Court File and Parties

Court File Number: 56/14 Date: 2015-04-14 Ontario Court of Justice Family Court at Orangeville

Between: Angela Marie Sandra Rivet Hayward Applicant

and

Paul James Hayward Respondent

Before: Justice B. E. Pugsley

Heard: April 1st, 2015 Released: April 14th, 2015

Appearances:

• Applicant and Counsel: Samantha Keser
• Respondent: (self-represented)

Endorsement

[1] Introduction

The Applicant has brought a motion to change the Separation Agreement made between the parties dated April 21st, 2011. This endorsement is my decision on the Applicant's motion for temporary relief.

[2] Essential Claim

Although broadly worded, the essential claim of the Applicant in her motion is that I fix the child support payable by the Respondent to the Applicant for the three children of the marriage based upon the Respondent having an imputed income of $90,000.00 per year.

[3] Custody Arrangement

The children are cared for by the parties in a shared joint custody regime, and have been since separation: all three children reside one-half of the time with each of the parties on a week-about arrangement. That arrangement is not in issue here.

[4] Background to the Separation Agreement

There is an old English saying: "Penny wise, pound foolish". In spite of the fact that both parties are apparently intelligent, educated and professional persons, the separation agreement was seemingly prepared and entered into between the parties on a shoestring: without any real legal advice, let alone independent legal advice. Both parties now plead ignorance of at least some of their respective legal rights at the time the agreement was signed. For example, the Applicant complains of an unequal property division and the Respondent complains that he agreed to pay far too much child support given the shared residency.

[5] Original Agreement and Subsequent Discussions

The agreement provided that the Respondent pay to the Applicant for child support $1,000.00 per month, and 60% of the children's expenses, with periodic financial disclosure. The Respondent states that after business reverses, and recognising their shared custody, he and the Applicant agreed that he should stop paying any child support. The Applicant agrees that they discussed the issue briefly but that there was no agreement. Nothing was reduced to writing.

[6] Commencement of Action and Change in Respondent's Employment

On June 26th, 2014, this action was commenced. Soon after that the Respondent's business circumstances formally changed. He separated from State Farm (indeed, State Farm was in the process of completing a sale to Desjardin Insurance starting in the spring of 2014) and started working as a painter/drywaller/carpenter. He states that the seeds of the end of his insurance business were planted much earlier than June of 2014, but the Applicant does not accept that this is true and claims that the Respondent is capable of earning far more than $25.00 per hour.

[7] Voluntary Child Support Payments

After the Applicant started this proceeding the Respondent commenced paying $500.00 per month for child support voluntarily.

[8] Employment History

At the time the parties separated the Respondent was an independent insurance agent contracted exclusively to State Farm Insurance. He employed the Applicant in his business, apparently at a salary of $70,000.00 per year. At the date of separation the Applicant ceased to be employed by the Respondent and sought out other employment. Recently she became a licenced paralegal.

[9] Respondent's Business Decline and CRA Issues

The Respondent states that after separation he encountered a long decline in his gross income from his business, leading to staff layoffs and an ultimate decision to close the business down. At the same time he had apparently fallen into arrears with the Canada Revenue Agency such that his income from State Farm had become the subject of a tax garnishment of about $114,000.00. Only very recently has he filed up to date income tax returns with the CRA. As of the date of the motion that agency had not yet released any Notice of Assessment forms for those tax years.

[10] State Farm Separation and Transition to New Employment

In the months before the date of his decision to cease carrying on his insurance business State Farm sold its Canadian assets to Desjardin Insurance. The options open to the Respondent at that time are set out in his filings on this motion. He could have continued as an agent with Desjardins or taken a modest buyout from State Farm. Near the end of August, 2014, the Respondent chose not to transfer his agency to Desjardin, and State Farm paid a separation sum to the Respondent in the amount of $25,000.00. All of the $25,000.00 was paid on the Respondent's behalf to the CRA to reduce his debt there.

[11] Cash-Based Employment

Instead of working in the insurance business again, the Respondent decided to immediately take up employment on August 25th, 2015, as tradesman, working for a friend (Robert Biggart)'s company, for cash. His supporting evidence as to this employment comes in the form of three letters – two undated – from Robb Painting and Contracting. At first the relationship is described as one of employer/employee. After critical comment by the Applicant's counsel in this proceeding, a new, dated, letter was provided. This last letter confirms that the Respondent, like all of Mr. Biggart's trades people, is paid in cash.

