SUPERIOR COURT OF JUSTICE - ONTARIO

DATE: 20131004

RE: IDI SHEIK ALI ABDIWAHAB, Applicant

AND:

ABDI MOHAMUUD, Respondent

BEFORE: Justice Croll

COUNSEL:
Jennifer Ryan, for the Applicant

Abdi Mohamuud, self-represented

HEARD: September 12, 2013

ENDORSEMENT

[1] The Applicant brings a motion for an order imputing income in the amount of $164,525 to the Respondent for 2011, and for an order seeking child support and contribution towards section 7 expenses based on this imputed income.

Background

[2] The Applicant and Respondent were married in a religious ceremony on December 15, 1996 and married civilly on August 15, 1997. They separated 14 years later on July 15, 2011. The Respondent now lives in Regina, Saskatchewan. They have seven children: Ayan Mohamuud Abdi [F] born October 12, 1997 (“Ayan”, age 15); Mohamed Mohamuud Abdi [M] born October 11, 1999 (“Mohamed”, age 13); Anas Mohamuud Abdi [M] born June 13, 2001 (“Anas”, age 12); Dhalha Mohamuud Abdi [M] born March 20, 2003 (“Dhalha”, age 10); Hanna Mohamuud Abdi [F] born November 22, 2004 (“Hanna”, age 8); Zayd Mohamuud Abdi [M] born October 9, 2006 (“Zayd”, age 6); and Ayub Mohamuud Abdi [M] born October 4, 2008 (“Ayub”, age 5).

[3] It is the Applicant’s evidence that during an unsuccessful discussion about family matters and reconciliation in May 2012, the Respondent threatened her. As a result, she brought an ex parte order for a restraining order. That order was not granted, nonetheless, the Applicant then moved to a shelter with the children.

[4] Subsequently, on May 31, 2012, the parties consented to an order for, among other things, access for the Respondent and the involvement of the Office of the Children’s Lawyer. No order for support was made as the parties could not reach a consensus.

[5] The parties attended a case conference on September 21, 2012 to deal with financial issues only. At that time, it was Respondent’s position that he earned $27,000 a year from running a courier business. While the Respondent provided a Notice of Assessment that shows an income of $27,741 for 2011, he did not provide an income tax return for 2011. The Applicant did not accept the Respondent’s position about his income as she had recently found a stack of cheque stubs indicating that approximately $150,000 in cheques had been written from one of the Respondent’s bank accounts. The account showed expenses related to cleaning, vehicle trading and courier businesses, including articles of incorporation. The Respondent’s corporation is 101161995 Saskatchewan Ltd. and the corporate profile indicates that it carries on business as a courier/delivery service.

[6] On consent and on a without prejudice basis, Mesbur J. made an order on September 21, 2012, that the Respondent pay child support in the amount of $1,373 per month, based on income of $48,000. This amount was sufficient to take the family off of Ontario Works.

[7] At the September 21 case conference, Mesbur J. also made an order for disclosure and established a time table so that a motion could be brought. Although the order provided for the Respondent’s disclosure within 45 days, disclosure was not delivered until January 2013. It is the Applicant’s position that even at that late date, disclosure was incomplete or unclear, and certain disclosure was not produced. As such, the Applicant continued to have concerns about the quantum of the Respondent’s income.

[8] On January 16, 2013, the Applicant’s counsel served the Respondent’s counsel with two Requests for Information, together with a detailed cover letter setting out the Applicant’s concerns. Among other things, the Applicant sought receipts, accounting and/or statements that supported deductions from the Respondent’s 2010 and 2011 corporate income tax returns and deductions as noted on the Respondent’s 2012 corporate expense statement. In particular, these deductions were for fuel/gas costs, meals and entertainment, employee costs, and insurance for the vehicles. The Respondent did not reply to the Requests for Information.

[9] At a motion dealing with access and custody on April 4, 2013, the parties agreed to this long motion date to deal with the support issues.

[10] Shortly after the April motion, on May 17, 2013, the Respondent’s counsel served a Notice of Change in Representation and the Respondent now represents himself. Despite knowing in early April 2013 that that the motion would be heard on September 12, 2013, the Respondent did not file any responding material. In fact, the Respondent has not provided any further disclosure since January 2013, although he brought some disclosure with him to the motion: some forms from the Information Services Corporation of Saskatchewan dated May 9, 2013; his 2011 Notice of Assessment; and his 2012 T1 General Income Tax Return.

