SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: FS-11-368799
DATE: 2012/03/15

RE: YUKIKO ICHIHARA, Applicant

AND:

ANDREW HENRY WILKENS, Respondent

BEFORE: PENNY J.

COUNSEL: Gabrielle Pop-Lazic for the Applicant
Mark Adilman for the Respondent

HEARD: March 15, 2012

ENDORSEMENT

[ 1 ] This is a motion for child and spousal support, production of financial information and other collateral relief.

[ 2 ] The parties were married in 1998. There is a disagreement about when separation took place but it was somewhere between July 15 and December 15, 2010. There is one child who was born July 27, 2009.

[ 3 ] On July 13, 2011 Sachs J. ordered the respondent to provide:

(1) personal and business income tax returns for 2008 2009 and 2010 plus financial statements prepared for any businesses during those years;

(2) copies of all personal and business bank statements from January 2010 to the present; and

(3) his Answer and financial statement, all by August 15, 2011.

This was not done.

[ 4 ] On September 26, 2011 Herman J. ordered the respondent to provide the documents, ordered to be produced by Sachs J., by October 11, 2011. Costs of $500 were awarded against the respondent due to his failure to comply with the order of Sachs J.

[ 5 ] On October 11, 2011 the respondent delivered a package to the applicant's counsel with an unsworn financial statement and some bank statements.

[ 6 ] In November, Mr. Adilman was retained. By the end of November 2011, through Mr. Adelman, the respondent provided a sworn financial statement and personal notices of assessment for the tax years 2008, 2009 and 2010. The bulk of the information ordered by Sachs J. and Herman J. had yet to be produced.

[ 7 ] In December and January, counsel for the applicant wrote to Mr. Adilman, demanding the missing information.

[ 8 ] On February 14, 2012 Mr. Adilman sent additional bank account information on behalf the respondent for the years 2008, 2009 and 2010. This information too was incomplete.

[ 9 ] The respondent filed an affidavit in this matter eight days before the return of this motion. His Answer has not yet been filed.

[ 10 ] In his affidavit, the respondent deposes that his accountant was not cooperating and that he had to obtain his personal tax returns directly from the CRA, which he says have now been provided although I saw no evidence of this in the Record.

[ 11 ] A schedule to the corporate tax return for 2010 was provided which purports to show the income statement of the respondent’s auction company. That statement shows total sales of $891,569, gross profit of $192,066 and operating expenses of $192,856 for a net loss in 2010 of $790. It does not appear that the complete corporate tax returns, or the financial statements of the corporation for 2008, 2009 or 2010 have been produced.

[ 12 ] The respondent claims his 2010 income, relying on his notice of assessment, was only $46,840. Yet the respondent’s bank accounts show deposits made it to his personal accounts in 2010 of over $167,000. The respondent claims that he uses two “modest” lines of credit from time to time to pay off credit card and other debts. However, the respondent produced only a few month’s records for only one of the two lines of credit. The scant records produced show relatively small draws on the credit line bearing no apparent relationship to the deposits to his personal bank account.

[ 13 ] At this point, a significant portion of the documents ordered to be provided by Sachs J. on July 13, 2011 and again by Herman J. on September 26, 2011, i.e., personal and business income tax returns and business financial statements for 2008, 2009 and 2010, the respondent’s Answer, and some of the bank records, have still not been produced.

[ 14 ] Further, much of the detailed information required under the Federal Child Support Guidelines, such as corporate documents and a statement showing the breakdown of all salaries, wages, management fees or other payments to persons with whom the corporation does not deal at arm’s length, has also not been produced.

[ 15 ] The applicant seeks to impute income to the respondent for support purposes in the amount of $167,000.

[ 16 ] The respondent argues that document production is not complete and that there has been no questioning. He argues, in this context, that, in the absence of full disclosure, there is no basis for the imputation of income. He refers to Stoyshin v. Stoyshin , 2007 CarswellOnt 2825 , where Cusinato J. said, at paragraph 10, that the court “must be cautious” when it is proposed to base child or spousal support on income other than that identified on the husband's tax return. Cusinato J. went on to say, in paras. 11 and 13:

Case law has established that benefits or other cash received from a family corporation may be imputed as income to the payor spouse for the purposes of determining spousal and child support… The fundamental principle is that the court must estimate the actual means which the parent has available for child support… Motions are however limited by the evidence available at this stage of the proceeding. As stated in Spiring v. Spiring … where it is difficult to determine a husband's income on a motion because of the limited nature of the evidence, it is prudent to be reasonable in the assessment as to support. To do this, the court may have regard to the lifestyle of the husband, both before and after, and to the present lifestyle of the wife with the child. It is further noted by the court at paragraph 20 that “it is incumbent on the person seeking a finding of imputation of income to provide the court with sufficient information from which a reasonable inference could be drawn.”

