Favero v. Favero, 2013 ONSC 4216

CITATION: Favero v. Favero, 2013 ONSC 4216

COURT FILE NO.: D 20028/05

DATE: 2013/06/19

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Mary Favero

Applicant

– and –

Daniel Favero

Respondent

Wayne H. Redekop, for the Applicant

Bruce MacDonald, for the Respondent

HEARD: February 19, 20, 21, 22, 25, 26, and 27, 2013

The Honourable Madam Justice Deborah L. Chappel

JUDGMENT

PART I: INTRODUCTION

[1] The Applicant Mary Favero (“the Applicant”) and Respondent Daniel Favero (“the Respondent”) were married on November 2, 1991, and separated on October 7, 2002. There are two children of their relationship, namely Sarah Daniella Mary Favero, born May 8, 1995 (“Sarah”) and Amber Marie Favero, born February 26, 1998 (“Amber”). This was the trial of a Motion to Change Final Order which the Respondent originally commenced on November 12, 2009, and which he amended on November 8, 2011.

[2] The Respondent seeks to change the provisions of the order of Milanetti, J. dated June 8, 2009 (“the Milanetti order”) relating to the residential arrangements respecting Sarah and Amber, child support and spousal support. In regard to time-sharing respecting the children, the Respondent seeks to increase the amount of time which he spends with the children, and to remove a number of conditions tied to his access which Maddalena, J. ordered on August 31, 2011. With respect to child support, he seeks to reduce his monthly child support obligation to $400.00 per month effective November 1, 2011 based on his position that his annual income has decreased significantly from the amount of $1,000,000.00 which he agreed should be attributed to him in 2009 to an income of approximately $34,322.00 for 2012. He seeks to terminate his spousal support obligation altogether on the basis of alleged material changes in his circumstances since the Milanetti order was made.

[3] For the reasons that follow, I am granting the Respondent the relief which he seeks in relation to access to Sarah and Amber. However, I am dismissing the Respondent’s Motion to Change as it relates to the child and spousal support issues on the basis that the Respondent has not met the onus of establishing that there has been a material change in circumstances since June 8, 2009 that would justify a change in the support terms of the Milanetti order.

PART II: BACKGROUND AND OVERVIEW OF COURT PROCEEDINGS

[4] I make the findings set out in this section respecting the important background facts in this case and the history of the court proceedings based on the evidence adduced at trial.

[5] As noted above, the parties separated on October 2, 2002 after a marriage of almost eleven years. They were divorced on August 10, 2009. Sarah and Amber have remained in the primary care of the Applicant since the separation. They have had regular visits with their father since that time, with the specifics respecting these visits changing from time to time.

[6] The parties embarked upon protracted Family Law litigation following the separation, which culminated in a trial before Milanetti, J. in June 2009. During that trial, the parties resolved all of the Family Law issues between them, and on June 8, 2009, Milanetti, J. made a final order on consent of both parties incorporating the terms of their agreement. The relevant terms of this order for the purposes of this proceeding are as follows:

a. Paragraph 1:

The Applicant and Respondent were granted joint custody of Sarah and Amber, but the Applicant was granted final decision-making regarding any issue involving the children. Sarah and Amber were to reside primarily with the Applicant.

b. Paragraph 2:

The Respondent was granted liberal and generous access to Sarah and Amber, to include every Wednesday overnight, every Sunday during the day, and such other reasonable access as may be agreed upon from time to time including sharing of holidays. Although the time for Sunday access was not specified, I find based on the evidence of the parties that this access usually occurred from 9:00 a.m. until 6:00 p.m.

c. Paragraph 5:

The Respondent was to pay the Applicant child support in the amount of $1,404.00 per month commencing July 1, 2009, and his proportionate share of section 7 expenses under the Federal Child Support Guidelines (the “Guidelines”)[^1].

d. Paragraph 6:

The Respondent was to pay the Applicant spousal support in the amount of $750.00 per month commencing July 1, 2009.

e. Paragraph 7:

The Respondent was ordered to pay a lump sum of $145,000.00 on account of retroactive child support and spousal support for the period from October 7, 2002 until June 1, 2009.

f. Paragraph 12:

The Respondent was to pay the Applicant a property settlement of $172,000.00. Of this sum, the amount of $100,000.00 related to the value of the Applicant’s shares in Favero’s Car Wash Limited located in Niagara Falls (“the Niagara Falls Car Wash”), which the Applicant was to transfer to the Respondent upon payment by the Respondent of $150,000.00 of the property settlement.

g. Paragraph 13:

The Applicant was to transfer her right, title and interest in two properties, namely 982 Garrison Road, Fort Erie and a piece of vacant land on Garrison Road in Fort Erie, to the Respondent.

h. Paragraph 22:

The funds which the Respondent owed to the Applicant pursuant to the order were to be paid in two instalments, the first of which was to be in the amount of $150,000.00 payable within sixty days of the order, and the second of which was to be payable within 120 days from the date of the order.

i. Paragraph 25:

The Applicant was granted an order pursuant to section 34(1)(k) of the Family Law Act[^2] securing the payment of the amounts owing under the order or any balance owing to the Applicant by a charge on all properties in which the Respondent has an interest.

[7] Prior to the Milanetti order being made, the Respondent signed an acknowledgement, witnessed by his counsel, that the support issues in the proceeding had been resolved on the basis of the Spousal Support Advisory Guidelines (“SSAG”) and Guidelines. Calculations and an assumed income for the Respondent of $100,000.00. The acknowledgement included a provision that the document could be referred to in any subsequent variation proceeding. With respect to the Respondent’s access, when the Milanetti order was made, his Sunday access was occurring from approximately 9:00 a.m. until 6:00 p.m.

[8] Soon after the Milanetti order was made, the Respondent ran into difficulties with the Family Responsibility Office (“FRO”) due to outstanding child and spousal support arrears. The FRO finally issued a First Notice of Intention to Suspend Driver’s Licence on October 15, 2009. During this same period, almost immediately after the Milanetti order was made, the Respondent began to seek the Applicant’s agreement to implement a week-about residential arrangement for the children. His lawyer sent correspondence to the Applicant setting out this request on July 9, 2009 and on July 30, 2009, his counsel suggested that the parties retain Mr. Lou Coppola of the Family Law Information Centre to meet with the children and carry out a Views and Preferences Report. Efforts to resolve this issue through counsel and social work professionals proved unsuccessful.

[9] Soon after the FRO issued its Notice of Intention to Suspend Driver’s Licence, the Respondent brought a motion for a refraining order. The motion was issued on November 12, 2009. On the same date, the Respondent also prepared the original Motion to Change Final Order which is the subject of these proceedings. That Motion to Change Final Order was subsequently issued on November 16, 2012. In that Motion to Change, the Respondent did not seek a change to the child and spousal support terms of the Milanetti order, but rather sought a change to the residence arrangements respecting Sarah and Amber to provide for the children to reside equally with each party on a week-about basis, with the exchange to occur each Sunday.

[10] The motion for the refraining order was heard on November 18, 2009. Quinn, J. granted an order on that date directing the FRO to refrain from suspending the Respondent’s driver’s licence, on conditions that the Respondent continue to pay ongoing child support in the amount of $1,404.00 per month and spousal support of $750.00 per month, as well as $100.00 per month on account of both child and spousal support arrears. The order was made on the basis of the Respondent’s undertaking that he would commence a Motion to Change the child and spousal support terms of the June 8, 2009 order, with a first court date to occur within twenty days of the refraining order being made. The Respondent did not comply with this undertaking to the court.

[11] On March 24, 2010, Tucker, J. referred this matter to the Office of the Children’s Lawyer to request that that office provide services to this family. Mr. Adams was appointed as counsel for Sarah and Amber, and a Clinical Investigator, Ms. Cynthia Katz, was later assigned to the file. On March 24, 2010, the Applicant and Respondent also consented to a variation of the access terms of the Milanetti order on a temporary basis to provide that the Respondent would have access to the children on a two week rotating schedule as follows:

a. Week One: Wednesday overnight, and from Friday evening until Sunday at 8:00 p.m.

b. Week Two: Wednesday overnight and Sunday from 11:00 a.m. until 8:00 p.m.

[12] Mr. Adams advised counsel for the Applicant and Respondent by correspondence on July 13, 2010 that the children were willing to alternate between the parties on a week-about basis during the summer months, to give them a better feeling as to whether this type of arrangement would suit their wishes and needs. At that time, Mr. Adams inquired as to whether the parties would consent to a week-about arrangement being implemented on a trial basis. The Applicant testified that she did not receive this letter until mid August, 2010, when the summer was almost over, and that she had concerns about this proposal in any event because the children had told her that they did not want to have a week-about arrangement. Despite the Applicant’s concerns, the parties agreed in the late summer of 2010 to implement a week-about arrangement on a trial basis. I find that the week-about schedule continued until late October 2010, when the children relayed that they did not want this arrangement to continue. At that point, the time-sharing arrangements resumed as per the agreement described in paragraph 11 above.

[13] With the input of Mr. Adams respecting the children’s views and preferences, the parties were able to negotiate changes to the temporary access order dated March 24, 2010. Specifically, the parties agreed that in Week One, access would be Wednesday overnight and from Friday evening until Sunday at 8:00 p.m., and in Week Two, access would be from Wednesday evening until Friday morning.

[14] I find based on the correspondence of Mr. Adams dated February 12, 2013 (marked as Exhibit 1 in this trial) and the Respondent’s evidence that more recently, Sarah and Amber have on occasion been staying with their father for an additional overnight during the Week One portion of the schedule, on Tuesday. The Respondent acknowledged, and I find, that the children find the additional Tuesday overnight visit hard, and that the parties have been flexible regarding this extra visit.

[15] The Applicant brought an urgent Motion on August 10, 2011, requesting a temporary order suspending the Respondent’s access to the children. She brought this Motion based on information that she had acquired suggesting that the Respondent had been charged with impaired driving and credit card fraud, and her understanding that there was an ongoing police investigation relating to an attempted murder that had occurred during a home invasion at the Respondent’s home located at 960 Garrison Road, Fort Erie. Tucker, J. granted a temporary order on August 10, 2011 suspending the Respondent’s access.

[16] On August 31, 2011, Maddalena, J. made an order that the access which the Respondent had been regularly exercising would resume, subject to the following conditions:

a. The Respondent was to exercise access in the presence of either his mother or father, who were his sureties.

b. No access was to occur at the Respondent’s residence, or at any of the rental properties owned by the Respondent or his father, including business properties.

c. Overnight access was to occur at the home of the paternal grandparents, and one of the grandparents was to be present at all times when the children were at the grandparents’ residence.

d. The Respondent was not to attend within 500 meters of the Applicant’s residence at 915 Canada Drive, Fort Erie.

[17] The Respondent’s criminal involvement following the Milanetti order is relevant both to the request for a change in the time-sharing arrangements respecting the children and the Respondent’s request to change child and spousal support, since the Respondent states that his charges and terms of release have impacted on his income earning capacity. I make the following findings respecting the Respondent’s involvement with the criminal law system since the Milanetti order was made:

a. The Respondent was charged with impaired driving and leaving the scene of an accident in or around July, 2010. His licence was suspended at that time. He pled guilty to a charge of careless driving in June 2011, and his driver’s licence was suspended for one year until June 14, 2012.

b. The Respondent was charged on or around September 13, 2010 with possession of stolen property having a value of less than $5,000.00. He was released on bail on September 14, 2010, with terms including that he reside at 960 Garrison Road, Fort Erie and that he not possess any credit cards that were not in his name. The Respondent was convicted of this offence in October 2011. He received a conditional discharge and was placed on probation for one year.

c. With respect to the home invasion which occurred at the Respondent’s home, I find that this incident occurred on or around August 2, 2011 in a building located at 960 Garrison Road which has the Respondent’s residence on one side and an office for the Respondent’s company, Favero General Contracting and Maintenance Ltd. (“Favero General Contracting”), on the other side. Sarah and Amber were not present at the time of the incident. On the date in question, two males entered the office with the intention of stealing marijuana that was present on the premises. The Respondent’s evidence at trial was that his friend brought the marijuana to the office to sell it, and that this friend had agreed to give him $100.00 to assist in the transaction. The Respondent attempted to escape during the incident. When he tried to leave the building, one of the robbers tried to shoot him, and the second assailant stabbed him five times on the back and once on his head. The two robbers have been charged in connection with this incident, and the Respondent recently testified at their preliminary inquiry.

d. On or around August 10, 2011, soon after the home invasion incident referred to above, the Respondent was charged with six counts of possession of a controlled substance for the purposes of trafficking, six counts of breach of recognizance and three counts of production of a controlled substance. He was released on August 19, 2011 subject to terms of bail that included the following:

i. He was to reside at the home of his parents Linda and Leo Favero at 136 Lakeshore Road, Fort Erie, Ontario;

ii. He was to be at the above noted residence daily except in the company of his sureties, who were his parents; and

iii. He was not to possess any drug paraphernalia or anything used in the production or growing of marijuana.

The Respondent testified that he intends to plead not guilty to these charges. With respect to the charges for possession for the purposes of trafficking, he testified that this charge was laid after the police found the marijuana in his office which he states belonged to his friend. In regard to the charges for production of a controlled substance, the Respondent stated that a tenant of his property located at 982 Garrison Road, Fort Erie was growing marijuana at that location, and that he had consented to this occurring on the understanding that the tenant had a valid licence to produce marijuana. The Respondent alleged that the tenant did not in fact have a valid licence to grow marijuana at that address, and he was therefore charged as the landlord of the premises.

e. On September 22, 2011, the Respondent’s bail terms were amended to allow him to be outside of his parents’ residence without the supervision of his sureties (his parents), for the purposes of employment only.

f. On February 24, 2012, the Respondent was charged with two counts of failure to comply with recognizance. He was released on a further recognizance of bail with terms including the following:

i. He was to continue to reside at the home of his parents, at 136 Lakeshore Road, Fort Erie, Ontario;

ii. He was to be in residence daily unless under the direct company of one of his sureties (his parents) and except for purposes of employment at 960 and 974 Garrison Road, Fort Erie, Ontario, and Favero’s Car Wash, Cropp Street, Niagara Falls, Ontario, and only between the hours of 7:00 a.m. and 5:00 p.m.; and

iii. He was not to attend premises where alcoholic beverages are sold or served as a primary source of revenue unless in the direct company of one of his sureties.

g. On August 23, 2012, the Respondent’s bail terms were varied to allow him to be outside of his residence without the supervision of one of his sureties for the purposes of employment at 960 Garrison Road, Fort Erie, and Favero’s Car Wash, Niagara Falls, only between 7:00 a.m. and 5:00 p.m., for attendance at court to meet with counsel, and on Saturday from noon until 4:00 p.m. for personal needs. The Respondent’s residence and supervision restrictions were again relaxed by way of a bail variation granted on October 12, 2012. That variation required the Respondent to be in the residence daily from 9:00 p.m. until 6:00 a.m., unless when in the direct company of his father or mother.

h. The charges referred to in subparagraphs (d) and (f) have not yet been dealt with. As of the time of trial, a preliminary inquiry had been requested but not yet scheduled.

[18] The Respondent issued an Amended Motion to Change the Milanetti order on November 8, 2011. In the Amended Motion to Change, he added the following claims:

a. He requested an order retroactive to November 1, 2010 reducing his child support obligation respecting Sarah and Amber to $470.00 per month, based on his stated annual income of $31,866.00.

b. He requested an order terminating his obligation to pay spousal support to the Applicant, retroactive to November 1, 2010.

[19] The Respondent brought a motion on December 14, 2011, requesting that the temporary order of Maddalena, J. be varied to remove the conditions that there be no access at his residence and that one of the paternal grandparents be present when the children are at the grandparents’ residence. In this motion, he also requested an order temporarily suspending enforcement of the child and spousal support terms of the Milanetti order pending a hearing of his Amended Motion to Change Final Order. The request for an amendment to the access terms of the Milanetti order was dismissed on December 21, 2011. The access arrangements in place for the Respondent as of the time of trial were therefore as set out in paragraph 11 above, and remained subject to the conditions set out in the temporary order dated August 31, 2011. No order was made suspending enforcement of the child and spousal support terms. I find that as of February 1, 2013, the Respondent had accumulated arrears of child and spousal support totalling $33,978.96. The FRO has had the Respondent’s driver’s licence under suspension since February 22, 2012 on account of unpaid support arrears.

[20] In response to the Amended Motion to Change, the Applicant requested various forms of financial disclosure from the Respondent relating to his income and the two business enterprises which he has owned, namely Favero General Contracting and Niagara Falls Car Wash. On February 6, 2012, Tucker, J. made an order requiring the Respondent to produce various types of personal and business financial disclosure for the period spanning from 2008 to 2012 by April 9, 2012. The Respondent had still not fully complied with this order by April 17, 2012, and therefore on that date, Matheson, J. ordered the Respondent to provide the disclosure ordered by June 20, 2012, failing which his pleadings would be struck. On June 27, 2012, some financial disclosure remained outstanding, and therefore Henderson, J. made an order extending the time for the Respondent to complete the disclosure to August 31, 2012.

[21] As noted previously, paragraph 25 of the Milanetti order granted the Applicant security for payment of amounts owing, or any balance owing, pursuant to the order by creating a charge on all properties in which the Respondent had an interest at the time. On April 23, 2010, an order was made by Matheson, J. deleting the charging order of Milanetti, J. from the parcel register for each of the properties which the Respondent owned at the time of the order.

PART III: CREDIBILITY

[22] The Respondent relies on a number of alleged changes in circumstances since June 8, 2009 in support of his request to reduce child support and terminate spousal support. The Applicant’s position is that there have been no changes in the Respondent’s situation that would warrant such relief, and that this proceeding is part of a longstanding pattern of behaviour on the part of the Respondent designed to avoid or minimize his financial responsibilities towards his family. The credibility of the parties is therefore a very important issue in this case.

[23] I found the Applicant to be a highly reliable and credible witness. My impression was that she had a sound recollection of relevant facts. She was honest and responsive in answering questions that were put to her both in examination in chief and on cross examination. She remained calm and respectful throughout the proceedings, even when under cross examination. I did not note any inconsistencies of concern in her testimony or between her testimony at trial and information contained in the documents that were submitted as exhibits or in the Trial Record.

[24] Counsel for the Respondent suggested that the Applicant engaged in questionable behaviour by withdrawing $88,000.00 from her bank account prior to swearing her first Financial Statement filed in connection with this proceeding. The Applicant was forthright in acknowledging that she did so. However, she provided a reasonable explanation for this withdrawal. I accept her evidence that she owed these funds to her father as a result of money that he had lent her over the years to assist her in upgrading her education and meeting the family’s basic needs. Her explanation was highly credible, given her limited income and the Respondent’s unreliability in terms of his spousal and child support obligations over the years.

