SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 04-1074
DATE: June 19, 2012

RE: DAWN MICHELLE NEWELL
Applicant

• and -

JOSEPH ERNEST FLANIGAN NEWELL
Respondent

BEFORE: HONOURABLE JUSTICE PEDLAR

COUNSEL:
JAMES N. EASTWOOD , for the Applicant
JOSEPH ERNEST FLANIGAN NEWELL , self represented

MOTION HEARD: May 1, 2012

RULING ON MOTION

[ 1 ] This motion was heard at Brockville on May 1, 2012. This is a motion to change a consent Order dated February 18, 2009.

[ 2 ] The amended motion to change is contained at tab 9 of the Continuing Record. The motion seeks a sole custody order on behalf of the applicant related to Elly Stephanie Newell, born March 6, 1996 who is the child of the applicant and respondent.

[ 3 ] The amended motion to change was filed on March 1, 2011 and spells out detailed terms that are suggested to deal with the issue of access by the said child to the respondent father.

[ 4 ] The motion also seeks the termination of an order that the applicant herein be required to pay child support on behalf of Shelby Lynn Newell, born February 25, 1992 and Zoe Elizabeth Newell born December 28, 1990, effective September 1, 2009.

[ 5 ] The evidence is that the children, Zoe and Shelby are attending university. Elly has been in the care of the applicant since late 2008 and appears to be doing well. Shelby moved to the care of the applicant as of September 2009. The respondent kept receiving support for both Elly and Shelby after Zoe was at university and Shelby and Zoe were with the applicant. Shelby left the care of the applicant in the spring of 2010 to live at the home of some friends of the respondent, through arrangements that the respondent was able to make on her behalf.

[ 6 ] Despite all of the comings and goings of the children and issues of payments continuing or not being made, there was no request for any reimbursement to the applicant for those time periods.

[ 7 ] The major issue that is in contention between the parties in this motion is the establishment of the respondent’s income. The applicant has raised a number of issues in her affidavit sworn May 10, 2011 relating to that issue. She points out that during the time the respondent was reporting virtually no income in his financial statement he was able to enjoy a lifestyle that allowed him to spend large sums of money on the children, including ski trips, vacations, cell phones, expensive activities and expensive purchases for them (computers, ski equipment etc.).

[ 8 ] The respondent has also provided evidence that, as of the date he swore his financial statement, he had $51,000.00 in a U.S. bank account and another $3,000.00 in a Canadian bank account. At the time of that disclosure, four months had passed during which the respondent had paid no support for two daughters for whom he had an obligation to support.

[ 9 ] The respondent chose, in August 2010, to become a missionary in El Salvador. The applicant claims that between that time and the swearing of her affidavit in May of 2011 the respondent had travelled back and forth from Canada to El Salvador ten to twelve times. Her evidence is that he has an expensive SUV in El Salvador and is advised by the children that he has now purchased a house there, complete with a swimming pool.

[ 10 ] The applicant also details a number of trips, of which she is aware that the respondent has enjoyed between 2008 and through 2010. Those are detailed in her affidavit and are set out as follows:

a. A 12-day vacation in Orlando with all three children;

b. a 1 –week trip to Mont Saint Anne ski Resort (with Zoe);

c. an 11-day trip to California (with Shelby) including a 7-day cruise to Mexico;

d. a 4-day trip (with Shelby) to Calgary;

e. a 3-week trip to Guatemala and El Salvador;

f. a 4-day trip to Italy;

g. numerous trips back and forth to El Salvador;

h. in addition, the respondent funded several ski trips for the children, a 10-day trip for Zoe to Wales, and a 8-day trip for Shelby to El Salvador;

i. the Respondent flew Elly to El Salvador for two weeks in the summer of 2010, three weeks over the Christmas holidays in 2010, and 1 week during the March Break in 2011;

j. the respondent travelled to Honolulu for a week;

k. various trips through Central America.”

[ 11 ] In terms of the lifestyle issues, the respondent stated when this motion was heard on May 1, 2012, that, in effect, his mother had paid for all of the trips that could be described as being vacation type trips for himself and the children. His trips back and forth to El Salvador he stated were largely made possible by the Air miles credits that he was able to build up with his missionary work in El Salvador. His statement, although not in sworn evidence, made to the Court, was that he uses a credit card that he still maintains that was originally connected to his travel agency business in the past. He uses that credit card to pay for arranging trips for missionary workers to come back and forth between Canada and El Salvador. He then earns the Air Miles and uses that for much of his travel back and forth to El Salvador.

