COURT FILE NO.: D18871-09
DATE: 2012 11 30
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Marc Taillefer
Applicant
– and –
Gillian Kaara Taillefer (Schultze)
Respondent
Richard Guy, for the Applicant
Réjean Parisé, for the Respondent
HEARD: November 1 and 2, 2012
REASONS FOR JUDGMENT
GORDON J.:
Overview
[1] The trial of this matter was conducted to determine the issues of child support and equalization of the parties’ net family properties. Although the trial was quite short, several issues presented, including a determination of the parties’ incomes for child support purposes, the validity of section 7 expenses claimed by the Respondent, and the valuation of several assets.
Background Facts
[2] The parties separated in late March or early April of 2009 after about 12.5 years of marriage. Together they have three children: Nicholas, who is now 14, Emmett, who is now 11, and Oliver, who is now 9. The parties are to be commended for having successfully negotiated the issues of custody and access. It is clear that both are committed to their children and their cooperation as it pertains to the children is reflected in the many successes the children have enjoyed.
[3] In the initial months following separation the Applicant did not pay child support but had the care of the children every day for three hours after school and every second weekend. Beginning in July of 2009, the Applicant paid child support of $700 per month. He stopped payment from November through February of 2010, a period of time during which he did not see the children, and was subsequently ordered to pay retroactively for that period at the rate of $700 per month without prejudice to either party having the appropriate amount determined at trial. Since March 1, 2010 he has paid monthly child support at the rate of $1,651.
[4] The Applicant is a school teacher and his salary may be readily determined. In addition to his salary, he works from time to time as a musician, operates a funnel-cake business, and has carpentry skills. At trial it was also revealed that he has rental income from the property he acquired after separation. The respondent argued that there should be income imputed to the Applicant from these sources and support calculated accordingly.
[5] The children of the marriage are athletically and musically gifted. They participate in many sports and have achieved significant success in several of them. However, there is a financial cost to such participation and it has been borne entirely by the Respondent since separation. She has advanced a significant claim for contribution to these expenses.
[6] When they separated, the parties owned the matrimonial home and a residential rental building. The home also has two residential rental units in it. The Respondent has remained in the home since separation, has maintained the home and has kept the rent proceeds. She has also remained in control of the rental property and has retained all rent proceeds from it. The house has increased significantly in value since separation, and the mortgage on the home has decreased significantly. The question which arises is who should benefit as a result and whether the Respondent should be reimbursed for the maintenance work she has done on the home.
[7] When the parties married, the Applicant owned a property at 1022 Southlane Drive in Sudbury. He purchased it in 1993 for $130,000 with $10,000 down and a mortgage of $120,000. The Respondent moved into that home with him a few months before they were married in 1996 and they remained there until 1999 when it sold for $156,000. The question for determination with respect to this property is its equity when the parties married in 1996. There is no question that the property was improved significantly between when it was acquired and when it was sold. What is not so clear is when the improvements were made and what the impact of the various improvements was on the home’s value.
[8] Just prior to separation, the Respondent acquired a used Saturn Station Wagon. There is a dispute over whether its value was $2,300 or $1,200.
[9] Once these issues have been determined there will be an adjustment to the amount payable to reflect the outstanding costs awards against the Applicant and his failure to make payment on a line of credit he was ordered to pay in February of 2010.
Analysis
The Applicant’s Income
[10] In 2009, the Applicant’s employment income was $88,592.79. After deduction of union dues, his employment income for the calculation of child support was $87,298.22. For 2010, the amount is $89,236.13. For 2011, the amount is $91,913.89. For 2012, the amount is $93,295.21 (assuming the same amount of union dues as for 2011).
[11] The Applicant has not been particularly forthcoming with financial information. He has claimed no income from any other source and has provided no accounting of other monies earned. His unsatisfactory explanation was that this was how he and the Respondent reported this income while they were together. He could apparently see no good reason to change that approach. What he fails to appreciate is that all of his income must be considered for the calculation of child support. It is not sufficient to say that it was not considered taxable income before separation and therefore is of no consequence.
[12] At trial he testified his musician’s income would be about $1,000 per year. He gave no indication of how that number was arrived at. He did not indicate how many events were played each year, what his group charges for a performance and what his share is. He provided no historical accounting of what has been earned in years past and no evidence from his fellow musicians to substantiate his claim. His effort to establish his income in this respect has fallen far short of what is expected and I have little doubt that his income from this source is understated.
