SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 810/10 (Guelph)
DATE: 20120424

RE: BARBARA ANN BLATHERWICK - and - BRIAN EARL BLATHERWICK

BEFORE: Lemon J.

COUNSEL:
John G. Cox, for the Applicant
Stuart M. Law, for the Respondent

HEARD: February 28, 2012

E N D O R S E M E N T

[ 1 ] Mrs. Blatherwick moves for interim spousal support, an advance on her equalization payment, an interpretation of an order relating to the payment of shareholder dividends and a finding that Mr. Blatherwick has breached an order of Justice Belleghem dated November 17, 2010 and my order of June 23, 2011.

Background

[ 2 ] This matter was first argued February 28, 2012 for a full day. Shortly after the hearing, both parties, understandably for reasons that will follow, asked the court to the reserve its decision beyond April 20, 2012 in order to allow them to resolve their issues. They have now advised me that they have failed to do so and I am required to make the determination with respect to the above issues.

[ 3 ] The parties married July 3, 1971 and separated November 18, 2010. Mrs. Blatherwick is 59 years of age and Mr. Blatherwick is 62 years of age. Mrs. Blatherwick remained at home to care for the three now grown children. Mr. Blatherwick acknowledges that Mrs. Blatherwick is entitled to interim support. The issue is the amount of that payment.

[ 4 ] The parties agree that neither has paid the proper amount of income tax to the Government of Canada. Mr. Blatherwick also concedes that:

(a) he has failed to report income to Revenue Canada to the extent that he may owe $548,000.00 in taxes and interest (excluding any penalties);

(b) he and his business partners have managed their business enterprise so as to avoid paying the appropriate tax to the Government of Hong Kong;

(c) before and after the agreed separation date, Mr. Blatherwick has paid thousands of dollars to three different girlfriends and has paid for at least two of their houses along with renovations to a third house. In 2010, he paid a total of $335,000.00 Canadian to the three women;

(d) he lied to Citizenship and Immigration Canada in his application to sponsor his fiancé. In that application he stated that he was widowed and that his wife died December 12, 2005;

(e) he received a dividend of $150,000.00 on behalf of one of his partners. That partner wanted to keep the knowledge of the $150,000.00 away from his wife and Mr. Blatherwick assisted him to do that.

[ 5 ] Accordingly, Mr. Blatherwick concedes that he is a liar and a cheat and he carries on business with partners that are the same.

[ 6 ] Against that background, the principal issues between the parties is a determination of what Mr. Blatherwick’s income is and what his share in various companies owned or controlled by him are worth.

Advance on Equalization

[ 7 ] To date, Mr. Blatherwick has paid $425,000.00 as an advance on the equalization payment. By this motion, Mrs. Blatherwick seeks a further advance of $1,075,000.00. Both parties have retained expert advice as to the valuation of the various businesses controlled by Mr. Blatherwick. Mrs. Blatherwick says that Mr. Blatherwick’s ownership is according to the documented registered share structure. Mr. Blatherwick says that it is a smaller interest according to an incomplete agreement between him and his other six partners.

[ 8 ] Mrs. Blatherwick’s expert has been unable to value the enterprise and has set out a variety of reasons for that. Essentially, more disclosure is needed. By contrast, Mr. Blatherwick’s expert proposes that the midpoint value of his registered share ownership is approximately $3,000,000.00 while his equity holdings based on his agreement with his partners would be just less than $2,000,000.00. Both values have contingent disposition costs to be calculated.

[ 9 ] The end result, from Mr. Blatherwick’s point of view, is that he will be required to pay an equalization payment of just over $311,000.00 and therefore he has already overpaid by $113,000.00. In order for Mr. Blatherwick’s position to be upheld at trial, not only will he have to be believed but his various business partners will also have to be believed. Given his credibility as conceded above, I need not set out the litany of inconsistencies and dubious documentation proffered by both he and his business partners. This must be left to the enjoyment of the trial judge.

[ 10 ] On the other hand, Mrs. Blatherwick, for good reason or bad, has no clear evidence of the value of the business and the resulting equalization payment. I agree with Mr. Blatherwick’s counsel the just because Mr. Blatherwick may be a liar on other issues, I cannot make an interim determination of these issues by writing a “blank cheque” for Mrs. Blatherwick. On the issues to be determined, he could, perhaps, be telling the truth.

The Laamanen Test

[ 11 ] Laamanen v. Laamanen , 2005 50808 (ON SC) stands for the proposition that the court may use its discretion to order an advance on equalization where:

(1) there is a reasonable requirement for the funds;

(2) there is little doubt that the person will receive an equalization payment of at least that amount, and;

(3) it is just to do so in the circumstances, including the payor’s ability to pay.