[ 12 ] The applicant states that the respondent has given other, less adequate, explanations in the past, including the limited capital that he had following the separation that took place in 2004 and was settled by final order of the Court in 2008. She states that clearly would not have provided the kind of capital needed to fund this lifestyle.

[ 13 ] A second explanation from the respondent, which was repeated at the time of the hearing on May 1, 2012 was that his mother loaned him $295,000.00.

[ 14 ] That money presumably comes from a family trust that is acknowledged to exist and is in the direction and control of his mother. The applicant’s position is that there is no reasonable expectation that the respondent will repay such a “loan”. She notes that the respondent has essentially claimed no income for the past five years as the respondent is now a missionary in El Salvador, seeking to be engaged in that work full time. She states there is no legitimate, reasonable expectation that he will be able to repay such a sum of money. She also points out that there has been no documentation confirming a transfer of funds to the respondent from his mother.

[ 15 ] The applicant also notes in her affidavit that the respondent has been involved in various business ventures including trips to Europe to purchase clothing, unspecified work in travel agencies etc.

[ 16 ] As a result of a disclosure order, the respondent has provided some disclosure, although the application claims the amount of disclosure is less than ordered by the Court. Based on the disclosure provided, even though it is regarded as incomplete, the applicant swears in her affidavit that the following facts emerge:

[ 17 ] With regard to account no. 6244125 with TD Canada Trust, on July 18, 2008, the balance in this account was $115,349.42. By December 31, 2008 this had reduced to $4,811.79. By October 1, 2009 the balance had increased to $88,764.43. She also points out that by that date of October 1, 2009 the respondent was not paying support for Elly or Shelby, but was continuing to receive support payments for Shelby and Zoe.

[ 18 ] The Applicant states in her Affidavit that this account from January 1, 2009 to December, 2009 discloses deposits of $258,284.00. No bank statements have been received through 2010 up until the present time.

[ 19 ] From the disclosure relating to the primary credit card, being a CIBC Aerogold Visa (No. 08447271), it is disclosed that monthly payments of $1,800.00 were made to the Pentecostal Assemblies of Canada on the third of each month. This payment is explained by the respondent as being a contribution towards his salary for his missionary work in El Salvador. The year-end statement (December 27, 2010) provides a summary of all activity on the card during the year. A copy is attached as exhibit “D” to the Applicant’s affidavit of May 10, 2011.

[ 20 ] That year-end statement for the VISA account confirms total expenses of $134,705.50 with a balance outstanding at $14,773.00. This would equate to more than $120,000.00 paid on the card by the respondent during the year.

[ 21 ] The Applicant also points out that in December 2009, the respondent paid $450.00 to “Corporations Canada”. She raises the issue as to whether or not that was an expense to incorporate a company. She has no other particulars.

[ 22 ] Disclosure also revealed that six monthly statements were provided for the TD Visa Card totaling $3,810.00 of expenses (averaging $630.00 per month).

[ 23 ] The Respondent’s explanation during submissions on May 1, 2012, not under oath, is that when he arranges travel for the various missionary groups coming back and forth between El Salvador and Canada, he puts those expenses on his card and he is reimbursed by the people actually travelling on those occasions. I must note that, without further evidence, it is difficult to reconcile the total of $258,284.00 going to the account in 2009 with the $134,705.50 spent in 2010 on the VISA card and sorting out how all that fits together with the explanation offered by the respondent.

[ 24 ] The respondent has filed an extensive affidavit sworn on April 27, 2012. The attachments to that affidavit include medical reports relating to a motor vehicle accident on May 16, 2006. His position is that he has been disabled as a result of that accident and his income has been severely affected. He states in his affidavit that he had the choice to either apply for long-term disability or seek to find his way in Christian ministry. He states that he attempted a variety of jobs but was unsuccessful in all of them. He had previously run a successful travel agency in Brockville, and at its peak, his earnings approached the $100,000.00 mark.

[ 25 ] In 2008, a consent order was obtained attributing an income for child support purposes of $30,000.00 per annum. The respondent’s evidence is that the $30,000.00 is far higher than his true income.

