COURT FILE AND PARTIES

COURT FILE NO.: FS-13-390742

DATE: 20140422

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jennifer Saunders, Applicant

AND:

Graham Saunders, Respondent

BEFORE: Czutrin SFJ.

COUNSEL: Harold Niman and Donna Wowk, for the Applicant on the Motion

Judy B. Piafsky, for the Respondent on the Motion

HEARD at Toronto: March 20, 2014

ENDORSEMENT

Overview

[1] The Applicant, Jennifer Saunders (the “mother”), brings this motion for temporary spousal and child support retroactive to the date of separation: August 17, 2013 according to the mother or May 23, 2013 according to the Respondent, Graham Saunders (the “father”).

[2] The parties started cohabiting in 2003 and married on November 20, 2004. They have two children, Kai born November 28, 2006 and Jake born November 10, 2009. Kai is in grade two at a public school. Jake attends half-day kindergarten and two afternoons per week he attends a private enrichment program.

[3] As I will explain, on the material before me, I am unable to determine with any confidence the father’s income, the appropriate amount of child support, and s. 7 expenses given that the father’s income exceeds $150,000 and he has paid certain expenses that may be s. 7 expenses. These are but some of the issues that require further analysis and information.

[4] An order for child and spousal support, which may be revisited on motion or at trial, is nonetheless appropriate as the mother is entitled to both child and spousal support that she is free to spend as she determines subject to some limited terms that I will provide. This should however not take place prior to disclosure being completed, experts’ reports are completed and exchanged, questioning is completed and a settlement conference takes place. However if there appears to be delay, the issue may be returned to me, if I am available, otherwise another judge, to re-consider any aspects of this endorsement.

[5] The mother’s motion also includes a request to amend the mother’s Application (granted on consent) and a request for disclosure, partly arising from the father’s expert income report. More specifically, the father’s expert had access to certain documents and questioned individuals. The father responded to the disclosure request for access to specific individuals who his expert spoke to by asking for the questions in writing and said that answers would be provided.

[6] The father brought a cross-motion for disclosure. I adjourned his cross-motion to a date before me agreeable by the parties.

[7] On February 27, 2014, the parenting issues were referred, on consent, to a mental health professional with experience in parental disputes. The parties also consented to a parenting schedule pending the outcome of the mediation or other resolution. Starting April 7, 2014, on a two-week rotation, the father has the children as follows:

Week One

• Monday: pick-up the children at the matrimonial home between 5:00 p.m. and 5:30 p.m. and overnight to the following morning, drop-off at school.

• Wednesday: same as Monday above.

• Friday: pick up the children at the matrimonial home between 5:00 p.m. and 5:30 p.m. and return the children on Sunday at 6:30 p.m.

Week Two

• Wednesday: same as Monday and Wednesday in Week One.

March Break

• The parties shall share March Break equally, with the father having the children on March 7 to 12.

[8] The mother’s counsel came with a draft order to address all issues on the motion and cross-motion. This is an extremely good practice and one that I encourage at all steps and attendances. Draft orders focus the parties, counsel, and judge as to what is truly in issue. They are not offers to settle, but they may influence the parties to resolve or narrow the issues. Draft orders certainly assist the judge as to how far apart counsel and the parties truly are. This practice is also consistent with the objectives of the Family Law Rules, O. Reg. 114/99.

[9] It would be helpful if each party provided the proposed order to the judge at the time of confirmation from both parties. If the draft orders were provided on a USB stick, it would be possible to amend the orders, based on the outcome, and walk away with a signed order on the day of the motion or when the decision is made.

[10] In absence of the father’s proposed draft order, I was not able to consider anything but the father’s request to maintain the status quo that he has determined.

Disclosure

[11] Paragraph 8 of the proposed draft order attaches a chart as a schedule (Schedule “B”) showing 44 items as requested by the mother’s financial expert. The request is dated January 29, 2014. The chart appears to address responses received on March 6, 7, or 14, 2014.

[12] During submissions, it appeared that the only contentious issue concerned access to, and documents relating to people at the father’s place of employment (items 11 and 14 in Schedule “B”). I was not in a position to determine whether the other requested items have been satisfied since March 6, 7, or 14, 2014.