[25] By contrast, I had serious concerns regarding the Respondent’s credibility and reliability. As a result, I have preferred the Applicant’s evidence over that of the Respondent where the two conflicted. My concerns regarding the Respondent’s reliability and credibility are discussed in further detail in the remainder of these Reasons for Judgment in the context of my analysis of the various issues in this case. In general terms, however, I found that the Respondent was often evasive in answering important questions about his financial affairs. On a number of occasions, he had to be told to answer questions more directly. He alleged that he was unable to recall important details about various significant financial transactions. He relied on alleged significant loans from his parents as justifying transfers of various properties to them at less than fair market value, but was only able to provide general comments about what these loans were for. He did not provide documentary proof of these loans or even a summary of the reasons for the loans as they were advanced to him, when the advances were made and the amount of each advance. He insisted that his parents kept those types of summaries, and his father Leo Favero testified that he thought his wife kept such records, but no such documentation was ever submitted as evidence.

[26] I have serious concerns about a number of significant inconsistencies between the Respondent’s testimony and his materials filed in these proceedings and other evidence adduced at trial. Some of the most glaring examples of these concerns are as follows:

a. In his Form 35.1 Affidavit sworn on November 8, 2011, he stated that he was facing a criminal charge of possession of marijuana. In fact, the evidence at trial revealed that he was facing numerous other criminal charges at that time.

b. In his Amended Motion to Change dated November 8, 2011 and his Change Information Form filed in support of that Motion, he stated that his 2010 income was only $31,866.00, and relied on his alleged reduction in income in support of his request to change child and spousal support. In fact, the evidence at trial revealed that including capital gains, his 2010 income was $358,673.80.

c. He did not report any income from capital gains in his Financial Statement sworn January 30, 2012. However, he sold four investment properties in January 2012.

d. He did not report interest income from a mortgage which he held against 1899 Thompson Street, Fort Erie (“Thompson”) in his Financial Statements sworn January 30, 2012, July 11, 2012 and February 14, 2013.

e. In his Financial Statement sworn February 14, 2013, he swore that he owed a personal debt to Niagara Falls Car Wash in the amount of $50,893.00. However, the evidence revealed that this was in fact a debt which the Respondent’s corporation, Favero General Contracting, owed to Niagara Falls Car Wash.

f. In his Financial Statement sworn May 27, 2009, he indicated that 960 Garrison Road was worth $725,000.00. However, in his Financial Statement sworn February 14, 2013, he attributed a value of only $325,000.00 to this property. He did not provide any plausible explanation for this discrepancy or any credible evidence to explain the alleged reduction in the value of the property.

g. He alleged that his income had decreased in 2012 largely because he was no longer able to carry out subcontract work with Niagara Falls Car Wash due to the FRO’s decision to suspend his driver’s licence. He stated that he stopped doing subcontract work with Niagara Falls Car Wash sometime between February and July, 2012. However, the evidence revealed that his licence had been suspended for an extended period of time prior to 2012, without any apparent effect on his ability to travel to Niagara Falls to work. As discussed in further detail later in these Reasons, he did not provide a credible explanation for his sudden difficulties in getting to Niagara Falls in 2012. Furthermore, his statement that he stopped doing this work by July 2012 is inconsistent with the varied recognizance of bail dated August 23, 2012, which specifically permitted him to work at the Niagara Falls Car Wash between the hours of 9:00 a.m. and 5:00 p.m. without supervision.

[27] In assessing the Respondent’s credibility, I have also taken into consideration evidence which has led me to conclude that the Respondent lacks respect for court orders and the court process generally. This general concern has caused me to question whether the Respondent respected the significance of the oath which he gave at trial prior to testifying. My concern in this regard is based in part on the Respondent’s non-compliance with the terms of the Milanetti order, and his conduct beginning almost immediately after the order was made which in my view demonstrated a clear and deliberate intention to avoid his support obligations. Details regarding this conduct are discussed in further detail later in these Reasons for Judgment. In addition to his non-compliance with the support terms of the Milanetti order, he failed to comply with an order made by the court when he obtained a refraining order to pay ongoing support and to make payments towards arrears, and with his undertaking at that time to bring a Motion to Change support within twenty days. In addition, he did not comply with a disclosure order made by Tucker, J. on February 6, 2012, and two further court orders were required in order to compel him to provide the disclosure which had been ordered. Finally, he has been charged with numerous counts of breach of recognizance of bail.

[28] I also heard testimony from the Respondent’s father, Leo Favero. I had concerns regarding Mr. Favero’s reliability. Like his son, he was unable to recall details about many important financial transactions that occurred between him and the Respondent. His evidence initially conflicted with that of the Respondent regarding the reasons why the Respondent allegedly stopped doing subcontract work for Niagara Falls Car Wash in 2012. Like the Respondent, he was unable to provide any specifics regarding significant loans which he and his wife Linda Favero are alleged to have made to the Respondent. For these reasons, I approached the evidence of Leo Favero with considerable caution, and did not give it significant weight where it conflicted with the evidence of the Applicant or with documentary evidence adduced at trial.

[29] Finally, I heard evidence from the Respondent’s accountants, Kenneth Lenchyshyn and Christine Malaguti. I found both to be highly credible witnesses, although in some areas, their evidence depended on the credibility and reliability of information provided by the Respondent. In those areas, I have taken my concerns respecting the Respondent’s credibility into consideration in assessing the weight to be accorded to their evidence.

PART IV: CLAIM FOR CHANGE IN THE CHILDREN’S RESIDENCE ARRANGEMENTS

I. POSITIONS OF THE PARTIES

[30] As noted above, in his original Motion to Change the Milanetti order, the Respondent requested that the residential arrangements respecting the children be changed to provide for a week-about arrangement between the parties, with the exchange of the children to occur every Sunday. On the first day of trial, however, the Applicant and the Respondent executed a Consent respecting a number of custody and access issues. This Consent included provisions relating to the children’s residential arrangements that reflected the position which counsel for the children took on behalf of the children at trial. Specifically, the parties agreed that the children would be with the Respondent as follows:

a. Week One: Tuesday and Wednesday sleepovers, and from Friday after school until Sunday evening.

b. Week Two: Wednesday and Thursday sleepovers.

c. Such other reasonable access as may be agreed upon from time to time including the sharing of holidays as agreed upon.

[31] These terms have the effect of confirming the residence arrangements that were informally in place prior to trial. The Consent also includes an additional term that access will be subject to the views and preferences of the children.

[32] The Consent did not continue the terms of the temporary order of Maddalena, J. dated August 31, 2011 regarding supervision of the Respondent’s time with the children by the paternal grandparents and the location of access. Instead, it provided for the inclusion of a new paragraph 2.2 in the Milanetti order, as follows:

Paragraph 2.2:

a) There shall be no access at any of the rental properties owned by the Respondent or his father, including business properties with the exception of the Niagara Falls Car Wash property.

b) This term shall be reviewed when the Respondent’s criminal charges are resolved.

[33] Counsel for the children agreed to all of the terms set out in the Consent which the parties executed, and he and the parties requested a final order varying the Milanetti order in accordance with the terms set out in the Consent. Based on my review of the Trial Record, I was aware at the time that this Consent was presented to me that the Respondent had been involved in a number of criminal matters. I therefore requested that the parties provide me with evidence in support of the request to change the custody and access terms of the Milanetti order, and to remove the conditions of the August 31, 2011 order relating to supervision and location of visits.

[34] After the Respondent gave his evidence on the custody and access issues, but prior to hearing evidence from the Applicant on these matters, the Applicant advised that she no longer agreed to the exception set out in the Consent which permitted the Respondent to be with the children on the property of the Niagara Falls Car Wash. This property is owned by the paternal grandparents. She explained that her change in position was based on the Respondent’s evidence respecting his criminal charges and the events surrounding the home invasion that occurred in the building where he resided on August 2, 2011. In particular, she was concerned about the Respondent’s admission that he was involved in the drug deal that led to the home invasion, and was worried about what may happen at the Niagara Falls Car Wash property having regard for the type of people who the Respondent has associated with in the recent past. The Respondent sought to enforce the terms of the Consent.

[35] On April 11, 2013, I granted a final order respecting the custody and access issues in this case in accordance with the Consent which the parties executed on February 19, 2013, and indicated that my written Reasons relating to this decision would follow. My Reasons are set out below.

II. THE LAW

[36] The legislation which applies to the request for a variation of the custody and access provisions of the Milanetti order in this case is the Divorce Act[^3]. Section 17(1)(b) of the Act provides that a court may make an order varying a custody order or any provision thereof on application by either or both former spouses or by any other person. Section 17(3) stipulates that on such an application, the court may include in a variation order any provision that the court could have included in the original order. In this regard, section 16(6) of the Act provides that in making an order respecting custody or access, the court may impose “such other terms, conditions or restrictions in connection therewith as it thinks fit and just.”

[37] Section 17(5) prescribes the factors which the court must consider in determining a custody variation proceeding as follows:

Factors for custody order

17(5) Before the court makes a variation order in respect of a custody order, the court shall satisfy itself that there has been a change in the condition, means, needs or other circumstances of the child of the marriage occurring since the making of the custody order or the last variation order made in respect of that order, as the case may be, and, in making the variation order, the court shall take into consideration only the best interests of the child as determined by reference to that change.

[38] As is evident from section 17(5), the threshold test which must be satisfied in a custody variation proceeding is whether there has been a change in the condition, means, needs or other circumstances of the child since the previous order was made. The second stage of the analysis involves a review of the evidence to determine the custody order that is in the best interests of the child having regard for the change.

[39] With respect to the first stage of the analysis, the court must be satisfied that the change in circumstances of the child is material.[^4] If this threshold test is not met, the inquiry ends and the request for a change in the order must be dismissed.[^5] If a material change in circumstances is established, the judge must then embark upon a fresh inquiry into the best interests of the child having regard to all of the relevant circumstances of the case.[^6]

[40] The second stage of the analysis involves an assessment of the best interests of the child. The Supreme Court of Canada has held that these interests must be ascertained from the perspective of the child rather than from the parents’ perspective; parental preferences and rights do not play a role in the analysis except to the extent that they are necessary to ensure the best interests of the child.[^7]

[41] Sections 17(6) and (9) of the Act set out additional principles that the court must apply in carrying out the best interests analysis. Section 17(6) stipulates that in making a variation order, the court shall not take into consideration any conduct that under the Act could not have been considered in making the order in respect of which the variation is sought. This section must be read in conjunction with section 16(9) of the Act, which states that in making a custody or access order, the court shall not take into consideration the past conduct of any person unless the conduct is relevant to the ability of that person to act as a parent of the child. Section 17(9) of the Act directs the court in a custody variation proceeding to give effect to the principle that “a child of the marriage should have as much contact with each former spouse as is consistent with the best interests of the child,” and to consider the willingness of a former spouse to facilitate such contact. The maximum contact principle set out in this section is not absolute, and remains at all times subject to the child’s best interests.

[42] The Act does not spell out a lengthy list of other factors for the court to consider in assessing the best interests of the child. The flexible and imprecise nature of the best interests test set out in the Act renders a measure of indeterminacy inevitable, but recognizes the paramountcy of the child’s needs and interests over the interests of expediency and predictability. However, in an effort to obtain some assistance in applying the best interests test, courts across the country have decided that provincial and territorial legislation setting out criteria to consider in carrying out the “best interests” analysis may be referred to as guides in deciding cases under the Act. The relevant statutory provision in Ontario is section 24 of the Children’s Law Reform Act,[^8] which provides as follows:

Merits of application for custody or access

24. (1) The merits of an application under this Part in respect of custody of or access to a child shall be determined on the basis of the best interests of the child, in accordance with subsections (2), (3) and (4). 2006, c. 1, s. 3 (1).

Best interests of child

(2) The court shall consider all the child’s needs and circumstances, including,

(a) the love, affection and emotional ties between the child and,

(i) each person entitled to or claiming custody of or access to the child,

(ii) other members of the child’s family who reside with the child, and

(iii) persons involved in the child’s care and upbringing;

(b) the child’s views and preferences, if they can reasonably be ascertained;

(c) the length of time the child has lived in a stable home environment;

(d) the ability and willingness of each person applying for custody of the child to provide the child with guidance and education, the necessaries of life and any special needs of the child;

(e) the plan proposed by each person applying for custody of or access to the child for the child’s care and upbringing;

(f) the permanence and stability of the family unit with which it is proposed that the child will live;

(g) the ability of each person applying for custody of or access to the child to act as a parent; and

(h) the relationship by blood or through an adoption order between the child and each person who is a party to the application. 2006, c. 1, s. 3 (1); 2009, c. 11, s. 10.

Past conduct

(3) A person’s past conduct shall be considered only,

(a) in accordance with subsection (4); or

(b) if the court is satisfied that the conduct is otherwise relevant to the person’s ability to act as a parent. 2006, c. 1, s. 3 (1).

Violence and abuse

(4) In assessing a person’s ability to act as a parent, the court shall consider whether the person has at any time committed violence or abuse against,

(a) his or her spouse;

(b) a parent of the child to whom the application relates;

(c) a member of the person’s household; or

(d) any child. 2006, c. 1, s. 3 (1).

[43] In situations where both parties agree to changes in a custody or access order, the court should give due deference to the agreement which they have reached.[^9] However, the court ultimately retains the discretion to reject the terms of the agreement if it is satisfied that the agreement is contrary to the child’s best interests.[^10]

III. ANALYSIS

[44] As previously noted, the only issue in dispute respecting the custody and access issues is whether the exception referred to in the Consent filed by the parties permitting the Respondent to spend time with the children at the Niagara Falls Car Wash should be enforced. Counsel did not in their submissions address the threshold issue of whether there has been a material change in the children’s circumstances. I find that this threshold test has been made. Most significantly in relation to this issue, I find that since the Milanetti order was made, the children have gradually begun to spend more time with their father. Whereas the Milanetti order provided for regular access on Wednesday overnight and during the day each Sunday, access as of the time of trial had expanded to include full alternate weekend access as well as more overnight time during the week. The children have advised their counsel that they enjoy their time with their father, and the progression in access has occurred in response to their views and preferences as relayed to their counsel. The children are now almost eighteen years old and fifteen years old, and their views and preferences at this point should be given considerably more weight.

[45] The other significant change that has occurred since the Milanetti order was made is the Respondent’s involvement in a number of criminal matters, as described above. These criminal issues have impacted on the Respondent’s access, as numerous bail terms have been placed on him which have affected how he has been able to exercise access with the children. The charges have also during the course of these proceedings raised concerns regarding the Respondent’s lifestyle, the safety of the children in his care, and the impact of his lifestyle choices on the children.

[46] Turning to the issue of the children’s best interests, the first question is whether the proposed time-sharing changes are appropriate having regard for all of the evidence relating to the children’s best interests. As previously indicated, the parties reached an agreement during the course of Mr. Adams’ involvement that timesharing would be as described in paragraph 1 above. The effect of the terms set out in the Consent is to add additional overnight visits on alternating Tuesdays, during Week One of the two week schedule.

[47] I have considered the evidence regarding the actual time-sharing arrangements that have evolved since the Milanetti order was made. There is a dispute between the parties as to whether the children have in fact been regularly with the respective parties in accordance with the agreement described in paragraph 13 above (“the agreement”). The Respondent alleges that the children have been with him as per the agreement described in paragraphs 11 and 13 above on a fairly consistent basis, and that they have begun spending some alternate Tuesday overnights with him in Week Two of the schedule. It is his position that the children have over the past several months been with him for roughly 50% of the time. The Applicant disagrees with this proposition. She states that the agreements were a general framework for the parties and the children regarding the time-sharing expectations, but that the situation has in fact been much more flexible and fluid. She stated that during Week One of the rotation, when the children are supposed to spend the weekend with the Respondent, Sarah and Amber typically stay with her on either Friday overnight, or come to her home on Saturday morning and spend the day with her. With respect to Week Two of the schedule, she testified that over the past six months the children have typically only gone for one overnight visit with the Respondent rather than the two consecutive overnights on Wednesday and Thursday which were contemplated in the agreement. Accordingly, her evidence was that the children regularly miss four of the overnight visits that were contemplated in the agreement in a one month period. She acknowledged that the children are with the Respondent approximately one day per month when they are supposed to be with her.

[48] Having regard for my conclusions regarding the credibility of the parties as described above, I prefer the Applicant’s evidence over the Respondent’s respecting the details of the actual time-sharing arrangement during the period leading up to trial. In addition, as previously noted, I have found that the children have been exercising occasional Tuesday overnight visits with their father during Week One of the two schedule set out in the agreement. Even if it is assumed that the children have been having two additional Tuesday overnight visits per month with their father, the net effect of the above-noted findings is that the children have typically spent at least one overnight less per week with their father than was contemplated under the agreement.

[49] Despite my conclusions regarding the amount of time which the children have actually been spending with their father, I find that the time-sharing arrangements which counsel for the children has proposed, and which the parties have consented to, is in the best interests of the children. Given the ages of the children and the pattern of flexibility which has developed respecting time-sharing, I conclude that the arrangements set out in the Consent will at best provide a general framework regarding expectations around time-sharing, and that the actual arrangements will continue to be fluid and flexible based on the needs, activities and wishes of the children. The Applicant and the Respondent have demonstrated their support for ongoing flexibility in the time-sharing arrangements by including the term in the Consent that access is subject to the children’s views and preferences. I conclude based on the submissions of Mr. Adam and his comments as set out in his correspondence dated February 12, 2013 that the children want ongoing flexibility in the schedule, but also need general guidelines which include an expectation that alternate Tuesday overnight time with their father can occur if they choose to exercise it.