[13] I received no evidence at trial of the amount of income generated by the funnel cake business. The Applicant did testify that there has been increasing competition in recent years and the business has become less profitable, yet I received absolutely no evidence of the gross amounts generated or the costs of operating the business. It is exceptionally hard to believe that the Applicant has absolutely no idea of the income generated by this business. He did admit on cross-examination that he attended various summer fairs and festivals for the purpose of earning income from the business. When asked if he earned $10,000 from this business each year, he disagreed and offered a guess of $1,500 annually.
[14] The Applicant did not indicate any carpentry income in his financial statement. When he was confronted on cross-examination with a roof job he had done in the summer of 2011, he acknowledged that he earned $600 for that work. He said he has had no other carpentry income. Again, he does not report this income and there is no independent means of determining what, if anything, he earns.
[15] The Applicant also failed to declare any rental income. When confronted on cross-examination with the allegation that he has had persons staying in his home, he acknowledged that to be the case and indicated that in 2011 and 2012 he had tenants that paid “a couple of hundred dollars per month”, although not for the entire years. Again, the level and extent of the disclosure was far from adequate.
[16] It is the obligation of each party to be forthright in the disclosure of income. All the more so when the purpose is to calculate an appropriate child support obligation. The complete lack of disclosure from the Applicant, and his feeble rationale for non-disclosure, lead me to believe the amounts earned are well in excess of what was admitted.
[17] In my view, given the nature and extent of the income earning opportunities available to the Applicant, and his failure to lead real evidence on the subject, it is appropriate to attribute an additional $7,500 per year of income to him. I suspect that even this amount may be somewhat understated, however I hesitate to attribute any more given that he maintains full time employment and earns this additional income during his time off.
[18] Given my findings, the Applicant’s income is determined to be as follows:
2009 - $94,798.22
2010 - $96,736.13
2011 - $99,413.89
2012 - $100,795.21
Retroactive Child Support
[19] The Applicant advanced no legitimate reason why child support was not paid from separation onwards. Although he was seeing the children every day for some time, his care of them was not argued to have approached a shared custody arrangement. Aside from providing them with dinner each night, I have no evidence that he contributed to any of the remaining costs of raising them. Those costs fell to the Respondent solely, without the Applicant contributing his fair share. I have no difficulty awarding child support retrospectively to reflect his obligation and ability to pay. Given his annual income as determined above, the result is as follows:
Year Amount Due Amount Paid Deficit
2009 $15,862.05 $4,200.00 $11,662.05
2010 $21,518.28 $17,910.00 $3,608.28
2011 $22,027.44 $19,812.00 $2,215.44
2012 $20,429.64 $18,161.00 $2,268.64
Total Deficit $19,754.41
The year 2009 reflects child support payable for nine months. The year 2012 reflects child support due to the date of this judgment (11 months). Current child support shall continue to be payable at the rate of $1,857.74 per month (based on the Applicant’s income of $100,795.21), beginning December 1, 2012 and shall be payable on the first of each month thereafter.
Section 7 Expenses
[20] Section 7 of the Child Support Guidelines provides that a court may require a parent to make payment to cover all or any portion of certain expenses taking into account the necessity of the expense in relation to the child’s best interests and the reasonableness of the expense in relation to the means of the parents and those of the child and to the spending pattern of the parents in respect of a child during cohabitation. Included are extraordinary expenses for extracurricular activities.
[21] To meet the definition of “extraordinary expenses” for extracurricular activities, the party requesting the order (in this case, the Respondent) must establish one of two things: (1) That the expenses claimed exceed those that she can reasonably cover, taking into account her income and the amount she receives for child support under the Guidelines; or (2) Where (1) is not applicable, the expense is extraordinary taking into account: (i) the amount of the expense in relation to her income, including the amount she receives for child support under the Guidelines; (ii) the nature and number of the extracurricular activities; (iii) any special needs and talents of the child; (iv) the overall costs of the programs and activities; and (v) any other similar factors that the court considers relevant.
[22] In support of her claim, the Respondent tendered a book of receipts cataloguing the expenses she has incurred for the children’s activities since separation. The total cost of the expenses is $33,833. She asks that the Applicant be required to pay his proportionate share of this amount having regard to their respective incomes.