[13] Items 11, 13, and 14 on Schedule “B” are to be provided within ten days of the release of this endorsement counsel shall arrange a meeting between the mother’s expert and the individuals named in Schedule “B.” The mother’s expert may be present with up to two people selected by the expert (not counsel or the mother). Similarly, the father’s expert may attend with up to two people and the individuals named in Schedule “B.” The mother’s expert’s questions related to determining father’s income are to be answered.

[14] Within 15 days if the release of this endorsement counsel are to provide a jointly prepared schedule (following schedule “B”) to confirm what is outstanding and what is subject to objection. Based on that schedule, I will make a detailed order with timelines.

[15] Draft orders with the jointly prepared schedule on USB sticks are to be delivered to the trial coordinator to my attention within 21 days of this endorsement.

The Father’s Income for Support Purposes

[16] I only make preliminary observations about the father’s income. The father submits that he is a T4 employee and he has voluntarily retained an expert to prepare an income report dated January 7, 2014. I have reviewed this expert report. However, the report may not be the final report that the father will rely on; it may be limited to this motion. Furthermore, the report raises issues that the father’s Line 150 income tax amount may not be determinative of the father’s income for child or spousal support purposes. The mother’s expert has requested additional information as discussed above. Unless the parties agree, it will be for a judge to determine any unresolved assumptions underlying the father’s expert’s opinion, and the application of the law on a number of issues.

[17] The mother’s draft order uses $2,532,499 as the father’s income. Using the Child Support Guidelines, monthly child support should be $29,172. Using the Spousal Support Advisory Guidelines (the “SSAG”), monthly spousal support in the low range should be $59,546.

[18] The father produced his expert’s income report for 2011 and 2012, and estimated for 2013. The report offers several scenarios depending on how capital gains and losses are used for support income determination.

[19] The father is employed by “Canaccord” since 1996 and his “recurring annual compensation consists of employment income and a bonus. The bonus is paid 80% in cash and 20% in Long Term Investment Plan (‘LTIP’) units that vest 1/3 in each of the three years following the award date.” No mid-year bonus was paid in 2013.

[20] The expert report speaks to a 2010 merger of the father’s employer, which resulted in non-recurring compensation being included in the father’s 2013 Line 150 income.

[21] The father also earned dividends and interest from investment holdings, rental income, and realized capital gains in 2011 and capital losses in 2012 and 2013.

[22] In reviewing the various calculations, the father’s Line 150 income was $4,680,139 in 2011; $2,187,157 in 2012; and was estimated at $2,532,499 in 2013 but the father’s expert reduced this income for support purposes that I have decided for this limited purpose to use as $1,050,703 as the father’s income. Rejecting his further reduction to $893,649.

[23] The mother proposes to use the father’s expert estimated 2013 line 150 amount for the father’s income. She further asserts that the father will earn considerably more in 2014.

[24] In calculating a lower than Line 150 income, the expert has, in all scenarios, allowed approximately $60,000 of employment expenses, over $340,000 in carrying charges and interest expenses, with a significant portion related to secured debt against the matrimonial home and other property that includes joint debts of the parties.

[25] The father suggests that his debt has significantly increased since separation. However, his latest financial statement shows a debt increase far less than he alleges. It is unclear to me how much relates to his margin accounts and similarly contingent increase in tax liabilities related to a near $500,000 increase in his RRSP in approximately one year.

[26] On a motion such as this, I cannot with great confidence determine the father’s income for support purposes without hearing from both parties’ experts and the benefit of questioning.

[27] The father prefers that I make no order and allow him to continue paying expenses related to the mother’s car insurance; mother’s club memberships; nanny; car repairs and maintenance; car lease; lines of credit against the home; property taxes; home insurance; utilities; and gardening.

