ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: FS-12-11
DATE: 20121218

BETWEEN:

Corolina Froehlich-Fivey Applicant – and – Jeffrey Richard Fivey Respondent

Andrew Feldstein, for the Applicant

Bonnie Oldham, for the Respondent

HEARD: November 16, 2012

O’Neill, j

REASONS ON MOTION

[ 1 ] PART A: INTRODUCTION

[ 2 ] The within motion was argued by counsel in Superior Court at Parry Sound on November 16, 2012. In the Applicant’s factum for the long motion, under Part 1, the Applicant sought fourteen enumerated orders in relation to the motion. However, it became clear that once submissions and arguments by counsel were completed, the two outstanding issues to be resolved, on a temporary basis were the following:

i. The income of the Respondent for the purposes of payment of temporary child and spousal support.

ii. Payment of interim disbursements in the sum of $8000 to permit the Applicant to complete a business evaluation and an income determination.

[ 3 ] At the conclusion of argument, I requested counsel to each prepare an executive summary dealing principally with the following issues:

i. Shareholder loans and working capital.

ii. The issue with respect to interim disbursements.

[ 4 ] The Applicant’s executive summary is dated November 26, 2012. The Respondent’s executive summary is dated December 3, 2012. I have reviewed these documents, as well as the considerable affidavit materials and exhibit materials filed by each of the parties in relation to the November 2012 motion. The following sets out my reasons with respect to the issues raised on the motion.

[ 5 ] PART B: THE SPECTRUM OR RANGE WITH RESPECT TO THE RESPONDENT’S INCOME

[ 6 ] The Applicant’s position as to the outside or highest level with respect to the Respondent’s income is summarized at pages 2 and 3 of his executive summary. That summary puts the Respondent’s income at $261,442.28 to $350,096.00 (inclusive of gross up).

[ 7 ] However, on the arguing of the motion in November, it became clear that the Applicant was suggesting that the Respondent’s income be fixed in the range of approximately $200,000 for purposes of fixing child and spousal support. Indeed, this position is set out at paragraph 29 of the Applicant’s executive summary where the request is made that the court impute the Respondent’s income at $199,847.00 per annum. At this amount, it is suggested that the Respondent would pay $1948.00 per month in child support and $4139.00 per month in spousal support (the mid-range amount of the SSAG).

[ 8 ] The gap in the income positions of the parties became clear on the arguing of the November 2012 motion, and it is clear following my examination of the Respondent’s executive summary dated December 3, 2012. In court, the Respondent suggested that a reasonable figure for assessing his income was $100,000.00. At paragraph’s 19 and 20 of the Respondent’s executive summary, counsel submitted that the Respondent’s income be fixed at $103,759.00 or the amount of $124,567 (being the amount determined in the income determination report for 2011 prepared by Westcott and Larkin LLP – Chartered Accountants).

[ 9 ] The Applicant also retained a business evaluator in order to determine the income of the Respondent and valuation of the business (CEASI). At paragraph 26 of her affidavit sworn October 30, 2012, the Applicant indicated that she required further funds in order for the valuator to complete a critique valuation and an income determination. She stated in paragraph 26, in part, as follows:

“The fees associated with same totalled $8000. However, as I have a lack of funds, I was unable to provide the further retainer for the business valuator, and as such I do not have his valuation and income determination for the purposes of this motion.”

[ 10 ] Exhibit N to the Applicant’s affidavit is a letter from Paul Mandel dated October 4, 2012. That letter states in part as follows:

“We are going to prepare a limited critique response to the valuation. The estimated fees are $3000.

We are going to prepare a calculation of his guidelines income for 2009 to 2011 for which the estimated fees are $5000. Once we have an idea where the numbers will come out, we will contact you and Mr. Feldstein before continuing with the report.

Please send in a retainer for $4000.”

[ 11 ] The Respondent’s report is dated November 6, 2012. At page 1 of her report, the writer, Christine Larkin, states:

Assignment

We have been requested to determine Jeff Fivey’s income available for support purposes pursuant to the Federal Child Support Guidelines (the “Guidelines”) and/or Family Law Act (Ontario) (the “Act”).

We understand that our report is required in connection with the separation/divorce proceeding of Jeff Fivey and Carol Froehlich Fivey.