[50] In considering both the proposed time-sharing provisions and the proposal to remove the restrictions in the August 31, 2011 temporary order, I have carefully reviewed the evidence respecting the Respondent’s criminal involvement since the Milanetti order was made. While I have significant concerns about many of the choices which the Respondent has made which have led to him becoming embroiled in criminal law proceedings, there are a number of factors which have led me to conclude that these proposed changes are in the children’s best interests. These factors are as follows:

a. I find that there is no evidence that the Respondent has been associated with any violent incidents or inappropriate activities involving alcohol or drugs since August 2011.

b. Although the Respondent has been charged with a number of drug related offences, he has not to date been convicted on these charges.

c. I find that the children have not been exposed to dangerous or illegal activities while in the care of the Respondent.

d. I accept the evidence of the Clinical Investigator appointed through the Office of the Children’s Lawyer, Ms. Cindy Katz, that the children are aware of the incident that occurred at their father’s office on August 2, 2011, and that they were not with their father at the time of the incident. That incident did not occur at the Respondent’s residence. I also find based on Ms. Katz’ evidence that the children have always felt safe while in their father’s care, and that they are not fearful that they may be subject to risk of harm if they continue to visit with their father.

e. The individuals who assaulted the Respondent on August 2, 2011 are incarcerated and awaiting trial.

f. I have taken into consideration Mr. Adams’ submissions on behalf of the children that the terms relating to supervision by the paternal grandparents and overnight access occurring at the paternal grandparents’ home have been cumbersome for the children and have interfered with their ability to have quality visits with their father.

g. The bail terms which the Respondent is subject to require him to live with the paternal grandparents and to be in residence from 9:00 p.m. until 6:00 a.m. daily except if he is under the direct supervision of either of his parents. I accept the Applicant’s evidence that in all likelihood, the paternal grandparents will be present in the home in the evening and morning hours, unless they are on vacation. This bail term provides considerable protection for the children from any potential risk while in the Respondent’s care during the evening and early morning hours.

h. I have taken into consideration the children’s ages and the evidence which leads me to conclude that they are both very intelligent and well adjusted. Based on this evidence, I am satisfied that the children would report any concerns that may arise during their time with their father, and would take reasonable efforts to protect themselves to the best of their ability if any dangerous situations developed while they were in the Respondent’s care.

i. Finally, I am satisfied based on my impressions of the Applicant and her clear concern for the safety and well-being of the children that she would return this matter to court forthwith to seek a change in the custody and access arrangements if any concerns arose regarding the children in their father’s care.

[51] Finally, I turn to the issue of whether there should be a restriction on the Respondent’s access with the children precluding him from being with the children on the Niagara Falls Car Wash property. The Applicant has concerns about the Respondent being with the children on any properties which either the Respondent or his father own. Her concern is based generally on the evidence regarding the Respondent’s association with dangerous individuals, and on the violent events that occurred at the Respondent’s business property on August 2, 2011. The Niagara Falls Car Wash property is owned by the paternal grandparents. I accept the Respondent’s evidence that he has had to attend at the Niagara Falls Car Wash property a number of times to see his parents for various reasons, and that the children have on those occasions had to wait at the property line due to the terms of the August 31, 2011 order. I also accept his evidence that the children wish to attend at the property on occasion on weekends to spend time with their paternal grandparents and to help out with the car wash operations.

[52] I conclude that the removal of the restriction regarding the exercise of access on the Niagara Falls Car Wash property is in the best interests of the children. In reaching this decision, I have given significant weight to the fact that the property is owned by the paternal grandparents and is under their care and control. There is no evidence that either of the paternal grandparents has a criminal record, is currently involved in any criminal proceedings, or has ever been investigated for engaging in or permitting illegal activities to occur on their properties. Furthermore, there is no evidence that the Respondent has engaged in any dangerous illegal activities on either his properties or on any properties owned by either the paternal grandparents or any other individuals since August 2011. Permitting the children to be with the Respondent on the Niagara Falls Car Wash property will avoid the children being left unsupervised on the property line when the Respondent attends there to see his parents. In addition, it will allow for greater opportunities for the children to connect with the paternal grandparents, with whom I find they have a very positive relationship, and to participate in the business which the paternal grandparents operate on the property. This will be of particular benefit to Amber, who is showing an interest in potentially taking over the family businesses in the future.

PART IV: CLAIMS FOR TERMINATION OF SPOUSAL SUPPORT AND REDUCTION OF CHILD SUPPORT

I. POSITIONS OF THE PARTIES

A. The Respondent’s Position

[53] The Respondent is seeking to terminate his obligation to pay spousal support to the Applicant, and to reduce his child support obligation in relation to Sarah and Amber from $1,404.00 to $400.00 per month. In his Amended Motion to Change issued on November 8, 2011, he requested that these changes to the Milanetti order be effective November 1, 2010. However, in closing submissions at trial, his counsel advised that the Respondent is only pursuing these claims effective November 1, 2011.

[54] The Respondent stated that a termination of spousal support and a reduction of child support are warranted as a result of significant changes in his income and net worth since June 2009. He stated that his income up to and including 2009 consisted of income from the two businesses which he owned and operated during that period, namely the Niagara Falls Car Wash, which he owned jointly with his father Leo Favero, and Favero General Contracting, as well as capital gains on investment rental properties. His position is that the amount of $100,000.00 which he agreed should be attributed to him on a consent basis in June 2009 for the period from October 7, 2002 onward was a notional amount that he agreed to solely for settlement purposes. According to the Respondent, he never actually earned such an income, but he hoped that he would be able to do so commencing in 2009 and on an ongoing basis. He submitted that since 2009, his income has in fact been far less than the notional amount of $100,000.00. He stated that this drastic difference from what he expected to be able to earn is attributable to the following:

a. He argued that he has been unable to draw any income from Favero General Contracting in 2012 because the company’s income has decreased since 2009 to the point that the company suffered a net loss of $44,996.00 in 2012.

b. The Respondent also argued that he no longer has income which he previously enjoyed from the Niagara Falls Car Wash, because he had to sell his interest in that business to his parents in order to pay the Applicant the amounts owed to her pursuant to the Milanetti order.

c. He alleged that he has had to sell many of his investment properties since 2009 for two reasons. First, he needed some of the proceeds to pay off the amounts owing to the Applicant pursuant to the Milanetti order and to meet his ongoing child and spousal support obligations. Second, he stated that some of the properties were transferred to his parents for the purpose of using the equity in the properties to offset debt payable by him to his parents.

d. He stated that the four properties which he has been able to retain have generated losses over the past three years, and he anticipates that they will continue to generate losses or at best a very minimal income.

[55] In relation to the spousal support issue, the Respondent also argues that as a result of the Milanetti order, which included retroactive support effective from 2002, the Applicant would have received spousal support for a period of nine years as of November 2011. He relies on the SSAG to argue that the appropriate range regarding duration of support would be between five and fourteen years. His position is that a period of nine years is appropriate in the circumstances of this case.

[56] With respect to the issue of child support, the Respondent’s claim for a reduction for child support is based in part on his position that he will have the children more than 40% of the time as a result of the changes to the children’s residence arrangements which I ordered on April 11, 2013. He argues that the Table amount of child support under the Guidelines is therefore no longer appropriate as a result of the new time-sharing arrangements. It is his position that child support should be calculated in accordance with the principles set out in section 9 of the Guidelines. The Table amount under the Guidelines based on the Respondent’s alleged annual income of $34,332.00 is $499.00 per month. The Respondent’s position is that this amount should be reduced to $400.00 per month pursuant to section 9 of the Guidelines to take into account the increased costs of shared parenting.

B. The Applicant’s Position

[57] The Applicant requests that the Respondent’s claim for a reduction of child support effective November 1, 2011 and for a termination of spousal support effective that date be dismissed. She argues the Respondent has not satisfied the onus of demonstrating that there has been a material change in his income or his overall condition means and other financial circumstances since the Milanetti order was made. She argues that the Respondent’s claim that there has been a change in circumstances must be considered in the context of what she describes as a longstanding pattern on the part of the Respondent of manipulating the court process to avoid or delay enforcement of financial obligations towards the Applicant and the children. In her view, this proceeding constitutes yet another attempt on the part of the Respondent to manipulate the court process in order to avoid his financial responsibilities.

[58] With respect to the Respondent’s income, the Applicant argues that the court must assume that the Respondent’s income as of the date of the Milanetti order was $100,000.00, despite the fact that Respondent reported income of only $16,712.00 on his 2009 Income Tax Return, and only $34,996 on his 2008 Income Tax Return. She further argues that the Respondent’s Guidelines income for 2010 was over $300,000.00, including the total amount of the Respondent’s capital gains, and that the Respondent has not provided any credible evidence to explain the alleged drastic reduction of his income in 2011 and 2012.

[59] In response to the Respondent’s argument that his net worth has decreased significantly since the Milanetti order was made, the Applicant notes that the Respondent was aware at the time the Milanetti order was made that he would have to dispose of some of his properties to satisfy the judgment. With respect to the properties which the Respondent sold after June 2009, she highlighted that most of these properties were sold to his parents Leo and Linda Favero. She argues that the Respondent has not established that he received fair market value for many of those properties. Furthermore, she alleges that the Respondent has not established on a balance of probabilities that he no longer has an interest in some of the properties which he sold to his parents. Her position is that the transfer of these properties from the Respondent to his parents was akin to a “shell game” involving an understanding between the Respondent and his parents that the Respondent’s interest in the properties would be preserved. She also highlighted a number of financial transactions involving properties which Linda and Leo Favero purchased, and submitted that this evidence suggests that the Respondent also has some type of interest in those properties.

[60] The Applicant’s position is that there has been no appreciable improvement in her income or overall net worth since the Milanetti order was made. She disagrees with the proposition that eleven years of spousal support from the Respondent have fully satisfied the objectives of the spousal support provisions of the Divorce Act. Her view is that $750.00 per month for spousal support continues to be appropriate, given the enormous financial burden which ongoing litigation with the Respondent has placed on her, her inability to improve her financial circumstances, and the fact that she gave up her interest in the Niagara Falls Car Wash as part of the June 8, 2009 settlement in return for indefinite spousal support at this level.

[61] With respect to child support, the Applicant’s position is that the full Table amount for two children continues to be appropriate. Her view is that the April 11, 2013 order did not grant the Respondent at least 40% of the time with the children, and that the children will continue to be primarily in her care. Accordingly, in her view, section 9 of the Guidelines is not relevant. Furthermore, she argues that even if section 9 is engaged, the Respondent has the onus of proving that there are increased costs associated with shared parenting, and he has failed to satisfy this onus.

II. THE LAW

A. Legal Principles Relating to Variation of Spousal Support

1. Statutory Framework

[62] The legislation that applies in relation to both the spousal and child support issues in this case is the Divorce Act. Section 17(1) of the Act provides that the court may, on application by either or both former spouses, make an order varying, rescinding or suspending prospectively or retroactively a support order or any provision thereof. In making any such order, the court may include a provision that could have been included in the order in respect of which the variation order is sought.[^11] This provision must be read in conjunction with section 15.2, relating to original spousal support orders. Section 15.2(1) stipulates that a court may on application of either or both spouses make an order requiring a spouse to “secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sum, as the court thinks reasonable for the support of the other spouse.” Section 15.2(3) provides that the court may make a support order for a definite or indefinite period of time, or until a specified event occurs, and may impose “terms, conditions or restrictions in connection with the order as it thinks fit and just.”

[63] Section 17(4.1) outlines the factors which the court must consider on an application to vary a spousal support order. This provision establishes a threshold requirement of showing that there has been a “change in the condition, means, needs or other circumstances” of either spouse since the making of the existing spousal support order. That section also directs the court to take that change into consideration in making the variation order.

[64] In deciding a spousal support variation application, the court must consider the objectives of spousal support variation orders, which are described in section 17(7) of the Act as follows:

Objectives of variation order varying spousal support order

17(7) A variation order varying a spousal support order should

(a) recognize any economic advantages or disadvantages to the former spouses arising from the marriage or its breakdown;

(b) apportion between the former spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;

(c) relieve any economic hardship of the former spouses arising from the breakdown of the marriage; and

(d) in so far as practicable, promote the economic self-sufficiency of each former spouse within a reasonable period of time.

2. The Threshold Test: Material Change in Spouses’ Condition, Means, Needs or Other Circumstances

[65] The Supreme Court of Canada recently summarized and clarified the general principles that apply in applications under the Act to vary spousal support orders in L.M.P. v. L.S.[^12] and R.P. v. R.C.[^13] The court clarified in L.M.P. that the proper approach in these proceedings is that which the court adopted in Willick v. Willick[^14] and B. (G.) v. G. (L.).[^15] Specifically, the court must first satisfy itself that there has been a change in the condition, means needs or other circumstances of either spouse since the making of the existing order. Once this change of circumstances has been established, the court must decide what variations to the existing order should be made, if any, in light of the change.

[66] Pursuant to section 17(4.1) of the Act, the change that justifies a spousal support variation proceeding must relate to a spouse’s “condition, means, needs or other circumstances.” Although this phrase is very broad, not every circumstance of the spouses will be relevant to the support analysis. The factors referred to must be interpreted in the context of the purpose of the spousal support provisions of the Act as articulated by the Supreme Court of Canada in Moge v. Moge,[^16] and are circumscribed by that purpose. As L’Heureux-Dube, J. emphasized in Moge, although marriage and the family provide an emotional and economic support system for family members, spousal support in the context of divorce “is not about the emotional and social benefits of marriage. Rather, the purpose of spousal support is to relieve economic hardship that results from the marriage or its breakdown,”[^17] and the focus of the analysis is therefore “the effect of the marriage in either impairing or improving each party’s economic prospects.”[^18] The condition, means, needs and other circumstances relied upon for the purposes of the support analysis must be relevant in some way to this purpose and focus.

[67] The condition of a spouse includes such factors as their age, health, needs, obligations, dependants and their station in life. A spouse’s “means” encompasses all financial resources, capital assets, income from employment and any other source from which the spouse derives gains or benefits. The assessment of the “needs” of a spouse should take into consideration the accustomed lifestyle of the spouse, subject to ability to pay.

[68] In L.M.P., the Supreme Court of Canada confirmed the principle established in Willick and B.(G.) that a change in a spouse’s condition, means, needs or other circumstances must be “material” to justify a variation of an existing spousal support order under section 17 of the Act. The term “material” has been interpreted as having both a quantitative and qualitative connotation. On a quantitative level, the Supreme Court of Canada has stated that trivial, insignificant or short-lived changes will not justify a variation.[^19] However, the sufficiency of the change must always be evaluated in light of the particular facts of each case.[^20] The Ontario Court of Appeal has emphasized that a change in circumstances for the purposes of support variation proceedings must be something that has a measure of continuity.[^21]

[69] On a qualitative level, in order to be material, the change must be one that was not foreseen at the time, and must be such that if it had been known at the time, it would likely have resulted in different terms. If the matter which is relied upon as constituting a change was known or contemplated by the parties at the relevant time, it cannot form the basis for a variation of the existing order.[^22] The fact that a change was objectively foreseeable does not necessarily mean that it was contemplated by the parties. The material change can be based on an unexpected change in either or both of the parties’ circumstances, or on evidence that an anticipated set of specified circumstances failed to materialize.[^23] The onus is on the party seeking to vary the order to establish that such a change has occurred.[^24] The analysis of whether there has been a change in circumstances involves a careful review of the basis upon which the existing order was made. The importance of leading evidence respecting the parties’ circumstances when the existing order was made was clearly highlighted in the decision of the Supreme Court of Canada in R.P.

3. The Appropriate Variation Order

[70] Once the court is satisfied that there has been a material change within the meaning of section 17(4.1) of the Act since the existing order was made, it must determine the appropriate variation, if any, that should be made to the existing order. Even if the threshold test of a change in circumstances is met, it does not necessarily follow that a change to the existing order must be made.[^25] In deciding whether the order should be varied, the court must take into consideration the change in the condition, means needs or other circumstance that justified the variation proceeding and the objectives of a variation order as set out in section 17(7) of the Act.[^26] The Supreme Court of Canada has held that in spousal support cases, all of the statutory objectives set out in the Act must be considered, since no single objective is paramount.[^27] However, as the court emphasized in Miglin v. Miglin,[^28] trial judges have a significant amount of discretion to determine the weight that should be placed on each objective, based on the particular circumstances of the parties.

[71] As the Supreme Court emphasized in Miglin and L.M.P., a variation proceeding is not an appeal or the existing order or a de novo hearing of the spousal support issue. The court dealing with the variation must presume that the judge who made the order knew the law and applied it correctly.[^29] Furthermore, the role of the court in a variation proceeding is not to consider all of the factors and objectives to make a new order that is unrelated to the existing order. Rather, the court’s task is to make a variation order that satisfies the objectives set out in section 17(7) against the backdrop of the change in circumstance(s) that justified the proceeding.[^30]

4. Application of the Spousal Support Advisory Guidelines in Variation Proceedings

[72] The Respondent relies on the SSAG to support his position that spousal support should be terminated. This position raises the question as to whether it is appropriate for the court to refer to the SSAG for guidance and assistance in variation proceedings. In Fisher v. Fisher,[^31] the Ontario Court of Appeal held that although the SSAG are not legislated or binding, they are a useful tool, provided that “the reasonableness of an award produced by the Guidelines must be balanced in light of the circumstances of the individual case, including the particular financial history of the parties during the marriage and their likely future circumstances.”[^32] However, the court commented that the SSAG “only apply to initial orders for support, and not to variation orders.”[^33] The court made this comment as part of a general overview of the intended scope of the application of the SSAG as described by the authors of the guidelines. The comment must be considered in light of that context and the fact that the court was not in that case dealing with a variation proceeding. In Part 14 of the SSAG, which addresses the application of the SSAG in variation and review proceedings, the authors do state that the SSAG do not apply as a matter or course in variation proceedings, since the formulas proposed by the guidelines “are intended to apply to initial orders and to the negotiation of initial agreements.”[^34] I conclude that this was the general comment which the Court of Appeal was echoing in Fisher. At a later point in Part 14 of the SSAG, however, the authors of the SSAG provide a detailed explanation of the various reasons why the courts must exercise caution in deciding whether or not to refer to the SAAG in variation proceedings, but outlined certain situations in which reference to the SSAG may in fact be appropriate. By way of example, the authors of the SSAG envisioned that the Guidelines would be of assistance to parties and the court in variation proceedings where the claim is based on alleged reductions in the payor spouse’s income, for the purpose of determining quantum of support. The Court of Appeal in Fisher did not include these additional details regarding the intended scope of the application of the SSAG in variation proceedings in its commentary because, quite simply, it did not need to do so on the facts of the case before it, which involved an initial support application. Accordingly, in order to obtain a comprehensive appreciation of the scope of application of the SSAG in variation proceedings, it is appropriate to turn to appellate authority from other jurisdictions for guidance.

