Introduction

[1] This is a continuation of a matter initially argued before me on March 27 of this year. That was a motion brought by the Applicant, Rosa Colivas, to strike the Respondent’s pleadings as a result of his failure to pay support and schooling costs as ordered by Boswell J. and Kaufman J. of this court, respectively. The facts surrounding these orders and the initial defaults can be found from my endorsement dated April 4, 2013. As can be seen from that endorsement, I found that Mr. Colivas was in default of payments of spousal and child support under the order of Boswell J. dated January 11, 2013 in the amount of $50,738.31.[^1] I also determined that Mr. Colivas had failed to pay some $6,413.08 in fees owing the Country Day School under the order of Kaufman J. made September 13, 2012.

[2] Because Mr. Colivas had brought a motion for leave to appeal the Boswell J. support order, I ruled that the motion to strike was premature as an order striking pleadings would render those proceedings, as well as any potential stay of that order, moot. I ordered that once the leave to appeal motion was argued, the matter could be returned before me for determination. Leave to appeal was argued before Mullins J. of this court on May 31, 2013, and by endorsement dated July 18, 2013, the motion for leave to appeal was dismissed.[^2] As the Boswell J. interim order is now “final” pending trial there is now no longer any impediment to consideration of the striking of pleadings, as the defaults under the two orders noted above continue.

[3] Both parties requested further relief from the court when they reconvened to argue the issue. Mr. Niman on behalf of the Applicant had amended his Notice of Motion in order to request payment of the Country Day School fees for the 2013-14 school year; the Kaufman J. order had only covered fees for the previous academic year. He also asks that certain fees of the assessor, Linda Chodos, be paid (although neither counsel raised that issue in argument). Mr. Colivas brought a motion as well requesting that certain payments made prior to the Boswell J. order be characterized as tax deductible spousal support so that Mr. Colivas could deduct those payments from his income, and Ms. Colivas would be liable to pay tax on those payments.

[4] This matter was originally returnable before me on August 29, 2013; Mr. Singer requested an adjournment of the motion because his client was visiting family in Greece. I granted the adjournment September 11, 2013 specifically so that Mr. Colivas could “put his best foot forward” and file an affidavit in response to the motion to strike; I felt that an adjournment was warranted as an order striking pleadings would potentially remove Mr. Colivas from the litigation. No further affidavit material was, in fact, filed, but Mr. Colivas was able to attend at the motion. I made it a condition of the adjournment that the initial fees of $5,000 owing to Country Day School be paid; they were, in fact, paid by Mr. Colivas’ mother prior to the return of the motion.

[5] Since the initial argument of the motion in March, 2013, the arrears have continued to accrue. Ms. Colivas states that the arrears of spousal and child support now total some $152,683.07; Mr. Colivas says that the child support is in good standing but acknowledges arrears of spousal support in the amount of $103,484.57. There remains $4,076.08 owing to Country Day School for the past academic year, and the children’s report cards for last year are not being released.

[6] For the reasons set out below, I have determined the following:

a. I find that there are arrears of spousal support and child support under the Boswell J. order in the amount of $143,335.42. In addition, there is $4,076.08 owing to Country Day School under the Kaufman J. order;

b. The Respondent shall have 20 days to bring these two amounts into good standing, as well as any support accruing under that order to the date of payment, failing which the Respondent’s pleadings shall be struck and this matter may proceed by way of uncontested trial;

c. The children shall remain enrolled in Country Day School and upon payment of support, the parties shall continue to pay the ongoing fees to Country Day School on an equal basis;

d. The parties shall each pay one half of Ms. Chodos’ most recent retainer request as well as any ongoing and reasonable fees necessary to complete the assessment.

e. The Respondent’s motion for a declaration as to the characterization of payments made prior to the Boswell J. order is dismissed.

Analysis

[7] I will firstly deal with the original issue adjourned before me, being the issue of striking Mr. Colivas’ pleadings. I will then deal with the ongoing Country Day School fees, the fees owing to Linda Chodos as well as the declaratory relief requested by Mr. Colivas.

