or other evidence which might support a credible basis for the sudden appearance of this money.

   b. The payor stated that his friend "John" gave him $15,000 and yet the payor could not recall John's last name.

   c. He would have the court believe that some mysterious benefactor, whose identity to this day remains shrouded in secrecy, suddenly surfaced and provided the remaining $15,000, so that the total of $49,600 could be paid and the payor released from jail, all within the space of 24 hours. This assertion is simply not believable.

   d. See subparagraphs 1 and 2 above.

[34] It is important to understand the context of the previous court-ordered payments of $49,600 and $5,000. When the payor came to court on each of the two days that those payments were ordered, he had no foreknowledge that the court was about to order him to pay any substantial amounts of money, essentially on the spot, or to face serious consequences.

[35] In Justice Nevins' case, the court effectively pulled the original $50,000 amount "out of a hat", no doubt because of the substantial arrears that had accrued and the payor's long history of effectively playing games with the court. And despite this lack of foreknowledge, the payor was somehow able to cobble together this money – an amount which is astonishingly large given the payor's professed impecuniosity and lack of ability to access any funds – within a 24-hour timeframe.

[36] Again, when the payor appeared before me on July 29, 2014, he was able to "buy" his requested adjournment by securing the sum of $5,000 within the space of about two or three hours, despite his having no foreknowledge that this not insignificant amount of money would be required of him in exchange for the requested adjournment.

[37] It simply beggars belief that the foregoing could occur in the manner that the payor outlined at this trial.

[38] Given that the payor's explanations are clearly not credible, then the only reasonable conclusion that this court can reach is that the payor has quick and easy access to large sums of money. These are monies that he either personally has, or that he has immediate access to, unconditionally. No other conclusion makes sense on the evidence before the court. And because of that, he has a demonstrated ability to make support payments, particularly when he is facing the prospect of immediate imprisonment.

Conclusion

[39] In my view, the payor has been playing games with his support obligations and with the support enforcement system for far too long. He has managed to find ways to delay and obfuscate such that there have been many court attendances to deal with the support enforcement issue. And all the while, his children and his former wife have gone without the support which they have been found to be entitled by prior court orders.

[40] When the evidence and submissions in this trial were finally concluded, it was abundantly clear to me that the payor's position was without merit. And because of that I took the somewhat unusual step of telling this to the payor immediately following the conclusion of the trial. I did this in an attempt to encourage him to try to work out an arrangement with the FRO for the payment of funds. I told the payor that I would give him some time to do this and that I would refrain from issuing my judgment in the meantime.

[41] Not having heard back from either the FRO or the payor after the passage of more than one month, I must now issue my reasons and my order.

[42] Given my earlier-stated conclusions that the payor has immediate and unconditional access to large sums of money, I was initially inclined to order the payor to forthwith pay the outstanding arrears in full, as well as to pay the ongoing support, or to be imprisoned in default. However, I have decided upon the somewhat less severe order requested in the alternative by FRO, with the hope that the payor will be motivated to pay his support, given his apparent dislike for prison. In the result I make the following final default order:

Final Order

1. The arrears of support are fixed and owing in the amount of $199,427 as at July 30, 2014.

2. Within 21 days following the release of this order, the payor shall pay the sum of $50,000 to FRO, in default of which he shall be imprisoned for 60 days, or until the sum of $50,000 is sooner paid.

3. No later than September 1, 2015, and by no later than September 1st in each of the following years until the arrears of $199,427 are paid in full, the payor shall pay FRO the sum of not less than $50,000. In default of any of these annual payments, the payor shall be imprisoned for 60 days or until the defaulted payment is sooner made.

4. Commencing August 1, 2014, the payor shall pay ongoing support in the amount of $3,644 per month. In default of each monthly payment he shall be imprisoned for five days or until the defaulted payment is sooner made.

5. In the event that FRO seeks a warrant of committal for any of the foregoing defaulted payments, it may seek that warrant on motion to the court, without notice to the payor, provided it seeks the warrant within six months of the alleged default(s).

Justice Robert J. Spence

September 8, 2014