[ 26 ] He became a volunteer missionary with the Pentecostal Assemblies of Canada and worked with them in the country of El Salvador.

[ 27 ] In reviewing the file, this matter has been before the Courts since 2004. I note that in the fall of 2005 the Court was required to impute an income to the respondent. At one point during the years that the parties lived together, the applicant states in previous affidavits that the respondent maintained four retail outlets for his travel business situated around eastern Ontario. That suggests a capacity to succeed in business and a work ethic to support that ambition.

[ 28 ] The most recent income tax information for the respondent is filed at tab 6 of volume 1 of the current Continuing Record. The notice of assessment for the income tax year of 2005 shows a line 150 total income of $3,480.00. For the year 2006 line 150 income of negative $2,630.00. For 2007 a negative income of $6,894.00. For 2008 an income of $4,084.00.

[ 29 ] The Respondent states that it is his intention to be accepted for a full time ministry position as a missionary in El Salvador with the PAOC. In that capacity he claims he would earn approximately $24,000.00 per annum income. He will also be required to raise those funds and he feels he will have no difficulty doing so.

[ 30 ] In response to my questions, the respondent stated that his role as a missionary will be largely to provide a support to other missionary staff and volunteers. He will be providing transportation to them by driving people around or making arrangements for them to travel within El Salvador. He will also be arranging flights to and from Canada, as he has done in the past.

[ 31 ] In terms of the demands of employment, it would seem that his decision to commit to full time mission work in El Salvador places demands on him that would be as rigorous as if he were to remain in Canada and seek gainful employment. The respondent’s evidence is that in order to be accepted for a full time position as a missionary in El Salvador he has to undergo some in depth probing. It is probable that such probing will include his physical and emotional health and general suitability for such a position. He has voluntarily chosen to seek this direction at this point in his life, while he still has child support obligations.

[ 32 ] The Applicant is relying on the reported case of Whalen v. O’Conner 2006 13554 (ON SC) , [2006] O.J. No. 1660, which is a decision of the Ontario Superior Court of Justice of February, 2006. In that case the Applicant was asking the Court to impute income to the respondent based up on gifts of money from her parents, underemployment and deficiencies in her financial disclosure.

[ 33 ] In that case, after reviewing some strikingly similar fact situations to the allegations here, where substantial gifts and loans from parents and future interests in a family trust were involved, the Court makes the following conclusion at paragraph 21:

“21. From these cases and from s. 19 of the Child Support Guidelines itself, I distil these principles:

1. The court should be cautious in imputing income on the basis of gifts when so doing would have the effect of transferring a child support obligation to someone who, legally, does not have that obligation.

2. Income is generally imputed where a parent is not properly utilizing earning capacity or other resources to support his or her children.

3. Factors supporting income imputation on the basis of gifts include:

a. the fits represent a significant portion of the recipient’s overall income;

b. the gifts are part of a planned or intentional diversion of income or substitution for income previously earned from this source; and,

c. there is reliance upon the regular and ongoing nature of the gifts as an income source in lieu of pursuing other remunerative employment commensurate with the abilities of the respondent.

4. Failure to make full disclosure is a frequent factor in cases where income is imputed.”

[ 34 ] The applicant also relies on the reported case of A.M.D. v. A.J.P. [2002] 0.J. No. 3731 which is a decision of the Ontario Court of Appeal from October of 2002.

[ 35 ] In that decision, the Court notes that there is no need to find a specific intent to evade child support obligations before income can be imputed. At paragraph 28 of that decision, the Court states: “Read in context and given its ordinary meaning, ‘intentionally’ means a voluntary act…”

[ 36 ] At paragraph 29 the court states

“I note that there is no requirement of bad faith in the provision itself, nor is there language suggestive of such a requirement.”

[ 37 ] At paragraph 32 the Court further states:

“Imputing income is one method by which the court gives effect to the joint and ongoing obligation of parents to support their children. In order to meet this legal obligation, a parent must earn what he or she is capable of earning.”

[ 38 ] Based on those decisions and applying the principles set out therein to the facts in this case, I find that the respondent is intentionally under employed within the meaning of s. 19.1(a), in relation to establishing income for the purposes of the Federal Child Support Guidelines. He has voluntarily chosen to take a path that will provide him with less income than he is capable of earning.