Requirement for the Funds

[ 12 ] To satisfy the first branch of the Laamanen test, Mrs. Blatherwick has to satisfy the Court that she needs the advance on equalization funds that she is requesting.

[ 13 ] In this case, Mrs. Blatherwick has already received an advance on equalization of $425,000.00. She has also received a tax-free retroactive spousal support payment of $79,000.00. She has received $11,375.00 a month tax-free spousal support since July 1, 2011. Excluding legal and expert expenses, that is $4000.00 more a month than her financial statement indicates she needs. Her home is unencumbered. Her savings have increased more than $100,000 since separation.

[ 14 ] This is not a case where a spouse finds herself or himself in a position where it is difficult to move the litigation along because of financial limitations.

[ 15 ] Mrs. Blatherwick’s valuator has not provided this Court with a detailed estimate of fees. Mr. MacRae estimates his fees to be $150,000 on a simple global basis. Mrs. Blatherwick has said that her solicitor needs $350-450,000.00 to take this matter to trial. The bill to date for both is over $300,000.

[ 16 ] In determining whether or not to exercise my discretion to order an advance on equalization, I need to consider whether I have enough evidence before me to assess the reasonableness of the request. While this litigation will be expensive, I do not have enough information to make this apparently exaggerated amount seem reasonable. Mrs. Blatherwick is not without means to litigate this matter. She has already received $425,000 in advance. She receives more support than her need. These are not the circumstances that cry out to “level the playing field”.

Equalization Payment at Trial

[ 17 ] To satisfy the second branch of the Laamanen test, Mrs. Blatherwick has to satisfy the Court that she will receive an equalization payment at trial which is at least the size of the advance she is seeking now. A request for an advance on equalization should be refused where the Court is unable to determine a minimum equalization payment. Haroun v. Haroun, 2001 28128 (ON SC) , [2001] OJ No. 2575 (SCJ).

[ 18 ] Mrs. Blatherwick is unable to do this. She has no evidence as to what the equalization payment should be at trial because her valuator has put no evidence before this Court as to what that eventual equalization payment could be. There is nothing that supports the specific amount requested.

[ 19 ] While Mr. Blatherwick’s valuator has calculated the value of his corporate assets, I will have to leave it to the trial judge to make that determination. Much will depend on the value of the evidence that supports that expert opinion.

[ 20 ] At this stage, I cannot easily discern a minimum equalization payment.

Just in the Circumstances

[ 21 ] While “justness” might support the request based on Mr. Blatherwick’s admitted behaviour, it cannot support such an order in light of the failure of Mrs. Blatherwick to meet the other factors. I am not persuaded that a further equalization payment can be ordered under these circumstances. Mr. Blatherwick has already paid a substantial advance. He cannot be faulted for that.

Spousal Support

[ 22 ] Mrs. Blatherwick’s expert says that Mr. Blatherwick makes approximately $1.5 million per year. His expert opines that he makes approximately $463,000.00 per year. Mr. Blatherwick represents to Canada Customs and Revenue Agency an income of approximately $45,000.00. In his application to Citizenship and Immigration Canada, he stated that his income was $125,000.00 per year. He acknowledges that this figure was not correct. In his Answer, he claims that his income from all of his companies is $250,000.00 per year. He accepts, for the purposes of this motion that his income is $463,000.00 per year. Despite that, Mr. Blatherwick says that he “will be living off the approximately $96,000.00 (taxable)” that he now receives from one of the companies controlled by him.

[ 23 ] Mrs. Blatherwick seeks interim support of $62,000.00 per month retroactive to the date of separation (November 18, 2010), representing an income split of fifty percent to each of the parties, presuming an imputed income of 1.5 million. Mr. Blatherwick submits that he should pay a midpoint Spousal Support Advisory Guideline (SSAG) amount of $16,880.00.

[ 24 ] By agreement, Mr. Blatherwick has been paying $11,375.00 per month plus specified household expenses for a total of $12,734.73 per month.

[ 25 ] In making an interim spousal support order under the Divorce Act , the Court shall take into consideration the condition, means, needs and other circumstances of each spouse, including

(1) the length of time the spouses cohabited;

(2) the functions performed by each spouse during cohabitation; and

(3) any order, agreement or arrangement relating to the support of each spouse.

[ 26 ] The need of the recipient spouse remains relevant in the spousal support analysis, as does the payor’s ability to pay.

[ 27 ] Spousal misconduct is not relevant in the spousal support analysis. In making an interim spousal support order under the Divorce Act , the Court shall not take into consideration any misconduct of a spouse in relation to the marriage. On the other hand, Mr. Blatherwick’s conduct affects his credibility.

