CITATION: Stoodley v Klein, 2013 ONSC 3058
COURT FILE NO.: 06-489
DATE: May 30, 2013
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Jeffrey Stoodley, Applicant
A N D:
Shawna Klein, Respondent
BEFORE: The Honourable Mr. Justice Robert J. Nightingale
COUNSEL: Jeffrey Stoodley - Self Represented
Renee Roy, for the Respondent
HEARD: April 29, 2013
E N D O R S E M E N T
[1] The Respondent mother brings this motion for payment of significant child and spousal support payable by the Applicant. Her allegation is that the Applicant is intentionally unemployed or underemployed and she requests that income be imputed to him for support purposes in the amount of approximately $386,000 annually. The Applicant has filed responding affidavit material and there has not yet been any questioning by the parties on their documents filed.
Factual Background
[2] The parties have three dependent children Emily, 14, Jacob, 13, and Heather, 10. They married in 1999, reconciled after an initial separation and separated again in 2010. Emily and Heather reside with the Respondent and Jacob resides with the Applicant.
[3] The Applicant’s Notices of Assessment regarding his income as a consultant in 2010 was $69,000, $70,000 in 2011 and $78,000 in 2012.
[4] The Respondent did not believe that this income was accurately stated even after taking into possible legitimate business expenses relying on an email provided by the Applicant to her in October 2011 wherein he said he was making a salary of $250,000 a year and that he would take home $130,000 a year.
[5] The Applicant explained in his affidavit that he was telling his wife at the time that it appeared that he was “taking home after taxes” $130,000 per year which would be the equivalent of $250,000, which was not the case.
[6] The contract the Applicant signed with Questrade on May 31, 2010 paid him $130,000 including GST per year as a consultant through his company Exsys Inc. up to June 30, 2010 and $145,600 per year including HST effective July 1, 2010.
[7] The Respondent’s evidence was that in April 2011 the Applicant submitted his income information to his bank indicating at that time that he was earning $130,000 per year. The Applicant did not dispute that evidence and in his own affidavit, filed a business plan for his proposed company Green Heat Purification Inc. of August 2012 wherein he stated he had been a successful technical architect and consultant for the past 15 years and had positions where he made over $150 per hour.
[8] The Applicant’s financial statements confirmed that he received consulting fees from two other companies after Questrade through Exsys Inc. from January 11, 2012 to May 25, 2012 of $66,425.
[9] The Applicant ceased that consulting business in the summer of 2012 and began this company Green Heat Purification that fumigated bed bugs and it is the income that he earned from this business since that time that is the main issue in dispute.
[10] The Applicant’s evidence is that he lost his three technical consulting jobs with Questrade, Vector Aerospace and Flex Solutions that he had from 2010 to 2012 because he had three criminal records which I understand to be involving domestic assault against the Respondent. The Respondent agrees that he was fired from those three jobs not because of his criminal record but rather because he was addicted to cocaine, had stolen $10,000 and a laptop from his employer to purchase drugs.
[11] Her evidence was that the Applicant received approximately $100,000 on the sale of his bedbug company business. However, on reviewing the documents including the reporting letter of the lawyer acting on the sale of that business, it is clear that that sale was not completed until February 28, 2013. The sale, which the Applicant swore was not announced until January 2013, was for $100,000 and $40,000 was provided to the company Green Heat Purification Inc. which the Applicant swore was not income but simply used to pay a massive amount of debt accumulated for the business. The remaining $60,000 was provided to the lawyer for the company. The lawyer reported that the company’s bank debt of $22,540 was paid from the sale proceeds held in trust and after other minor disbursements, the company received $28,790. Again, this was all in 2013 not 2012.
[12] The Respondent indicated that Green Heat Purification was a business failure which cost him in that 1 year period $90,000 of his own money. There is some evidence in support for that, although it is quite limited and rather speculative, as his original business plan forecasted gross revenues of $600,000 for the first year.
[13] Unfortunately, the gross revenues, at least according to the financial statements produced, were approximately $85,500 from May 19 to August 16, 2012 and approximately $181,000 from then until January 2013 totalling only approximately $266,000. Moreover there was allegedly a 30% failure rate of Green Heat’s initial work requiring the job be done again for free.
[14] The Respondent alleges that there are other companies of the Applicant known as Pure Heat Purification Inc. or Pure Heat Purification Limited in 2013. The Applicant stated that he was not aware of these two companies but rather states that his two business companies were Green Heat Purification Inc. and also a company known as Green Heat Pest Elimination Inc. in which he states he invested $40,000 of his own income in 2012 to build the business but which he says incurred substantial losses along with Green Heat Purification Inc. Both were allegedly business failures.