Imputing of Income

[11] The Applicant submits that income should be imputed to the Respondent under four headings: the Respondent’s personal income; director’s fees received by the Respondent; increased retained earnings in the Respondent’s company; and to account for corporate deductions such as meals, entertainment, and fuel, commonly known as “add-backs”.

Personal income

[12] A review of the Respondent’s corporate bank accounts shows that in 2011, the Respondent received $42,225.96 in employment income from DHL Express. The Respondent’s total corporate deposits for 2011 are $310,146. When the DHL Express payments of $42,225.96 are deducted from the total deposits, approximately $268,000 remains and this is the amount that the Respondent has shown as his gross corporate income for 2011. However, there is no accounting for the $42,225.96.

[13] There is, as well, no information as to whether the $42,225.96 was net of tax or a gross payment. Although it is the Applicant’s belief that the amount is net of tax, based on what she was told by the Respondent during the marriage, the Applicant does not request that this sum be grossed up to account for any tax consequences.

Director’s fees

[14] The Respondent’s 2011 corporate income tax return shows a $136,000 deduction from gross corporate income on account of subcontractors. The corporate financial statement shows that of this $136,000, $100,000 was paid to driver subcontractors and $36,000 was paid to the Respondent as director’s fees. The Respondent confirmed this arrangement in his submissions on the motion. However, this $36,000 is not accounted for anywhere else in the financial disclosure that has been provided. In particular, there is no acknowledgment by the Respondent that this amount forms part of his personal or corporate income for 2011.

Retained earnings

[15] The retained earnings in the Respondent’s corporation increased from $10,500 in 2010 to $38,000 in 2011, an increase of $27,500. (It is noted that the Applicant’s counsel calculated this increase incorrectly to be $26,500 in her material, and used the figure of $26,500 in all calculations. During the hearing of the motion, the Applicant’s counsel indicated that she would rely on the lower amount of $26,500).

[16] It is the Applicant’s submission that since the Respondent is the sole shareholder of 10116995 Saskatchewan Ltd., the increase in retained earnings must be considered to be income of the Respondent. In other words, as no one else is entitled to the retained earnings, it must be imputed to the Respondent.

[17] At the motion, the Respondent provided a Saskatchewan Corporate Registry Profile Report which indicates that as of May 9, 2013, there are three shareholders of his company: the Applicant, Shukri Jama and Alaeldin Kittaneh. I note that the Profile Report indicates that Shukri Jama resides at 24-26 Shaw Street in Regina. This is the address of the Respondent on his Answer and other material, and the address at which the Respondent was served, although the Profile Report shows a different address for the Respondent. The Applicant submits that Shukri Jama is the Respondent’s new partner.

[18] In any event, the corporate shareholding in 2013 is not relevant to the relief sought today. The Applicant asks that income be imputed from 2012 on, based on 2011 corporate income. In 2011, the sole shareholder of 101161995 Saskatchewan Ltd. was the Respondent.

Add-backs to income

[19] The Respondent deducted $6,800 for meals and entertainment expenses from corporate income in 2011; however he has not provided any receipts for these expenses in order to show that they were properly incurred.

[20] As well, as indicated, the Respondent’s 2011 corporate income statement shows a $136,000 deduction, $100,000 of which is subcontractor expenses and $36,000 of which is director’s fees payable to the Respondent. However, a review of the Respondent’s business bank account for the year January 1 to December 31, 2011 shows actual cheques paid in the amount of $73,496. This is approximately $26,000 less than the $100,000 amount deducted. If the corporate year end of April 20 is used, the actual cheques total $82,114, which amounts to a difference of approximately $18,000 between what was spent and what was deducted. The Applicant submits that given this differential between actual expenses paid to subcontractors and expenses claimed on the corporate income statement, there should be an add-back to the Respondent’s income of at least $18,000.

