ONTARIO
SUPERIOR COURT OF JUSTICE
Court File No.: FS 04-051882-00
Date: 2013-04-26
B E T W E E N:
JOSEPH SERAFINI
P. GRUNWALD, for the Applicant
Applicant
- and -
LESLEY SERAFINI (REID)
Self
Respondent
Heard: March 18, 19 and 20, 2013
REASONS FOR JUDGMENT
Van Melle, J.
[1] Joseph and Lesley Serafini started living together on May 15, 1989, married on November 12, 1994, separated January 28, 2004 and divorced in 2006.
[2] During their marriage they had four children: Max who passed away in 1998 at the age of 2; Jack born December 2, 1997; Lilly born March 13, 2000; and Eli born July 17, 2002.
[3] The issues of custody and access have been resolved. The children have their primary residence with Lesley and Joseph sees them Wednesday evenings, alternate weekends and shares holiday times and long weekends.
[4] The issues for trial are:
a) Spousal support – ongoing and arrears;
b) Child support – ongoing and arrears;
c) Section 7 expenses:
d) Equalization.
SUPPORT ISSUES
[5] The parties separated in January of 2004. In February of 2005 Justice Snowie made an Order, on consent, which provided that Joseph was to pay spousal support to Lesley in the amount of $2,250.00 per month and child support in the amount of $1,808.00 based on an annual income of $114,500.00. The order also provided that the parties were to pay special or extraordinary expenses in proportion to their incomes.
[6] At a case conference before Justice Baltman on January 29, 2007, Joseph consented to an order that he increase his child support payments (base amount) to $2,011.00 per month based on his income of $111,813.00 beginning February 1, 2007. In reality, his income, for child support purposes for 2007 was $114,676.00.
[7] After Justice Snowie's Order in 2005, Joseph asked Lesley if she would agree to opt out of the Family Responsibility Office collection regime. She agreed. Joseph paid the amounts pursuant to the Snowie and Baltman Orders until 2009. He stopped paying spousal support in August 2009 and child support in December 2009. This meant that when Joseph stopped making the spousal support payments in 2009 and the child support payments sometime later, Lesley had to return to court to enforce the Court Order.
[8] In November of 2009, Joseph was served by Family Responsibility Office with a notice that it was going to suspend his driver’s licence. He sought and obtained a Refraining Order. On January 12, 2011, Justice Hourigan made an order that pending trial Joseph was to pay without prejudice child support of $1,400.00 and spousal support of $600.00 per month commencing February 1, 2011.
[9] Joseph’s position at trial is that he has over paid support. He says that his income for support purposes has been as follows:
YEAR
INCOME
2005
$114,673
2006
$114,679
2007
$114,676
2008
$114,674
2009
$59,617
2010
$36,000
2011
$52,075
2012
$55,200
[10] I note here that his income for child support purposes is higher than the income on his Income Tax Returns, because he has added back non-taxable income relating to benefits and Employment Insurance exemption adjustment. I commend Joseph and his counsel for reflecting his income in this manner.
[11] Joseph has recalculated his spousal and child support obligations from 2005 onward using the Child Support Guidelines and the mid-point value of the Spousal Support Advisory Guidelines. Yet, he consented to the spousal support amount in 2005. Certainly prior to 2008, based solely on his numbers, there should be no adjustment of spousal support. As well, based on his calculations, it appears that he did in fact underpay child support during that time period in the amount of $4,078.00.
[12] It is important to note that the case law does not mandate a court to use the midpoint on the SSAGs in fixing spousal support. In any event, Joseph consented to the amount of spousal support; the amount was well in the range of spousal support payable, he cannot now say that it was too high.
[13] Justice Mossip released a decision on March 27, 2013 -- Laurain v. Clarke, 2013 ONSC 726 wherein she said at paragraph 64:
In my view trial courts rarely dramatically affect the final arrears of support owing by a “re-jigging” of the numbers.
[14] Joseph testified that in 2004 and 2005, his business interests were affected by the speciality channels that were coming into the marketplace in Canada. As well, business in the United States started to retract because the Canadian dollar was gaining in strength, eventually reaching parity with the American dollar. From his own representations, his income was not affected until 2009 when he says he earned $59,617.00. As seen from the table above, according to him his income decreased from 2009 to today.