[ 28 ] While the SSAG’s do not apply when a payor’s annual income exceeds $350,000.00, this does not necessarily mean that the amount provided for when a payor’s income is $350,000.00 is to be considered a “cap” on the amount of spousal support that can be awarded. The SSAG’s can and have been used as a starting point for support in cases where the payor’s income far exceeds $350,000.00. They can provide a range of spousal support for the court’s consideration, but, in the cases of incomes over $350,000.00, that range must be subject to an examination of the parties’ individual circumstances. These principles were recognized and accepted by DeSousa J. in Denofrio v. Denofrio , (2009), 2009 41354 (ON SC) , 72 R.F.L. (6 th ) 52 (Ont. SCJ).

[ 29 ] In Haroun v. Haroun , 2001 28128 (ON SC) , [2001] OJ No. 2575 (SCJ), at para. 10 , Mesbur J. said:

“When I consider Mrs. Haroun’s current budget in her financial statement, in conjunction with her “proposed budget”, I find that her reasonable after tax needs, pending trial, are about $7,000 per month. In coming to this conclusion, I have considered her stated current budget, and deducted it from the figure for income tax, as well as the amount for legal fees, which I find to be a capital, rather than support expense. I find her request for additional amounts for clothing and vacation, as well as increased amounts for things like gifts, and charitable donations to be reasonable, considering the level of income Mr. Haroun earned, the ages of the parties and Mrs. Haroun’s wish to be able to travel more, and visit her native country of Egypt . Given the means of the parties, there is no reason she should be deprived of these expenses pending trial. These costs, together with some general inflationary increases, bring her net monthly needs to roughly $7,000, which I find reasonable in all the circumstances pending trial. Although at trial a larger, or smaller amount may be awarded. I must consider the effect of the interim order; it is inappropriate to award a sum that would allow Mrs. Haroun to have a significant surplus from the support award .” (emphasis added)

[ 30 ] In an application for interim support, it is not sufficient only to consider the factors of need and ability to pay. The presumptive claim to an equal standard of living, subject to the equitable sharing of the consequences of the marriage breakdown, should also be considered. Carr v. Carr (1993), 1993 14760 (BC SC) , 46 R.F.L. (3d) 326 BC Supreme Court.

[ 31 ] Mrs. Blatherwick submits that the traditional approach to interim support based on established need and the ability to pay is not always an approach that is fair and just in the circumstance. Where the ability to pay is not an issue, the parties should have the financial ability to enjoy a similar lifestyle, regardless of whether they did or did not choose to enjoy such a lifestyle. Lakhani v. Lakhani (2003), 2003 2161 (ON SC) , 43 R.F.L. (5 th ) 125, 2003 CarswellON 3928 (Ont. SCJ).

[ 32 ] However, here, the ability to pay is an issue. The expert report provided by Mrs. Blatherwick relies on a number of determinations that I cannot make on the materials before me. There are a variety of expenses that the appraiser has added back into Mr. Blatherwick’s income that will require a determination based on the credibility of Mr. Blatherwick. Given his admitted lack of credibility, it would be enticing to put the two of them out of their misery and make those determinations on an interim basis. I am persuaded that the law prevents me from following that path and I leave it to the trial judge. Without those determinations, I cannot be sure of Mr. Blatherwick’s real income.

[ 33 ] On the evidence before me, and on a completely without prejudice basis for the benefit of the trial judge, I make my order on the basis of an imputed income to Mr. Blatherwick of $463,000.00 and order support at the high end of the range being $20,000 per month. Based on her financial statement, Mrs. Blatherwick can clearly make ends meet on this amount. In my view, the substantial legal expense that Ms. Blatherwick will have to endure to proceed with this litigation would indicate support on the high side. This order shall commence November 18, 2010 subject to payments made by Mr. Blatherwick (not including the $4000.00 dealt with below).

Justice Belleghem November 18, 2010

[ 34 ] On November 18, 2010 Mr. Justice Belleghem ordered:

The Respondent shall continue to make any and all historical payments he has been making since the date of separation in relation to all assets in Canada , including the matrimonial home, directly and indirectly on behalf of the Applicant.