[ 39 ] In making that finding, I am not attributing bad faith to the Respondent. His sense of calling to Christian Ministry in El Salvador may very well be legitimate, and as such commendable. I find that on the balance of probabilities, he is able to make that voluntary choice more easily because of the safety net provided to his financial security by the family trust. He acknowledges a “loan” from his mother in the amount of $295,000.00. Even without documentation to confirm that, it is improbable under all of these circumstances that there is any realistic expectation that such a loan will be repaid. If, and when, he receives future benefits from the family trust, it may very well be that loan will be accounted for at that time. At this point, it is not unreasonable to consider that loan, under these circumstances, as some evidence with which to determine imputed income.

[ 40 ] The respondent also clearly benefits, at the very least, by the provision of a number of expensive vacations, some of which include, and also directly benefit, the children.

[ 41 ] For the purposes of child support then, I do find that the respondent is intentionally under employed within the meaning of the Guidelines.

[ 42 ] In the past he has demonstrated a capacity to earn an annual income of between $75,000.00 and $100,000.00. That may no longer be available, as it was dependent upon a travel agency business, which may not necessarily be easy to re-establish and is subject to all the frailties of self employment, economic downturn and the impact of internet technology on the travel industry. Other factors in this case include the injury suffered in 2006 which clearly would have had some impact on his capacity to earn. It is somewhat surprising that he reports only receiving $65,000.00 from the proceeds of a settlement of that injury, when related to his past earnings and his claims of long term disability. The mathematics there just do not add up.

[ 43 ] Another factor in this case is the family trust safety net that exists. I find that this trust is a safety net not only for the applicant but the children have benefited directly with these trips, paid for by their grandmother. Also, there is a safety net there, if required, to help with unexpected or emergency expenses. In no way, is the grandmother required to support these children directly, but she certainly has voluntarily done more than her share to use her resources to support them in many ways.

[ 44 ] This support obligation is now going to be relatively short term. The children are either in secondary or post secondary education. Those education programs will all be concluded within the next few years.

[ 45 ] While acknowledging there was some reduction in the Respondent’s capacity to earn income resulting from his injury, there seems to be a return to full capacity, in view of his current plans to apply for full time missionary work in a rather rigorous and demanding setting.

[ 46 ] It should be noted that the respondent has helped to provide for the post-secondary education and expenses of Zoe and Shelby. The applicant has not contributed to those expenses. In fairness there has been a lack of documentation to support those expenses. Under all of the circumstances. I would start any new order here based on an attributed income to the respondent as of the date of the issuing of the notice of motion to change.

[ 47 ] The parties have been separated for eight years. Taking into account the imputed income of $30,000 from the 2008 consent order, which the respondent is content to continue for this order, together with the loan from his mother in the amount of $295,000.00, I find it reasonable to spread the income from that loan over an eight to ten year period, for an additional $30,000 per year, and attribute an income to the respondent for the purpose of child support in the amount of $60,000.00 per annum.

[ 48 ] Due to the unanswered questions in this file about what the true financial resources are available to the respondent, unless otherwise agreed between the parties, all future section 7 expenses are to be split evenly and are payable only with the proper documentation to substantiate them, particularly as it relates to any post secondary education expenses.

[ 49 ] As I stated a number of times during the hearing of this motion, I feel somewhat restricted by the available information. The difficulty with imputing an income is that some of the information provided is rather superficial and could only be flushed out through a rather expensive process of a full trial of an issue. If the applicant is prepared to take the risks of that type of litigation, she could request a trial of an issue, within 30 days. If she chooses to seek a trial of an issue, then this order will be suspended pending resolution of that hearing. The next step would be a trial management conference to determine whether all disclosure has been made and set up a series of conditions, time estimates and time lines to allow that to take place, otherwise this order shall be effective as of the date of the issuing of the current notice of motion. Under all of the circumstances there will be no adjustments for retroactive support or arrears with regard to either ongoing support or section 7 expenses, to that date. The new support amount will commence on the first day of the month following the issuing of the Notice of Motion herein by the applicant.

[ 50 ] An order for custody of Elly will issue with access as spelled out in the amended motion to change.

[ 51 ] This litigation has been ongoing for almost eight years now and is extremely frustrating and expensive for the parties and it needs to come to an end.

Pedlar, J.

DATE: June 19, 2012