[15] Lesley takes the position that Joseph’s true income was as follows:
YEAR
INCOME
2004
$189,928
2005
$169,924
2006
$195,797
2007
$139,971
2008
$112,935
2009
$55,496
2010
$24,000
[16] These figures were arrived at by Mr. Michael Moran, the expert called by Lesley to testify as to Joseph’s real income. Mr. Moran is a Chartered Business Valuator, Chartered Accountant who has been conducting forensic investigations in family law matters for many years. His report is dated January 23, 2012 and was served on Joseph in February 2012. For the most part, I find his report very compelling. Joseph’s counsel tried to challenge Mr. Moran during cross-examination on a number of issues. Yet, as stated above the report was served more than a year ago. According to Mr. Moran, at no time prior to cross-examination was he advised that Joseph disagreed with any of the presumptions underlying the report. Counsel for Joseph pointed out that that he was not obligated to respond to the report. This may be so, but surely one of the goals of early disclosure of experts’ reports is to promote and facilitate settlement. Very unfortunately, this did not occur here.
[17] For the years 2004 to 2008, I am prepared to accept Joseph’s figures (from Exhibit 15) as reflecting his true income for support purposes. I do this because Mr. Moran increases Joseph’s income to reflect cash that was available to him in the business. However, in calculating the values of Joseph’s business interests for equalization purposes, I accept that there was money owing to him from the business at separation which I believe addresses the allegation that he did not take from the company all the money that was available to him.
[18] However, Mr. Moran in his report described Joseph’s lifestyle since 2009. According to his Financial Statement sworn February 11, 2012, Joseph’s income now is $3,000.00 per month despite his testimony at trial that he earns $55,000.00 per year. Joseph is remarried to Marissa Collyer. At trial he testified that he does not pay any of the housing expenses connected with living in her house, yet on his financial statement he says he has a housing expense of $1,003.18 per month. He shows utility expenses as well. He testified that he is able to write-off for income tax purposes some of the housing expense as he works from the house. Fortunately for Joseph, his spouse, who works in the same industry as he does, earns some $84,000.00 per year.
[19] Mr. Moran described a lifestyle where Joseph was travelling extensively. He went to Hawaii on a number of occasions. He went to Florida. He went on at least one cruise. During cross-examination, Joseph’s counsel seemed to suggest that the Hawaii trips were all business related and that Joseph was reimbursed for these expenses. As well, he suggested that Ms. Collyer’s parents paid for the cruise. As I already stated, Joseph had Mr. Moran’s report in February of 2012. If there had been proof that he had been reimbursed for these expenses, or that Ms. Collyer’s parents paid for the cruise, surely this proof would have been adduced at trial.
[20] Of interest is that some of the Hawaii trips took place after December 31, 2009, the date after which Joseph testified that he no longer had any business interests in the Hawaii company. He flew to Honolulu with his wife on January 1, 2010. He incurred additional resort, restaurant and bar expenses in Honolulu for the period that ended on February 13, 2010.
[21] Another interesting expenditure is a charge of $2,897 related to the New Air Aviation flight training school in New York in September 2011. Joseph did not provide any explanation for this expenditure.
[22] Mr. Moran also testified as to a number of positions for which Joseph would be qualified and as to income he could earn in those positions. I find his testimony in that regard to be somewhat speculative, but given Joseph’s lifestyle, I find it appropriate to impute an income to him of $75,000.00 per year from 2009 onward.
[23] Joseph did not make the disclosure that he was ordered to make by Justice Langdon on August 25, 2011. That disclosure would have assisted in the determination of his actual income. Joseph did not provide a credible explanation as to why the disclosure was not forthcoming.
[24] The Spousal Support Advisory Guidelines suggested a spousal support payment to Lesley in 2005 of $1,786 to $2,506.00 for an indefinite period, with a maximum duration of 17 years. This was based on the parties’ incomes at the date of separation. Lesley went back to work full-time in 2009. She earned $47,877.00 in 2009; $57,179.00 in 2010; $54,911.00 in 2011 and $58,585.32 in 2012. In view of the income that I have imputed to Joseph, I find it appropriate to reduce spousal support to $1,000.00 per month from January 1, 2009 and to terminate spousal support with the last payment of $1,000.00 being payable on January 31, 2011.
[25] Child support shall be adjusted retroactively to January 1, 2009 to $1,444.00 per month.
[26] The Family Responsibility Office is directed to recalculate the arrears using these figures.
SPECIAL AND EXTRAORDINARY EXPENSES
[27] Both parties presented schedules setting out the special and extraordinary expenses each claim they have paid.
[28] Lesley incurred baby-sitting expenses for the children. She testified that she contacted the police department to find out the legal age that children could be left alone. She was told that if a child was 11 years old, he could be left in charge of his siblings. She felt that Jack was mature enough to be left in charge of his brother and sister. Subsequently she received a visit from Children’s Aid who said that there had been a complaint that the children were left unsupervised. The complaint was initiated by Joseph. As a result, Lesley arranged for babysitting until Jack was 12. Despite Joseph’s initiation of the complaint, he has never paid his proportionate share of the childcare expenses.