[21] There were also detailed submissions made regarding the deductions taken by the Respondent for fuel expenses. The Respondent’s 2011 corporate income statement shows a deduction for fuel in the amount of $93,506. In contrast, a review of the Respondent’s business bank account shows what appears to be fuel costs in the amount of $615 for the 2012 calendar year and $1,596 for the 2011 calendar year. In addition, the Applicant reviewed the Respondent’s business account and credit card payments for the period January 2011 to September 2012. (Interestingly, these payments included those made on a credit card in the Applicant’s name for charges that she never incurred.) Based on that review, the Applicant submits that there was only $21,657 spent on fuel for the period January 2011 through September 2012. This amount results in fuel expenses of about $71,000 less than what Respondent claimed as a deduction from his corporate income in 2011. Given the lack of clarity and deficiencies in the financial disclosure, the Applicant submits, rather arbitrarily, that half of this amount should be added back to the Respondent’s income. This approach still leaves $35,000 of unsupported fuel costs being deducted from income.

[22] The Respondent stated, among other things, that he had thousands of receipts for fuel expenses. At the request of the court, he reviewed his own bank statements and arrived at a figure of some $45,600 that he claimed was on account of fuel expenses and paid by email transfers. However, as noted, no receipts for fuel expenses were ever disclosed, and the bank statement record of email transfers does not provide any indication of the reason for the transfer. In my view, to take the position on the day of the motion that there are thousands of receipts unaccounted for is simply not acceptable. This is especially the case since the original detailed Request for Information was made in January 2013, at a time when the Respondent had counsel.

[23] The Respondent also submits that he reimbursed the drivers for fuel charges on their own credit cards. Again, there is a deficit of documentary evidence to support this position, and payments to the subcontractor drivers are accounted for.

[24] The aggregate of the expenses the Applicant seeks to have added back to the Respondent’s income is $59,800, consisting of $6,800 in meals and entertainment expenses, plus $18,000 for the deduction for subcontractors that was not paid out, plus $35,000 in unsupported fuel expenses.

Analysis

[25] I have considered the position of the Applicant that income of $164,525 should be imputed to the Respondent. In summary, this imputed amount stems from the following: the DHL Express income in the amount of $42,225.96; the $36,000 in director’s fees; the $26,500 in retained earnings; and the $59,800 of “add backs”.

[26] In my view, the Respondent has not provided any reliable evidence to dispute this calculation. Rather, he acknowledged in his submissions that he received the amount of $42,225.96 as a gross amount from DHL Express and that he was entitled to the $36,000 director’s fee. The Corporate Registry Profile Report filed at the motion to show that there are three shareholders as of May 9, 2013 has no relevance to the retained earnings issue in 2011. In any event, it is with some skepticism that I view this update, considering its timing and the apparent non-arm’s length relationship between the Respondent and at least one of the other shareholders.

[27] With respect to the add-backs, as stated, there is a wholesale deficit of documentary evidence to support the deductions that the Respondent claims are legitimate corporate expenses. This is a case governed by section 18 of the Federal Child Support Guidelines, S.O.R./97-175 (“Guidelines”), which provides that when the spouse is a shareholder, director, or officer of a corporation, if a court thinks that his or her income does not otherwise reflect all of the available money, the court may include: all or part of the pre-tax income of the company, amounts that should have been paid by the company to the spouse for the services he or she provided, and amounts paid by the company to people with whom the company has a personal relationship. As stated in Elder v. Dirstein, 2012 ONSC 2852, [2012] O.J. No 2165, at para. 16, “Whenever s. 18 comes into play the onus is on the shareholder, director or officer to show that corporate monies, whether retained earnings or pre-tax corporate income, are not available for support purposes”. In my view, the Respondent has not met this onus.

[28] I am satisfied that the Applicant has been fair and reasonable in her calculation of imputed income. For example, while it was the Applicant’s belief that the DHL income was net of taxes, the Applicant did not seek a gross up in oral submissions. As well, despite the dearth of documentation to support the fuel expenses, the Applicant nonetheless took the position that half of the unsupported expenses should be allowed. In addition, as noted, the calculation of fuel expenses undertaken by the Applicant covered the period from January 2011 to September 2012. This 18 month period of expenses was applied to a 12 month analysis of income, thus giving a benefit to the Respondent.

[29] Finally, the incomplete disclosure must be viewed under the lens of the Respondent’s credibility. In this regard, I note that the 2011 Notice of Assessment shows that the Respondent received social assistance of $4,354 in 2011. Given the Respondent’s own admissions on this motion, his entitlement to social assistance is, at its highest, disturbingly unclear.