Our report has been prepared in conformity with the Practice Standard of the Canadian Institute of Chartered Business Valuators. In conducting our assignment and arriving at our conclusion we act independently and objectively. Our compensation is not contingent on an action or event resulting from the use of this report.

Conclusion

Based upon the scope of our review and subject to the assumptions, qualifications and restrictions as noted herein, we conclude that Jeff Fivey’s income available for support is as follows:

2009 2010 2011 2012/2013 (expected)

$101,841 $115,413 $124,567 $103,579

[ 12 ] When the motion was argued before me in November, I did not have the benefit of Mr. Mandel’s critique report. At paragraph 3 of the Respondent’s executive summary, the Respondent indicated that Mr. Mandel did communicate and discuss Ms. Larkin’s report with her at length. It is clear that until the issue with respect to Mr. Mandel’s fee requirements is resolved, neither the Applicant, the parties nor the court will have the benefit of a critique report.

[ 13 ] PART C: SHAREHOLDERS LOAN AND WORKING CAPITAL

[ 14 ] The Applicant’s position is that the net income of the company in the amount of $17,256.00 as per the December 31, 2011 year end corporation financial statement is available to be included as income of the Respondent for consideration of the court in making temporary support orders. The Respondent’s position is that the growth in the loan to Carol Fivey (from $15,000 as of the date of separation to $86,700 currently) is further evidence of working capital shortfall. The parties have expended considerable time dealing with the issue of shareholder loans and whether the appropriate or accurate amount has been set out in the financial statements. On a temporary motion, this court cannot engage in a forensic examination of this issue nor can it make an order which could be considered a final order in relation to the financial statements and the corporations accounting structure. Suffice it to say that there is evidence before me that sets out a running tally of the loan from Carol Fivey. The Respondent’s business valuator, (and now the accountant for the business) has suggested adjusting entries in order to deal with this loan. This issue is dealt with in schedule 3 to Ms. Larkin’s report under note 5.

[ 15 ] I cannot conclude, on a temporary basis, without additional information that might be available in a critique report, that the shareholder loan issue and the working capital shortfall issue are otherwise incorrect or not as dealt with by Christine Larkin in her report. Furthermore, the affidavit materials and exhibits and the submissions of counsel for the Respondent do, at least under these present circumstances, support the fact that there has been an increase in the loan monies with respect to Carol Fivey. And there is merit in Christine Larkin’s valuation report note that: “The ability of the Company to continue as a going concern will be dependent on not removing any additional funds from the Company before the shortfall is repaid and creditors agreeing to drawn out terms on their receivables from the Company”.

[ 16 ] PART D: DETERMINING THE RESPONDENT’S INCOME FOR SUPPORT PURPOSES

[ 17 ] In my view, the fairest and most reasonable approach to take with respect to determining the Respondent’s income available for support is as set out under the column 2011- Schedule 1 – contained in the Larkin valuation report. That determination utilizes Mr. Fivey’s line 150 income, income available from Canadian Environment Air Services Inc, as well as personal benefits included in corporate expenses. That income totals $124,567.00 for the year end December 31, 2011. It is important to indicate that a report that is prepared in conformity with the practice standards of the Canadian Institute of Chartered Business Valuators has the potential to assist the court in its income determination findings.

[ 18 ] I appreciate that the Larkin report does not include the income paid to the Applicant of $42,825.00. This income has now been replaced by the approximate sum of $30,000.00, representing an annual salary paid to Carol Fivey.

[ 19 ] But this report does accept that certain personal benefits are included in corporate expenses (even accepting that for 2012 and 2013, home office expenses will not be included as available income).

[ 20 ] The sum of $124,567.00 represents a reasonable and fair calculation, at least on a temporary basis, of the income available to the Respondent for support purposes. Any other approach, without the benefit of a critique report or a report from the Applicant, would require this court to pick and choose amongst accounting numbers, income numbers and expenses, and in short to create, make or write a new income report. In my view that approach is to be avoided in motions involving temporary support.

[ 21 ] Having said that, I appreciate that the $800 in monthly rent was not included in the December 31, 2011 report. But I accept that this cash money was at that time paid to both the Applicant and Respondent and it is also clear that effective April 2012, it has been included in the accounting records of CEASI. This rental income will appear, therefore, in subsequent financial statements, and it can be taken into account when the court is required to convert a temporary support order into a final court order.