(a) Striking of Pleadings

[8] At the beginning of argument, Mr. Colivas undertook to provide that day a cheque to Ms. Colivas in the amount of $10,000 and undertook to the court to request that his mother pay the Applicant the arrears under the Boswell J. order. That did not, however, avoid continued argument of the motion as the undertaking was not to pay the monies, but only to make a request for payment to his mother. According to the materials filed by Mr. Colivas, that undertaking was no guarantee of anything as he maintains that he has no say over the funds controlled by his mother.

[9] I have already discussed the criteria for the striking of pleadings in my endorsement of April 4, 2013. I do not intend to rehash that discussion. Suffice to say, and as set out in that endorsement, the authority to strike pleadings lies under Rule 1(8) and/or Rule 14(23) of the Family Law Rules.[^3] And in my application of those rules, I intend upon applying the three part test outlined in Ferguson v. Charlton, 2008 ONCJ 1, [2008] O.J. No. 486 (C.J.):

First, the court must ask whether there a triggering event that would allow it to consider the wording of either subrule 1(8) or subrule 14(23). That triggering event would be non-compliance with a court order "in the case or a related case" [subrule 1(8)] or an order "made on motion" [subrule 14(23)].

Second, if the triggering event exists, the court should then ask whether it is appropriate to exercise its discretion in favour of the non-complying party by not sanctioning that party under subrule 1(8), or by ordering that subrule 14(23) does not apply. My review of the foregoing case law suggests that this discretion will only be granted in exceptional circumstances. In my view, the court's decision whether or not to exercise its discretion in favour of a non-complying party, ought to take into account all relevant history in the course of the litigation and, more specifically, the conduct of the non-complying party.

Third, in the event that the court determines that it will not exercise its discretion in favour of the non-complying party, it is then left with a very broad discretion as to the appropriate remedy pursuant to the provisions of either subrule 1(8) or subrule 14(23).

[10] In my previous endorsement, I had determined that the Respondent was then in breach of the orders of Boswell J. and Kaufman J. and as such the first requirement had been met. I determined, however, that there were exceptional circumstances to then making an order striking pleadings as the Respondent had sought leave to appeal Boswell J.’s support order, by far the larger obligation and event of default. I determined that it would be unfair to strike pleadings prior to that issue, and the accompanying issue of a stay, being determined.

[11] The Respondent’s motion for leave to appeal has now been dismissed. It is also apparent that the triggering event continues and, in argument, the Respondent did not demonstrate any other “exceptional circumstances” which would cause me to exercise my discretion not to apply Rules 1(8) or 14(23). He acknowledges that the order is in default and that there is at least $90,000 in spousal support arrears owing. He does not deny that the Country Day School fees for the previous year have not been paid in full. The motion for leave to appeal has been dismissed and the order is extant. In fact, things have deteriorated since the parties appeared before me in March of this year: the Range Rover broke down and the Respondent removed it from the Applicant’s possession and she was forced to lease a vehicle. The hydro was not paid on the Applicant’s residence, and has been cut off and Ms. Colivas and the children have been forced to find alternative accommodation.

[12] Accordingly, I am going to order that the Respondent’s pleadings be struck. However, as noted above, I am going to give the Respondent an opportunity to pay the arrears under the two orders in default and to that purpose, I must determine what those arrears actually are. In fact, the majority of the argument before me concerned the quantum of spousal and child support arrears under the Boswell J. order rather than the striking of Mr. Colivas’ pleadings.

[13] The parties are largely agreed on most of the payments made by the Respondent to Ms. Colivas. However, Mr. Colivas wishes the lease payments made on the Range Rover to be deducted for spousal support purposes; Ms. Colivas disagrees. As well, Mr. Colivas denies owing any child support whatsoever as he says that he pre-paid a large amount of child support prior to the Boswell J. order and he contends that child support is therefore in good standing as of the date of argument of the motion.

(i) Range Rover Payments

[14] In my earlier endorsement, I had credited the car lease payments on the Range Rover which was used by Ms. Colivas towards payments of spousal support: see paragraph 17. Mr. Colivas continued to make lease payments on that vehicle in the amount of $1,869.53 per month. The amount of the lease payments made since the Boswell J. order is now $9,347.65. In July of this year, the Respondent towed the vehicle from the Applicant’s residence with police assistance.