[73] The British Columbia Court of Appeal specifically addressed the question of whether the SSAG apply in variation proceedings under the Divorce Act in Beninger v. Beninger.[^35] I adopt the principles which the court set out in that case. Prowse, J. referenced the comments of the authors of the SSAG that the Guidelines should be approached with considerable caution on variation applications. She reiterated the point made by the SSAG authors that the formulas were not specifically designed to address some of the more complex issues which can arise on variation proceedings, including the impact of remarriage, second families and retirement. However, she accepted the proposition of the SSAG authors that the guidelines can be used in variation proceedings in some situations, provided that caution is exercised to ensure that the use of the guidelines is appropriate taking into account the particular facts of the case before the court.[^36]

B. Legal Principles Relating to Variation of Child Support

1. Statutory Provisions Relating to Variation Proceedings

[74] The applicable legislation respecting the child support issues in this case is also the Divorce Act. Section 15.1 of the Act stipulates that the court may make an order requiring a spouse to pay for the support of any or all children of the marriage. Entitlement to child support under the Act is therefore dependent on the child being a “child of the marriage” within the meaning of section 15.1. The definition of “child of the marriage” is set out in section 2 of the Act, which provides as follows:

“child of the marriage”

“child of the marriage” means a child of two spouses or former spouses who, at the material time,

a. is under the age of majority and who has not withdrawn from their charge, or

b. is the age of majority or over and under their charge but unable, by reason of illness, disability or other cause, to withdraw from their charge or to obtain the necessaries of life

[75] The fact that an adult child is still undertaking educational studies may constitute “other cause” within the meaning of section 2(1) of the Act, but it is not in and of itself determinative of the issue of entitlement to child support.[^37] The entitlement analysis is a fact-driven undertaking in each case.

[76] Section 17 of the Act outlines the principles that apply on an application to change an existing child support order. Section 17(1) directs that a court may make an order “varying, rescinding or suspending, prospectively or retroactively” a support order or any provision of the order. Section 17(3) stipulates that the court may include in a child support variation order any provision that could have been included in the order in respect of which the variation order is sought. This section must be read in conjunction with section 15.1(4) of the Act, which provides that in deciding a child support application, the court may make an order for a definite or indefinite period, or until a specified event occurs, and may impose terms, conditions or restrictions in connection with the order as it thinks fit and just.

[77] Section 17(4) establishes that before varying a child support order, the court must satisfy itself that there has been a change of circumstances as provided for in the Guidelines since the making of the existing order.[^38] Section 14 of the Guidelines provides that where the amount of child support set out in the order includes a determination made in accordance with the Tables under the Guidelines, any change in circumstances that would result in a different child support order or any provision thereof constitutes a change that gives rise to the making of a variation order. Accordingly, a change in the payor spouse’s income, or evidence that the child is no longer a “child of the marriage” as set out in section 2 of the Act would satisfy the threshold test of whether there has been a change in circumstances since the previous order was made.

[78] In ascertaining whether a change in circumstances has occurred for the purposes of a Motion to Change child support, the court must consider whether the alleged change was “significant and long lasting; whether it was real and not one of choice.”[^39] Where the payor has been unable for relatively short periods of time in the past to make child support payments as they come due, this does not constitute a change in circumstances that meets the threshold for initiating a variation proceeding.[^40] Furthermore, as in the case of variation of spousal support, the change must be one that was not foreseen when the existing order was made.

[79] The powers of the court on an application to change a child support order or adjust outstanding arrears of child support under section 17(1) of the Divorce Act are broad. The court can not only change the terms of the order, either prospectively or retroactively, but can also suspend or discharge the order, either in whole or in part, and on either a prospective or retroactive basis. The court’s authority with respect to arrears is similarly broad, and includes the power to rescind the arrears and interest either entirely or in part, or to reduce the amount of arrears payable.

2. Presumptive Rules Relating to Child Support Determinations

[80] In making a variation order under the Divorce Act, the court is presumptively required to do so in accordance with the Guidelines.[^41] The starting point for the determination of the amount of child support under the Guidelines is section 3, which establishes the following presumptive rules respecting the amount of child support, depending on whether the child in question is under or over the age of majority:

Presumptive rule

3. (1) Unless otherwise provided under these Guidelines, the amount of a child support order for children under the age of majority is

(a) the amount set out in the applicable table, according to the number of children under the age of majority to whom the order relates and the income of the spouse against whom the order is sought; and

(b) the amount, if any, determined under section 7.

Child the age of majority or over

(2) Unless otherwise provided under these Guidelines, where a child to whom a child support order relates is the age of majority or over, the amount of the child support order is

(a) the amount determined by applying these Guidelines as if the child were under the age of majority; or

(b) if the court considers that approach to be inappropriate, the amount that it considers appropriate, having regard to the condition, means, needs and other circumstances of the child and the financial ability of each spouse to contribute to the support of the child.

[81] The child Sarah turned eighteen years of age on May 8, 2013, and therefore consideration must be given to the principles that apply to the interpretation of sections 3(1) and (2) of the Guidelines. The Ontario Court of Appeal outlined the following principles regarding the manner in which the calculation and quantum of child support should be determined pursuant to these sections in Lewi v. Lewi:[^42]

a. Where the child is under the age of majority, the analysis is undertaken pursuant to section 3(1). The presumption is that the amount of child support is the amount set out in the Tables and the amount, if any, determined under section 7 in relation to special and extraordinary expenses. The court determined that pursuant to section 3(1), contributions to section 7 expenses that the court determines are appropriate are not properly characterized as “add-ons” to the child support order, but are a part and parcel of the basic child support amount ordered under section 3(1).

b. If a party seeks child support for a period after a child attains the age of majority, the amount of child support payable after the child becomes an adult must be determined under section 3(2) of the Guidelines.

c. The court is directed by section 3(2)(a) to start with the presumption that in cases involving children over the age of majority, child support should be calculated in the same manner as for a child under the age of majority, that is, by calculating the applicable Table amount and adding any contribution to section 7 expenses which is determined to be appropriate. The court described this approach as “the standard Guidelines approach.” However, the court must then determine whether this approach is “inappropriate” based on the particular facts of the case.

d. If the court determines that the standard Guidelines approach is inappropriate, the court must determine the amount of child support in accordance with section 3(2)(b) of the Guidelines, which provides that the amount of support is the amount which the court considers appropriate, “having regard for the conditions, means, needs and other circumstances of the child and the financial ability of each spouse to contribute to the support of the child.” The use of the term “approach” in section 3(2)(b) makes it clear that the court cannot depart from the standard Guidelines approach simply on the basis that the amount determined using the standard Guidelines approach is inappropriate, and makes it clear that deviations from the presumptive approach under section 3(1)(a) should be the exception rather than the rule.

e. Where the child is over the age of majority, and the court determines that applying the standard Guidelines approach is inappropriate, the analysis should be carried out entirely pursuant to section 3(2)(b) of the Guidelines, and resort should not be made to section 7. However, in carrying out the section 3(2)(b) analysis, the court may draw upon the principles set out in section 7 and other provisions of the Guidelines and its experience in applying them.

f. Section 3(2)(b) requires the court to consider the means of the child along with the means of the parents in determining an appropriate amount of child support. The court has the discretion to decide the amount that the child should be expected to contribute.

[82] The term “inappropriate” in the context of section 3(2)(b) of the Guidelines means “unsuitable” rather than “inadequate.” There is therefore a broad discretion with the trial judge to determine whether or not the standard Guidelines approach should be resorted to.[^43] A review of the case-law dealing with this issue reveals that typically, the closer the circumstances of the child are to those upon which the standard Guidelines approach is based, the more likely it is that the standard approach set out in section 3(1) of the Guidelines will be applied.[^44] Both before and since the Ontario Court of Appeal released its decision in Lewi, courts have often considered the standard Guidelines approach to be inappropriate in cases where children are attending post-secondary education programs away from home,[^45] or where the child has the ability through their own means to pay not only for post- secondary education expenses but also a portion of their living costs.[^46]

3. General Principles Relating to Shared Parenting Arrangements

[83] As noted above, the Respondent argues that the change in the court ordered residential arrangements respecting the children takes the case outside of the presumptive rules set out in section 3 of the Guidelines, and triggers the operation of section 9 of the Guidelines, which addresses the issue of child support in “shared custody” situations. The phrase “shared custody,” encompasses situations where a spouse has a right of access to, or has physical custody of, the child for not less than 40 percent of the time over the course of a year.[^47] In a shared custody situation, the amount of child support must be determined in accordance with the principles set out in section 9, which provides as follows:

Shared custody

9. Where a parent or spouse exercises a right of access to, or has physical custody of, a child for not less than 40 per cent of the time over the course of a year, the amount of the order for the support of a child must be determined by taking into account,

(a) the amounts set out in the applicable tables for each of the parents or spouses;

(b) the increased costs of shared custody arrangements; and

(c) the condition, means, needs and other circumstances of each parent or spouse and of any child for whom support is sought.

[84] The Supreme Court of Canada addressed the issue of how child support calculations should be approached in shared custody situations in Contino v. Leonelli-Contino.[^48] In that case, the Supreme Court made the following significant comments regarding the interpretation of section 9 and the manner in which child support calculations should be approached in shared parenting scenarios:

a. The court emphasized that in shared parenting arrangements, there is no presumption in favour of the parent who has less time with the child paying the Table amount of child support. Rather, the court must determine the quantum of child support in accordance with the three factors listed in section 9.

b. A finding that a shared parenting arrangement exists does not automatically dictate a deviation from the Table amount of child support. The court emphasized that in some cases, a careful review of all of the factors set out in section 9 may lead the court to conclude that the Table amount remains the appropriate figure.

c. None of the three factors listed in section 9 prevail over the others. In reaching an appropriate child support figure, the court must consider the overall situation of shared custody, the costs to each parent of the arrangement and the overall needs, resources and situation of each parent. The weight to be accorded to each of the three factors set out in section 9 will vary according to the particular facts of each case.

d. The court emphasized that the purpose of section 9 is to ensure a fair and reasonable amount of child support. It concluded that in adopting section 9 of the Guidelines, Parliament made a clear choice to emphasize the need for fairness, flexibility and the actual condition, means, needs and circumstances of each parent and the child, even if this meant sacrificing to some degree the values of predictability, consistency and efficiency.

e. The calculation of child support pursuant to section 9 involves a two step process. First, the court must determine whether the 40% threshold has been met; second, if the threshold has been met, the court must consider the factors outlined in section 9 to determine the appropriate quantum of support.

f. With respect to section 9(a), the amounts set out in the applicable Tables for each parent, the court stated that the simple set-off approach outlined in section 8 of the Guidelines may be a useful starting point, as a means of bringing consistency and objectivity to the child support determination. This is particularly so in cases where the parties have provided limited information and the incomes of the parties are not widely different. However, the court emphasized that the simple set-off approach has no presumptive value in carrying out the support calculation. It cautioned against a rigid application of the set-off approach, noting that the set-off figure may not be appropriate when a careful examination of the respective financial situations of the parties and their household standards of living raises concerns about the fairness of a drastic reduction in child support to the recipient.

g. The court held that the judge has the discretion to modify the simple set-off amount where “considering the financial realities of the parents, it would lead to a significant variation in the standard of living experienced by the children as they move from one household to another, something which Parliament did not intend.”[^49] It emphasized that the court should insofar as possible strive for a result that avoids the child experiencing a noticeable decline in their standard of living as they move between households.

h. The court highlighted as one consideration in carrying out the section 9 analysis whether one parent is actually incurring a higher share of the child’s costs than the other, such as costs relating to clothing and activities.

i. With respect to subsection 9(b), the court emphasized that this section does not refer only to the increased expenses which the payor parent has assumed as compared to the expenses that they would be incurring if they had the child less than 40% of the time. This subsection recognizes that the total global cost of raising the child in a shared custody arrangement may be higher than in a primary residence arrangement. It requires the court to consider the total additional costs attributable to the situation of shared custody. In carrying out this analysis, evidence of necessary duplication of fixed costs arising due to the shared child care arrangement may be important.

j. The court recognized that not every dollar spent by a parent who has the child over the 40% threshold is a dollar saved by the recipient parent. It stated that in the absence of evidence to the contrary, it is possible to presume that the recipient parent’s fixed costs have remained the same, and that their variable costs have only marginally decreased by the other parent’s increase in time with the child. The court stated that where no evidence respecting the increased cost of shared custody is adduced, the court should recognize the status quo regarding the recipient parent.

k. Financial statements and /or child expense budgets are necessary in order for the court to properly carry out the child support analysis pursuant to section 9. The judge should not make assumptions regarding additional costs attributable to a shared parenting arrangement, but must apply the evidence relating to the additional costs.

l. The court’s discretion under section 9 is sufficiently broad to bring a parent’s claim for section 7 expenses into the analysis under that section, taking into consideration all of the factors outlined in section 9.

[85] There is disagreement in this case as to whether the 40% threshold has been met as a result of the changes in the court ordered residential arrangements, and a review of the law on this issue is therefore necessary. The onus is on the parent who is relying on section 9 of the Guidelines to establish that the 40% threshold has been met.[^50] In Contino v. Leonelli-Contino, the Supreme Court of Canada was not required to address the issue of how the threshold 40% time period referred to in section 9 of the Guidelines should be calculated. In Froom v. Froom,[^51] the Ontario Court of Appeal held that there is no universally accepted method of deciding the 40% threshold issue, and that rigid calculations of time are not necessarily appropriate. The court endorsed the comments of the trial judge in that case that the court should focus on determining whether physical custody is truly shared by the parents. In Maultsaid v. Blair,[^52] the British Columbia Court of Appeal provided guidance on how the issue of time calculation should be addressed in cases where the parent exercises mid-week overnight access. The court concluded that school time in these situations should not be credited to the parent relying on section 9 unless the parent has the child both before and after school on a particular day.

C. Income Determination

1. General Principles

[86] This case raises a number of issues respecting income determination in the context of child support and spousal support variation proceedings. Specifically, the following income-related issues must be addressed:

a. Should the court go behind the attribution of income of $100,000.00 which the Respondent consented to in 2009 and which formed the basis of the Milanetti order based on the Respondent’s submission that he never actually earned that income?

b. How should the Respondent’s income be calculated, given that he has supported himself in part from capital gains, which have fluctuated from year to year?

c. Should income be imputed to the Respondent?

[87] Sections 15 to 20 of the Guidelines are the starting point for the calculation of a party’s income for child and spousal support purposes. Section 15(1) provides that subject to section 15(2), a spouse’s annual income is determined by the court in accordance with sections 16 to 20. Section 15(2) stipulates that where both spouses agree in writing on the annual income of a spouse, the court may consider that amount to be the spouse’s income for the purposes of the Guidelines if it thinks that the amount is reasonable.

[88] Section 16 of the Guidelines provides that subject to sections 17 to 20, a spouse’s annual income is determined using the sources of income set out under the heading “total income” (line 150) in the T1 General Form issued by the Canada Revenue Agency, and by then making the adjustments provided for in Schedule III to the Guidelines. Schedule III includes a number of adjustments which are relevant to this case. Specifically:

a. Section 5 directs that the taxable amount of dividends from taxable Canadian corporations received by the spouse are to be replaced with the actual amount of those dividends received by the spouse.

b. Section 6 provides that the taxable capital gains realized in a year by the spouse are to be replaced by the actual amount of the capital gains realized by the spouse in excess of the spouse’s actual capital losses in that year.

c. Section 11 provides that the spouse’s deduction for an allowable capital cost allowance with respect to real property is to be included.

[89] The determination of income for the purposes of applying the SSAG differs than for child support cases in that social assistance is not treated as income for the purposes of the SSAG, but the Child Tax Benefit and other government child benefits are included in income under the “with child” formula.[^53]

2. Section 17: Pattern of Income, Fluctuation in Income or Receipt of Non-Recurring Amounts

[90] Section 17 of the Guidelines is relevant to this case, as it addresses situations where a party’s income fluctuates. The Respondent’s evidence is that he derives his income in part from rental income and capital gains on rental properties, the total amounts of which vary considerably from year to year. Section 17 provides as follows:

Pattern of income

17. (1) If the court is of the opinion that the determination of a spouse’s annual income under section 16 would not be the fairest determination of that income, the court may have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years.

Non-recurring losses

(2) Where a spouse has incurred a non-recurring capital or business investment loss, the court may, if it is of the opinion that the determination of the spouse’s annual income under section 16 would not provide the fairest determination of the annual income, choose not to apply sections 6 and 7 of Schedule III, and adjust the amount of the loss, including related expenses and carrying charges and interest expenses, to arrive at such amount as the court considers appropriate.

[91] With respect to non-recurring income amounts, section 17 does not require the court to exclude these amounts in the income calculation, but rather allows the court to exercise its discretion in dealing with these types of income earning events. The Ontario Court of Appeal addressed the question of how to deal with non-recurring sources of income in Marinangeli v. Marinangeli.[^54] It noted that although courts have differed in their approach when dealing with non-recurring income, “the recurring theme is that the child of the marriage should benefit from a sudden increase in lifestyle and money available to the family.”

[92] The Alberta Court of Appeal considered section 17 of the Guidelines and the treatment of non-recurring sources of income in Ewing v. Ewing.[^55] It highlighted that the purpose of child support orders is to ensure that to the extent possible, children enjoy the same standard of living as they would have enjoyed if the marriage had not ended. Thus, in deciding upon a fair and reasonable income under section 17, the day-to-day standard of living that the family would have enjoyed if it had remained intact is relevant to the analysis. In determining whether to apply section 17, the issue of whether income in any given year is non-recurring is only one consideration. Some of the questions which the court found may be relevant to the decision as to whether the income analysis should be undertaken pursuant to section 16 or section 17 of the Guidelines were as follows:

a. Is the non-recurring gain or fluctuation actually in the nature of a bonus or other incentive payment akin to income for work done for that year?

b. Is the non-recurring gain a sale of assets that formed the basis of the payor’s income?

c. Will the capital generated from the sale provide a source of income for the future?

d. Are the non-recurring gains received at an age when they constitute the payor's retirement fund, or partial retirement fund, such that it may not be fair to consider the whole amount, or any of it, as income for child support purposes?

e. Is the payor in the business of buying and selling capital assets year after year such that those amounts, while sale of capital, are in actuality more in the nature of income?

f. Is inclusion of the amount necessary to provide proper child support in all the circumstances?

g. Is the increase in income due to the sale of assets which have already been divided between the spouses, so that including them as income might be akin to redistributing what has already been shared?

h. Did the non-recurring gain even generate cash, or was it merely the result of a restructuring of capital for tax or other legitimate business reasons?

i. Does the inclusion of the amount result in wealth distribution as opposed to proper support for the children?

[93] The Court emphasized that the mere fact that an amount in any particular year is non-recurring is not grounds for excluding that amount from the income calculation. It also noted that when section 17 is engaged, the court is not required to average out income over the previous three years. Although averaging of income is one approach which the court may adopt, the court has the discretion to pursue whatever approach it considers appropriate to determine an income figure that is fair and reasonable for the purposes of child support, including removing all or part of any non-recurring gains from income. Furthermore, the court clarified that section 17 applies with equal strength to retroactive and prospective support orders.