[15] The Respondent relies on an email message from the Applicant to his former partner of June 23, 2012 wherein he refers to the company’s daily revenue valued at $2500. That may be but again that would not allow for the usual expenses incurred that would come off that in calculating the actual daily profit of the company.
[16] Lastly, the Respondents filed an affidavit from her sister Laura Klein who worked for the Applicant’s Green Heat Purification business from June to October 2012. She alleged that the Applicant invited cash transactions and received at least one per week at a minimum of $1500 suggesting he received at least $6000 by way of cash monthly. The affidavit however does not allege or conclude that that cash income did not make its way into the books of Green Heat Purification. It certainly appears suspicious that the Applicant may have kept this money himself personally but again, there is neither a specific allegation nor proof of that in the material before me.
[17] The Applicant also swore that all Green Heat Purification Inc. transactions were accounted for in the company financial records and deposited into the business bank account. He explained that they offered 5% discounts to all clients who paid cash as an incentive for them to use their services.
[18] However, there was advertising, supplies, travel, fuel and other business expenses that one would expect for this type of business as well as fees for the people providing the labour required. The Respondent submits that there should be deductions made from these business expenses for personal expenditures of the Applicant including automobile, computer and Internet, fuel, telephone, of upwards of 50%. However, the business did have other employees performing labour work which business required the trucks and fuel to generate the income and there is really no evidence before me at this stage that any significant amount of the business expenses was for the Applicant’s personal use.
[19] Those financial records confirmed that the Applicant received subcontractor fees in July 2012 totalling $11,840 and approximately $33,000 from August 2012 to December 2012 some of which are noted to be payroll/salary “loans”.
[20] Accordingly, it appears that the Applicant, as a bare minimum in 2012, earned his consulting fee income from Exsys Inc. of approximately $66,400 plus his income from Green Heat Purification of approximately $45,000 for a total income of approximately $111,000.
[21] The Respondent seeks to rely on the details of a series of deposits into the Applicant’s bank account from March 2012 to February 2013 totalling $220,115.31 outlined as Exhibit F, a spreadsheet of those deposits made by the Respondent based on the Applicant’s financial records.
[22] The Applicant’s explanation for these amounts was that he did not strictly keep personal and business accounts separate and, that, for example, a $25,000 deposit was paid to him by his business partner investor Larry Hart which was then moved into the Green Heat account over the following days which he says was clearly listed in the bank statements he provided.
[23] The Applicant alleged that this business partner stole $8000 from the Green Heat Pest Elimination Inc. account and that in order to protect the business assets, the Applicant transferred $25,000 into his personal account. He continued to move revenue funds from Green Heat Pest Elimination into his personal account in June and July 2012 totalling approximately $40,000. He then received $40,000 in January and February 2003 from the sale of Green Heat Purification Inc. He does not say how much he deposited into his personal account (although the bank statements confirm that $25,000 was deposited on January 11) but states that the money was not income but was a deposit on the sale of the company required to pay a massive amount of debt accumulated.
[24] For example, Exhibit F suggests that the Applicant deposited $42,300.48 into his personal bank account from June 22 to July 23, 2012. That appears correct but the same account shows that a $30,025 fund transfer to ELJO Industries was made in that same month as well as significant online bank transfers, loan payments, mortgage payments and cash withdrawals which may, or may not be, related to the company’s business debts.
[25] What is most troubling, however, are the actions of the Applicant in October 2012 when he unilaterally and without warning reduced the $3200 per month he was paying in support to the respondent to $2200 per month. This was at the same time he was pleading guilty in November 5, 2012 to charges of uttering threats against her. He apparently provided the same support amount in November 2012.
[26] On consent, Justice Pazaratz made an Order on January 25, 2013 requiring the Applicant to pay her $1037 per month for the support of Emily and Heather in the Respondent’s care.
[27] Even though the Applicant states his business was failing, he then took their son Jacob on a 10 day long trip to the West Coast including Los Angeles, Las Vegas and Phoenix in February 2013. His Visa statement confirmed he accumulated approximately $4500 of debt for that month alone but that he was able to pay $2500 towards that account in January 2013. He also took Jacob to Miami for a weekend trip earlier that month. He also wrote two cheques to himself on the Green Heat Purification bank account on January 10 and January 31 of $2000 each and a further cheque on February 14 to himself in the amount of $700. He also received a money order or bankers cheque from the TD Bank in the amount of $5000 on January 10, 2013 with no explanation for that.
[28] On the other hand, one of the $1100 cheques the Applicant provided the Respondent for support in December 2012 was returned by the bank NSF. In addition, he was able to make a payment of $5700 on his personal Visa account on March 6, 2013 but there is no source indicated for that payment.
[29] The Applicant has been receiving Ontario Works benefits since April 1, 2013 in the amount of $1241 monthly. The Respondent states that it was her understanding that the Applicant was currently being investigated for fraudulent collection of those benefits but no further evidence was provided.