[15] Mr. Niman says that these payments should not be credited against the spousal and child support. His client notes in her affidavit that the car could not be driven since February, 2013 because it required significant repairs which she could not afford. As a result, she leased another vehicle and she says that the payments on the Range Rover were accordingly not to her benefit.

[16] Unfortunately, Ms. Colivas’ affidavit does not make it clear when she notified her husband of the vehicle breakdown. He did not have use of the vehicle and if he did not know about the necessary repairs, how was he to pay for those repairs in order to ensure that Ms. Colivas and the children had transportation? In fact, it appears that as late as July 2, 2013, after a threat by her husband of removal of the Range Rover, Ms. Colivas stated through counsel that she “had no other vehicle..[or] the ability to obtain another automobile.” She demanded that no steps be taken to remove the vehicle.[^4] It was only the next day that Mr. Colivas was advised that the Range Rover required repairs that the Applicant could not afford and that she had leased another vehicle.[^5]

[17] Under the circumstances, it appears that, as far as the Respondent knew, the Applicant was continuing to use the Range Rover right up until July 3, 2013. As far as he knew, the payments for the Range Rover continued to be for the benefit of the Applicant and he can hardly be expected to repair a vehicle that he did not know required repairs. Had he known about the breakdown of the car, he could have removed it earlier or repaired it. As such, the Range Rover payments will be credited towards the spousal and child support payable under the Boswell J. order.

(ii) Child Support

[18] The Respondent states in his affidavit that he has paid excessively towards the children’s expenses prior to the Boswell J. and the Kaufman J. orders. He states that he paid $55,000 towards the Country Day School during the 2011/12 school year. He also says that he spent about $5,000 towards other expenses of the children for a total of about $60,000. He says that this means that he has fulfilled his obligation for child support to date and states that “Fair is fair.”[^6]

[19] It has been a constant theme of the Respondent’s materials that he has paid enormous amounts of money to his wife and that he should receive credit, both morally and fiscally, for those payments. He has complained of this in the affidavits placed before me in the original motion to strike pleadings in March, 2013[^7] and in submissions made by counsel before me. On both appearances before me, counsel noted the prior payments made by Mr. Colivas and said that it was unfair to make him wait until trial to obtain a credit for those payments.

[20] More importantly, however, Mr. Colivas also placed the payments made towards Country Day School as well as other extra-curricular expenses, before Boswell J. in argument of the spousal support and child support motion.[^8] And Boswell J. addressed this issue insofar as he began payments of child and spousal support on November 1, 2012, and refused to make a retroactive order. More importantly, he noted in paragraph 34 of his decision that “adjustments made (sic.) be made retroactively at trial in the interests of justice.” He also noted in paragraph 33 that, “[o]nly after a trial will it become clear whether Mr. Colivas has overpaid or underpaid support, or whether his capital has been unfairly encroached upon.”

[21] These statements are as applicable to expenses paid prior to November 1, 2012 as after. As such, I decline to apply past payments made towards the children to the child support award of Boswell J. made on January 11, 2013. This is an adjustment that should be made in the accounting for payments made, both for the children and for Ms. Colivas, at trial. At that point in time, presumably a Justice of this court will determine what Mr. Colivas should have paid for the support of the children from the date of separation on, and account for funds paid for the children, both prior to and under the Boswell J. support order.

[22] Finally, I note that the amounts set out in the affidavit appear to be inexact, to say in the least. In 2012, Mr. Colivas stated that he had paid some $50,000 for Country Day School; before me he stated that it was $55,000. He states that he has paid some $5,000 towards the children’s expenses prior to the Boswell J. order, but does not itemize those expenses. The claim of the Respondent fails in any event for lack of specificity.

[23] Accordingly, the amount of arrears will include the child support payments outstanding under the Boswell J. order in addition to spousal support payable thereunder.