[23] Although the Respondent is unhappy with having to pay all of these expenses, she did not argue that they exceed those she can reasonably cover given her income and the amount of child support she receives. The focus of argument was under the second branch of the definition of extraordinary expense. In that regard, I make the following findings: First, the amounts spent on the children’s activities is significant relative to her income (including the child support she receives), particularly when one considers they must be paid from after tax income. Secondly, the nature and number of activities is unusual and reflects the children’s many athletic and musical aptitudes and interests. Thirdly, the children have significant athletic talent (as evidenced by the “Sports Resumes” filed in evidence) which require additional coaching costs, training costs, equipment costs and competition costs. Fourthly, the overall costs of the activities are significant. Having regard to these considerations, I am satisfied the Respondent has incurred extraordinary expenses in relation to the children’s extracurricular activities. However, it cannot be said that all of the expenses claimed are extraordinary. It is to be noted that the guidelines do not require an additional contribution for all extracurricular activities. The contribution is to be toward only those which, having regard to the enumerated factors, go beyond the ordinary. Ordinary extracurricular activities are to be expected and are included in the required monthly payment dictated by the guidelines. In the binder of expenses tendered by the Respondent, the following are examples of what might be termed “ordinary” expenses: basic hockey registration, seasonal ski passes and basic athletic equipment.
[24] Having found that a good number of the expenses claimed by the Respondent meet the required definition, it must next be determined whether the Applicant should be made to contribute having regard to the necessity of the expense in relation to the children’s best interests and the reasonableness of the expense in relation to the means of the parents and their spending pattern prior to separation.
[25] The Applicant concedes that the activities in which the children are engaged are in their best interests. They are being given the opportunity to develop their athletic and musical abilities to meet their potential and in the process are gaining important insight into self-discipline, team work and leadership. Although one might question the necessity of some of the expenses claimed (such as dragonboat races and rock band camp), there can be little doubt many expenses are necessary having regard to the best interests of the children.
[26] Section 7 of the Guidelines allows for the estimate of extraordinary expenses. Rather than undertake a review of each of the dozens of receipts submitted in support of the expenses incurred, I find that an appropriate estimate of extraordinary extracurricular expenses is $2,400 per child per year in the circumstances of this case. Are such expenses reasonable in relation to the means of the parents and their prior spending pattern? I note that together the parties earn not insignificant money, and prior to their separation they did not hesitate to spend money on extracurricular activities beneficial to the children. Although the depth and breadth of those activities have expanded since separation, so too have the parties’ incomes and their ability to contribute. Indeed, the Applicant’s financial statement indicates surplus funds available to contribute to these types of expenses.
[27] I am somewhat troubled with the timing of the Respondent’s request for contribution towards these expenses. The amounts involved are not insignificant and it may be perceived as unfair for the Respondent to incur them without advance consultation with the Applicant or even notice to him of her intention to seek recovery. On the other hand, the Applicant was well aware that the children were participating in all of these activities and was supportive of them. Indeed, even in his application, he references having paid for their extraordinary expenses. In the circumstances it was obvious that he knew of his obligation to contribute. He was aware that expenses were being incurred. He was supportive of the programs being undertaken. It would be patently unfair to saddle the Respondent with all of the costs.
[28] In order to apportion those costs according to the incomes of the parties, it is necessary that I make a finding with respect to the income of the Respondent in the years since separation. Her income is made up of basically two components: Employment income and rental income. Her employment income is readily discernible but must be adjusted downward to reflect union dues. Her rental income presents something more of a challenge.
[29] The Respondent receives rental income from two units in the matrimonial home and from the rental property. With respect to the rental property, I accept her income to be as stated in her income tax returns as the various expenses claimed are reasonable.
[30] The issue is a bit more complicated for the home because of the manner in which certain expenses were claimed. Because the rental units are within the home, and because certain expenses are incurred for the building as a whole, expenses have to be apportioned between that part of the building used by the tenants and that part which is personal use. Notwithstanding that the appraisals attribute about one fifth of the floor space of the home to the rental units, two thirds of the mortgage interest, insurance and property taxes were expensed against the rental income. The result is a reduction in the net rental income claimed by the Respondent. When the amounts are reapportioned to reflect that one fifth properly relates to the rental units, the Respondent’s net rental income increases by $4,000 for 2009, $6,000 for 2010 and $3,200 for 2011. For 2012 I would add an amount similar to 2011.
[31] With these readjustments, the Respondent’s income for the years in question is as follows:
Year Adjusted Income
2009 $62,745.10
2010 $81,332.24
2011 $88,671.99
2012 $88,671.99
[32] Having determined the income of both the Applicant and the Respondent for the years in question, and having found additional expenditures which qualify as extraordinary, the portion attributable to the Applicant is as follows:
Year Applicant’s Percentage Section 7 Expense Applicant’s Share
of Total Income
2009 60 $5,400 (9 mos) $3,792
2010 54 $7,200 $3,888
2011 53 $7,200 $3,816
2012 53 $7,200 $3,816
[33] The result of this calculation is that the Applicant is required to pay to the Respondent on account of section 7 expenses, the sum of $14,760.
