NEWMARKET COURT FILE NO.: FC-03-17794-00

DATE: 20121113

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: The Director, Family Responsibility Office, for the benefit of Nadine Elizabeth Gray, Applicant

AND:

Mario Rizzi, Respondent

BEFORE: The Honourable Madam Justice H.A. McGee

COUNSEL: Ugo Popadic, for the Applicant

Peter B. Cozzi, for the Respondent

HEARD: October 26, 2012

ENDORSEMENT on default hearing

Background

[1] This is the second Default Hearing to enforce the ongoing payment of child and spousal support, and arrears of $292,088.26 against the Respondent, Mr. Mario Rizzi (“the father.”)

[2] The Director of the Family Responsibility Office ("FRO") is required by statute to enforce the arrears. Subsection 41(9) of the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31, as amended (the "Act"), states that "unless the contrary is shown, the payor shall be presumed to have the ability to pay the arrear.

[3] Subsection 41(10) lists the various powers of a court in an enforcement proceeding, where the court is satisfied that the payor has the ability to pay. Those powers include periodic payments and imprisonment. Section 42 deals with registrations on title of properties owned by the payor and the sale of a property to satisfy arrears.

[4] The payor is the beneficial owner of a property held in the estate of his deceased parents of which he is the sole executor and beneficiary. He has taken no steps to transfer the property for a period in excess of three years.

[5] The parties separated on August 1, 2002 after twelve years of marriage. At the time of separation their two children were 12 and 6 years of age. It is now ten years later and the parties agree that support for the oldest has terminated.

[6] The respondent father never filed an Answer to the mother’s 2003 Application. He never filed a sworn Financial Statement within the Application. Ultimately the mother obtained a November 1, 2005 default judgement, the terms of which are those being enforced today.

[7] Enforcement proceedings began in earnest in 2007. A warrant for arrest was issued July 30, 2008. A final default order was issued August 4, 2011. There were 20 court attendances over the four years between 2007 and August 2011 on the first default hearing. This is the 8th appearance on the second default hearing.

[8] The father commenced a motion to change in July 2009, three and a half years after the final order of November 2005. The father’s motion to set aside the final order was dismissed by Justice Boswell on October 4, 2012 and the appeal of that order was dismissed by the Court of Appeal on May 13, 2011.

[9] On January 21, 2010 Justice Gilmore made a detailed order on motion governing the conduct of the motion to change. Little of that endorsement has seen compliance. However, there was subsequently a seizure of the totality of the father’s RRSP savings at face amount, with the resulting tax liability accruing to the father.

[10] The matter returned to me for a default hearing on June 16, 2011. The father appeared without counsel and sought an adjournment. He had not provided disclosure. An adjournment was granted to August 4, 2011 – peremptory.

[11] Despite my endorsement, there were further adjournments of the default hearing from August 4, 2011 to October 4, 2011, to February 2, 2012 to May 17, 2012. It appears that during that time the father was making regular payments as a condition of the adjournments.

[12] On May 17, 2012 I reviewed the status of the father’s 2009 Motion to Change. No steps had been taken. He continued not to file a Financial Statement. I again ordered the next attendance for July 5, 2012 to be peremptory. I made an order that the father must serve FRO counsel and Ms. Gray his 2011 Income Tax Return and Financial Statement.

[13] On June 21, 2012 the father sought an order adjourning the July 5th date. Ultimately he was successful and this default hearing was adjourned to October 12, 2012.

[14] On October 12, 2012 I denied the father’s request to again adjourn the default hearing. It commenced at 4:30 p.m. and after a period was continued to October 26, 2012 with directions as to the documents to be produced and the witnesses to be called.

[15] Also heard on October 12, 2012 was the mother’s motion to stay the father’s Motion to Change for lack of disclosure, lack of diligence, and a failure to pay prior costs award per Rule 14(23.) I made a detailed order on that day requiring the father to pay the outstanding $16,583 in costs within 20 days and allowed him to encumber the Eileen Street property up to $20,000 to effect payment. Absent compliance, and delivery of certain disclosure the mother could renew her motion to stay the father’s motion to change.

Orders Sought

[16] The Director seeks a final order that:

a. The support payor make a lump sum of $50,000 by January 1, 2013, failing which the support payor shall be incarcerated for 30 days.

b. Commencing November 1, 2012 the support payor pay support of $6,868 per month which is $3,868 for ongoing support and $2,000 towards arrears, failing which the payor will be incarcerated for five (5) days for each missed payment.

c. Commencing April 1, 2013 the support payor will pay $8,868 per month, which is $3,868 for ongoing support and $5,000 towards arrears, failing which the support payor will be incarcerated for five (5) days for each missed payment.

d. The Director has leave to amend this final order per section 41(22) of the FRSAEA by 14B Motion incorporating the terms of a changed support order, if any, with the addition of a thirty day committal terms for default of lump sum payment terms in the changed support order, if any, ant the addition of a five day committal terms for default of periodical payment terms(s) if any.

e. The Director may proceed with a motion for warrant of committal ex parte.

f. The director may not file with the Court a motion for warrant of committal, if any, until six months have elapsed from the date of this Order.

g. Pursuant to Section 41(10) (e) of the FRSAEA the entirely of the arrears under the order of Justice Loukidelis, dated November 1, 2005, shall be secured against the property known municipally as 39 Eileen street, Toronto M6N 1V6 and having a legal description of LT233 PL 1719 TWO OF YORK S/T = T/W CY607215; Toronto (York) City of Toronto.