3. Section 19: Imputation of Income

i. General Principles

[94] The Applicant in this case argues that the court should continue to attribute, or alternatively impute, income to the Respondent in the amount of $100,000.00. The principles that apply in determining whether to impute income are the same in both child support and spousal support cases.[^56] The Guidelines provide that the court may impute income to a party in appropriate circumstances. The relevant section of the Guidelines is section 19, which provides as follows:

Imputing income

19. (1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following:

(a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse;

(b) the spouse is exempt from paying federal or provincial income tax;

(c) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;

(d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;

(e) the spouse’s property is not reasonably utilized to generate income;

(f) the spouse has failed to provide income information when under a legal obligation to do so;

(g) the spouse unreasonably deducts expenses from income;

(h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and

(i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

[95] The list of circumstances set out in section 19 provides a useful summary of when it may be appropriate to consider imputing income in spousal support cases. This list is not exhaustive, and therefore does not circumscribe the court’s general discretion to impute income in other situations where it considers it appropriate to do so. These other situations need not be analogous to the circumstances listed in section 19 in order to provide a foundation for imputation of income.[^57]

[96] Regardless of the basis upon which income is imputed, the amount of income that the court imputes to a party is a matter of discretion. The only limitation on the discretion of the court in this regard is that there must be some basis in the evidence for the amount that the court has chosen to impute.[^58]

[97] The question of onus with respect to imputation of income is an important one. The recent decision of Pazaratz, J. in Trang v. Trang[^59] represents a significant development on this point, as it clarifies that different principles apply regarding the onus issue in original proceedings as compared to Motion to Change proceedings. In original proceedings, the onus is on the party requesting the court to impute income to establish the grounds for this request.[^60] The support payor has an obligation to disclose all information that is relevant to their position respecting their income, which includes full and frank disclosure of all information required to properly assess their income, their income earning potential and efforts which they have made to maximize their earnings. As Pazaratz, J. emphasized in Trang, however, once a court imputes an income to a party, the onus no longer rests with the support recipient in a subsequent Motion to Change based on alleged changes to the payor’s income to establish why income should continue to be imputed on the same basis as it was in the previous proceeding. In these circumstances, the court has already made a determination of fact respecting income, and the onus therefore shifts to the payor to establish that their income should now be calculated in a different way. The party who argues that an imputed income is no longer appropriate must go further than simply establishing their subsequently declared income for income tax purposes; they have an obligation to provide a rational explanation as to why income had to be imputed in the first place, the basis for the amount of income imputed, and evidence of changed circumstances that establish that either:

a. It is no longer necessary or appropriate to impute income, and the payor’s representations as to income should now be accepted; or

b. Even if income should still be imputed, changed circumstances suggest a different amount is more appropriate. [^61]

[98] In Trang, Pazaratz, J. also addressed how the court should approach a situation where the income previously imputed to the party occurred in the face of conflicting income information set out in income tax documentation. He emphasized that if the judge who imputed income in the first instance did so on the basis that the party’s income tax returns did not reflect cash sales and excessive write-offs, ‘there should be a presumption that so long as the payor maintains the same business activities and accounting practices, subsequent tax returns will be equally unreliable.” [^62]

[99] Finally, in Trang, Pazaratz , J. addressed how the court should respond to situations where the payor argues on a Motion to Change support that they never actually earned the income that was previously imputed to them. He emphasized that when a court imputes income, this is a determination of fact. As he stated in reference to income imputation:

“It’s not an estimate. It’s not a guess. It’s not a provisional order awaiting better disclosure or further review. It is a determination that the court had to calculate a number, because it didn’t feel it was appropriate to rely on- or wait for- representations from the payor.”[^63]

[100] As Pazaratz, J. noted, if a party wishes to challenge the imputation of income in earlier proceedings, the appropriate remedies are an appeal or a motion to set aside the order. However, if the party proceeds by way of a Motion to Change, “they must face the presumption that the original order was correct and the original imputation of income was correct.”

ii. Intentional Unemployment or Underemployment

[101] The Ontario Court of Appeal has held that in determining whether to impute income on the basis that a party is intentionally underemployed or unemployed pursuant to section 19(1)(a) of the Guidelines, it is not necessary to establish bad faith or an attempt to thwart support obligations. A parent is intentionally underemployed within the meaning of this section if they earn less than they are capable of earning having regard for all of the circumstances.[^64] In determining whether to impute income on this basis, the court must consider what is reasonable in the circumstances. The factors that the court is required to consider include the age, education, experience, skills and health of the party, the party’s past earning history and the amount of income that the party could reasonably earn if they worked to capacity.[^65]

[102] In determining a party’s capacity to earn income, some of the principles which the court should consider and which are relevant to this case include the following:

a. There is a duty on the part of the payor to actively seek out reasonable employment opportunities that will maximize their income potential so as to meet the needs of their children.[^66]

b. The court will not excuse a party from their child support obligations or reduce these obligations where the party has persisted in un-remunerative employment, or where they have pursued unrealistic or unproductive career aspirations. A self-induced reduction of income is not a basis upon which to avoid or reduce child support payments.[^67]

c. If a party chooses to pursue self-employment, the court will examine whether this choice was a reasonable one in all of the circumstances, and may impute an income if it determines that the decision was not appropriate having regard for the parent’s child support obligations.[^68]

d. When a parent experiences a change in their income, they may be given a “grace period” to adjust to the change and seek out employment in their field at a comparable remuneration before income will be imputed to them. However, if they have been unable to secure comparable employment within a reasonable time frame, they will be required to accept other less remunerative opportunities or options outside of the area of their expertise in order to satisfy their obligation to contribute to the support of their children.[^69]

e. A party may be imputed income if his unemployment or under-employment are self-induced. Examples include where the payor quits their employment for selfish or bad faith reasons[^70], is terminated for cause,[^71] engages in criminal conduct which leads to incarceration, loss of employment or problems finding work,[^72] or engages in reckless and anti-social behaviour which affects their income earning capacity.[^73]

iii. Unreasonable Deduction of Expenses

[103] The Respondent has set off numerous expenses against his income in this case, including expenses against rental income on numerous properties. Accordingly, consideration of section 19(1)(g) of the Guidelines is required.

[104] Where a party raises questions regarding the reasonableness of business expenses, the burden of proof is on that party to establish that the expenses are unreasonable.[^74] There is a distinction between this onus and the onus on the party claiming the deductions to establish their income. The parent who relies on expenses to reduce their income cannot simply put forth numbers for alleged business expenses with no justification or evidence to support those numbers, and then put the other party to the expense of disclosure motions and questioning in an effort to obtain proof regarding the specifics and actual amounts of the expenses. Rather, that party has an obligation to explain the reasons for the expenses and how they were calculated, and must provide documentary proof of the expenses in an organized manner so that the court can make a proper determination as to the reasonableness of the expense from the standpoint of the child support calculation.[^75] This is particularly important in situations where the expenses reported on the party’s income tax returns fluctuate from year to year.[^76] If the party fails to provide meaningful supporting documentation or other evidence in respect of those deductions, an adverse inference may be drawn by the court in making the income determination.[^77]

[105] In order to impute claimed business expenses back into a parent’s income pursuant to section 19(1)(g) of the Guidelines, it is not necessary to establish that the party who has claimed the deductions has acted improperly or outside the norm for claiming expenses in the income tax context. Rather, the issue is whether the full deduction of the expense results in a fair representation of the actual disposable income that is available to the party for personal expenses.[^78] In determining whether business expenses claimed by a party are unreasonable, the court must balance the business necessity of the expense against the alternative of using those monies for the purposes of child support.[^79]

[106] With respect specifically to expenses claimed against rental income, the Ontario Court of Appeal in Graves v. Eager[^80] accepted deductions for what it referred to as “hard costs” relating to earning such income, referring to payment of mortgage interest, property taxes and property insurance.

III. ANALYSIS

A. Issue # 1: Has There Been a Material Change in the Respondent’s Income Since June 9, 2009?

1. Overview

[107] For the reasons outlined below, I conclude that the Respondent has not met the onus of establishing a material change in his income since the Milanetti order was made. Relying on the Respondent’s own income evidence, including the information set out in his 2010 and 2011 income tax returns, I conclude that the figure of $100,000.00 continues to be a fair and reasonable annual income to attribute to the Respondent. In the alternative, I am satisfied that it is reasonable to impute or attribute an ongoing annual income of $100,000.00 to the Respondent on various grounds.

2. The Starting Point: The Respondent’s 2009 Income

[108] The starting point for determining whether there has been a change in the Respondent’s income is to clearly identify what the Respondent’s income was as of June 8, 2009. As previously indicated, the Respondent executed an acknowledgement on June 8, 2009 that his income for the purposes of the child and spousal support provisions of the Milanetti order was $100,000.00, and that the written acknowledgement could be relied upon in any subsequent variation proceedings. The Respondent has urged me to accept the following propositions as the starting point for my analysis of the income issue:

a. That he agreed to the figure of $100,000.00 purely for settlement purposes;

b. That he never actually earned this amount of money;

c. That he hoped to be able to earn $100,000.00 commencing in 2009; and

d. That the “change in circumstances” is that his hopes in this regard have not come to fruition.

[109] The evidence respecting the income which the Respondent reported for income tax purposes from 2005 until 2009 indicates that the amounts reported never remotely approached the $100,000.00 figure which the Respondent agreed to have attributed to him in June 2009. I find that the Respondent’s income reported for tax purposes for those years was as follows:

2005: $ 5,968.00

2006: $13,493.00

2007: $39,287.00

2008: $34,996.00

2009: $16,713.00

[110] An important preliminary question is whether the premises put forth by the Respondent as described above should form the analytical starting point for the change in income analysis in this Motion to Change support, or whether the income analysis should begin with the premise that the Respondent was actually earning an income of $100,000.00 from 2002 until 2009. The distinction is important, as the issues to be addressed in the case are very different depending on the premises which form the foundation for the analysis. Accepting the Respondent’s propositions would require that he explain why he expected to earn a significantly higher income starting in 2009 than he had ever earned before, and the reasons for his inability to achieve his income objectives. On the other hand, if the Respondent’s income was actually $100,000.00, the onus on the Respondent would be to establish why he has experienced such a drastic increase in his income since 2009.

[111] I do not accept the premises which the Respondent has asked me to adopt as the starting point of his income determination. In reaching this conclusion, I am mindful of the fact that the Respondent agreed to the income figure of $100,000.00 not only for the year 2009 and for the purposes of ongoing support, but also for the years 2002 until 2008 for the purposes of the retroactive child and spousal support calculations. I did not receive evidence respecting the income which the Respondent reported for income tax purposes for the years 2002 until 2004, but if the Respondent’s income for the years 2005 until 2008 was in fact as he reported in his income tax returns for those years, it is exceedingly difficult to comprehend why he would agree to an income determination of $100,000.00 for those years. The Respondent’s explanation that he did so only for settlement purposes with the goal of finally “achieving peace” between the parties is not plausible. I state this having regard for my serious concerns regarding the Respondent’s credibility generally and particularly around his financial affairs, and taking into consideration my following findings respecting his conduct immediately following the Milanetti order, which demonstrate that the Respondent had no intention whatsoever of working towards peace with the Applicant:

a. Almost immediately after the Milanetti order was made, the Respondent began to request changes to the residential arrangements set out in the Milanetti order, and to seek week-about time-sharing. The parties remained embroiled in considerable ongoing conflict regarding this issue, and the Respondent commenced his Motion to Change Final order to change the arrangements less than 1.5 years later.

b. The Respondent went into arrears of child and spousal support almost immediately after the Milanetti order was made. Soon after the order was granted, the FRO issued a notice that it intended to suspend his licence as part of its enforcement efforts. The Respondent’s efforts to change the recently agreed-upon residential arrangements respecting the children occurred at the same time as the FRO enforcement efforts intensified. The Respondent obtained a refraining order on November 18, 2009, which was subject to conditions agreed to by the Respondent that he bring a Motion to Change support within twenty days, and that he pay the full amount of child and spousal support pursuant to the Milanetti order on an ongoing basis as well as $100.00 per month towards arrears. He did not comply with these conditions.

c. The Respondent made a lump sum payment of support of $10,841.50 on November 5, 2011, after he sold his property located 225 Phipps Street, Fort Erie (“Phipps”) but thereafter he did not make any voluntary support payments whatsoever until the FRO commenced enforcement proceedings in 2012. It was only after the FRO obtained an order in October 2012 requiring him to pay ongoing support of $600.00 per month, failing which he would face incarceration, that he began to pay support on a regular basis but limited to the $600.00 which the court ordered.

d. In September 2009, only three months after the Milanetti order was made, the Respondent advised the Applicant that he would be appealing the order and that pending the outcome of his appeal, his intention was to only pay $90,000.00 towards the $172,000.000 equalization payment that had been ordered.

e. The Respondent did not comply with paragraph 14 of the Milanetti order, which required him to obtain FamilySure insurance to secure his support obligations. In fact, after the Milanetti order was made, he cancelled the life insurance policy of $500,000.00 which he had in place at the time of the order, under which the children had been named as beneficiaries.

[112] I have also considered the Applicant’s evidence that during the course of the marriage, the Respondent’s practice was to claim only 60% of the income which the Fort Erie Car Wash generated, and only 70% of the income which the Niagara Falls Car Wash generated. The Respondent denied this allegation, and stated that any cash that was not deposited in the bank was nonetheless declared as income and applied towards expenses. Based on my credibility assessment of the parties, I prefer the Applicant’s evidence over that of the Respondent on this issue. I have also taken into consideration the evidence that a forensic audit of the Respondent’s business interests which the Applicant obtained in 2009 suggested that the Respondent was not declaring all of the income from his car wash businesses. The Respondent denied this allegation, and while I make no findings in relation to the report, I do note that the case was settled soon after the report was produced.

[113] Quite apart from the concerns regarding the Respondent’s credibility about his reasons for agreeing in June 2009 to an income of $100,000.00 being attributed to him, I conclude that it is not appropriate on a Motion to Change support for a payor to resile from a previous agreement respecting their income that was filed with the court pursuant to section 15(2) of the Guidelines by suggesting to the court that their actual income was other than as specified in the agreement. To allow payors to do so would be to defeat the purpose of section 15(2), would be prejudicial to the other party who has relied upon the income determination being final as part of their decision-making in the previous proceeding, and would create a burden on the judicial system by encouraging parties to re-open issues regarding income determination which the court has previously decided. Consent orders are binding and final, subject to any legal basis to set them aside. The Respondent did not bring a Motion to set aside Milanetti, J.’s determination regarding his income. As the Ontario Court of Appeal has stated respecting the finality of consent orders:

Finality is important in litigation. This is so for the sake of the parties who reached their bargain on the premises of an allocation of risk, and with an implicit understanding that they will accept the consequences of their settlement. Finality is also important for society at large, which recognizes the need to limit the burdens placed on justice resources by re-litigation…”[^81]

[114] Accordingly, I have undertaken the analysis of whether there has been a change in the Respondent’s income since June 2009 from the starting point of $100,000.00 being a fair representation of the Respondent’s actual annual income for the period from 2002 until 2009. The corollary of this conclusion is that the significantly lower amounts which the Respondent claimed as income for income tax purposes for those years is not reliable to the extent of any discrepancy between the amounts actually reported and the sum of $100,000.00.

3. Analysis of Respondent’s Income for the period from 2010 to 2012 Based On Respondent’s Income Evidence

i. Overview

[115] The Respondent’s position that there has been a material reduction in his income since June 2009 was based largely on the evidence respecting the income which he reported for income tax purposes for 2010 and 2011. He had not completed his income tax returns for 2012 by the time the trial ended. As a preliminary point, I emphasize that I do not accept the income which the Respondent reported in 2010 and 2011 for income tax purposes as a reliable indicator of the income which he actually earned in those years, and conclude that the reported income represents the minimum which he earned in those years. In reaching this decision, I have taken into consideration the considerable discrepancy discussed above between the income which he reported from 2005 until 2008 and the figure of $100,000.00 which he agreed to on June 8, 2009 for those years, my overall concerns regarding the Respondent’s credibility and the Respondent’s inability to provide a reasonable explanation for numerous questionable financial transactions reflected in his financial records since 2009, which are discussed in further depth later in these Reasons.

[116] While I do not accept the Respondent’s reported income in 2010 and 2011 as being an accurate reflection of his true income, I have relied on his own income evidence for those years as set out in his income tax returns, as well as his evidence relating to his 2012 income, as the starting point for my analysis of whether there was a material change in his income over the period from 2010 to 2012. Upon considering this evidence, I conclude that the income analysis should be undertaken pursuant to section 17 of the Guidelines, and that the sum of $100,000.00 continues to be a reasonable representation of the Respondent’s annual income applying the approach set out in section 17.

ii. Evidence Respecting the Respondent’s Income from 2010 to 2012

[117] The evidence which the Respondent adduced in these proceedings respecting his income since 2009 reveals the following:

2010 Income

[118] In 2010, the Respondent reported income of $199,911.00 on line 150 of his income tax return. However, applying the income calculation principles set out in sections 15 and 16 and Schedule III of the Guidelines, his income for support purposes was actually $357,673.80, broken down as follows:

a. Employment income from Favero General Contracting in the amount of $31,866.12.

b. Net Rental income from the rental properties which he held in 2010 totalling $35,791.23.

c. Actual total capital gains totalling $54,509.60 from the sale of four rental properties, namely 70 Courtwright Street, Fort Erie (“Courtwright”), Phipps, 23-25 Jarvis Street, Fort Erie (“Jarvis”), and 75 Bertie Street, Fort Erie (“Bertie”).

d. Actual total capital gains totalling $210,000.00 from the sale of his interest in Niagara Falls Car Wash to his father.

e. Capital cost allowance totalling $25,506.85 which he claimed on twelve of his rental properties, and which he is required to include back into his income for the purposes of income calculation under the Guidelines.

2011 Income

[119] In 2011, the Respondent reported income of $18,270.00 in his Income Tax Return. However, his income determined in accordance with section 15 and 16 of the Guidelines was actually $37,428.00, calculated as follows:

a. Employment income drawn from Favero General Contracting in the amount of $18,195.00.

b. Interest and investment income of $432.00, from a mortgage which he held in relation to Thompson Street which he sold in 2011.

c. Total capital gains of $38,175.49 from the sale of four rental properties, namely Thompson, 14 Aberdeen Street, Fort Erie (“Aberdeen”) and 61 Torrance Street, Fort Erie (“Torrance”).

d. The Respondent claimed a loss against the above noted income sources of $19,374.00 relating to his rental properties.