The Property Issues
[34] It was agreed by the parties that the Applicant’s pension be divided at source and the amount to be transferred to the Respondent is $120,646.15. It is ordered accordingly.
[35] The Respondent wishes to retain the home and the Applicant is content that she do so. By agreement, then, the home is to be her asset in the determination of the equalization payment. However, the parties are unable to agree upon the net value to be attributed to the home. In my view, the value should reflect its current market value since that is its value to her. The most current appraisal was done by Neil Faddis as of July 27, 2012, and determined a value of $335,000. The Respondent contends that this must be discounted to reflect the cost of roof repairs of about $15,000. The appraiser was not called as a witness to explain whether or not he had accounted for the condition of the roof. The evidence established that the roof requires repair on a fairly urgent basis. The appraiser described the roof condition as “fair” particularizing only that the roof is comprised of asphalt shingles and the owner reports leaking. It is apparent that the appraiser did not examine the roof independently. Had he done so, he would have discovered that its condition is poor and that repair is required. In the circumstances, I agree with the Respondent and the value of the home should be reduced by $15,000 to reflect the costs of replacing the roof. The value of the house is therefore determined to be $320,000.
[36] Also pertaining to the house is the issue of repair work done since separation. The Respondent has provided a detailed list of repair work done to the home, however the list includes payment for chattels that she purchased and many items that amount to general upkeep of the home. Given that the Applicant is sharing in the value of the home as it is appraised today, it is reasonable that he share in the capital expenses associated with the improvement of the property since separation. However, he should not be made to contribute to day to day maintenance of the home when he did not enjoy the benefit of possession during that time. It must also be remembered that the Respondent retained the full amount of the rents received for the house. The only invoices which reflect capital improvements are the furnace replacement of $4,418, and lumber purchases of $651.52 and $635.86. The total amounts to $5,705.38, one half of which is properly the responsibility of the Applicant.
[37] A further issue is who should benefit from the reduction in the mortgage since separation. Although the Applicant has been responsible for much of the delay in getting this matter tried, it must be noted that the Respondent has had sole possession of the home in the interim. In addition, she has retained all of the rental proceeds from the house and has claimed a significant portion of the interest expense in the calculation of her income for tax purposes. In effect, she has used the Applicant’s share of the rent proceeds to pay down the mortgage. In these circumstances, it is appropriate that he benefit equally from the reduction in the mortgage principal. Accordingly, the balance of the mortgage for use in calculating the equalization payment is $40,654.
[38] A further issue for determination is the value of the property owned by the Applicant on the date of marriage. In particular, the parties were unable to agree on the value to be attributed to the home on Southlane Drive which was then owned by the Applicant. The onus is on the Applicant to establish this deduction from his net family property. The evidence established that when he acquired the property about three years before marriage, it was valued at $130,000 and that he paid $10,000 down. The evidence also established that when he disposed of the property about six years later it sold for $156,000. The Applicant’s position is that when the parties married (about 3 years after the property was acquired) the equity in the property would have been $26,000.
[39] I received no evidence to establish to what extent the mortgage on the property was reduced during this period of time. Presumably it was reduced somewhat, but without evidence of the amortization period, interest rate and payments made, it is impossible to discern to what extent. It is likewise almost impossible to determine with any accuracy the extent to which the improvements made before marriage increased the value in the home. The Respondent did concede that prior to her moving in, the house had been raised and a basement installed. There was conflicting evidence on when the basement floor was poured, and the extent of the other renovations that were completed by the parties together. She termed them as substantial and adding significant value to the home after marriage. He termed them as cosmetic and adding little in value. In this case, even if I were to accept the Applicant’s version of the facts, I have no evidence of the value that was added by any particular renovation and no evidence of its value at the relevant date. I have no evidence of real estate market conditions then existing. I am asked to speculate on the increase in value resulting from these improvements between two dates that occurred over 15 years ago. In my view there is not a sufficient evidentiary basis to make such a finding. The evidence does establish that the Applicant had $10,000 in equity when the home was acquired. Given the absence of other evidence I am left with little choice but to set the amount of this deduction at $10,000. It is appropriate to comment on the Applicant’s allegation that the “paperwork” on the property was left in the matrimonial home and it is the Respondent’s fault that it was not produced to the court. Even if I were to accept this as true, I was not provided with evidence of what that “paperwork” entailed. If it included documents from the purchase and sale of the property, that same basic information could have been obtained from the land registry office. If it contained receipts and details of amounts spent improving the home, it would have been of limited assistance because it would still have given no indication of the increase in value of the home resulting from the improvements in question. Accordingly, even if I were to accept the Applicant’s evidence in this regard, it is of no consequence.