[17] Conditional on financing, the support payor asks for an order that he might encumber the Eileen Street property in the further amount of $35,000.00, with proceeds disbursed as follows:

a. Municipal tax arrears in the amount of $20,210.36 as at September 30, 2012 plus any additional amount accrued to the date of the encumbrance in order to bring arrears into good standing;

b. To pay the FRO $10,000 in arrears;

i. The balance in legal fees necessary to convey title of Eileen Street to the support payor;

ii. Any remaining balance to the FRO Office.

[18] The payor proposes to complete the transfer of title and filing of a mortgage (encumbrance) on title by November 30th. At the same time, his counsel submits that the transfer of title and placing of a mortgage on title (for which there is no assertion that he can qualify) cannot go forward so long as the property is secured for the payment of support arrears.

[19] The payor asks for a stay of enforcement proceedings by FRO. I will not deal with this ground as the court has no jurisdiction to order FRO to stay enforcement proceedings.

Default Hearing

[20] The payor delivered voluminous materials the day before the continuation of this motion. The materials include an affidavit deposed October 23, 2012 which he adopted for the purposes of his direct examination on October 26.

[21] In a nutshell, his affidavit states that he never did have the ability to pay support as ordered by Justice Loukedelis on November 1, 2005. He attaches for the first time in this continuing record copies of his 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010 and his 2011 Income Tax Returns. He deposes that he used his portion of the matrimonial home sale proceeds to support himself from 2004 to 2006 and he chronicles his inability to hold consistent, remunerative work in his chosen field of software development since 2005.

[22] On cross examination, the payor gave evidence that he has chosen not to look outside his area of interest for employment, despite his dire financial circumstances. He states that he is 50 years of age, struggles with depression and is barely surviving. The parties’ oldest child Michael has been living with him since May of 2012. The father states that he uses Michael’s ODSP allowance to assist with household bills, (being the home held in the title of his deceased parents.)

[23] The father’s assessed 2011 Income Tax Return shows business income of $36,536; $26,612 of which is taxable income. Because of the late filing of most of his Income Tax Returns, he now has tax arrears of $35,441. His Statement of Business Activities includes expenses for internet, telephone, travel, supplies, meals and entertainment; as well an adjustment for home office expenses for 38 Eileen Street, Toronto.

[24] The latter deduction is questionable. The payor does not own the home. He cannot avoid settling title as executor, and at the same time take personal tax deductions against the property.

[25] I find that the payor’s 2011 Income Tax Return demonstrates income for support purposes in the range of $30,000. I have determined this amount by adding back and grossing up a small portion of the internet, telephone, travel, supplies, meals and entertainment expenses and all of the home office expenses.

[26] The father’s Financial Statement and updating affidavit claims considerable less income in 2012 than 2011. Given the pattern of extreme gaps between the income represented to be earned by the father and that set out in his Income Tax Returns, I decline to rely on the stated 2012 income. I prefer the evidence of his 2011 assessed income for the purposes of this Default Hearing.

[27] The mother’s current income is in the range of $60,000. Only one child remains dependent for table support.

Analysis

Presumption at Hearing - Section 41(9) FRSAEA

[28] On a default hearing the payor is presumed to be able to pay arrears unless he is able to demonstrate otherwise within the statutory scheme of the legislation. That scheme does not task the Court with a recalculation of arrears on a Default Hearing, but rather, an appropriate payment plan and penalties for breach. Although tempting, the issues at a default hearing cannot be confused with the issues within a Motion to Change.

[29] As set out in Rajan v Rajan (1981) 1981 CanLII 233 (ON CJ), O.J. No.150; for a payor to argue that he is unable for a valid reason to pay the arrears on a Default Hearing per section 41(9), he must demonstrate that:

a. The circumstances giving rise to the failure to pay are not voluntary;

b. He accepts his responsibility and places the interests of the child above his own, and

c. He has provided full, frank disclosure to the court

[30] The three part test is conjunctive.

[31] Ontario (Director of Support and Custody Enforcement) v McLeod (1990) O.J. 757-89 interpreting the prior support endorsement legislation and finds a valid reason to only be that “which the debtor has no control that renders him totally without assets or income with which to meet his obligations.” Self-induced periods of unemployment do not create a justifiable or acceptable “inability to pay” a maintenance order: Rollason v Rollason (1978) 1978 CanLII 3100 (ON SC), 1 R.F.L. (2nd) 97.