[30] For all these reasons, income in the amount of $164,525 is imputed to the Respondent for the year 2011. The table amount for seven children based on the Guidelines is $4,170 per month. The Applicant seeks an interim award of child support based on this amount commencing June 1, 2012. (The date of the Application was May 29, 2012).

[31] In D.B.S. v. S.R.G., 2006 SCC 37, [2006] 2 S.C.R. 231, the Supreme Court affirmed the availability of retroactive support. At p. 259, the court noted that the parental obligation to pay support commensurate to the parent’s income exists independent of any statute or court order. In addition, the court held that generally, such an award should be retroactive to the date when effective notice was given to the other parent (at p. 288).

[32] The Respondent is ordered to pay child support on a temporary basis in the amount of $4,170, as of June 1, 2012, based on imputed income in the amount of $164,525 for the seven children of the marriage: Ayan Mohamuud Abdi [F] born October 12, 1997 (age 15); Mohamed Mohamuud Abdi [M] born October 11, 1999 (age 13); Anas Mohamuud Abdi [M] born June 13, 2001 (age 12); Dhalha Mohamuud Abdi [M] born March 20, 2003 (age 10); Hanna Mohamuud Abdi [F] born November 22, 2004 (age 8); Zayd Mohamuud Abdi [M] born October 9, 2006 (age 6); and Ayub Mohamuud Abdi [M] born October 4, 2008 (age 5). The Respondent will be given credit for any child support amounts he has paid from June 1, 2012 to date.

[33] In order to deal with the section 7 expenses under the Guidelines, the Applicant submits that a minimum income of $21,320 should be attributed to her. Given that the Applicant is the sole care giver for seven children between the ages of 5 and 15, I find this to be a very reasonable position. The attribution of $21,320 to the Applicant results in a proportional split of section 7 expenses of 75% to be borne by the Respondent and 25% to be borne by the Applicant.

[34] The children Ayan, Mohamed, Anas and Dhalha require orthodontic work. The orthodontist Dr. Chopra has provided a quotation and a monthly payment plan to the Applicant in order to make this treatment attainable. This plan, designed initially for Ayan, proposes $200 for the initial consultation, $1,000 upfront payment, and $300 per month until the treatment is complete. Dr. Chopra has advised that she is prepared to offer the same payment plan for the other children. For Ayan, the Applicant has already paid the $200 consultation fee.

[35] The Respondent is ordered: (i) to pay $750, being his share of the $1,000 upfront payment for Ayan’s orthodontics directly to Dr. Chopra, and (ii) to make ongoing contributions to section 7 orthodontic expenses for Ayan, Mohamed, Anas and Dhalha in the amount of $225 per month. The Respondent shall receive the receipts from the orthodontist for tax purposes.

[36] The Respondent shall contribute to other section 7 special expenses for the children on a 75% Respondent / 25% Applicant basis. The Applicant shall provide the Respondent with all invoices and accounts for these expenses upon receipt.

[37] For so long as child support is to be paid, the Respondent and the Applicant must provide updated disclosure to the other party each year, within 30 days of the anniversary of this order, in accordance with section 25(1) of the Guidelines.

[38] A Support Deduction Order shall issue.

COSTS

[39] The Applicant seeks costs on a full recovery basis in accordance with Rule 24 of the Family Law Rules, O. Reg. 114/99, and in particular rule 24(5), (8) and (11).

[40] In my view, this was a classic case of “catch me if you can” litigation. In Trudel v. Trudel, 2010 ONSC 5177, [2010] O.J. No 3961, at para. 10, Quinn J. found that the husband failed to make full and frank disclosure of his financial information and understated his income until he was compelled to answer undertakings. Quinn J. found that this behavior amounted to a catch me if you can approach, demonstrating dishonesty and bad faith and, on this basis, awarded full recovery costs to the wife (at paras. 17-18). Harper J., in Stevens v. Stevens, 2012 ONSC 6881, 29 R.F.L. (7th) 19, aff’d 2013 ONCA 267, 114 O.R. (3d) 721, at para. 20, observed that the Applicant “did not provide full accurate and complete disclosure in a timely manner and on some material issues, he did not provide disclosure at all.” Though the Applicant in that case provided some disclosure as a result of motions brought by the Respondent, some financial information remained outstanding even by the date of the trial. As a result of his bad faith and his refusal of favourable offers to settle, Harper J. awarded full recovery costs to the Respondent (at para. 35).