(iii) Quantum of Arrears and Order

[24] Accordingly, I find that the arrears repayable under the Boswell J. order are $143,335.42.[^9] In addition, there is acknowledged to be owing to Country Day School under the Kaufman J. order the sum of $4,076.08. The total payable under the two orders is accordingly $147,411.50.

[25] I am going to strike Mr. Colivas’ pleadings, provided that he will have 20 days from the date of this order to pay the arrears under both orders. If the Respondent does not make the payments noted above, the Respondent’s pleadings will be struck without further notice to him.

(b) Country Day School

[26] The Kaufman J. order respecting Country Day School only speaks to the tuition for the 2012-13 school year. Ms. Colivas requests that this order be extended to this academic year. That may be optimistic; at the pace of this litigation, it may be that this issue will again be before the court next August. In any event, Ms. Colivas notes in her material that the children have attended Country Day School both before and after separation, Lucas for four years and Costa for three. Lucas has been diagnosed with both Tourette’s Syndrome and ADHD and is in a special routine at Country Day School which meets his needs.[^10] Ms. Colivas submits that, considering the spending pattern prior to separation, the costs of Country Day School is a reasonable section 7 expense under the Child Support Guidelines.^11 Based upon Boswell J.’s order, which provided that certain s. 7 expenses be equally divided between the parties, Mr. Niman suggests that the Country Day School fees also be divided on that basis.

[27] Counsel for Mr. Colivas noted that the parties live a stone’s throw from each other, and that the children, who are in the shared custody of the parents, could easily go to the public school within the parties’ catchment area. He submitted that the Country Day School fees are excessive for these parties, and do not constitute a reasonable section 7 expense.

[28] When I asked Mr. Singer where his client’s evidence was in opposition to the motion for the Country Day School fees, he stated that the matter was argued before Kaufman J. and that all of the evidence was available from the record before the court at that time.

[29] It is correct that extensive material was filed on the record by Mr. Colivas in opposition to Ms. Colivas’ September 2012 motion for the enrollment of the children at Country Day School. I note that there was nothing in that material which went to the issue of whether the school suggested by Mr. Colivas was within the catchment area of both parties. However, affidavits were filed by Mr. Colivas and the children’s tutor, Stuart Ackerman, indicating that both parties had been dissatisfied by Country Day School prior to and after separation, and that Country Day School had essentially failed both children, and in particular, Lucas’ special needs. The material filed by Mr. Colivas was unambiguous in its denigration of that school and in suggesting that the public school system could better meet the needs of the children, and in particular, Lucas.[^12]

[30] In the face of that material, and based upon argument and the affidavit filed by Ms. Colivas, Kaufman J. ordered that the children attend Country Day School during the 2012-13 academic year. And I would have expected Mr. Colivas to provide me with up to date evidence as to how Country Day School met, or failed to meet, the children’s needs during the last academic year. He has failed to provide affidavit evidence updating the issue in any way.

[31] Further, Kaufman J. determined on extensive material that it was in the best interests of the children that they attend Country Day School. To displace that determination, in my view, the Respondent would then have to demonstrate some change in circumstances which would indicate that it is now no longer in the children’s best interests to go to that school. Again, there is no affidavit evidence to that effect. The only changes in circumstances that I can find are the support order of Boswell J., and Lucas’ diagnosis from Sick Kid’s Hospital which would tend to support the need for stability. And, without more, stability also would dictate that the children remain at their present school pending trial. The support award is addressed by the request for only one half of the fees to be borne by each party.

[32] Accordingly, it is my determination that the Respondent and the Applicant each pay one half of the fees for Country Day School for the 2013-14 academic year and that the children continue to attend Country Day School for the coming academic year. The Respondent will receive a credit for the Applicant’s share of the initial enrollment fee paid by him in the amount of $2,500.

(c) Fees of Linda Chodos

[33] Neither counsel argued this issue before me on their re-attendance on September 11, 2013. It was not noted as being abandoned or settled.

[34] Assuming the Boswell J. order has equalized the income and capital expenditures of the parties, the same logic would apply in respect of the fees of Linda Chodos as with the section 7 expenses ordered by Boswell J. and as above. In fact, Kaufman J. treated 50% of the assessment costs to be a loan from Mr. Colivas to his wife.