2012 Income

[120] The Respondent did not provide adequate documentary proof of his income for 2012. For instance, he did not adduce proof of the rents which he claimed in relation to his rental properties in 2012, the expenses which he intended to claim as against the income which those properties generated in 2012, T4 slips, documentary proof of investment or interest income or proof of his 2012 capital gains. Neither he nor any of his witnesses were able to confirm whether or not there would be any recapture on capital cost allowance or claims for capital cost allowance on real property in 2012, both of which would have to be included in his income for the purposes of the income determination under the Guidelines. Despite these serious deficiencies in the Respondent’s evidence respecting his 2012 income, I conclude based on the evidence which he adduced at trial that the figure of $79,783.00 is a reasonable estimate of his minimum 2012 income. This conclusion is based on the following:

a. I find that the Respondent earned employment income of at least $18,195.00. Although the Respondent and his accountant, Mr. Kenneth Lenchyshyn both testified that the Respondent did not earn employment income from Favero General Contracting in 2012, the Respondent reported monthly employment income from some source of $1,516.25 per month in 2012 in two separate Financial Statements sworn on January 30, 2012 and July 11, 2012, both of which were filed as Exhibits at trial. This monthly figure would translate into annual employment income of $18,195.00, which is consistent with his reported 2011 income from employment. The Respondent did not provide an explanation for his employment income entries on his two 2012 Financial Statements at trial. It was incumbent upon him to do so if those entries were not accurate. I note that the figure of $18,195.00 is lower than the employment income which he declared in 2009 ($21,830.00) and in 2010 ($31,866.12). Moreover, the Respondent reported in his Financial Statement sworn January 30, 2012 that his business was paying some of his personal expenses, including his property insurance, property taxes, water, telephone and car insurance. He did not include the value of these contributions in the figure of $18,195.00. I am satisfied based on the Respondent’s own Financial Statements sworn in 2012 and his pattern of employment income since 2009 that $18,195.00 is a reasonable representation of his employment income for 2012. Even if he did not actually earn this income, I would impute at minimum this amount of employment income to him for 2012 for the reasons discussed in detail later in these Reasons.

b. I find based on the evidence of both the Respondent and his accountant that the Respondent received a total dividend from Favero General Contracting in the amount of $31,500.00. The actual amount of this dividend, rather than the taxable amount, would be included in the Guidelines income determination.

c. The Respondent testified that he receives $375.00 per month in relation to the mortgage which he holds as mortgagee on the Thompson property which he sold in 2011. This translates into an annual figure of $4,500.00.

d. The Respondent reported capital gains of $19,088.00 in his Financial Statement sworn July 11, 2012. I find that the Respondent sold four properties in 2012. Specifically:

• He sold his interest in 10 Wellesley Street, Fort Erie (“Wellesley”) to his parents sometime between January 2012 and July 11, 2012. This property is listed as an asset on his January 30, 2012 but is not included in as an asset in his Financial Statement sworn July 11, 2012.

• He sold the vacant lands located on Garrison Road, Fort Erie, lots 5, 26 and 27 Plan 119 to his parents sometime in January 2012. These lands are not included in the Capital Gains Report attached to his 2011 Income Tax Return, but they are no longer listed as an asset in his January 30, 2012 Financial Statement.

• He sold 46 Douglas Street, Fort Erie (“Douglas”) to his parents on January 6 2012.

• He sold 3225 Grove Avenue, Fort Erie (“Grove”) to his parents on January 16, 2012.

• He sold 170 Stanton Street, Fort Erie (“Stanton”) to his parents on January 27, 2012.

The figure of $19,088.00 which the Respondent reported as his capital gains for 2012 in his July 11, 2012 Financial Statement represents the minimum amount which he earned in capital gains that year, as he did not adduce any evidence of the proceeds which he received from the sale of Wellesley and the vacant lands.

e. With respect to rental income in 2012, the Respondent acknowledged that he had four rental properties as of July 11, 2012 when he swore his Financial Statement, namely 960 Garrison Road, Fort Erie, 974 Garrison Road, 982 Garrison Road and 1076 Spears Road, Fort Erie (“Spears”). He testified that he does not believe that these properties generated a positive income for him in 2012. Specifically, he stated that Spears, 974 Garrison, and 982 Garrison continued to operate at a similar loss as in 2011, and that 960 Garrison was breaking even or may have even made a small profit in 2012. I do not accept the Respondent’s assertion that he did not generate income from these properties in 2012, and conclude that the sum of $6,500.00 is a reasonable estimate of the rental income which the properties generated in that year. The losses which the Respondent declared from these properties in 2011 totalled $15,983.00. However, I find based on the evidence of the Respondent, his accountant, Christine Malaguti, and the Financial Statements for Favero General Contracting for 2011 and 2012 that the total rental income which the Respondent received from Favero General Contracting increased from $2,926.00 in 2011 to $25,445.35.00 in 2012, for a total increase in rental income over that period of $22,519.35. The Respondent did not adduce any evidence respecting the expenses which he incurred in connection with these properties in 2012. Even if I accept that the expenses related to these properties remained relatively the same in 2012 as in 2011, the increase in income in 2012 would cover those losses and result in a net overall income to the Respondent in the range of $6,536.35 (increase in income from 2011 of $22,519.35- 2011 losses of $15,983.00= $6,536.35).

[121] The reasoning set out above respecting the Respondent’s 2012 income is based on the assumption that the expenses associated with the rental properties which the Respondent owned in 2012 were as high as those which he claimed in 2011. As noted above, the Respondent did not prove this point at trial. Furthermore, a review of the historical evidence relating to 982 Garrison Road raises concern about the credibility of the Respondent’s evidence regarding the losses which he allegedly experienced in relation to this property in 2011, and which he states he continued to experience in 2012. I find that the gross reported rental income for 982 Garrison decreased by approximately $10,323.43 from 2010 until 2011. Furthermore, the loss reported on this property for 2011 was $7,048.58, whereas the Respondent declared income on this property in 2010 of $4,429.38 including the capital cost allowance which he claimed on the property that year. The Respondent did not provide any explanation for the decline in the gross income which the property generated, or for the significant decrease in the net income.

2013 Income

[122] The Respondent did not adduce any documentary evidence respecting his 2013 income. He testified that he expects his four remaining rental properties to operate at the same level as in 2012, but I did not receive any proof of the rent which he had received or the expenses which he had incurred in relation to these properties in January and February 2013. Furthermore, I did not receive any documentary evidence as to how Favero General Contracting has been managing in 2013. The Respondent testified that he intends to look for a job, and that he may sell some of his remaining properties. He did not comment on the types of jobs which he will be searching for or the typical incomes which such jobs generate. There is insufficient information upon which I can reach a reasonable estimate of the Respondent’s anticipated 2013 income. Accordingly, my determination of whether there has been a material change in the Respondent’s income since 2009 is based on his income from 2010 until 2012.

iii. Conclusions

[123] My findings respecting the Respondent’s minimum income for the years 2010 to 2012 do not support the Respondent’s argument that there has been a material change in his income since 2009. In reaching this conclusion, I have first compared the Respondent’s reported income for those years to the Respondent’s historical record of income reporting.

[124] I have previously noted my conclusion that the Respondent’s reported income for the years 2005 to 2009 was not an accurate reflection of his true income over that period of time. I am not satisfied the Respondent’s historical pattern of income reporting has changed, given the serious concerns regarding his credibility and his failure to explain numerous transactions and financial evidence, as detailed in further depth below. A comparison of the Respondent’s historical reporting of income to his own reported income evidence for the years 2010 to 2012 is therefore of some assistance in carrying out the analysis of whether there has been a material change in his income situation. This comparison reveals that the Respondent’s reported income for the years 2010 and 2012 is actually significantly higher than his reported income for the years 2005 to 2009. His 2011 income, including the gross up for capital gains, is also considerably higher than his reported income for each of those years except for the year 2007, when his total income inclusive of actual capital gains was $52,891.00. In order to establish a material change in circumstances, the Respondent must establish that the change relied upon has a measure of continuity. Using his reported income as a measuring stick, he has not met this test for the years 2010 to 2012.

[125] Alternatively, using the figure of $100,000.00 as the starting point for the comparison of the Respondent’s 2009 income to his income over the period from 2010 to 2012, I also conclude that the Respondent has failed to prove that there was a material change in his income during that time period. It is clear from the evidence that the Respondent’s income fluctuated significantly from 2010 to 2012. The changes in his reported income are a reflection in large part of the manner in which he has chosen to earn a living. The Respondent acknowledged that he has been an entrepreneur throughout his entire working life, and that he has not had a steady, predictable income source since at least 2005. His most stable source of income in recent years appears to have been from Favero General Contracting, but this has been solely self-employment income that has also been subject to changes depending on the yearly success of that company. The Respondent acknowledged that since 2009, a major focus for him has been to earn income from purchasing properties, renovating and renting them, using the equity from the properties to finance additional real estate investments, and selling these investment properties from time to time. This type of business venture by its very nature involves ebbs and flows in income from year to year, depending on the time when properties are purchased and sold, the status of the renovations and rentals, and the vagaries of the real estate and rental markets. The significant increase in the Respondent’s reported income in 2010 was attributable to the fact that he sold his interest in the Niagara Falls Car Wash that year, and also sold a number of properties which he had previously purchased as part of his real estate business venture.

[126] Given the significant fluctuations in the Respondent’s income from 2010 until 2012, and the inclusion of a significant non-recurring gain in 2010 from the sale of Niagara Falls Car Wash, I conclude that calculating the Respondent’s income pursuant to section 16 of the Guidelines does not result in the fairest determination of his income during those years. The appropriate course of action with respect to the years 2010 to 2012 is to apply section 17 of the Guidelines and determine an amount of income that is fair and reasonable in the circumstances.

[127] In considering how to approach the section 17 income analysis in this case, I have weighed the factors which the Alberta Court of Appeal outlined in Ewing v. Ewing. With respect to the capital gains on the investment properties which the Respondent reported in 2010, and the significant amount of capital cost allowance which forms part of the 2010 income calculation, I do not consider it appropriate to exclude these amounts from the income determination, given the Respondent’s acknowledgement that during this period, he was purchasing, renovating and selling properties as a business venture. In reviewing the Respondent’s income tax evidence, it is clear that the Respondent derived the benefit of claiming significant rental income losses in relation to many of these properties as against his other income sources. Many of the expenses claimed related to renovation work. The sale of the properties in 2010 was clearly the culmination of efforts which were undertaken during the years leading up to 2010, and the proceeds of sale were more in the nature of income given the nature of this real estate business venture.

[128] I have also not excluded the $31,500.00 dividend that the Respondent received in 2012 from Favero General Contracting from the income analysis under section 17. I find that this dividend was declared to clear shareholder loans which the company had made to the Respondent prior to 2012. Accordingly, the declaration of the dividend did not actually generate funds for the Respondent in 2012. However, the Respondent had had the benefit of the loan during the period leading up to 2012, which he had not declared as income for tax purposes during the time. I find based on the testimony of Mr. Lenchyshyn that the reason the loan was cleared by declaring a dividend in 2012 was precisely to avoid the potential of having the loan being treated as income by Canada Revenue Agency, and to take advantage of the tax benefits involved in declaring a dividend.

[129] The more difficult question is whether the entire amount of the capital gain from the sale of Niagara Falls Car Wash in 2010, $210,000.00, should be included in carrying out the income determination under section 17. This gain resulted from the sale of an asset that generated a portion of the Respondent’s income in previous years, and it is clear from the evidence respecting the Respondent’s income since 2005 that the Respondent has not ever derived this type of gain from the sale of a business since that time. Unlike the situation with the Respondent’s investment properties, the Respondent was not in the business of regularly purchasing and selling businesses during the period from 2009 to 2012. However, I have also considered the evidence that the capital gain from the sale of the Respondent’s interest in the car wash did not provide a source of income for the future. Rather, I find that the Respondent used the proceeds to pay off part of the debt owing to the Applicant pursuant to the Milanetti order. In addition, I have considered the Respondent’s young age at the time of the sale, and I conclude that it is not appropriate to consider this capital gain or any portion of it as part of the Respondent’s retirement fund. I have taken into account the Respondent’s agreement that his income was $100,000.00 for the years 2002 to 2009, and the fact that such an income would have provided a comfortable lifestyle for the family. I am mindful of our Court of Appeal’s comments in Marinangeli v. Marinangeli in the context of applying section 17 of the Guidelines and those of the Supreme Court of Canada in D.B.S. v. S.R.G.; L.J.W. v. T.A.R; Henry v. Henry; Hiemstra v. Hiemstra,[^82] that children should if possible benefit from increases in a payor’s income. Having regard for all of these considerations, it is in my view fair and reasonable to include half of the proceeds from the sale of Niagara Falls Car Wash in the Respondent’s income for 2010 for the purposes of carrying out the income analysis pursuant to section 17. Excluding 50% of the proceeds from the 2010 income figure would result in a 2010 income amount of $252,673.80.

[130] Given the entrepreneurial nature of the Respondent’s employment history and the resulting overall ebb and flow of his income over the past several years, I am satisfied that averaging out his income over the period from 2010 to 2012, after making the significant adjustment described above respecting the car wash proceeds, is a fair and reasonable method of carrying out the income determination for those years. Applying this approach, the Respondent’s annual income for those years was $123,294.66. Even if only one quarter of the proceeds from the sale of the Niagara Falls Car Wash were included in the Respondent’s 2010 income, the Respondent’s average income over the course of the three year period from 2010 to 2012 would be $105,794.93. Accordingly, this analysis leads to the conclusion that the Respondent has not proven a material change in his income over the course of those years.

4. Analysis Based on Imputation /Attribution of Income

[131] The determination of income pursuant to section 17 of the Guidelines is a highly discretionary undertaking, and as such it may be vulnerable to critique by the litigant who is negatively impacted by the end result. For this reason, I have also considered the Respondent’s income since 2009 from the alternative angle of whether income should be imputed or attributed to the Respondent since that time. I conclude that even without resorting to section 17, I would have continued to either attribute or impute an income of $100,000.00 to the Respondent from 2010 onward. For the reasons set out below, I find that the Respondent’s explanations for the alleged decrease in his income are either not credible or not supported by evidence. Furthermore, even if the Respondent’s income has in fact decreased since 2009, I conclude that it is appropriate to impute income to him on a number of grounds.

i. The Respondent’s Arguments Respecting the Decline in the Profitability of Favero General Contracting

[132] As previously noted, one of the Respondent’s explanations for the decrease in his income since 2009 is that the profitability of his business, Favero General Contracting, has decreased to the point that he has not earned any income from that company since the beginning of 2012. According to the Respondent, the four sources of revenue for this company have been a car wash located in Fort Erie (the “Fort Erie Car Wash”), a storage facility, signage income and subcontract work which the Respondent carried out on behalf of Favero General Contracting for Niagara Falls Car Wash. He alleges that the decrease in Favero General Contracting’s income is attributable to the following three factors:

a. He argued that there has been a general downturn in the economy in the Fort Erie area, where the company’s business enterprises are located. However, the Respondent did not adduce any independent evidence to support this position.

b. He stated that the business of the Fort Erie Car Wash decreased significantly in 2012 because the City of Fort Erie undertook major construction on the road in front of the car wash. Again, the Respondent did not lead any independent evidence as to when this road construction was carried out, and the Respondent’s accountant Ms. Malaguti testified that she thought this work occurred in 2011. In any event, even if this did cause financial difficulties for the car wash operation, it is not the type of persistent change that would justify a variation of the Respondent’s support obligations.

c. Finally, he stated that the subcontract work which he carried out on behalf of Favero General Contracting for Niagara Falls Car Wash was no longer available starting in 2012, because the FRO suspended his licence for non-payment of support that year. However, I find that the Respondent had been carrying out this subcontract work since at least 2008, and that he continued to do this work until well into 2012, despite the fact that his licence had in fact been suspended commencing July 2010 due to this criminal charges. Furthermore, the bank records for the Respondent’s personal bank account relating to 960 Garrison Road, where the Fort Erie Car Wash is located, do not show any deposits from Niagara Falls Car Wash (also known as Favero's Car Wash) up until December 31, 2011. This would make sense, since the Respondent’s evidence was that the subcontract income flowed through Favero General Contracting. Curiously, however, commencing January 2012, there are suddenly cheques deposited from Favero's Car Wash into the Respondent’s personal account relating to 960 Garrison Road, suggesting that funds began flowing directly from the Niagara Falls Car Wash to the Respondent as of that time. When the Respondent was cross examined on the fact that his licence had been suspended long before 2012, he explained that prior to 2012 he was able to rely on his father and friends for transportation to Niagara Falls to carry out the subcontract work on behalf of Favero General Contracting. He did not provide a plausible explanation for why the modes of transportation that were available to him from July 2010 until late 2011 suddenly became unavailable in 2012. Furthermore, when the Respondent’s father Leo Favero, who owns the Niagara Falls Car Wash, was questioned about why the Respondent allegedly stopped carrying out subcontract work for the Niagara Falls Car Wash in 2012, he did not initially make any reference to the Respondent not being able to drive to Niagara Falls due to his licence suspension. His explanation was that he offered the subcontract work to his son on a short term, temporary basis only to help him out financially, and that he secured the services of another service provider in the Niagara Falls area to carry out the work for a more affordable price in 2012. Again, this explanation is not credible, given my finding that the Respondent had carried out this subcontract work from at least 2008 until late 2011, a period of almost four years. Furthermore, there was no explanation as to why the work was not offered to the Respondent at the more affordable rate that the current subcontractor charges. Finally, the Respondent did not provide any evidence of efforts by either him or any other person to replace the subcontract work which the company allegedly lost from Niagara Falls Car Wash with other work in the area of Fort Erie, where transportation would not have been such a problem for the Respondent. If there were reasons why the void from this loss of subcontract work could not be replaced, it was incumbent upon the Respondent to provide an explanation to the court.