[28] At para. 10 of his factum on this motion, the father calculates the cost of health insurance premiums for the mother and children; the nanny; the mother’s club memberships; a winter chalet shared by the parties; the children’s school fees, tutoring, activities, and club memberships; mortgages and lines of credit registered against a cottage and the matrimonial home; insurance; taxes and utilities for the jointly held cottage; and a monthly cash payment of $8,660 for the mother’s discretionary use. His calculations total $61,537.77 per month. If this is accurate, comparing it to his latest financial statement, this is part of his total monthly expenses of $106,644.51. This includes the approximately $17,000 per month in professional fees for this case. It also includes instalments for taxes of $13,761 per month.

[29] The monthly carrying costs of debts are reported at $38,206.33. According to the father’s expert, he deducts for tax purposes $340,000 annually in carrying charges.

[30] He asserts that he is servicing nearly $11,000,000 of debt of which about $7,000,000 is joint debt. He claims he is living on credit and incurring debt. A proper consideration of how this affects a determination of income will await completion of experts’ reports and questioning.

[31] The father seeks to impute income to the mother. I find that this is a premature consideration.

[32] In her draft order, the mother proposes to share the expenses related to the cottage, while the father continues to service the “joint lines of credit.” She further proposes sharing the children’s special and extraordinary expenses agreed and consented to by both parties.

[33] The father’s expenses and what he suggests are benefits to the mother raise many questions.

[34] The father works in financial services and appears to have managed the party’s finances. They have minimized taxes and increased their individual and personal net worth in the period of their cohabitation.

[35] His most recent financial statement still has many items shown as “TBD.” I note that the father has now produced an estimate of value report for the date of marriage and his separation date of May 23, 2013. The report is dated February 21, 2014. I will not review this report, as it may be the basis of inserting the “TBD” items on the father’s net family property statement.

[36] For now I am left with issues of child and spousal support on a very temporary basis. The equalization issues and ultimate disposition of jointly held property remain outstanding.

Child and Spousal Support

[37] The mother asks that I apply the Child Support Guidelines although the father’s income exceeds $150,000. She similarly wants me to apply the SSAG although the father’s income exceeds $350,000.

[38] This is a temporary order and possibly will return before this case is trial ready. The father’s income is the most significant staring point in determining a proper level of child and spousal support and allocation of what may be section 7 expenses. .

[39] I find the mother is entitled to spousal support on a temporary basis. I have considered the parties’ history including the birth of two children, each party’s role during the marriage, and the family’s lifestyle during the relationship. While the mother has obligations to reasonably seek employment, it would be unreasonable to impute income to her at this time. Once the property issues, parenting issues, and the father’s income are determined, issues of imputing income and any terms concerning her ongoing support may be considered.

[40] The parties should aim to complete disclosure, questioning, and the expert reports and proceed to a settlement conference. They should also consider a meeting of the experts. Subject to the parties and their counsel, I am prepared to manage this case to a settlement conference, trial, and resolution, if I am available to address disputes concerning disclosure, process, and timetables.

[41] The Divorce Act, R.S.C. 1985, c. 3 governs, not the SSAG. However, as the law has evolved, we are now obliged to consider the SSAG. They are a valuable tool to fix a quantum for spousal support.

[42] I did five SSAG calculations. I also had the one provided by the mother. I attach the calculations not imputing income to the mother and using the following five possible incomes for the father: $350,000 because that is the highest amount contemplated by the SSAG; $893,649 he claims as his 2013 income; $1,050,703 he claims as his 2013 income before deducting $139,958 for a forgivable loan and $17,096 being interest on the forgivable loan; $1,749,000; and $2,187,157.

[43] I reviewed the mother’s financial statement dated March 14, 2014. She has many “TBD” for household and utilities expenses, but shows other monthly expenses as follows: cell phone is $200; groceries, household supplies, meals outside the home, and laundry are $4,600; nanny and babysitting costs are $4,366 (the father claims $2,655.44 per month for the nanny); transportation expenses, not including the car lease, insurance, or repairs are $1,200; clothes, hair care, alcohol, tobacco, and entertainment total $15,500; and clothing for the children, vacations, debt payments, Georgian Peaks, and Med Can for the children and mother total $6,474.99. She therefore claims monthly expenses of $32,340.99.

[44] I interpret the non-fixed expenses in both parties’ financial statements as discretionary. In other words, servicing the debt, utility payments, taxes, insurance, lease payments, and nanny expenses are quantifiable, but other expenses are unreliable.

