ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Sheri-Lee Walsh
Applicant
– and –
Leo Walsh
Respondent
Steven L. Nagy, for the Applicant
Self-represented
HEARD: June 16 and 19, 2014
The Honourable Justice C.A. Tucker
d e c i s i o n
Issues
1(I) What is the proper quantum of ongoing child support?
(II) What is the amount of child support owing to date?
(III) What is the proper quantum of ongoing spousal support?
(IV) What is the amount of spousal support owing to date?
(V) Should the application be amended to add SQP Safety Solutions Limited (“SQP”) as a party?
(VI) Should any judgment against the respondent also bind SQP?
(VII) Should the court order ongoing disclosure from SQP?
Background
2The applicant, Sheri-Lee Walsh (“Sheri-Lee”) and the respondent, Leo Walsh (“Leo”) were married on November 25, 1994. Two children were born of the marriage, Brittany on December 29, 1994 and Cameron on May 31, 1996. They separated on January 2, 2011. An interim separation agreement (“the agreement”) was entered into by the parties on March 1, 2012. The agreement provided among other things that Leo would pay Sheri-Lee interim spousal support in the amount of $3,400 monthly commencing April 1, 2012. He had paid $3,000 a month since separation. Pursuant to the agreement, he was able to deduct these amounts from his taxable income. In the agreement Leo acknowledged Sheri-Lee’s entitlement to spousal support and that all that remained to be renegotiated was the quantum of the same.
3Child support in the agreement was set at $2,209 for the two children commencing January 1, 2011 based on Leo’s representation that his income was $167,280. In fact, at the time the agreement was signed Leo’s income was $252,000 and was in excess of $200,000 for the year before. These payments were made from the date of the agreement until several months ago when the respondent claimed to have lost his employment.
4The agreement was without prejudice to either party as to the quantum of child and spousal support.
Positions of the Parties
5The applicant seeks child and spousal support based upon the income actually earned by the respondent since the date of separation. Sheri-Lee also seeks ongoing support for Cameron and ongoing spousal support for herself.
6The respondent first asserted that he had lost his employment and then he had found “employment” with “SQP”.
7In 2013 the respondent incorporated a company of which he is the sole shareholder and has directed his “employment” income to be paid to that company SQP. It is his position that, as a result, his income for child and spousal support has been reduced and as such his obligation to pay the same should be reduced. It is also his position that he has contributed to his children’s support in addition to paying base support by assisting with tuition for the child Brittany and related expenses. Further, he argued that Cameron, having just turned 18, will receive ODSP which Leo suggests that amount could be as much as $800 a month.
8Leo also submits that Sheri-Lee could be using her spare time during the hours Cameron is in school or asleep to upgrade her skills so that she can move into the work force once a placement for Cameron is found.
9The applicant argues that the “corporate veil” should be pierced here when the sole purpose of SQP’s creation was to reduce Leo’s income and his obligation to pay child and spousal support. As a result, the applicant seeks to have any court order binding upon the corporation as well as Leo.
Overview of Evidence
10There are two features that distinguish this case from many others. One is the secret use of SQP as a vehicle to redirect Leo’s income. The other is the child Cameron who just turned 18 and suffers from autism to such a degree that he requires constant care which for the most part is provided by Sheri-Lee and has been since 2009.
11I turn first to the respondent’s income. At the time of marriage, both parties were employed but Sheri-Lee did not return to work after the birth of the children. Leo was a welder at John Deere, and then retrained to become a health and safety inspector. In 2009 he went to work in Alberta in that area of work. At trial we all first learned that his employment was to have been through employment agencies and consisted of a series of contracts, all of which appear to have been very lucrative.
12Leo failed to provide financial information prior to trial but I find from his evidence at trial that his income was as follows:
2009 $143,711
2010 $167,280
2011 $204,258
2012 $252,188
2013 $330,000
13By extrapolation from his contracts to date this year, I find that Leo’s income for 2014 will be in the same range as his 2013 figure. The figures in the interim separation agreement for child and spousal support made in 2012 were based upon his 2010 income of $167,280 which is half his present income.