[ 22 ] To repeat, I do not believe it appropriate at this juncture to pick apart, substitute or delete various income and expense amounts so as to arrive at a ‘forensically accurate’ report. This cannot be the standard on motions for temporary support.

[ 23 ] This is an approach that is in accord with case law, for example, the decision Dickie v. Dickie 2001 28203 (ON SC) , [2001] O.J. No. 2885 where the court indicated that at the interim stage, “it is too time-consuming and expensive to spend court time litigating the payor spouses allegations of reduced income for the current year, where such allegations were challenged but not contradicted by the other spouse” (see para. 24 of Applicant’s executive summary). In my view, the income determination as at December 31, 2011 is the most reliable indicator, on a temporary basis, of the income of the Respondent available for support purposes.

[ 24 ] We know that Mr. Mandel required the further sum of $4000 to commence the concluding work on his critique report. He may have been able to produce a draft critique report for this sum. But these monies were never paid to him and the court is left, on a temporary motion, with only the report of Christine Larkin.

[ 25 ] What is somewhat troubling to me, and what might be borne out if it is necessary for me to deal with the issue of court costs, is why both parties were prepared to expend considerable time, resources and legal expense arguing the issue of temporary support, in lieu of finding some solution to Mr. Mandel’s reasonable request that he receive the sum of $4000 as a further payment toward completing his critique report. I cannot be certain at this stage, but it may well be the case that of the $8000 required by Mr. Mandel to complete his report, that the parties themselves have expended, on a combined basis a sum likely substantially greater than the remaining monies required by the Applicant’s valuator to complete his report.

[ 26 ] PART E: CONCLUSIONS

[ 27 ] In all of the circumstances herein, and for the reasons outlined, I conclude for the purposes of determining interim support that the Respondent’s available income be fixed at $124,567.00. Accordingly, his child support payment will be fixed at $1287.00 per month and the mid-range spousal support payment will be fixed at $2258.00 per month.

[ 28 ] As to interim disbursements, I conclude that it is fair and just that the Respondent pay to the Applicant the sum of $4000.00, representing the monies now required by Mr. Mandel to commence completion of his critique report. To the extent that there is a balance owing to Mr. Mandel of $4000.00, as some point in the near future, I conclude that responsibility for payment of the final balance in that expected amount should rest with the Applicant.

[ 29 ] Accordingly, for the reasons herein outlined, an order is made as follows:

i. The Respondent shall pay to the Applicant, for the support of the children Christine Froehlich-Fivey, born November 21, 1993 and Stephanie Froehlich-Fivey, born August 31, 1996, the sum of $1287.00 per month commencing December 1, 2012 and continuing on the first day of each month thereafter until further order of the court.

ii. The Respondent shall pay to the Applicant, for temporary spousal support, the sum of $2258.00 per month commencing December 1, 2012 and continuing on the first day of each month thereafter until further order of the court.

iii. The Respondent shall pay to the Applicant, for interim disbursements, the sum of $4000.00 payable on or before January 31, 2013.

[ 30 ] The orders made herein are without prejudice to the issue of retroactive support.

[ 31 ] I have reviewed the Applicant’s Notice of Motion and I have considered the submissions made by the parties both on the hearing of the motion and as outlined in their executive summaries. It seems to me that most of the remaining orders requested by the Applicant have either been agreed to on consent, or are capable of resolution without the court making an order on a contested basis. If this is not the case, the parties may contact the Trial Coordinator at Parry Sound and schedule a further one hour motion at which time submissions may be made with respect to collateral or corollary orders that either party may be seeking on a temporary basis.

[ 32 ] The issue of costs with respect to this motion remains unresolved. The costs issue shall be dealt with as follows:

i. The Applicant shall forward a Bill of Costs and a short written submission setting out her position on costs. The costs submissions shall be filed by January 7, 2013.

ii. The Respondent shall file his responding costs submissions including his Bill of Costs by January 17, 2013.

[ 33 ] Order accordingly.

Justice J.S. O’Neill

Released: December 18, 2012

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: Corolina Froehlich-Fivey Applicant – and – Jeffrey Richard Fivey Respondent REASONS on motion J.S. O’NEILL

Released: December 18, 2012