[40] A further issue at trial was the value to be attributed to the Saturn motor vehicle retained by the Respondent. The Respondent tendered the bill of sale for the vehicle when it was purchased just days before separation, which showed a price of $1,200. However, contrary to that figure, she had claimed its worth as $2,300 in her original financial statements. In addition, in correspondence directed to her original counsel, she confirmed its value of $2,300 and directed attention to a specific withdrawal from a bank account for the purchase price. The Applicant testified that the car was purchased for $2,300 and that the bill of sale was likely drafted as it was to reduce the tax payable on the purchase. Although the bill of sale is compelling evidence, even more compelling is the Respondent’s admission of value and her specific reference of the price in her letter to counsel. It was clear from the evidence at trial that the Respondent is detail oriented and it strikes me as unlikely that she would have made this representation to her counsel in error, and would subsequently have been mistaken when entering the value of the vehicle in her financial statements. I find the value of the vehicle at separation to have been $2,300.
Other
[41] At the date of separation the parties had a joint line of credit with the Bank of Nova Scotia. At or about the date of separation the Applicant drew $23,018.86 from that joint line of credit. It is agreed that exclusive of that draw, the balance on the date of separation was $70,203 and that in the calculation of the equalization payment, that amount is to be borne by the Respondent. The additional amount of $23,018.86 is to be paid by the Applicant. On a practical basis, this amount will be assumed by the Respondent on her acquisition of the home and it is therefore appropriate that the equalization payment due by her be reduced by that amount (or such other amount as may now be owing by virtue of that withdrawal by the Applicant).
[42] By order of Justice O’Neill, the Applicant was to make the required payments on the joint line of credit from March 1, 2010. The Applicant acknowledges that he is in default of $14,417.22 on the line of credit, as required by the order of Justice O’Neill, and this has been paid by the Respondent. It is appropriate that this amount be set off against the equalization payment due from the Respondent.
[43] The Applicant owes costs awards totalling $3,750 and it is appropriate that this amount be set off against the equalization payment due from the Respondent.
Summary
[44] The equalization of the parties’ net family properties is determined to be as follows:
Applicant Respondent
$320,000 Mat. Home
$105,000 Rental Property $105,000 Rental Property
$25,000 Ford Exp. $2,300 Saturn Wagon
$20,000 RV and Business $15,663 LIRA
($8,382.35) LOC re RV ($8,382.35) LOC re RV
($70,203) Jt LOC
($996.64) VISA
($40,654) Home mortgage
($72,011.50) Rental mortgage ($72,011.50) Rental mortgage
($1,021.44) Overdraft
($10,000.00) Property DOM ($30,000.00) Property DOM
$59,606.15 NFP $219,694.07 NFP
[45] The required equalization payment based upon this allocation of assets and debt is $80,043.96 owing by the Respondent.
Set Offs Against Equalization Payment
[46] It is appropriate to set off against the equalization payment, various amounts due to the Respondent from the Applicant, namely: (1) The sum of $23,018.86 (subject to adjustment), being the amount drawn on the joint line of credit by the Applicant at or about the date of separation; (2) The sum of $14,417.22, being the amount of arrears on payment of the line of credit owed by the Applicant by virtue of the order of O’Neill J.; (3) The sum of $3,750, representing the outstanding costs awards; (4) The sum of $19,754.41, representing the retrospective child support award calculated above; (5) The sum of $14,760, representing the Applicant’s contribution to section 7 expenses calculated above; and (6) The sum of $2,852.69, representing the Applicant’s share of capital improvements to the matrimonial home since separation. The total of these set off amounts is $78,553.18, subject to possible adjustment as set out in (1).
Consent Matters
[47] On September 12, 201, I made an endorsement in which it was indicated that certain provisions had been agreed upon and would be included in any final order. Counsel are directed to my endorsement and are to include in the final order those matters indicated therein.
Costs
[48] In the event the parties are unable to agree on costs, they may make written submissions to me within 60 days of release of this decision. Submissions are to be limited to five pages plus attachments.
The Honourable Mr. Justice R.D. Gordon
Released: November 30, 2012
COURT FILE NO.: D18871-09
DATE: 2012 11 30
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Marc Taillefer
Applicant
– and –
Gillian Kaara Taillefer (Schultze)
Respondent
REASONS FOR JUDGMENT
R.D. Gordon J.
Released: November 30, 2012