[133] The Respondent testified that Favero General Contracting operated at a net loss of $44,996.00 in 2012, as compared to a report of net earnings of $26,748.00 in 2011 and $30,750.00 in 2010. These numbers are reflected in the company’s financial statements for those years. However, a review of the Unaudited Statements of Operations relating to Favero General Contracting raises a number of questions regarding the credibility of the Respondent’s evidence regarding the decline in the company’s profitability. For instance, the Respondent testified that the car wash operations suffered in 2012 largely because of road construction in front of the entrance. However, a review of the Financial Statements and the evidence of Ms. Malaguti reveal the following respecting the reported gross revenues from the car wash:

a. In 2009, the year when the parties were in court and finalized their proceedings, the revenue from the car wash was only $37,236.82.

b. In 2010, the year after the court proceedings were finalized, the revenue jumped significantly to $60,525.84.

c. In 2011, the year that the Respondent brought the Motion to Change support, the revenue dropped sharply again to $43,412.45. The Respondent did not provide an explanation for this decrease, apart from his bald assertion that the economy in the area was suffering. His explanation regarding the road work on Garrison Road pertained to the year 2012.

d. In 2012, when these proceedings were underway, the car wash revenue decreased significantly again, to $29,049.23. Accordingly, the total revenue from the car wash decreased by more than 50% from 2010 to 2012. However, the revenue from the vacuum sales for the operation increased from $436.28 in 2011 to $978.75 in 2012, representing an increase of 55%. The Respondent did not explain why construction work that allegedly impeded access to the car wash operations did not affect the vacuum sales.

[134] A review of the Financial Statements respecting Favero General Contracting and Ms. Malaguti’s evidence reveal a similar trend respecting the revenue from the storage facility Specifically:

a. In 2009, the year the parties finalized their court case, the revenue was $92,892.92.

b. In 2010, the year after the property and support issues were resolved, the revenue increased to $106,119.56.

c. In 2011, the year when the Respondent commenced the Motion to Change child and spousal support, revenues decreased again to $74,649.99. The Respondent did not provide a credible explanation for this significant decrease in revenue.

d. In 2012, the storage revenue decreased again to $62,681.17. The total decrease in revenue from 2010 was therefore $43,438.39. Again, I did not receive a credible explanation for this significant decrease in revenue.

[135] Another item on the Unaudited Statement of Operations for 2012 that raises serious questions is the expense for rent, which ballooned from only $2,926.00 in 2011 to $36,067.00 in 2012, an increase of $33,141.00. As previously noted, $25,445.35 of this rent went to the Respondent and formed part of his 2012 income. This item is highly suspect having regard for the alleged decrease in the overall profitability of the company from 2011 to 2012. Of additional concern is that the Respondent did not produce any documentation regarding his 2012 income at trial, and he did not comment on this aspect of his 2012 income in his evidence in chief. The fact that he received this additional income in 2012 was only revealed through careful cross examination by counsel for the Applicant after he dissected the information in the Financial Statements for Favero General Contracting. The Respondent’s only explanation for this rental increase was a reference without elaboration to not wanting his properties to go into receivership.

[136] A review of the Unaudited Balance Sheet for Favero General Contracting for 2012 raises additional concerns. Under “Current Liabilities,” the sum of $50,894.00 is listed as being due to a related company. Ms. Malaguti testified that this money is owed to Niagara Falls Car Wash, which is owned by the Respondent’s parents. This amount was rounded up from the sum of $50,893.70, which is noted on the spreadsheet relating to advances and payments on this loan (Exhibit 32). This debt had increased from $25,000.00 in 2011, representing more than a 50% increase. The Respondent did not provide an explanation for either the original amount of the debt or the increase in 2012, although Ms. Malaguti testified that $4,491.75 of this amount was on account of fees which Niagara Falls Car Wash paid to her accounting firm to complete work for Favero General Contracting. Of even greater concern is the fact that the sum of $50,893.70 is listed on the Respondent’s Financial Statement sworn February 14, 2013 as being owed personally by the Respondent to Niagara Falls Car Wash. This appears to be the same alleged debt, claimed twice over. If it was not, it was incumbent on the Respondent to provide an explanation given the identical numbers noted. Under “Current Liabilities” in the 2012 Unaudited Balance Sheet for Favero General Contracting there is also an item of $7,840.00 listed as being due to a related party. Ms. Malaguti testified that this amount is owed to the Respondent’s father, Leo Favero. Again, no explanation was provided for this debt.

[137] I have considered the Respondent’s evidence regarding the decreased profitability of Favero General Contracting in conjunction with his evidence regarding his plans to earn income on an ongoing basis. His evidence regarding his plans raises additional concern regarding the credibility of his evidence regarding the functioning of his company. Given the dire picture which the Respondent has painted regarding the operations of Favero General Contracting, one would have expected to hear about plans to shut the business down. However, he testified that he intends to keep this business in operation.

ii. The Respondent’s Loss of Income After the Sale of His Interest in Niagara Falls Car Wash

[138] Another explanation which the Respondent advanced for the alleged decrease in his income since 2009 is that he no longer receives income from his interest in the Niagara Falls Car Wash, because he had to sell his interest in that business to his parents in order to pay the amounts due to the Applicant pursuant to the Milanetti order. One of the major difficulties with this argument is that the Respondent led no evidence regarding the income which he derived up to 2009 from this car wash operation. In fact, he vehemently opposed the suggestion by the Applicant that he received a significant unreported income from this car wash and the Fort Erie Car Wash. The Respondent’s evidence respecting the income from the Niagara Falls Car Wash was conveniently flexible.

[139] Even if it is assumed that the Niagara Falls Car Wash provided a reasonable income for the Respondent prior to its sale in 2010 which he no longer received after the sale, the Respondent must demonstrate that this change in circumstances was not foreseen when the Milanetti order was made. The Respondent acknowledged that he knew when he consented to the order that he would have to sell a number of his assets in order to discharge his obligations to the Applicant. The fact that he specifically chose his interest in the Niagara Falls Car Wash as one of his assets to be sold does not negate the foreseen nature of this outcome.

[140] If it is assumed that the Respondent did in fact earn a reasonable income from his interest in the Niagara Falls Car Wash, the question arises as to why he sold this asset to satisfy his obligations to the Applicant pursuant to the Milanetti order, rather than other assets that he owned in 2010 which were operating at a loss (ie. Spears, Grove, Aberdeen, Stanton) or only generating a minor income source (ie. Thompson and Douglas). It was incumbent upon the Respondent to explain in comprehensible terms why he chose to sell certain assets over others to pay his debt to the Applicant, and to satisfy the court that the options which he chose served to maximize his income earning potential so that he could meet his ongoing support obligations. He failed to do so.

iii. Imputation of Income Pursuant to [Sections 19(1)](https://laws-lois.justice.gc.ca/eng/regulations/SOR-97-175/index.html)(e)and (g) of the [Guidelines](https://laws-lois.justice.gc.ca/eng/regulations/SOR-97-175/index.html)

[141] The discussions outlined above regarding the Respondent’s interests in Favero General Contracting and Niagara Falls Car Wash raise more general questions as to whether the Respondent has been using his property to reasonably generate income. The court can impute income to the Respondent pursuant to section 19(1)(e) of the Guidelines if it is not satisfied that he has made reasonable efforts to maximize the income earning potential of his property. The Respondent has not proven that he has used his property reasonably in such a way as to generate income that could satisfy his child and spousal support obligations. In addition, he has not adduced the necessary proof of the significant expenses which he claimed against rental income so as to allow the court to make a proper determination of the reasonableness of the expenses from the standpoint of the spousal and child support analysis. In the absence of evidence regarding the particulars of the expenses, it is not possible for the court to balance the business necessity of the expenses against the alternative of using the monies for the purposes of support. Accordingly, it is appropriate to impute income to the Respondent in this case pursuant to sections 19(1)(e) and (g) of the Guidelines.

[142] My conclusions on the issue of imputing income are based on the following findings and concerns:

a. As discussed above, the Respondent failed to explain why he sold his interest in Favero Car Wash Limited in 2010 to satisfy his debt to the Applicant rather than selling properties that were not generating income.

b. Furthermore, as noted above, the Respondent has kept Favero General Contracting in operation and plans to keep operating the business despite his evidence regarding the poor performance of the company. The Fort Erie Car Wash and the storage facility are located on the adjacent properties of 960 and 974 Garrison Road, which the Respondent owns. These are valuable properties which could be sold, with the potential for significant capital gains, or used for other profitable income generating purposes. The Respondent indicated in his Financial Statement sworn May 27, 2009 that 960 Garrison Road had a value of $725,000.00. On his Financial Statements sworn January 30^th^ and July 11^th^, 2012, he stated that the property was worth $625,000.00. He indicated on his February 14, 2013 Financial Statement that the property is now worth only $350,000.00, but he failed to provide a credible explanation for this significant decrease. With respect to 974 Garrison Road, the Respondent indicated in his Financial Statement sworn February 14, 2013 that it is worth $220,000.00.

c. A review of the evidence relating to the profitability of the Respondent’s rental properties reveals the same concerning trends as those noted in regard to the revenue reported for Favero General Contracting, and raises questions which the Respondent should have addressed in his testimony but failed to. Specifically:

i. In 2008, the Respondent reported gross rental income of $148,589.00 and net rental income of $17,543.00. In 2009, the year when the parties went to trial, the Respondent reported a total rental loss of $4,667.00. The total differential in terms of the income from 2008 to 2009 was $22,121.78. The loss in 2009 was likely attributable in part to the purchase of four new rental properties, namely Stanton, Phipps, Douglas and Torrance, but the losses relating to those properties only totalled $9,363.53. A review of the documentation regarding the properties that the Respondent owned in both 2009 and 2008 reveals that those properties generated an overall net income of $17,453.85 in 2008 but an overall net income of only $1,794.67 in 2009. The Respondent failed to explain this significant decrease.

ii. In 2010, the year following the parties’ settlement of the property and support issues, the Respondent’s rental income increased to $35,761.23. This increase is attributable in part to recapture of capital cost allowance upon the sale of 75 Bertie Street, Courtwright, and Jarvis, and to the Respondent receiving rent on two properties which he acquired in 2009, namely Stanton and Torrance. However, there were rent increases for properties which he had owned throughout 2009, namely an increase of $3,000.00 for 974 Garrison Road, of $12,005.43 for 982 Garrison Road, and of $3,600.00 for Thompson Street.

iii. In 2011, when the Motion to Change child and spousal support was commenced, the Respondent reported a rental loss of $19,374.00. It is important to note that he did not adduce any documentary evidence to support the expenses which he claimed against the rental income on his properties. His accountants Mr. Lenchyshyn and Ms. Malaguti confirmed that they do not obtain documentary proof of all claimed expenses prior to completing the Respondent’s income tax returns, but rather relied on a written summary from the Respondent recording the income from the properties and a breakdown of expenses. The significant change in the situation respecting the Respondent’s rental properties from 2010 to 2011 is partly attributable to the sale of a number of his rental properties in 2010 and 2011. However, there are questions regarding the rental incomes from the properties which the Respondent owned in both 2010 and 2011 which the Respondent did not clarify at trial. For instance, the gross rental income for 974 Garrison Road decreased by $5,870.87 from 2010 to 2011. The gross rent on 960 Garrison Road increased slightly in 2011, but the property recorded a loss of $7,049.53 in 2011 whereas it had a net income of $1,663.17 in 2010. The gross rental income on 982 Garrison went down by $10,323.43 from 2010 to 2011. The gross rental income on Spears went down by $1,762.35 during the same period, and on Douglas, it went down by $6,350.00. The Respondent failed to provide explanations for all of these changes.

d. The Respondent testified that one of his major business undertakings since 2009 has been to purchase, improve and sell properties for profit. It is therefore necessary to consider the history of his real estate transactions since 2009, and whether he maximized his potential for capital gains through the purchase and sale of his various properties. The Respondent has not satisfied me that he maximized his potential capital gains. I reach this conclusion based on the following findings and concerns:

i. The Respondent sold Courtwright to his parents on April 7, 2010. Schedule 3 to the Capital Gains Report attached to the Respondent’s 2010 Income Tax Return indicates that the proceeds of disposition were $100,000.00. As consideration, I find that the Respondents’ parents paid the outstanding balance on the mortgage owing on the property in the amount of $54,275.00, and they provided funds in the amount of approximately $45,752.00 to pay the Applicant part of the amount owed to her pursuant to the Milanetti order. However, the Respondent did not provide independent proof of the fair market value of this property at the time he transferred it to his parents.

ii. The Respondent transferred Phipps to David Henry on October 19, 2010 for $153,000.00. He testified that he sold the property to pay off his legal fees and to make a payment towards arrears of support. The net proceeds from the sale were $54,353.79, from which he paid only $10,841.50 towards support arrears and paid four times more, $43,512.29, to his lawyers on account of legal fees for the Family Law litigation. The Schedule 3 Capital Gains Report attached to the Respondent’s 2010 Income Tax Return indicates that the Respondent suffered a capital loss of $26,490.40 in relation to this property. This raises serious questions as to whether the Respondent sold the property at fair market value. He did not provide independent evidence of the value of the property at the time of sale. Furthermore, a review of the legal account of Mr. David Hurren in relation to the sale indicates that the Respondent was credited an additional amount on closing for occupancy fees for the period from September 11 to October 19, 2011. It appears, therefore, that the purchaser may have been the tenant. The Respondent did not provide any explanation of the reasons why he suffered a loss on this property.

iii. The Respondent sold Torrance to Niagara Falls Car Wash, which is owned by his father, on December 22, 2011 for $92,518.00. This was the outstanding balance owing on the mortgage on the property at the time of transfer. The Schedule 3 Capital Gains Report attached to the Respondent’s 2011 Income Tax Return shows a value of $122,000.00 for the property. This report also shows that the Respondent suffered a capital loss on the property of $1,910.43. The Respondent testified that the consideration for this transfer was the $92,518.00 as well as forgiveness of loans which Niagara Falls Car Wash had advanced him totalling between $15,000.00 and $20,000.00. However, he did not adduce any independent evidence respecting the fair market value of the property at the time of transfer.

iv. The Respondent sold Stanton to his parents on January 27, 2012 for $46,097.00. The land transfer tax statement relating to this transfer indicates that this was the outstanding balance owing on the mortgage on the property at the time. Again, the Respondent did not adduce any independent evidence relating to the fair market value of the property at the time of transfer. As of his Financial Statement sworn almost three years earlier on May 27, 2009, he stated that the value of the property was $55,000.00.

v. I find that the Respondent transferred Wellesley to his parents sometime between January and July, 2012. He did not provide any evidence regarding the value of the property at that time. However, he testified that he transferred the property to his parents as repayment of money which he owed to his parents. He stated that he had no recollection of how much he transferred the property for, or whether he received any proceeds of disposition. In addition, he did not provide any documentary proof regarding the existence of the debt to his parents, or the precise reasons for the debt. His father, Mr. Favero, advised that his wife, Linda Favero, kept records of money which the Respondent owes to his parents, and the reasons for the loans, but Linda Favero did not testify and no such records were submitted as evidence.

vi. The Respondent disposed of his interest in vacant lands on Garrison Road, Fort Erie, lots 16, 25, 26 and 27, Plan 119 sometime in early 2012. These lands are not noted on his Financial Statement sworn January 30, 3012. Again, he did not provide any evidence respecting this sale, including the fair market value of the lands at the time of sale, who he sold the lands to, the sale price, whether he derived any capital gains from the sale and if so, the amount of the gains.

vii. I find that the Respondent sold Grove to his parents on January 16, 2012 for $104,018.76. It appears that this figure was the outstanding balance owing on the mortgage on the property, which had a balance of $108,248.77 in November 2011 according to the Respondent’s Financial Statement sworn November 8, 2011. The price is lower than the value of $115,000.00 which the Respondent attributed to the property in his Financial Statement sworn 2.5 years earlier, on May 27, 2009. Furthermore, the parcel register respecting the property indicates that the Respondent took out a mortgage on the property in the amount of $114,750.00 with Meridian Credit Union on May 26, 2008. The Respondent did not adduce any evidence respecting the fair market value of the property as of the date of the transfer to his parents.

viii. The Respondent transferred Douglas to his parents on January 6, 2012 for $63,500.00, which he testified was on account of forgiveness of loans which they had advanced to him. However, the land transfer tax statement shows the consideration of $63,530.00 as being the assumed mortgage balance on the property. The Respondent did not adduce any evidence of the fair market value of the property at the time of the transfer, although in his Financial Statement sworn 2.5 years earlier on May 27, 2009, he stated that the property was worth $110,000.00. Furthermore, I find that the Respondent’s parents sold the property to Richard Hudd a month after they purchased it from the Respondent for $115,000.00. There was no documentary proof adduced respecting the alleged loans, and neither the Respondent nor his father was able to provide clear specifics regarding the alleged loans.

[143] The findings set out in subparagraph (d) above indicate that the Respondent did not actually receive in hand the proceeds which he could have secured from the sale of many of the properties referred to. The complete lack of evidence regarding the details of the transfer of Wellesley and the vacant lands on Garrison Road also raises serious suspicion about whether he received fair market value for those properties. If the Respondent’s evidence is accepted, he chose to pay off his debts to his parents before his support arrears, and before applying all possible capital gains towards income generating ventures that could have helped him meet his support obligations.

iv. Evidence Indicative of Real Estate Trust Arrangements with Leo and Linda Favero

[144] The other possibility raised in the evidence with respect to some of the properties referred to above that the Respondent transferred to his parents, and respecting other properties in the names of the parents, is that the Respondent and his parents had agreements that the Respondent would retain a trust interest in the properties and would continue to receive part of the income which the properties generated. The following findings, when considered in their entirety and in conjunction with the findings set out in subparagraph (d) above, suggest that these types of trust arrangements between the Respondent and his parents were entered into after the Milanetti order was made:

a. With respect to the transfer of Grove, as noted above, the Respondent took out a mortgage on this property with Meridian Credit Union on May 26, 2008. This mortgage account remained open to the Respondent after the transfer to his parents until at least May 26, 2012, and the Respondent continued to pay the mortgage payments. It is unknown whether he continued to pay the mortgage after May 2012, as the disclosure which the Respondent provided only included mortgage statements up until that time.

b. The Respondent transferred Jarvis to his parents on April 7, 2010. The value shown on the Schedule 3 Capital Gains Report attached to the Respondent’s 2010 Income Tax Return was $175,000.00. The consideration for this property was an assumption of the outstanding mortgage balance of $75,134.00, and forgiveness of loans which the parents advanced to the Respondent to pay his debt to the Applicant arising from the Milanetti order. The evidence suggests that the Respondent or his company Favero General Contracting retained some type of connection with the property. The 2012 Financial Statements for Favero General Contracting indicate that the company paid a significant amount for rent that year, and Ms. Malaguti testified that of this amount, $10,621.25 was paid to the parents in connection with 23-25 Jarvis Street.

c. I find based on the testimony of Leo Favero that the Respondent’s parents own property located at 16 Jarvis Street, Fort Erie. The Fort Erie Community Credit Union account in the name of Favero General Contracting shows a capital contribution made by the company to this property in the amount of $5,000.01 on June 30, 2011. The Respondent’s only explanation for this transfer of funds was that it was on account of a loan which was owed to his parents. He could not provide any specifics or documentary evidence relating to this loan, or any reasonable explanation as to why the payment would have been directed to 16 Jarvis Street rather than to his parents directly.

d. With respect to the transfer of Stanton to his parents, the evidence indicates that the Respondent continued to make payments towards this property after the closing on January 27, 2012. His Meridian Credit Union Limited account relating to the Stanton property remained open until at least July 2012, which was the last month for which the Respondent provided disclosure of the statements. The statements from February to July 2012 reveal the following transactions on the account:

i. A capital contribution to the account of $500.01 on February 23, 202 from an account which the Respondent could not identify.

ii. Deposits to the account of $650.00 on February 1, 2012 and again on March 8, 2012.

iii. Cheques written on the account of $518.13 on February 2, 2012, $519.13 on March 1, 2012 and $518.13 on April 3, 2012.

