ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: FS-11-0306
DATE: 2013-06-27
B E T W E E N:
Wendy Ann Wallace,
Mary Ann Currie, for the Applicant
Applicant
- and -
Scott Alan Wallace,
William Shanks, for the Respondent
Respondent
HEARD: May 30 , 2013,
at Thunder Bay, Ontario
Mr. Justice D. C. Shaw
Decision On Motion
[1] This is a motion for interim spousal support brought by the respondent, Scott Alan Wallace.
[2] The notice of motion also requests an order to permit Mr. Wallace to amend his Answer/Claim By Respondent, to claim spousal support, and an order requiring the applicant, Wendy Ann Wallace, to reinstate coverage for Mr. Wallace under her extended health care plan, available to her through her employment.
[3] In fact, an amended Answer/Claim By Respondent, claiming spousal support, served by Mr. Wallace on January 25, 2013, was filed on January 28, 2013, although no order granting leave had been taken out. However, Ms. Wallace takes no objection on this motion to the filing of the amended Answer/Claim by Respondent nor to having the motion for interim spousal support heard notwithstanding the procedural irregularity.
[4] An order shall issue that the filing of the Amended Answer/Claim By Respondent on January 28, 2013 is approved, nunc pro tunc. The applicant shall have 20 days from the release of these Reasons to serve and file a Reply to the Amended Answer/Claim By Respondent.
[5] On the hearing of the motion, counsel for Ms. Wallace advised that Ms. Wallace has reinstated coverage for Mr. Wallace under her extended health care plan, that she has submitted Mr. Wallace’s past health care expenses for reimbursement and that she has requested that the insurer provide a health coverage card for Mr. Wallace. This aspect of the motion therefore need not be dealt with. However, if there are any difficulties in regard to coverage for Mr. Wallace or reimbursement of past expenses, Mr. Wallace shall be at liberty to renew this part of his motion.
[6] The parties were married on July 19, 1986. Mr. Wallace is 53 years of age. Ms. Wallace is 52 years of age. They separated in April 2011.
[7] There are two children born of the marriage, ages 21 and 18. The children share time with each parent. Both children are in university. Their education costs are being paid through Registered Education Savings Plans and the children’s own earnings. Child support is not being claimed by either parent.
[8] Mr. Wallace is a self-employed sheet metal worker who works through his corporation, S.A. Wallace Construction Inc.
[9] After separation, Mr. Wallace purchased Ms. Wallace’s interest in the matrimonial home. He continues to reside in the home. Mr. Wallace deposes that there is a small shop in the garage of the home. He further deposes that he contracts his sheet metal services out to various businesses and work sites and that he works out of his company’s van which contains all his tools and carries supplies and finished work product to the job sites.
[10] Mr. Wallace has provided a summary for the years 2008 through 2012 of (a) the gross revenue of the company, (b) its net, after tax income, (c) its retained earnings and (d) his T-4 earnings:
Co. Contract Co. Net Co. Retained T-4 Personal
Revenue Income Earnings Earnings
2008 $233,306.00 $30,582.00 $20,823.00 $82,500.00
2009 $132,248.00 -$3,570.00 $17,253.00 $39,000.00
2010 $108,185.00 $6,301.00 $23,554.00 $70,000.00
2011 $200,883.00 -$11,614.00 $8,140.00 $87,250.00
2012 $132,530.00 $22,763.00 $30,903.00 $43,909.28.
[11] In April 2012, Mr. Wallace suffered a heart attack. He deposes that he was off work for three weeks after his heart attack and that for the next six weeks he worked on a very diminished basis. He deposes that he still works, but due to his health, he works more slowly and cannot do as much work as he used to do, although he still works an average of six days per week.
[12] Mr. Wallace deposes that the retained earnings of the company usually accrue because he has not collected accounts receivables or has not paid government holdbacks or other obligations. He states that he needs a small amount of retained earnings to finance periods of time when he has not yet been paid for his work and for the materials which he has purchased. He deposes that it is not unusual for him to wait up to 90 or 120 days before payment after invoicing, and sometimes longer.
[13] The year-end of the company is September 30. The figures shown above in paragraph 10 are for the company’s fiscal year.
[14] From September 30, 2012 through to May 1, 2013, the company had revenue of $69,669.34. Extrapolated over 12 months, to September 30, 2013, the projected revenue, on this calculation, would be $119,433.12.
[15] Counsel for Ms. Wallace points out that of the $69,669.34 billed between September 30, 2013 and May 1, 2013, the sum of $54,736.95 has been invoiced since January 1, 2013, during which the Respondent was away from work for some period of time on a Caribbean cruise with the parties’ two daughters. Extrapolated over a calendar year, not the company’s financial year, $54,736.95 between January 1 and May 1, 2013 would project to company revenue of $164,210.84.