[35] Accordingly, I am going to order that the parties each pay one half of Ms. Chodos’ retainer request as well as the ongoing fees necessary to complete the assessment. It is essential that this be done in order to move this matter toward a trial sooner rather than later.

(d) Characterization of Prior Payments as Spousal Support

[36] Mr. Colivas has brought a motion for a declaration that certain payments made by him in 2011, 2012 and 2013 be characterized as tax deductible spousal support. Specifically, the motion requests that $184,256.49 paid in 2011, $129,906.71 paid in 2012 and $57,391.93 paid in 2013 all be declared to be “tax deductible spousal support” for those years.

[37] The motion requires the court to delve into the rather complex relationship between spousal support and its tax consequences under the Income Tax Act.[^13] The scheme for the tax deductibility of spousal support is set out in ss. 56 to 60.1 of the ITA. Those sections provide that periodic payments of spousal support made pursuant to a written agreement or court order are tax deductible by the paying spouse, and are taxable in the recipient’s hands. Third party payments like the ones alleged to have been made by the Respondent in the present case, are only deductible if the order identifies the payments as such and make it clear that the payments are intended to be within the inclusion or deduction scheme: see s. 60.1(1) of the ITA. There are limits as to the tax treatment of retroactive support as set out in s. 56.1(3) of the ITA. It is also trite that this court cannot determine whether payments are tax deductible in the payer’s hands or taxable in the recipient’s; that is solely the province of the Canada Revenue Agency.

[38] The net effect of the Respondent’s claim for characterization would be to presumably allow the Respondent a large tax deduction for the years in issue, and would, on the other hand, create a large tax liability for the Applicant. Bearing this in mind, the Respondent’s motion for the characterization of the payments as tax deductible spousal support is dismissed. I do so for several reasons.

[39] Firstly, as noted above, these issues were addressed by Boswell J. in his order made on January 11, 2013. In his affidavit sworn for that motion, Mr. Colivas deposed that he had paid $200,624.77 since separation, and he requested in his affidavit (without a formal motion) that he “be credited with payment of spousal support in the amount of $102,655.46 and $97,969.31 so far for 2012.”[^14] Although the numbers changed before me, the request did not. And Boswell J. answered this request when he ruled, at paragraph 33 of his endorsement that the “full forensic machinery of a trial will be necessary to do justice between these parties” and that:

A trial will be necessary to accurately assess Mr. Colivas' income and to determine the equalization of net family property. Only after a trial will it become clear whether Mr. Colivas has overpaid or underpaid support, or whether his capital has been unfairly encroached upon. Only after a trial will it be possible to address any double-dipping issues or set-offs/adjustments for over-payments or under-payments.

[40] Boswell J. later stated that it was in the hands of the trial judge to “re-adjust and/or re-characterize any amounts paid”. He stated that the order was specifically without prejudice to the power of the trial judge to do so: see paragraphs 34(iii) and 37 of the endorsement. In my view, this ruling encompasses pre-order payments as well as payments made pursuant to that order. The issue of payments made in 2011 and 2012 were, effectively, reserved to the trial judge and, pending trial, that issue is therefore res judicata.

[41] Secondly, as with the child support payments that Mr. Colivas says he previously made, he has again not provided me with sufficient evidence of past payments to allow me to characterize them as spousal support. For example, one of the payments he wishes a deduction for is the removal of $99,000 from the joint account by the Applicant in June of 2011.[^15] That can hardly be said to be a “periodic payment” or a qualified “third party payment.” He also claims stock transfers of Tear Labs stock to Ms. Colivas made in January, 2012 which totaled $20,000;[^16] again, how can that be characterized as a periodic payment of spousal support which would qualify as tax-deductible spousal support rather than a transfer of capital?

[42] When I put these issues to Mr. Singer, he said that I should just not include those payments in my characterization but include the rest. What he really is asking me to do is to go through the voluminous material filed in support of the motion attached to his client’s affidavit to sort out which payments qualify and which don’t. That, with respect, is something to be done at trial after full evidence and not by a motions judge, exactly as determined by Boswell J. in his decision.