[29] There is no question that the Child Support Guidelines contemplate child care expenses incurred as a result of the custodial parent’s employment as a special or extraordinary expense.
[30] For the other extraordinary expenses claimed one must bear in mind the wording of section 7(1.1):
For the purposes of paragraphs (1)(d) and (f) [extraordinary expenses for extracurricular activities], the term "extraordinary expenses" means
(a) expenses that exceed those that the spouse requesting an amount for the extraordinary expenses can reasonably cover, taking into account that spouse's income and the amount that the spouse would receive under the applicable table or, where the court has determined that the table amount is inappropriate, the amount that the court has otherwise determined is appropriate; or
(b) where paragraph (a) is not applicable, expenses that the court considers are extraordinary taking into account
(i) the amount of the expense in relation to the income of the spouse requesting the amount, including the amount that the spouse would receive under the applicable table or, where the court has determined that the table amount is inappropriate, the amount that the court has otherwise determined is appropriate,
(ii) the nature and number of the educational programs and extracurricular activities,
(iii) any special needs and talents of the child or children,
(iv) the overall cost of the programs and activities, and
(v) any other similar factor that the court considers relevant.
[31] In response to Lesley’s claim for section 7 expenses, Joseph has provided a list of expenses that he says he incurred on behalf of the children. I do not accept many of his items as properly falling into the extraordinary expense category. Skiing is not an expense to which Lesley, given her income, should have to contribute. She also does not have to contribute to Theatre Orangeville tickets for Lilly, summer camp for the children or school supplies. It is ironic that Joseph is claiming these extravagant expenses during a time when he says he was not earning much money and he was accumulating significant arrears of child and spousal support.
[32] Joseph claims hockey photos as an extraordinary expense. Photos are a tangible item, presumably for Joseph’s enjoyment and if he wanted them, he has to pay for them.
[33] He shows clarinet rental. In my view this would normally be an extraordinary expense, but I accept Lesley’s testimony that she rented a trumpet for one of the children, but did not put it on her list as she did not believe that it was an extraordinary expense. Her rental of an instrument equals Joseph’s rental of an instrument.
[34] Joseph shows an item Winterlude on the list of extraordinary expenses. The amount that he has charged for this ($397.90) is actually a payment to the Embassy Suites Hotel. This appears to be a recreational family trip and is clearly not an extraordinary expense.
[35] I have allowed all the music lessons and the dance lessons as extraordinary expenses. These total $3,721.48. He will receive a credit for one half of this amount namely $1,860.74.
[36] I did not allow the camp expense, as he did not have the children on a full-time basis and did not have to send them to camp. There is no evidence before me that the camp expense was discussed with Lesley.
[37] Lesley has been trying to enforce Justice Snowie's Order regarding extraordinary expenses for years now. It appears that each judge asked to deal with this issue felt that a trial date was looming and that this issue could be left to trial.
[38] One of Lesley’s extraordinary expenses involves Eli’s enrolment in rep hockey. Prior to putting him in rep hockey, Lesley sent an e-mail to Joseph seeking his opinion. He replied that he thought it would be a good idea to enrol Eli in rep hockey. Subsequently when Lesley presented him with a copy of the bill for rep hockey he refused to pay.
[39] I am satisfied that the expenses enumerated by Lesley are appropriate extraordinary expenses. I also accept her calculation which is Exhibit 26. I find that Joseph owes Lesley $12,761.49 ($14,622.23 less the credit of $1,860.74.)
EQUALIZATION
[40] There are two issues in connection with the equalization calculation. The main issue on equalization involves the valuation of Joseph’s business interests. At the date of separation he held the following:
a) 50% interest in Crunch Recording Group Inc.
b) 50% interest in Crispy Publishing Inc. formerly Nu Sound Productions Inc.
c) 33% interest in Soundminer Inc.
[41] At trial, Joseph’s witness regarding valuation was his cousin, Gene Pettinelli. Mr. Pettinelli is a chartered accountant practising in Hamilton. He testified that he valued the businesses himself even though he has 4 Chartered Business Valuators on staff. His report consists of one page, which is Exhibit 21 to this trial.
[42] In his letter, dated March 25, 2004 wherein he summarizes the estimated fair market values of all the outstanding shares of the companies in which Joseph had an interest at the date of separation, he says:
We have not been engaged to prepare a formal valuation report. We have extensive working paper analysis and calculations to support the above-noted estimates. This information will be furnished upon request.