[16] Mr. Wallace deposes that since the company’s year-end in September 30, 2012, the gross billings of the company have not kept pace with previous years. He estimates that based on the gross revenue of $69,669.34 for the seven months following September 30, 2012, that his personal earnings for the September 30, 2012 to September 30, 2013 period will be similar to the $43,909.28 that he reported for the 2012 as T-4income.
[17] With respect to the Caribbean cruise, Mr. Wallace deposes that he paid for the airfare for himself and the two children by points and that the cruise portion of the trip cost him about $675.00 for each of the children and himself. He submits that this vacation was typical of the vacations that the family took before separation.
[18] Ms. Wallace is an elementary school teacher with the Lakehead Board of Education. Her 2012 income was $77,153.97. Her current income is $82,610.44.
[19] Ms. Wallace takes issue with Mr. Wallace’s position that his income should be set at the amount of his 2012 T-4 invoice, namely, $43,909.28.
[20] Ms. Wallace submits that there are four components to Mr. Wallace’s actual income:
(1) his T-4 income;
(2) the company’s income in 2012, before income taxes, of $26,842.00. She submits that this amount should be added to Mr. Wallace’s income;
(3) a personal benefit component of the vehicle expense of $20,482.00 claimed by the company. Ms. Wallace sets this personal benefit at $10,000.00; and
(4) a personal benefit component of office expenses, utilities and insurance claimed by the company. Ms. Wallace sets this personal benefit at $7,500.00.
[21] Ms. Wallace submits that Mr. Wallace’s company does not need to keep its retained earnings at the level of the 2012 retained earnings, namely $30,903.000. The 2012 retained earnings increased from $8,140.00 in 2011 by the net income of the company, namely, $22,763.00. Ms. Wallace submits that Mr. Wallace’s argument that he does not get paid on a timely basis for his work and materials is not borne out by his records which show that he does not usually have to wait 60 or 90 days from the invoice date for payment. She also submits that Mr. Wallace paid $18,794.00 for materials in 2012 and therefore would not need significant retained earnings to pay for materials. Ms. Wallace submits that the 2012 retained earnings are higher than the years 2008 through 2011 because Mr. Wallace wants to minimize his income for support purposes. Ms. Wallace submits that if the business was an unincorporated sole proprietorship, the entire income of the enterprise would come into Mr. Wallace’s personal income.
[22] Ms. Wallace submits that although Mr. Wallace does incur vehicle expenses for business purposes, the sum of $20,482.00 for the year is excessive and that half of it should be attributed to personal use.
[23] The company claims office expenses of $10,118.00, insurance expenses of $2,872.00 and utility expenses of $3,686.00 for 2012, for a total of $16,676.00. Ms. Wallace submits that of these expenses, $7,500.00 should be attributed to personal use.
[24] Ms. Wallace submits that the following represents Mr. Wallace’s true income:
T-4 $43,750.00
Corporate Income $26,000.00
Vehicle expenses $10,000.00
Office, utility and insurance expenses $7,500.00
Total $87,250.00.
[25] Ms. Wallace submits that Mr. Wallace will have even greater income for 2013.
[26] Ms. Wallace also takes issue with the expenses set out in Mr. Wallace’s Financial Statement, submitting that they are overstated in the categories of taxes, vehicles, medical – dental, hair care and beauty, vacation and lines of credit.
[27] Ms. Wallace submits that no spousal support should be ordered.
[28] Mr. Wallace responds that the company requires retained earnings and that to focus on when invoices are rendered and paid ignores the fact that the company is not being paid for a particular job while he works on that job. Mr. Wallace notes that the balance sheet for 2013 includes $14,942.00 due from Mr. Wallace as shareholder, which is reflected in the retained earnings of $30,903.00. He submits that the retained earnings have been flowed to him as salary.
[29] Mr. Wallace submits that the expenses shown for the company have been incurred and have been accepted by Canada Revenue Agency.
Discussion
[30] The evidence on this motion is by affidavits only, with no cross-examination. This makes it difficult to determine what income and expenses of the company, if any, should be attributable to Mr. Wallace.
[31] However, it is clear that Mr. Wallace is the sole directing mind of the corporation. He has complete control over how much money will be withdrawn from the company, which increases or decreases the company’s retained earnings.