[32] The operative principle is that payors are not to be released from their obligations by self serving acts, but only by court orders or domestic contracts. Both the payor and recipient are parties to an order or domestic contract. The recipient is not a party to an enforcement proceeding. Entitlement cannot be varied exclusive of the recipient’s participation. Only in the rare circumstances can a payor rebut the presumption of ability to pay at a default hearing.

[33] In this case, there is no question that the payor father has failed to make full, frank disclosure to the Court. And that failure cannot be simply attributed to a decision not to file timely Income Tax Returns for the past decade. Neither has he filed sworn Financial Statements in either the Motion to Change or the enforcement proceedings until quite recently. In finding that the payor has not provided full or frank disclosure to the court, I need not explore the remaining two factors. The presumption under 41(9) stands.

Powers of Court Section 41(10) and section 42 FRSAEA

[34] The legislative scheme presupposes that orders for child and spousal support will be varied over time. Section 41(10) should be interpreted and applied with a view to the circumstances of the payor, the most efficient manner to enforce payment and the ultimate disposition of the issues.

[35] The payor states that he cannot comply with the payment of costs which are a precondition to proceeding with the Motion to Change unless he borrows from the home held in the estate of his parents. At the same time he states that as the executor, he cannot transmit title to his name unless the current security held by the FRO is lifted. He suggests no manner of permanent escape from this quandary, but rather seeks a temporary remedy: to take financing from the property.

[36] The father cannot qualify for financing without security and has no guarantee that he will qualified for financing were the home transferred to his name and pledged as security.

[37] Moreover, should the father transfer the home into his name, its available equity is significantly limited. The home has a municipal tax assessment of only $289,000. There are currently six known debts attached to the home, or waiting to be attached:

a. Costs of the transmission of title (est. $3,000);

b. Probate fees (to be determined);

c. Outstanding municipal taxes ($20,210.36 );

d. The father’s personal income tax arrears ($35,441);

e. Outstanding costs award per Order of October 12, 2011 ($16,583);

f. A historic mortgage which has not been discharged (amount owing, or fees to discharge unknown).

g. $292,088.26 in support arrears

[38] There is already insufficient equity in the property to satisfy all creditors. Certain debts continue to accrue interest. Even with a significant reduction in support arrears, there may be insufficient equity to meet all the debts.

[39] The Director seeks an order for the forthwith payment of all arrears through a combination of large periodic payments and timed lump sum payments.

[40] I have given serious consideration to that relief sought, but fear that it would be a prelude to further breaches. Absent a sale of the home, Mr Rizzi lacks the necessary cash flow and access to capital.

[41] I have also considered the payor’s request for an order to encumber 39 Eileen Street to provide a payment of $10,000 on account of arrears and to otherwise order no further enforcement of support. I decline to do so. There is already an order permitting an encumbrance to satisfy outstanding costs arrears and there is no evidence at this time that title to the property has been (or can be) transferred from the estate or that financing is available to the father even with the pledging of the home as security.

[42] It appears to the Court that the only appropriate or even remaining remedy is a sale of 39 Eileen Street per Section 42(2) of the FRSAEA. Sale proceeds would first discharge the various debts - including the payment of prior costs awards - with the balance secured pending determination of the Motion to Change.

Final Order

[43] The temporary order for security on property shall continue. More specifically, order to go pursuant to Section 41(10) (e) of the FRSAEA that the entirely of the arrears under the order of Justice Loukidelis, dated November 1, 2005 shall be secured against the property known municipally as 39 Eileen Street, Toronto M6N 1V6 and having a legal description of LT233 PL 1719 TWO OF YORK S/T = T/W CY607215; Toronto (York) City of Toronto.

[44] The payor is at liberty to list for sale 39 Eileen Street. The temporary order for security shall be lifted upon a sale of the property approved by the Director. The net sale proceeds after discharge of the amounts in paragraph 36 above are to be secured pending determination of the Motion to Change.

[45] As the Director did not give notice of a motion for sale, I will not order 39 Eileen Street sold within this endorsement. If the payor does not agree to its sale either as the executor of the estate or its owner following a transfer of title, then the Director may bring a motion for sale before me on a date to be scheduled through the Trial Coordinator.

[46] Either the payor or the Director may move on notice for directions respecting a registration on 39 Eileen Street per Section 42(1), transmittal of title to 39 Eileen Street from the estate, sale of the property per Section 4(92) of the FRSAEA and/or the disposition of its sale proceeds.

[47] Commencing November 1, 2012 the support payor shall pay monthly support of $1,250 per month, failing which the payor will be incarcerated for five (5) days for each missed payment. The amount of $1,250 represents a fifty percent garnishment of income in the range of $30,000.[^1]

[48] The Director has leave to amend this final order per Section 41(22) of the FRSAEA by 14B Motion incorporating the terms of a changed support order, if any, with the addition of a thirty day committal terms for default of lump sum payment terms in the changed support order, if any, and the addition of a five day committal terms for default of periodical payment terms(s) if any.

Released: November 13, 2012

Justice H.A. McGee

[^1]: See paragraph 25