[45] I did the SSAG calculations for comparison purposes. It allows me to look at the parties’ net disposable income to some extent, but it does not show a true reflection of their net incomes because of the father’s deductions for tax purposes. For example, his Line 150 income as assessed in 2012 was $2,187,157. His total tax as deducted and paid in instalments was $894,334.24. He received a refund of $177,369.17. Therefore, tax on his $2,187,157 income was approximately $717,000. His net income was $1,470,157 (or approximately $122,513 per month after taxes).

[46] I do not have the father’s complete tax returns to see the details of his deductions. Although, his expert’s report provides some insight.

[47] I have decided for this limited purpose to use the SSAG, and $1,050,703 as the father’s income based on the only expert report I have , being the father's expert, in spite of my questions and clearly indicating in in this endorsement that it is as outlined subject to reconsideration and adjustment retroactively. I am mindful of the issue of the SSAG ceiling. However, Professor Carol Rogerson, Faculty of Law, University of Toronto and Professor Rollie Thompson, Dalhousie Law School write the following at p. 37 in the March 2010 “Spousal Support Advisory Guidelines: A New and Improved User’s Guide to the Final Version” available on the Department of Justice Website:

11. CEILINGS AND FLOORS

The “ceiling” and the “floor” define the upper and lower boundaries of the “typical” cases where the formulas can be used. Above the ceiling and below the floor, the formulas alone cannot be used, as individual adjustments are required, much like for the “exceptions”. Not surprisingly, there is much more case law and discussion for incomes above $350,000, so we will address cases below the floor first [payor incomes below $20,000/$30,000], and then the many cases above the ceiling.

(b) Payor income above the $350,000 ceiling (FV 1.1, 11.3)

There aren’t that many of these cases, but they are over-represented in the decided cases, partly because of the high stakes involved, partly because they test the outer limits of our thinking about spousal support. A number of these cases have made their way to the B.C. Court of Appeal in recent years: Rogerson and Thompson, “Complex Issues Bring Us Back to Basics: The SSAG Year in Review in B.C.” (2009), 28 Can.F.L.Q. 263 at 283-86.

• The ceiling is not an absolute or hard “cap”, as spousal support can and usually does increase for payor incomes above $350,000: Smith v. Smith, [2008] B.C.J. No. 1068, 2008 BCCA 245 and Denofrio v. Denofrio, [2009] O.J. No. 3295, 2009 CarswellOnt 4601 (S.C.J.), 2009 41354 (ON SC).

• The formulas are not to be applied automatically above the ceiling, although the formulas may provide an appropriate method of determining spousal support in an individual case, depending on the facts. For cases where the formulas appear to be used automatically, see E.(Y.J.) v. R.(Y.N.), 2007 CarswellBC 782, 2007 BCSC 509; or Teja v. Dhanda, [2007] B.C.J. No. 1853, 2007 BCSC 1247. For a more individualized case-specific use of the formula, see J.K.S. v. H.G.S., [2006] B.C.J. No. 2051, 2006 BCSC 1356. In its most careful high-income decision, the B.C. Court of Appeal considered the formula ranges and the different approaches to these “above-ceiling” cases: Loesch v. Walji, [2008] B.C.J. No. 897, 2008 BCCA 214. In four other decisions, the Court offered less guidance: Bell v. Bell, [2009] B.C.J. No. 1201, 2009 BCCA 280; James v. James, [2009] B.C.J. No. 1151, 2009 BCCA 261; Teja v. Dhanda, [2009] B.C.J. No. 928, 2009 BCCA 198; and Smith v. Smith, [2008] B.C.J. No. 1068, 2008 BCCA 245.