[32] For the purposes of this motion, I am satisfied that Mr. Wallace has provided plausible business reasons for keeping a reasonable level of retained earnings. I will not attribute to him the entire pre-tax income of the business. It is fiscally responsible for him to keep some monies in the business to pay wages (as was done in 2011) and to cover expenses pending receipt of payment of invoices for work done and materials purchased. However, Mr. Wallace cannot choose to keep his retained earnings unusually high so that his T-4 income is lower for support purposes. Between 2008 and 2011, inclusive, the company’s retained earnings were never higher than in 2010 when they were $23,554.00. The retained earnings in 2012 were $30,903 or $7,349.00 higher than the highest of any of the previous four years. I will impute this sum of $7,349.00 to Mr. Wallace’s income.
[33] I turn next to the corporation’s vehicle expenses of $20,482.00 in 2012. In his Financial Statement, sworn April 23, 2013, Mr. Wallace shows personal vehicle expenses – gas and oil, car insurance and license, repairs and maintenance – of $920.00 per month, or $11,040.00 per year, exclusive of an additional $400.00 per month for car insurance for one of the children. Mr. Wallace’s Financial Statement shows that he has a 2007 Silverado truck and a 2005 Fort Freestar Van. Based on what Mr. Wallace shows in his personal Financial Statement for vehicle expenses, I attribute to his personal use the sum of $10,000.00 for the vehicle expenses shown in the 2012 company financial statement.
[34] With respect to the amount shown in 2012 for office, utilities and insurance expenses, I observe that Mr. Wallace deposes that there is a small shop in the garage of the home and that he works out of his company’s van which contains all his tools and in which he carries all his supplies and finished work product to job sites. The corporation’s expenses shown in the 2012 Financial Statement of $10,118.00 for office expenses and $3,686.00 for utilities seem high for a small shop in the garage of the matrimonial home. It is unclear whether the insurance expense of $2,872.00 is for the home, so I will not take that into account. I will attribute $5,000.00 of the office and utility expenses to Mr. Wallace’s personal use.
[35] I am unable to conclude from the information before me that Mr. Wallace’s 2013 T-4 income will be different from his 2012 T-4 income. There is no reason at this time to base his income on an extrapolation over the period January 1, 2013, to May 1, 2013, as Ms. Wallace contends I should do, instead of an extrapolation over the period October 1, 2013 to May 1, 2013, as Mr. Wallace contends I should do.
[36] For the purposes of this motion I therefore find Mr. Wallace’s income for spousal support purposes to be:
(1) T-4 income $43,909.28
(2) Corporate retained earnings in excess of
highest year of the previous four years $7,349.00
(3) Personal component of vehicle expenses $ 10,000.00
(4) Personal component of office and
utility expenses $5,000.00
Total $66,258.28.
[37] This was a 25 year marriage. Ms. Wallace earned her teacher’s qualifications during the marriage while Mr. Wallace was the primary income earner. The parties have apparently divided on an equal basis the responsibilities for the care of their two adult children who are in university. There is no issue that Mr. Wallace had a heart attack. I accept his evidence that, at least on a interim basis, the heart attack has had an impact on his ability to work as hard and productively as he previously did.
[38] Section 15.2(6) of the Divorce Act sets out the objectives of a spousal support order. If any one of the four objectives are applicable, a spouse is entitled to support. See Bracklow v. Bracklow, 1999 715 (SCC), [1999] 1 S.C.R. 420. The Divorce Act requires the court to consider not only compensatory factors but also the needs and means of the parties. No single objective in s. 15.2(6) is paramount; all must be borne in mind. The court must also consider the factors set out in s. 15.2(4) of the Divorce Act and look at the conditions, means, needs and other circumstances of the spouses, including, but not limited to, the length of cohabitation and the functions performed by the spouses.
[39] I have determined that on an interim basis, Mr. Wallace is entitled to support and that Ms. Wallace has the ability to pay spousal support pending trial. The Spousal Support Advisory Guidelines set out a range of approximately $500.00 to $680.00 per month based on the respective incomes of the parties, as I have found them.
[40] An order shall go that commencing June 1, 2013, Ms. Wallace shall pay to Mr. Wallace interim spousal support of $600.00 per month.
[41] This order is without prejudice to the position of either party at trial to claim, on a more complete evidentiary record, that Mr. Wallace’s income for the period covered by this order should be fixed at some amount other than the $66,258.00 that has been imputed to him and to re-adjust, retroactively, the amount that should have been paid. The trial judge may credit or debit either party, as the case may be, for any overpayment or underpayment that the trial judge finds appropriate.
[42] If the parties are unable to agree on the costs of this motion, they shall each file written submissions within 30 days.
The Hon. Mr. Justice D. C. Shaw
Released: June 27, 2013
COURT FILE NO.: FS-11-0306
DATE: 2013-06-27
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Wendy Ann Wallace
Applicant
- and –
Scott Alan Wallace
Respondent
DECISION ON MOTION
Shaw J.
Released: June 27, 2013
/mls