[ 17 ] However, as the Court of Appeal said in Graham v. Brute 2008 ONCA 260 , 2008 CarswellOnt 1906 at para. 4 :

As to the imputed income going forward, the appellant submits that the amount was arbitrary and that there was a burden on the respondent to adduce evidence. However, this was not simply a case of deliberate unemployment; the appellant also failed to make proper financial disclosure. That said, in our view, there was a basis in the record for the amounts of imputed income. The trial judge had the various financial statements, such as they were, which showed various sources of income and large monthly expenditures.

[ 18 ] Section 19 of the Federal Child Support Guidelines specifically provides that the court may impute such amount of income to a spouse as it considers appropriate in circumstances, which include: where it appears that income is being diverted which would affect the level of child support to be determined under these Guidelines; or where the spouse has failed to provide income information when under a legal obligation to do so.

[ 19 ] In my view, the respondent is seeking to profit from his own dilatory conduct and disregard of prior orders of this Court in failing to provide most of the information ordered eight months ago. The financial information which has not been produced in contravention of those orders includes the very information that would enable the applicant and the Court to determine the income of the business in relation to the respondent’s own true income, for child support purposes, for the years 2008, 2009 and 2010. For example, section 19(2) of the Federal Child Support Guidelines provides that the reasonableness of an expense deduction is not governed solely by whether the deduction is permitted under the Income Tax Act . The relationship between the respondent and his auction company, and the manner in which funds flow from that company to him, are at the heart of what his income should be for child and spousal support purposes. The only reason this information is not available is that respondent has refused to provide it, in contravention of two prior orders of this Court and his onus and obligation under the Guidelines.

[ 20 ] I accept, as does the applicant, that $167,000 of deposits in 2010 does not necessarily mean the respondent had $167,000 of income. However, the evidence is that the applicant relied upon the respondent’s income during the marriage. Since the separation, she has had no income other than the $500 per month in child support (based on income of $48,000) and baby bonus checks. She had to leave her apartment because she could no longer afford it and now rents a room where she sleeps with her son on a mattress on the floor.

[ 21 ] The respondent says the applicant has capital by way of savings in banks in Canada and in Japan. This may be so but I do not think the applicant should be required to deplete capital for her and her son's basic daily living expenses. To the extent the applicant has relevant capital, it will go into the mix in the calculation of her net family property.

[ 22 ] The respondent also argues that the applicant used to run her own auction business and therefore has earning capacity not being utilized. This may true, although: (a) caring for a young child is a serious disadvantage in terms of returning to the workforce immediately; and (b) the income from that business was, in any event, relatively modest. For interim support purposes, I am not prepared to impute income to the applicant merely because she is not operating her former business in her current circumstances.

[ 23 ] The respondent’s serious failure to produce much of the financial information required of him puts the Court at a serious disadvantage in assessing his income for child and spousal support purposes. For interim support purposes only, I believe it is just and reasonable to impute income to the respondent of $90,000. If the respondent wishes to show this amount cannot be supported, he will do so by promptly providing complete financial disclosure and supporting professional analysis and seeking a variation on this basis.

[ 24 ] The respondent shall file his Answer within 21 days.

[ 25 ] The applicant also seeks production of outstanding and additional financial information including a business valuation. An order shall issue requiring the respondent to produce all of the corporate and financial information listed in paragraph 4 of the applicant’s notice of motion. This information shall be produced within 30 days, with the exception of paragraph 4(n), the business valuation of A. H Wilkens Auctions and Appraisals. With respect to paragraph 4(n), the valuation shall be produced within 90 days. In default of this order, the applicant shall be at liberty to move, on notice, to strike the respondent’s Answer.

[ 26 ] The applicant also seeks a non-depletion order under section 40 of the Family Law Act . According to the respondent's affidavit, his shareholdings in A. H. Wilkens Auctions and Appraisals Inc. dropped from 65% to 50% on October 31, 2011. No explanation for this change was provided. In the circumstances, I believe an order prohibiting the respondent from further depleting his property is warranted.

[ 27 ] Leave to conduct questioning is granted to both parties.

[ 28 ] The applicant seeks full indemnity for her costs of $11,854.27. Mr. Adilman submits that an order for full indemnity is not warranted and that, if successful, the applicant should be awarded only $5,000 in costs. If the respondent had complied with the order of Sachs J. and with his other legal obligations concerning production of financial information, this motion would not have been necessary. It is because of the respondent’s disregard for prior orders of this Court that I have come to the conclusion that an order for substantial indemnity costs is warranted. I fixed those costs in the amount of $9,500 enforceable in the same manner as the ordered support.

[ 29 ] In summary, it is my order that:

(a) commencing April 1, 2012, the respondent shall pay child support in accordance with the Table amount based on an imputed income of $90,000;

(b) commencing April 1, 2012, the respondent shall pay spousal support in accordance with the SSAG (mid range) based on an imputed income of $90,000;

(c) the respondent shall file his Answer within 21 days;

(d) the respondent shall produce the documents and information referred to in paragraph 25 above;

(e) the respondent is prohibited from the depleting his assets;

(f) the parties shall have leave to conduct questioning; and

(g) the respondent shall pay the applicant’s costs, fixed the amount of $9,500, enforceable in the same manner as my support order.

PENNY J.

Date: March 16, 2012