[43] On November 18, 2005, Justice Corbett ordered that:
Melanie Russell of Kalex Valuations Inc. review the business valuations provided by Gene Pettinelli and contained in his letter to Peter A. Grunwald dated April 5, 2004 and the working papers utilized by Gene Pettinelli in respect to same regarding Crunch Recording Group Inc., Crispy Publishing Inc., and Soundminer Inc., and that Melanie Russell do so at the previously agreed cost not exceeding $7,000.00, with each of the applicant and the respondent to pay for half of the costs of the aforesaid review.
[44] Ms. Russell prepared a “Without Prejudice Draft Dated 4/21/2010 – for discussion purposes only – subject to change.”
[45] Joseph argues that I should prefer the Pettinelli valuation to the Kalex valuation as the Pettinelli valuation is not in draft form. I suspect that the Kalex valuation was in draft form to enable the parties to provide comments and/or additional information upon which basis the report would then be finalized.
[46] At trial, although I allowed Mr. Pettinelli to testify, I did not qualify him as an expert in valuing of businesses. He acknowledged under cross-examination that he had not followed the guidelines of the Chartered Business Valuators in preparing the valuation. He is the accountant for the companies as well as being Joseph’s cousin. His report is a one-page letter that does not set out the basis upon which he made his calculations. He does not explain how he has calculated the values of the minority interests. His e-mail to Mr. Grunwald setting out the updated values of the companies was not entered into evidence.
[47] Rule 20.1 of the Family Law Rules sets out the duty of experts. Rule 20.1 (1)(a) stipulates that the duty of an expert is to provide opinion evidence that is fair, objective and non-partisan. I do not have any faith in the conclusions reached by Mr. Pettinelli and find that he is indeed in a conflict position.
[48] While the Kalex report may be a draft report, there was no evidence to significantly challenge the conclusions reached by Melanie Russell. Her report is thorough and well annotated. I chose to use the figures set out in the Kalex Report. The Pettinelli report cannot be accepted as evidence of the value of the business interests because the author was not an expert; did not employ proper techniques and as I have already stated, was in a conflict position.
[49] In the Kalex report, Ms. Russell sets out that, as of the date of separation there was money owing to Joseph from Crunch Recording Group Inc. and from Crispy Publishing Inc. She states in a footnote that those amounts should be shown as assets in his Net Family Property Statement.
[50] The other issue arising from the calculation of the parties’ respective net family properties concerns the costs of disposition of the matrimonial home. Title to the matrimonial home was registered in Lesley’s name. This was done to protect Joseph from creditors should the need arise. The sale of the matrimonial home closed on March 31, 2004, two months after the date of separation. Joseph’s Net Family Property statement has the value of the matrimonial home as at the date of separation on Lesley’s side of the ledger. He does not, however, show the costs of disposition. In fact, during argument, Mr. Grunwald did not want to allow Lesley the penalty for breaking the mortgage as a cost of disposition. After I asked him about this, he appeared to concede that the mortgage penalty should be shown as a debt to Lesley. As the matrimonial home was actually sold, Lesley is entitled to deduct all costs of disposition. She is entitled to deduct the real estate commission of $24,182.00 and legal fees of $718.08.
[51] I attach as schedule “A” to this Judgment a Net Family Property calculation.
[52] Joseph’s Net Family Property is $572,957.44 and Lesley’s is $197,895.34. Joseph owes Lesley $187,531.05 as an equalization payment.
JUDGMENT
[53] The following Judgment will issue:
a) Joseph is to pay ongoing child support in the amount of $1,444.00 based on an imputed income of $75,000.00 commencing January 1, 2009;
b) Spousal support is terminated with the last payment being January 31, 2011;
c) Joseph is to pay $12,761.49 as his contribution for past extraordinary expenses,
d) Joseph is to pay 50% of all extraordinary expenses incurred by Lesley; Lesley is to present Joseph with an accounting of all extraordinary expenses every 6 months and Joseph is to pay his share within 15 days;
e) Joseph is to make an equalization payment to Lesley in the amount of $187,531.05; and
f) The Family Responsibility Office is directed to recalculate the arrears owing using the support numbers in this Judgment.
[54] I will entertain brief written submissions on costs. Lesley has 15 days from today’s date to serve and file her submissions; Joseph has 10 days to respond.
Van Melle J.
Released: April 26, 2013
COURT FILE NO.: FS 04-051882-00
DATE: 2013-04-26
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
JOSEPH SERAFINI
Applicant
- and –
LESLEY SERAFINI (REID)
Respondent
REASONS FOR JUDGMENT
Van Melle J.
Released: April 26, 2013