[30] The Applicant said that he continually warned the Respondent in 2012 that his income status was changing due to his failing business and that he had offers of employment withdrawn in March and April 2013 by financial institutions once they found out about his criminal records.
Analysis
[31] There are indeed many questions that arise from the financial records of the Applicant and his companies since the spring of 2012 regarding what his actual income has been until now.
[32] As indicated above, the records from his consulting work without question paid him $66,400 until mid-May 2012 and his subcontractor’s income directly from the company’s payroll records confirmed an additional $45,000 for the balance of the year for a total 2012 income of approximately $111,240. The Exsys company consulting income for that 4.5 months in 2012 is entirely consistent with an annual income of approximately $130,000-$145,000 he earned in 2010 and likely in 2011 as a consultant.
[33] The fact that the Applicant was able to split his income for income tax purposes with his wife for those years and to deduct certain expenses for income tax purposes as being self-employed are irrelevant to the issue of what he was actually earning on a gross annual basis for the purpose of calculating his income for support purposes. I do not accept at this stage the Applicant’s position that his 2012 income for support purposes would be only approximately $30,000 after taking into account the significant business losses he alleges he incurred. Counsel for the Respondent concedes that there is no evidence at this time that the Applicant is operating a business.
[34] Rather, even though the usual test is to consider the means and needs of the parties on motions for interim support, “means” includes not only what the parties are earning but also what they can reasonably expect to earn; it means not only actual income but the ability to earn it. Rilli v. Rilli 2006 34451 (ON SC), [2006] O.J. No. 04142. The Respondent’s motion should proceed on an interim basis rather than a permanent basis because of the conflicting affidavit evidence of the parties and the lack of any questioning of the parties to date on their affidavits filed, in particular the financial statements of the Applicant.
[35] In my view, it would not be appropriate at this stage, given those circumstances, to find or impute an income to the Applicant as the Respondent suggests of over $300,000 annually especially given the above-mentioned evidence of the Applicant’s business failure and its eventual sale at, allegedly, a significant financial loss in early 2013. The significant deposits of over $200,000 in the Applicant’s personal account in approximately one year may be proven by the Respondent to be actual income of the Applicant after questioning especially if the withdrawals from the Applicant’s personal account do not represent true business expenses.
[36] However, I do not feel it is appropriate nor do I think it is possible for me to make that determination at this stage without that evidence.
[37] Nevertheless, the evidence before me clearly establishes an income of the Applicant of no less than $111,000 in 2012. If his income was averaged over the years 2010 to 2012 based on his consulting contracts, his 2012 income would be approximately $125,000.
[38] In addition, this is a case of intentional unemployment. The fact that he is presently in receipt of Ontario Works is not determinative in my view of his financial position at this time for support purposes which he says is because of his inability to secure employment elsewhere due to his criminal record. Even if that were true, his criminal record as such, being self-induced especially with respect to the allegations of domestic assault involving the Respondent, is no excuse for his inability to work so as to provide for the support of his spouse and children. Rogers v Rogers 2013 ONSC 1997.
[39] I am satisfied that $125,000 is the appropriate annual income to be used for calculating the Applicant’s income for child and spousal support purposes on an interim basis pending questioning of the parties especially given the Applicant’s ability to find significant funds to pay for his own personal vacation expenses, his Visa account and the potential that at least some of the significant funds paid to him and deposited into his personal bank account in 2012 and 2013 could represent income for him.
Respondent’s Income
[40] The Respondent during her relationship with the Applicant stayed at home with the children and did not earn income outside of their home. Her income for income tax purposes was sharing in his consulting business income until separation.
[41] Her only source of income is as a personal trainer earning approximately $170 per month through this employment and $160 a month for personal training.
[42] Upon separation, the Respondent enrolled in a registered massage therapy program taking a temporary leave of absence from her studies in December 2012 due to the stress of this litigation and reduced finances. She returned to school on April 16, 2013 and is currently in school full-time expecting to graduate from Trillium College in November 2013.
[43] The Respondent’s evidence is that the Applicant while they cohabited did not wish her to work outside the home.
[44] The Applicant states that the Respondent has had plenty of time to obtain gainful employment and that she refused to work during their relationship. He said he helped her set up a daycare business and provided her with over $3000 per month for her to pursue her career objective as a personal trainer and was always very supportive of her.
[45] The Respondent has suggested that her income is $3960 per year which I accept for the purposes of this interim motion. Her financial statement confirms she is receiving child tax benefit for tax rebates totalling $800 per month with these dependent credits claimed by both parents.
Child Support and Extraordinary Expenses
[46] The Guidelines confirm that, based on these incomes, the Applicant is required to pay to the Respondent $1721 monthly for child support for Emily and Heather in her care and he is ordered to do so.