• Above the ceiling, spousal support cases require an individualized, fact-specific analysis. In most cases, the formula ranges are calculated, as part of the individualized decision-making process, e.g. C.L.M. v. R.A.M., [2008] B.C.J. No. 608, 2008 BCSC 217; O.(S.) v. O.(C.S.), 2008 CarswellBC 444, 2008 BCSC 283; or Milton v. Milton, [2008] N.B.J. No. 467, 2008 NBCA 87, affirming [2007] N.B.J. No. 414, 2007 NBQB 363, Where the husband’s income was “far beyond” the ceiling ($1.6 million), an entirely discretionary approach was adopted by the B.C. Court of Appeal in Loesch v. Walji, [2008] B.C.J. No. 897, 2008 BCCA 214. See also Dobbin v. Dobbin, [2009] N.J. No. 52, 2009 NLUFC 11 ($1.5 million) and Dyck v. Dyck, [2009] M.J. No. 139, 2009 MBQB 112 ($3 million).

• Where the payor’s income is close to the ceiling, the formula ranges will often be used to determine the amount of spousal support, e.g. Hosseini v. Kazemi, [2009] B.C.J. No. 743, 2009 BCSC 502 (income $351,649) or Abelson v. Mitra, [2008] B.C.J. No. 1672, 2008 BCSC 1197 (income $355,000). As the payor’s income rises higher and higher above the ceiling, then courts begin to diverge from the formula ranges.

• Far too often, in these high-income cases, lawyers and judges fail to consider the SSAG formula ranges at all, in arriving at their conclusions. Formula ranges can be calculated for different hypothetical income levels, from $350,000 on up the scale, to assist in defining the much broader range of potential outcomes and to offer helpful insights in determining the appropriate large amount. For some examples of this approach, see Rogerson and Thompson, “Complex Issues in B.C.”, above.

• In some high-income with child support formula cases, the courts have calculated the table amount of child support on the full payor’s income and then calculated the formula range for a gross payor income of $350,000 for spousal support purposes: J.W.J.McC. v. T.E.R., [2007] B.C.J. No. 358, 2007 BCSC 252; and J.E.B. v. G.B., [2008] B.C.J. No. 758, 2008 BCSC 528 (Master). Remember that if you do this hypothetical calculation for the spousal support range, it is critical that you use the child support amounts appropriate for an income of $350,000 too, and not the actual higher amount of child support (an error made in the otherwise careful analysis in Dickson v. Dickson, [2009] M.J. No. 374, 2009 CarswellMan 515, 2009 MBQB 274).

[48] As I have stated, I cannot determine with any certainty the father’s income for support purposes. I am left with many questions about his income that will no doubt become clearer after disclosure and after the mother’s expert has the same access to information as the father.

[49] The motion for temporary child and spousal support may be revisited after the parties complete disclosure, expert reports, questioning, the “TBD” items on financial statements are completed by the parties , net family property statements, and a settlement conference.

[50] On a temporary basis, I used a straight application of the Child Support Guidelines without considering the fact that this is a plus $150,000 case; I have used the high range of spousal support less the payments associated with the mother’s car use.

[51] Using $1,050,703 as the father’s income, commencing January 1, 2014, the father is to pay child support of $12,500 per month and spousal support of $26,000 per month (rounded). The father is to have credit of the monthly $8,660 per month from January 1, 2014. Section 7 payments will ultimately have to be determined as I am unable, absent better evidence and calculations, to determine this issue. For now, the father is to maintain all memberships, nanny costs, and all medical and insurance plans with the mother as beneficiary.

[52] Considering the child and spousal support I ordered, the father will continue to be responsible for club memberships for the wife and children and the car expenses, lease, insurance, and repairs. He will continue to service and maintain in good standing all joint lines of credit. However, the mother will be responsible from May 1, 2014 forward for the utilities, home insurance, internet, cable, telephone, and gardening expenses as she continues to occupy the home. The father will receive credit for half of the property tax payments he has made for 2014 on any final settlement or resolution of the equalization issues.

[53] Commencing May 1, 2014 the parties shall share the expenses of the Port Carling cottage property, but the father will remain responsible for the secured lines of credit or debts registered against the cottage.

[54] I am prepared to address costs and any issues arising from this disposition either by way of written submissions or on a date counsel may arrange before me. Counsel are to advise me within ten days as to how they decided to address costs and remaining issues and any time table they have agreed to.

[55] Support Deduction Order to issue.

Czutrin SFJ.

Released: April 22, 2014