[12] Cash-Only Financial Arrangements

Apparently to avoid having any bank account that can be attached by the CRA, the Respondent keeps no bank account. Even his child support payments are made through his spouse's account. He states that he pays his mortgage in cash.

[13] Applicant's Position on Income Imputation

The Applicant submits that the Respondent recently had a gross business income of over $300,000 and has become intentionally under employed such that, on all of the evidence, an annual income of $90,000.00 is fairly imputed to him for child support purposes. On this basis she claims $1,614.56 per month child support, payable via the Family Responsibility Office. She notes that there is no cross-motion seeking to have income imputed to her. Her stated income in her last financial statement is $33,000.00.

[14] Respondent's Position on Income

The Respondent's submission is that his income is $56,000.00 per year. He seeks to calculate his child support obligation, if any, based upon an earning potential of $70,000.00 attributable to the Applicant. After all, he himself paid her this when they worked together in his insurance business.

[15] Applicant's Reply on Income Splitting

In reply the Applicant notes that her income at Hayward Insurance was an income splitting instrument.

[16] Procedural Issues with Self-Represented Respondent

The Respondent was formerly represented by counsel here. He now represents himself. This perhaps goes towards explaining his multiple pages of raw exhibits filed here. Even worse, many exhibits are edited from their original form such that their value is much reduced. The effect is similar to sending a shoe box of edited receipts to the CRA and telling them to figure out one's annual income. The process is not helpful and indeed is unacceptable on a motion such as this. Disclosure is to be organized and presented rationally to the opposing side and then summarized in evidence. A party who has chosen to appear without counsel is nonetheless held to the same standard of process as a party with counsel.

[17] Affidavit Compliance Issues

Similarly, much of the Respondent's affidavit material (and some of that filed by the Applicant as well) does not comply with the Rules as to the content of an affidavit: a statement of facts, without opinion or argument. Unsworn statements by supporters in the form of attached letters, and excerpts from email or text exchanges without context, are equally essentially useless.

[18] Clear Facts from Evidence

What is clear from the lengthy material filed by the Respondent are two important facts.

[19] First Fact: Business Decline

First, I accept that he had had a decline in his gross business after separation, although the reason for that decline is not entirely apparent. The Respondent states that there was a general decline in the "insurance business" and that State Farm raised its prices unilaterally, but he provides no evidence of this beyond his own assertion. The underwriting totals set out in the State Farm / Desjardins separation documents show a more modest percentage decline. The Respondent certainly reduced his employee expenses. Apparently he also stopped filing tax returns and got into considerable difficulty with the CRA which must have also caused a business problem. In other words, for the purposes of this motion, I accept that his business started to decline. Whether a factor in his ultimate decision to abandon his long standing insurance profession was the start of this action in June of 2014 is not relevant for this motion.

[20] Genuine Business Reversal

In other words, there was a genuine business reversal suffered by the Respondent as alleged.

[21] Second Fact: Cash-Only Transactions

Second, the Respondent's then decision to withdraw from any transactions other than those based on cash is, to say the least, ill-considered. In effect the Respondent, already in some admitted difficulty with the CRA, is withdrawing into the gray market of hard to trace cash transactions. As notoriously noted by the CRA, such cash businesses are still subject to GST/HST reporting and remitting. Large cash transactions are now carefully reported and scrutinized for national security and policing purposes. Although cash of course remains legal tender, its increasing rarity in employment and purchasing use suggests that when an employer says "I only pay in cash" and a recipient says that he or she only deals in cash, alarm bells justifiably go off and the veracity of their relationship becomes subject to greater attention.

[22] Suspicious Nature of Cash Arrangement

In this case, the Respondent and his employer both seem to have decided to only engage in cash transactions. They are close friends. Both businesses are unincorporated, and each carries on business in the somewhat vague endeavour of painting and contracting. This is very suspicious. Plainly put, if someone choses to engage in a business where one's income and expenses are incapable of independent verification then one should not be surprised if those amounts are discounted as essentially fictional.

[23] Applicant's Income Not Irrelevant

I do not agree with the Applicant that her own income is irrelevant here. Clearly when the children's residential arrangement is equally shared both parties' income is to be applied to determine what the child support payable should be, if any. I do accept her submission however that the issue of imputation of extra income to the Applicant has not been properly placed before the court on this motion. That said, there is no basis on this record to suppose that an annual income of $70,000.00 would be imputed to the Applicant. The Respondent submits that his own income dropped precipitously and beyond his control until he had to change his profession, while refusing to accept that the same analysis might be applicable to his ex-spouse.