[47] Heather is enrolled at Trinity Christian School and the Applicant has always paid her tuition without issue. He apparently stopped payment of the tuition fees which resulted in the school advising the Respondent that Heather will have to leave if the tuition falls more than two months in arrears. The letter from Trinity Christian School of March 25, 2013 confirmed that the balance outstanding as of that date was $1725.45 from the initial tuition fee of $9490.
[48] It is appropriate to require that the Applicant immediately pay for that balance outstanding and this Court orders him to do so. The issue of the continued enrolment of Heather at Trinity Christian School because of the significant tuition fees for the school year commencing September 2013, and the requirement of the Applicant to cover most or all of those of those fees will be determined by the judge hearing the matter after questioning or by the trial judge.
[49] Emily has piano lessons but the Respondent is not aware of the costs associated with that expense as she never paid for them given that the Applicant always did. He notified the school that he would no longer pay for them but the Applicant stated that he simply asked if the lessons be suspended temporarily as he was unable to meet that financial obligation because of his current employment situation.
[50] Without any evidence as to the cost of the piano lessons or more details of the actual income of the Applicant, and given the interim child support being ordered at this time, the determination of the Applicant’s obligation to pay for those lessons will be dealt with by the judge after questioning or by the trial judge.
Spousal Support
[51] The Respondent has clearly established an entitlement for interim spousal support based on her financial circumstances including her own lack of income, her need to complete her education and the ability of the Applicant to contribute towards her support. The parties cohabited for approximately 15 years before their final separation and because of her being at home to raise the children during their marriage, she is presently unable to provide for her own support or contribute to the support of the children.
[52] Counsel for the Respondent provided Divorcemate calculations for spousal and child support based on significantly higher incomes for the Applicant which the court has not accepted at this stage. In order to be fair to both parties, I ask that the parties provide the appropriate Divorcemate calculations for spousal and child support based on these findings of the parties respective incomes within 10 days the date of his decision at which time I will make the appropriate interim spousal support order.
Justice Pazaratz’s Order for Costs
[53] Justice Pazaratz ordered that the Applicant pay the Respondent’s costs of the motion before him on January 25, 2013 in the amount of $1000. The Applicant, notwithstanding his having received funds from different sources in early 2013, for some reason has chosen not to pay these costs but rather to spend money for other personal expenses. Court orders must be obeyed and the Applicant is ordered to pay those costs forthwith.
Financial Disclosure
[54] The Respondent, rightfully so in the circumstances, asked for financial disclosure of the Applicant’s personal and business banking and financial records for himself and his companies. Since the service of this notice of motion, the Applicant has provided a good number of financial records but the Respondent says they are not complete. In order to ensure complete and continuing disclosure, the Applicant is ordered to provide complete disclosure of those records as indicated below in this order.
Conclusion
[55] On an interim basis, pending questioning: 1. The Applicant’s annual income for 2012 and 2013 for child and spousal support purposes is determined to be $125,000 and the Respondent’s annual income is $3940.
Commencing April 1, 2013 on a without prejudice basis for any retroactive adjustment for the support payable for the children Emily Stoodley born June 11, 1998 and Heather Stoodley born December 21, 2002, the Applicant shall pay to the Respondent child support based on the Federal Child Support Guidelines in the monthly amount of $1721 based on the incomes of the parties referred to in paragraph 1, Jacob residing with the Applicant and Emily and Heather residing with the Respondent.
The Applicant shall immediately pay for the outstanding tuition fees of Emily at Trinity Christian School in the amount of $1725.45.
The Applicant shall pay interim spousal support to the Respondent to be determined by this Court upon further written submissions of the parties which shall be provided to this Court within 10 days from the date of this decision including the appropriate Divorcemate calculations using the Spousal Support Advisory Guidelines based on these findings.
The Applicant shall pay forth with to the Respondent the $1000 in costs awarded to the Respondent by Justice Pazaratz in his Order of January 25, 2013, failing which the Respondent shall be at liberty to commence a motion to have the Applicant’s pleadings struck.
The Applicant shall immediately provide to the Respondent at his expense outstanding and ongoing disclosure of his personal and business financial affairs of any company in which he has or had an interest in 2012 at 2013 including Green Heat Purification Inc., Green Heat Pest Elimination Inc., Exsys Corporation, Pure Heat Purification Inc.( if it ever existed) Pure Heat Purification Limited (if it ever existed), including all corporate tax returns, financial statements, banking records and the Applicant’s complete income tax returns for 2009, 2010, 2011, and 2012 including attachments.
The parties can make their submissions with respect to the cost of this motion within 10 days from the date of this decision restricted to three pages in length plus any Bill of Costs and details of any relevant offers to settle.
May 30, 2013
The Honourable Mr. Justice R. J Nightingale