The Respondent did not provide any satisfactory explanation for these transactions.

e. With respect to 61 Torrance, which was transferred to Niagara Falls Car Wash on December 22, 2011, the Respondent disclosed mortgage statements in his name respecting this property up until June 2012. Those statements reveal that the Respondent continued paying the mortgage principal and interest on the property until at least that time. The Respondent did not provide any credible explanation of why these payments were coming out of his account. Furthermore, the reporting letter from legal counsel Mr. Hurren dated December 22, 2011 relating to the closing indicates that the Respondent paid for both the preparation and the registration of the deed, as well as the land transfer tax, which should have been paid by the purchaser.

f. With respect to the transfer of Douglas to the Respondent’s parents on January 6, 2012, the reporting letter dated January 6, 2012 from the lawyer Mr. Hurren relating to the transfer indicates that the Respondent paid for both the preparation of the deed and the registration of the transfer, and he also paid the land transfer tax despite the fact that he was the vendor.

g. The Respondent’s parents are the legal owners of 151 Gilmore Road, Fort Erie. They purchased this property in March 2010 for $142,500.00. However, I find that the original agreement of purchase and sale, showing a closing date of March 1, 2010, was in the name of the Respondent. Furthermore, the statement of monies owing to the real estate agency Century 21 in connection with this transaction, dated February 8, 2010, shows that the transaction involved a sale from the vendor Judy Chiu to the Respondent. In addition, the accountants’ notes relating to Favero General Contracting for the year ending November 30, 2011 included a query respecting a cheque in the amount of $700.00 to the vendor of Gilmore, Judy Chiu. Ms. Malaguti testified that she posted this as a shareholder loan to the Respondent, since the Respondent advised her that it involved a personal matter. The Respondent did not provide a satisfactory explanation for these indicia that he has an interest in 151 Gilmore Road. He was evasive in answering questions about this property. His only explanation was that he was initially the intended purchaser but his parents eventually bought the property because he could not obtain financing. However, he also suggested that he was simply acting as his father’s agent in dealing with the real estate agency. His explanations were inconsistent and not credible, having regard for all of the other indicia of his involvement with other properties in the name of his parents.

h. The Respondent’s parents also own 68 Goderich Street, Fort Erie. They purchased this property on May 3, 2010 for $145,000.00. There is a restaurant located on the property called Café by the Bridge. There are a number of indicators that the Respondent or his company Favero General Contracting have some type of interest in this property as well. For instance, a cheque was drawn from Favero General Contracting’s account #78675 with Fort Erie Community Credit Union on May 1, 2010 for $3,128.70 to David Hurren, in trust for the closing on this property. Ms. Malaguti testified that either the Respondent or Mr. Hurren confirmed with her that this cheque was on account of the closing for the Goderich property. The Respondent did not have an explanation for why his company paid these closing costs. In addition, on April 29, 2011 there was a deposit to Favero General Contracting’s account #78675 in the amount of $2,471.31 with a notation “garage rent for May.” The Respondent testified that this deposit was made in error. Three days later, there was a transfer out of the same account in the same amount of $2,471.31, with a notation “68 Goderich #1.” The Respondent’s explanation was that this amount was to repay a loan that his parents had advanced to him. He did not provide any details regarding this alleged loan or any documentary proof of it, and he did not provide a credible explanation as to why this withdrawal was in the exact amount as the deposit on April 29, 2011. On August 3, 2011, there was another transfer from the same Favero General Contracting account #78675 in the amount of $1,500.01 with a notation “cc to 68 Goderich.” Predictably, the Respondent’s explanation was again that this was for repayment of a loan from Goderich. No independent documentary evidence was adduced of any such loan. Finally, there was a deposit of $1,000.00 on July 18, 2011 to the Respondent’s Meridian Credit Union account relating to his property at 3225 Grove Avenue, with a notation “Café by the Bridge,” the restaurant located at 68 Goderich Street. The Respondent did not provide a credible explanation for why this amount was deposited into his account. His only explanation was a vague reference to having met the tenant of the property on behalf of his father to arrange for post-dated rent cheques to be delivered to his parents, but he denied ever collecting the rent from the property.

[145] The findings set out in paragraphs 142 and 144 above reveal an extremely convoluted web of dealings between the Respondent and his parents that is frankly impossible to untangle. The number of suspicious and non-arm’s-length transactions and unanswered questions creates a major cloud over the Respondent’s case. The numerous bank accounts which the Respondent has opened for his various properties add to the confusion, as the Respondent acknowledged drawing from these various accounts at times for reasons unrelated to the associated properties to cover expenses related to other properties. It is not the task of this court to try to unravel this web of confusion on its own. The onus was on the Respondent to provide clear and credible explanations for all of the suspicious transactions and evidence described above. He did not satisfy this onus. I am quite simply unable to formulate a clear picture of the Respondent’s true financial and asset situation based on the evidence adduced at this trial. I am satisfied, however, that the Respondent either a) transferred some of his properties to his parents for less than fair market value, or b) holds a trust interest in a number of the properties in his parents’ names, or c) in all likelihood there has been a combination of both types of dealings with his parents. My conclusion respecting the likelihood of real estate trust arrangements and income sharing in relation to income properties between the Respondent and his parents is supported by evidence confirming that there has been a longstanding history of such trust arrangements between family members in this case. This evidence is as follows:

a. In his Financial Statement sworn May 27, 2009, the Respondent indicated that although title to 73 Bertie Street, Fort Erie was 100% in the Applicant’s name, the Applicant held the property in trust for him. He alleged that he paid all of the major expenses relating to the property, including the mortgage payments, taxes, insurance and utilities.

b. In the same Financial Statement sworn May 27, 2009, the Respondent noted that title to 75 Bertie Street was originally solely in the Applicant’s name, but that the Applicant held the property partly in trust for him and his parents. He explained that Leo Favero’s name was not put on title, because the vendor had had a dispute with Leo Favero and would likely not have sold the property or would have inflated the price if he had known that Leo Favero was an intended purchaser. The Respondent described an arrangement with his parents whereby they paid the down-payment of $11,791.98 on the understanding that they would eventually receive a return of the down-payment and 50% of the proceeds when the property was sold.

c. The Respondent also made a trust claim against the Applicant in 2009 respecting the vacant lands located on Garrison Road, lots 16, 25, 26 and 27, Plan 119.

d. With respect to 974 Garrison Road, the Respondent testified that he bought this property prior to his marriage to the Applicant, that his parents paid the down-payment on the property, and that as of June 2009, he held 50% of this property in trust for his parents.

e. In 2009, the Respondent claimed that although title to 982 Garrison Road was solely in the Applicant’s name, he had a 100% constructive trust claim to the property. He alleged that the Applicant had not had any involvement in the acquisition or maintenance of the property, and that he had transferred the property into her name solely for the purpose of avoiding a merger of properties and to bypass Ministry of Transportation rules regarding entrances to properties.

f. In his Financial Statement sworn May 27, 2009 the Respondent also alleged that although title to a rental property located at 122 High Street, Fort Erie (“High Street”) had been solely in the Applicant’s name, the Applicant held the property 100% in trust for him. He stated that the Applicant had nothing to do with the acquisition of the property, the expenses relating to the property or managing the rental of the property.

g. The Respondent further alleged in his Financial Statement sworn May 27, 2009 that although the Applicant was on paper a 50% owner of the Niagara Falls Car Wash, she always held that interest in trust for him. His position was that as a 50% owner of the company, he also had a claim to a 50% interest in 6843 Cropp Street where the car wash was located.

h. With respect to Thompson, the Respondent alleged in his Financial Statement sworn May 27, 2009 that he was the sole owner of the property. However, when he was questioned at trial about why his father received part of the proceeds from the sale of this property in November 2011, his explanation was that his father actually had a trust interest in the property, and the payment to Leo Favero from the sale proceeds was on account of that interest. Based on the Respondent’s evidence, it appears that Leo Favero wished to secure the Thompson property because he owned a property on Kenwood Street which backed onto the Thompson land, and the only access to the Kenwood property was through the Thompson lot.

v. Imputation of Income Pursuant to [section 19(1)](https://laws-lois.justice.gc.ca/eng/regulations/SOR-97-175/index.html)(a) of the [Guidelines](https://laws-lois.justice.gc.ca/eng/regulations/SOR-97-175/index.html)

[146] Upon carefully considering all of the evidence adduced at trial, I have also concluded that it is appropriate in this case to impute income to the Respondent on the basis of underemployment. Even if I had accepted the Respondent’s position that none of his income earning activities has produced a stable and reasonable source of income for him for the past several years, I would have determined that the figure of $100,000.00 continues to be a fair representation of the income which the Respondent could reasonably have been earning since 2009. While the Respondent had a right to seek income as he did through various forms of self-employment, he also had a positive obligation to maximize his income earning potential so as to meet the needs of the Applicant and the children. If I were to have taken the Respondent’s evidence respecting his income since 2009 at face value, I would have concluded that he persisted unreasonably in pursuing income activities that were not remunerative, and that he earned far less than what he was capable of earning.

[147] As noted previously, the Respondent did not provide a reasonable explanation for persisting with Favero General Contracting despite the limited income which he has allegedly derived from the company. There is no evidence that he or anyone else on behalf of the company pursued alternative income earning activities after the subcontract work with Niagara Falls Car Wash allegedly ended. I find that Favero General Contracting has in the past earned income from snow plowing, yet there is no evidence that this type of work was been pursued since 2009.

[148] The Respondent has been involved in various types of business ventures throughout his life. These include a window cleaning business, a landscaping business, and a janitorial business. He has extensive experience in carrying out and overseeing renovation and general contracting work and managing properties. His income tax return for the year 2008 indicates that he acted as a U-Haul agent that year. I find that he has not actively sought out employment opportunities in any of these areas of work since 2009, or in any other alternative lines of business that could have generated a reasonable income for him.

[149] The Respondent testified that he suffers from a number of medical problems that impact on his ability to perform work of a physical nature. However, he did not adduce any medical documentation whatsoever or call any medical professionals as witnesses to support this bald assertion.

[150] In considering the Respondent’s income earning potential, one cannot overlook the fact that he has had considerable involvement with the criminal law system since June 2009, as described in detail earlier in these Reasons. The terms of his release in his criminal proceedings, the injuries which he suffered as a result of the drug related home invasion in August 2011 and the suspension of his licence as a result of both criminal charges and FRO enforcement proceedings have no doubt created challenges in terms of his ability to earn income. However, I find that these challenges are directly attributable to the Respondent’s own irresponsible behaviour. If his capacity to earn income has in fact been negatively impacted as a result of this behaviour, the consequences should be borne by him and should not form a foundation for a reduction of his child and spousal support obligations.

[151] Finally, on the issue of whether an income of $100,000.00 should continue to be either attributed or imputed to the Respondent, I note that there are a number of financial transactions reflected in the Respondent’s financial documentation for which the Respondent was unable to provide a reasonable explanation. These transactions also raise serious questions as to whether the Respondent has an interest in additional income earning properties, is involved in other forms of income earning activities, has diverted income during the course of these and previous court proceedings or has bank accounts which he has not disclosed. The transactions in question are as follows:

a. With respect to the Respondent’s Meridian Credit Union account relating to Torrence, mortgage proceeds of $99,346.00 were deposited on June 19, 2009, eleven days after the Milanetti order was made. On the same date, the sum of $62,544.18 was transferred out to account #5786470 with a notation “forterie merit.” The Respondent could not identify this account or the reason for this significant transfer out of the account.

b. On the Respondent’s Meridian Credit Union account #3605672 relating to Douglas, there was a transfer into the account of $101,000.00 from the same unidentified account referred to above, #5786470, just over a month after the Milanetti order was made, on August 28, 2009. The Respondent was unable to identify the reason for this transfer into the Douglas account or the source of the funds. Furthermore, there were two separate cheques written on the Douglas account on the same date, each in the amount of $50,006.50. The Respondent was also unable to identify the purpose of those two cheques.

c. On the Respondent’s Meridian Credit Union account #3618006, relating to Stanton, there was a transfer into the account on February 23, 2012 of $500.01 from account #9174319, with a notation “frteriemaxi.” Neither the Respondent nor Leo Favero could identify this account or the purpose of the transfer into the Stanton account.

d. In the account for Favero General Contracting, there is a notation in the accountants’ working papers of a transfer to account #79913 of $2,471.31 on November 30, 2011. The Respondent was also unable to identify this account or the reason for this transfer out, but hypothesized that it may have been for repayment of a loan from his parents.

B. Issue # 2: Has There Been a Material Change in the Respondent’s Net Worth Since June 2009?

[152] As previously noted, one of the Respondent’s arguments in connection with his claim to terminate spousal support is that he has experienced a material decline in his net worth since the Milanetti order was granted. He alleges that he has had to sell off most of the assets which he owned in June 2009 to pay the amounts owing to the Applicant pursuant to the Milanetti order, make payments towards ongoing child and spousal support, and pay off his parents for money which they loaned him.

[153] I have considered all of the evidence relating to the Respondent’s net worth after the Milanetti order was made. In his Financial Statement sworn May 27, 2009, the Respondent indicated that the value of his assets at that time totalled $2,460,311.38. There is no evidence that he acquired any additional assets from that date until June 8, 2009, when the order was made. He indicated in that Financial Statement that his debts and liabilities totalled $1,116,130.04. To these debts, I find the following must be added in order to determine his net worth after the Milanetti order was made:

a. I find that he personally owed legal fees relating to the Family Law proceedings in the amount of approximately $90,666.00. This finding is based on an email from the Respondent’s counsel to Ms. Malaguti dated June 26, 2012 which indicates that as of March 2010, the Respondent still owed his counsel legal fees of $136,000.00 in connection with the Superior Court of Justice proceedings, approximately one third of which related to business rather than personal matters.

b. The Respondent owed the Applicant $317,000.00 on account of retroactive support and the equalization payment which Milanetti, J. ordered him to pay on June 8, 2009.

c. The Financial Statement sworn May 27, 2009 does not show a mortgage relating to Stanton. However, the parcel register relating to this property indicates that a charge was registered against the property in favour of Harvey and Lorraine Witty on March 27, 2009, and that this was not discharged until April 13, 2012. The Respondent’s Financial Statement sworn November 8, 2011 indicates that the outstanding balance on that mortgage at the time was $46,000.00. Accordingly, the Respondent’s net worth as of June 2009 should be reduced by at least that amount.

[154] Based on these adjustments respecting the Respondent’s debts and liabilities, I find that the Respondent’s net worth after the Milanetti order was made was approximately $890,515.00.

[155] The onus is on the Respondent to demonstrate on a balance of probabilities that there has been a material change in his net worth since June 8, 2009. In addressing this issue, he had the responsibility of presenting full and complete information respecting the acquisition and disposition of his assets since that time in an organized and comprehensible fashion. As I have already indicated above in connection with my analysis thus far of the Respondent’s property dealings since 2009, the Respondent has not discharged this responsibility. He failed to provide credible explanations for or clarifications about numerous suspicious transactions that he has been involved in since June 2009. I am satisfied on a balance of probabilities that the Respondent retains some type of involvement with or interest in a number of assets which are in the name of his parents. As a result, I have been unable to develop a clear picture of the Respondent’s true net worth since 2009.

[156] Despite the difficulties in formulating an accurate picture of the Respondent’s net worth since 2009, I have undertaken an analysis of the issue based on the information that was available to me. In my view, this information would provide a general sense of the best possible case for the Respondent. I conclude that even on the basis of the information which the Respondent has provided, the Respondent has not proven that there has been a material change in his net worth since 2009. In analyzing this issue, I have considered the evidence at two important points since 2009. The first point in time that I have considered is early November 2011, when the Motion to Change child and spousal support was issued. The second point in time that I have considered is February 2013, when the trial of this matter occurred.

[157] Turning first to the Respondent’s net worth as of early November 2011, I find that the Respondent’s assets as of that time were as follows:

• Wellesley, valued at $2,500.00.

• The vacant lands on Garrison Road, lots 16, 25, 26 and 27, Plan 119, valued at $30,000.00.

• 960 Garrison Road. The Respondent stated in his May 27, 2009 Financial Statement that this property was worth $725,000.00. In his Financial Statement sworn November 8, 2011, he sets out a value of only $625,000.00. He did not provide an explanation for this alleged reduction in value and did not provide an opinion from a qualified professional regarding the value. Accordingly, I have attributed an ongoing value of $725,000.00 for this property.

• 974 Garrison Road. The Respondent indicated in his Financial Statement sworn November 8, 2011 that the value of the property continued to be the same as in May 2009, $110,000.00. He did not provide an independent valuation of the property as of November 2011. Accordingly, I find that the figure of $110,000.00 likely represents the minimum value of the property as of November 2011.

• 982 Garrison Road. Again, the Respondent indicated in his Financial Statement sworn November 8, 2011 that the value of this property remained the same as in May, 2009, $140,000.00. He did not provide an independent valuation as of November 2011. This figure therefore likely represents the minimum value of the property.

• 1076 Spears Road, Fort Erie (“Spears”), valued at $75,000.00.

• Grove, valued at $115,000.00.

• Thompson. The Respondent attributed a value of $45,000.00 in his Financial Statement sworn November 8, 2011. However, the property sold for $55,000.00 in late November 2011, and therefore I attribute that value to the property.

• Stanton. The Respondent attributed a value of $55,000.00 to this property in May 2009, but only $45,000.00 in his Financial Statement sworn November 8, 2011. He did not provide any explanation or professional evidence in support of this lower value. Accordingly, I attribute a value of $55,000.00 to the property as of November 2011.

• Torrance, valued at $125,000.00.

• Douglas, valued