[24] Assessment of Declared Incomes

The Applicant's disclosed income is $33,000.00 per year for the purposes of the Federal Child Support Guidelines (Ontario). The Respondent's declared income is set out in his (in part incomplete) latest financial statement is $56,000.00 per year. Given my earlier comments concerning the highly suspicious nature of his current employment remuneration, there is almost no evidence before me upon which I can rest a finding that that figure is accurate. The cash nature of his business invites a grossing up of his declared income. The Respondent's income tax returns have yet to be assessed, and may be subject to an audit given his past history with the CRA, such that the issue of support cannot abide that result, even presuming that it affected the Guidelines result.

[25] Rejection of $90,000 Imputation

The Applicant submits that the Respondent's income ought to be imputed at $90,000.00 per year. The only route to that exact figure that I can see is that it leads to a differential child support payment by the Respondent to the Applicant that approximates the $1,000.00 per month sum originally agreed to between the parties in 2011. As I have already noted, for the purposes of this motion I accept that the Respondent did have a genuine downturn in his business income since that time.

[26] Purpose of Temporary Order and Out-of-Court Questioning

A temporary order for child support is intended to tide the parties over while the case is heading to resolution based either upon a settlement or a judgment of the court. In this case, as with many cases involving self-employed individuals, the Guidelines calculation is complicated by untested evidence and assertions not present when the payor's income comes from regular employment. In this case the prayer for relief contains a request for out of court questioning by the Applicant's counsel of the Respondent. Such questioning would be a valuable bridge between the parties' respective positions here since the more facts that can be established the greater the likelihood of a settlement when those facts are applied to the law.

[27] Income Grossing-Up Calculation

The Respondent states that his income is $56,000.00 per year. I intend to gross up that figure by 15% to account for the fact that his income is paid in cash and is unverifiable. $56,000.00 times 15% is $8,400.00 for a total imputed annual income of $64,400.00.

[28] Guidelines Calculation

In the end I find that the following annual incomes are applicable to the Guidelines calculation here (children's residence shared equally between the parties):

(1) the Applicant: $33,000.00 per year for three children equals $649.00 per month;

(2) the Respondent: $64,400.00 per year for three children equals $1,253.00 per month;

(3) DIFFERENCE: the Respondent pays to the Applicant $1,253.00 minus $649.00 equals $604.00 per month.

[29] Arrears and Start Date

The Respondent has been paying the lesser sum of $500.00 per month for some time, but should have been paying $604.00 based on the above calculations. In the result, adjusting for what he has paid, the start date for the adjusted child support should be on the first of the month after the action was started. Any arrears created are modest and subject to adjustment either by settlement or by the Justice disposing of this action at trial.

[30] Costs

Neither party has been entirely successful in this motion. Unless I am referred to any offers to settle that would have approximated this result by submission in writing addressed to the judicial secretary at Orangeville within the next 14 days, there shall be no costs award here.

[31] Order

(1) Commencing on July 1st, 2014, the Respondent shall pay to the Applicant for the support of the children of the marriage: Kielan River Hayward (DOB: September 20, 2004); Jayden Maddox Hayward (DOB: October 4, 2006); and Tyler Cruz Hayward (DOB: September 20, 2009), the monthly sum of $604.00. This sum is based upon the Federal Child Support Guidelines (Ontario) for three children, shared residency, the Applicant's declared annual income of $33,000.00 and the Respondent's imputed annual income of $64,400.00.

(2) Any arrears created by this order shall be reduced by the actual support paid by the Respondent to the Applicant after July 1st, 2014.

(3) Support deduction order to issue.

(4) The Applicant's counsel has leave to examine the Respondent out of court upon taking out an appointment to do so. The Applicant's counsel shall attempt to accommodate the Respondent's work schedule in setting up the said examination. If the parties are unable to arrange a mutually agreeable date place and time for the said examination within 30 days, the Applicant's counsel may move in chambers without notice to the Respondent for directions and/or an order compelling such attendance.

(5) Unless a subsequent order is made after considering any offers to settle, there shall be no costs of this motion.

Justice B. E. Pugsley OCJ at Orangeville