[41] In this case, while the Respondent provided some disclosure, it was late and inadequate. The Respondent took some two months to comply with the September 2012 disclosure order of Mesbur J. and did not respond to Requests for Information, at a time when he had counsel. It was left entirely to the Applicant and her counsel to undertake a line by line review of incomplete bank and financial statements and tax returns, to arrive at the amount to be imputed. The Respondent has filed no material in response to the motion. Given the Respondent’s constant non-compliance with his obligations, it was essentially impossible for the Applicant to formulate a realistic offer to settle: see Singh v. Singh (1993), 10 C.P.C. (3d) 42 (Ont. C.J. (Gen. Div.)).

[42] That said, on January 16, 2012 the Applicant made a proposal, albeit not a formal offer, after receipt of the Respondent’s January 7, 2012 disclosure package. After setting out a request for further disclosure and clarification, she suggested that an imputed income of $100,000 be used to calculate child support, unless the Respondent could provide accurate documentation supporting why this should not be so. That proposal was made some 20 months ago, and does not appear to have been considered by the Respondent.

[43] The quantum of fees and disbursements on a full recovery basis is $10,027.98. Given the time required to prepare for and argue this motion, in my view that is a reasonable amount. However, the Applicant was on a legal aid certificate, and the total of fees and disbursements at the rate paid by Legal Aid Ontario is $3,554.46.

[44] Nonetheless, the Legal Aid rates are not determinative of the costs award. Costs should be awarded as they would have been was there no Legal Aid certificate. Subsections 46(1)-(3) of the Legal Aid Services Act, 1998, S.O. 1998, c. 26, provide that:

46. (1) The costs awarded in any order made in favour of an individual who has received legal aid services are recoverable in the same manner and to the same extent as though awarded to an individual who has not received legal aid services.

(2) Subsection (1) applies even if no part of the costs of the legal aid services received by the individual in whose favour the order is made has been contributed or is or will be contributed to the Corporation by the individual or by a person responsible for him or her.

(3) Subsection (1) applies even if the costs so ordered are in excess of the total amount contributed or to be contributed to the Corporation by the individual, or by a person responsible for him or her, for the costs of the legal aid services received by the individual.

[45] This section has been interpreted to mean that a legally aided client is in the same position as any other party and an award of costs should not be affected by the fact that the person’s legal fees are funded by Legal Aid. As stated by J. Wein in Ramcharitar v. Ramcharitar (2002), 2002 53246 (ON SC), 62 O.R. (3d) 107 (S.C.), at para. 25, “[T]he party paying the costs simply pays the same amount as they would if the client were not legally aided. In fact, to hold otherwise would grant an inadvertent windfall to the party fortunate enough to only have to pay costs to an opposing party on Legal Aid, since the rates would be accordingly reduced.” In El Feky v. Tohamy, 2010 ONCA 778, [2010] O.J. No. 6002, at para. 1, the Court of Appeal agreed that costs should not be fixed at the Legal Aid rate.

[46] In this case, the Applicant has been entirely successful. She has carefully reviewed the disclosure that has been provided and where there was a question about a particular expense she has taken a position that benefits the Respondent. She has agreed to have a minimum wage imputed to her. The Applicant has taken these very reasonable positions even in light of the financial burden of seven children. In contrast, the Respondent has not provided any reliable or justifiable explanation as to why the income should not be imputed to him as sought. He was casual and cavalier about his finances despite his obligation to seven children. He denies any special relationship with a recent shareholder, yet their addresses are the same. Finally, he chose to ignore a reasonable proposal in June 2012. If there is no cost order, the Respondent might believe that he could continue to deal with the case as he pleased, without any meaningful repercussions: Caceres v. Boshkov (6 January 2012), Toronto, FS-10-363250 (Ont. S.C.) at para. 22.

[47] For all these reasons, the costs of the litigation shall be payable by the Respondent, on a full recovery basis, in the amount of $10,027.98, within 30 days.

Croll J.

Date: October 4, 2013