[ 35 ] At the time, Mr. Blatherwick paid Mrs. Blatherwick $4,000.00 per month as a dividend from one of his companies. The parties acknowledge that this payment was a historical expense that had been paid prior to separation. However, as of September 29, 2011, Mr. Blatherwick took the position that he was never obligated to pay the dividend. Rather, he did that because he was “a good guy”. Mr. Blatherwick and his counsel now submit that the $4,000.00 dividend had never been “on her behalf”. Instead, the provision is to cover such payments as property taxes and insurance relating to the matrimonial home but does not cover the $4,000.00 monthly dividend. Mrs. Blatherwick submits that this amount was an historical amount that the parties agreed would continue to be paid pursuant to the ex parte order and the consent order that followed.

[ 36 ] In short, where should the emphasis be placed? Is it on “any and all historical payments that he has been making since the date of separation” or is it “on behalf of the applicant”.

[ 37 ] In the transcript of Justice Belleghem’s ruling, he states:” with respect to the requirement that he continue to make the payments he is obviously the major breadwinner. It is apparent on the material that on balance it is likely that he will end up being required to pay some form of support and likely an equalization payment.” In my view, Justice Belleghem is referring to not only expenses relating to the house but also all other payments. [1]

[ 38 ] The payment was being made from Seasonal Design Group Inc., an Ontario Corporation. In my view, Mr. Blatherwick had been making the dividend payments on a historical basis relating to an asset in Canada. While the grammar of the term is not particularly clear, it was extended by both parties in July, 2011. Both counsel are experts in their field. Mr. Blatherwick is an experienced business man. In my view it is not open to Mr. Blatherwick to change his interpretation of an order with which he had been steadily complying. He should have continued to make that payment and should catch up on the arrears forthwith.

[ 39 ] The term appears to be a stop gap measure to be applied until an interim order could be determined. Now that I have determined interim spousal support, that dividend payment should come to an end as of May 1, 2012 subject to the trial judge’s determination.

Breach of Court Order

[ 40 ] Mrs. Blatherwick brought a notice of contempt motion with respect to failure of Mr. Blatherwick to make the payment of $4,000.00 referred to above. The request for a finding of contempt was withdrawn, and instead, Mrs. Blatherwick seeks “an order that the respondent Brian Blatherwick, breached the order of Mr. Justice Lemon dated June 23, 2011”.

[ 41 ] The notice of motion does not set out what the result might be of such an order. I sought the assistance of Mrs. Blatherwick’s counsel at the motion and he submitted that I should require Mr. Blatherwick to pay costs or a financial penalty to Mrs. Blatherwick.

[ 42 ] Based on my ruling above, Mr. Blatherwick ought to have paid the dividend. As can be seen from the materials, however, he sought legal advice and received advice from his lawyer before he ceased to make the payment. He immediately advised Mrs. Blatherwick that the payment would no longer be made. The drafting of the order is such that its interpretation is one upon which reasonable minds may differ. I do not believe that it is appropriate to penalize Mr. Blatherwick for his failure to make the payment. I agree that he is in breach of the term, but Mrs. Blatherwick’s counsel has wisely withdrawn any request for contempt. In my view, pursuant to Rule 1(8) of the Family Law Rules , this breach can be dealt with, if necessary, in the issue of costs.

Next Steps

[ 43 ] If the parties cannot otherwise agree on costs, written submissions of no more than five pages (not including any offers to settle or bills of costs) may be made by Mrs. Blatherwick within the next thirty days and Mr. Blatherwick may reply within thirty days thereafter.

[ 44 ] It may be helpful to remind counsel that our cost rules are designed to foster three fundamental purposes: (1) to indemnify successful litigants for the cost of litigation; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behaviour by litigants. Without the benefit of submissions and baring a significant offer to settle, I would anticipate that the costs of this motion would be left to the trial judge.

[ 45 ] As the case supervision judge, I need to move this matter along. There have been extensive cross-examinations and examinations to date. There have been many volumes of productions and undertakings. I do not know whether there are further steps to be taken prior to trial. If possible, both counsel shall provide me with a consent order for the timetable going forward to trial. If they cannot agree, they shall arrange a date to appear before me within the next forty-five days so that I might hear submissions and order that timetable. Because of an ongoing lengthy trial before me, that attendance will have to be in Brampton.

Lemon J.

DATE: April 24, 2012

COURT FILE NO.: 810/10 (Guelph)
DATE: 20120424

SUPERIOR COURT OF JUSTICE - ONTARIO RE: BARBARA ANN BLATHERWICK - and - BRIAN EARL BLATHERWICK BEFORE: LEMON J. COUNSEL: John G. Cox, for the Applicant Stuart M. Law, for the Respondent ENDORSEMENT Lemon J.

DATE: April 24, 2012

[^1]: It may well be that this matter should have returned before Justice Belleghem. Neither party made submissions with respect to that matter. Given that this matter took a full day to argue, it seemed expeditious for me to answer their question as asked.