[43] Finally, the payments made in late 2012 and in 2013 towards spousal support were presumably made and credited to the Boswell J. order as fully argued by counsel and determined above. As the Boswell J. order is effective November 1, 2012, I am safe to assume that any such payments have been fully credited to the Respondent as determined above and based upon the material filed by both counsel for this motion and as argued before me.

[44] Therefore, the Respondent’s motion for the characterization of payments as spousal support is dismissed.

Order

[45] There will be therefore an order to go as follows:

a. Arrears of spousal support and child support owing by the Respondent to the Applicant under the Boswell J. order dated January 11, 2013 are fixed in the amount of $143,335.42. In addition, the Respondent owes $4,076.08 to Country Day School under the Kaufman J. order dated September 13, 2012;

b. The Respondent shall have 20 days to bring these two amounts into good standing, as well as any support accruing under the Boswell J. support order to the date of payment, failing which the Respondent’s pleadings shall be struck without notice to the Respondent and this matter may proceed by way of uncontested trial;

c. Temporary order to go that the Respondent and the Applicant shall each pay one half of the fees for Country Day School for the 2013-14 academic year and the children shall continue to attend Country Day School for the coming academic year. The Respondent to receive a credit for the Applicant’s share of the initial enrollment fee paid by him in the amount of $2,500.

d. The parties shall each pay one half of Ms. Chodos’ most recent retainer request as well as any ongoing and reasonable fees necessary to complete the assessment.

e. The Respondent’s motion for characterization of payments made by him as spousal support is dismissed.

[46] The parties may provide costs submissions for these motions including the March appearance, first by the Applicant and then the Respondent on a ten day turnaround. Costs submissions to be no more than five typewritten pages, not including bills of costs or offers to settle submitted on the motion.

McDERMOT J.

Date: September 18, 2013

[^1]: See Colivas v. Colivas, 2013 ONSC 168

[^2]: See Colivas v. Colivas, 2013 ONSC 4777

[^3]: O. Reg 114/99

[^4]: See paragraph 15 of the Applicant’s affidavit sworn August 23, 2013 and in particular the correspondence from Mr. Neiman dated July 2, 2013 noted in that paragraph.

[^5]: Mr. Bernstein’s letter to Mr. Singer dated July 3, 2013

[^6]: Affidavit of Mr. Colivas sworn August 15, 2013, paragraph 13.

[^7]: See paragraphs 10 and 11 of Mr. Colivas’ affidavit sworn March 24, 2013.

[^8]: See paragraphs 38 and 39 of Mr. Colivas’ affidavit sworn October 19, 2012.

[^9]: In calculating this amount, I have taken the amount of child and spousal support arrears set out in paragraph 13 of the affidavit of Rose Colivas ($136,115.55) and added to it the amount of spousal support and child support less the mortgage and home insurance for September, 2013 ($16,567.52). From that I have deducted the amount of the Range Rover payments which were made by Mr. Colivas and which I have determined should be credited to spousal support as above ($9,347.65). The net arrears are accordingly $143,335.42.

[^10]: See the Applicant’s affidavit sworn August 23, 2013 at paragraphs 22-27 inclusive

[^12]: See the Respondent’s affidavit and the affidavit of Stuart Ackerman both sworn September 10, 2012 which can be found at Tabs 3 and 4 of Volume 5 of the Continuing Record.

[^13]: R.S.C. 1985, c. 1 (5th Supp.)

[^14]: See paragraphs 38 and 41 of Mr. Colivas’ affidavit sworn October 19, 2012.

[^15]: Exhibit “A” to the affidavit of Mr. Colivas sworn August 15, 2013

[^16]: Ibid. at paragraph 10.

Colivas v. Colivas, 2013 ONSC 5904

Case Summary

Introduction

Analysis

(a) Striking of Pleadings

(i) Range Rover Payments

(ii) Child Support

(iii) Quantum of Arrears and Order

(b) Country Day School

(c) Fees of Linda Chodos

(d) Characterization of Prior Payments as Spousal Support

Order

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Legal Tests 1

Legislation 3