14On February 7, 2013, Leo incorporated SQP. Leo made the payments under the agreement until March 2013 when he reduced the amount from $5,209 a month to $4,504.50 on the basis that Brittany no longer resided with Sheri-Lee. In February 2014, Leo reduced the amount to $3,000 a month claiming that his employment had been terminated and provided a termination letter dated November 2013 to that effect. He provided a pay stub from SQP which indicated that his yearly earnings for 2014 would be $84,000. Only immediately before the trial did the applicant learn that SQP was Leo’s solely owned company. At trial I learned that the same “employer” who terminated him was one of the companies that now had retained SQP instead of Leo personally, making a sham of the “termination” alleged. Leo pays a “friend” $3,000 a month from SQP earnings to assist him in arranging flights. This is the same amount he has paid to his wife and dependent son who requires 24 hour care. It is very hard, especially in these circumstances, for the court to view such behaviour dispassionately. Although Leo is working hard he is being well compensated, and he leaves his former partner with a totally dependent child/adult and by deception tries to avoid proper payment to them. He only now and then provides respite without planning or notice to Sheri-Lee for the child. Leo’s employment cannot ever be equated with the enormity of the task of caring for Cameron that Sheri-Lee endures on a daily basis.
15During the trial Leo filed a number of bank statements where he highlighted “expenses” that he plans to have his accountant deduct to reduce the income of SQP. Leo also testified about the payments that he had made dutifully to and for the benefit of Brittany and her education, including $6,390.47 for tuition in 2012 and $6,691.08 for tuition in 2013. He said he purchased a $1,615 computer and $100 of applications for her and gave her a car worth $1,500. He also paid car repairs of $726.03 for her in January 2014. He pointed out that Brittany earned $6,684.28 in 2012 and $10,105.74 in 2013. Sheri-Lee points out that Leo was repaid the tuition as a result of RESPs the couple had for their children. Brittany lived with him for approximately six months in 2013.
16Leo pointed out that in 2013 the corporation return for SQP showed a net loss of $580 and a book value of $580. No valuation of this company was provided. Leo acknowledged purchasing a 60,000 dollar plus truck in 2013 but testified it was financed. He purchased a home in the area for Brittany, he said, but she resided in it only for a few months. Leo’s testimony was that he always encouraged Sheri-Lee to work to help out with expenses but she would not do so. In his cross-examination of his former wife, Leo suggested that after Cameron was in bed and while the child was in school Sheri-Lee could be educating herself to become self-sufficient. Sheri-Lee’s response was that Cameron is a fulltime job on a 24-hour basis leaving her without the time or physical energy to do anything else.
17I find that the applicant should be entitled to amend her application to include SQP as a party and to have any spousal and child support payment enforced against it. The corporation may have benefits to Leo for tax purposes but it is a vehicle used by him, I find, to hide and disguise his true income. He is the sole owner of this corporation. He uses the corporation to split income with a “friend” paying her $36,000 of after tax dollars for her assistance, although until the company was incorporated he showed no evidence of paying any other such assistant. The income he “takes” as an employee of the corporation is $84,000 a year. He proposed and based his child and spousal support payment based upon that figure without any legal or other justification. Accordingly, I find the amount SQP earns from his contracts to be Leo’s income for child support rather than the amount he draws from SQP.
18I now turn to Leo’s 2014 income, the expenses that might be properly deducted for income tax purposes, and that that can be allowed for child and spousal support purposes. It may be his income may be legitimately reduced in the future by proper tax deductions to his corporation; however, we are left without a factual basis for such adjustments at the present time. As it stands I find that the corporate veil should be pierced and the income earned by the corporation shall be deemed to be the employment income of the respondent.
19I acknowledge that until recently Leo has paid his agreed upon support, which is a substantial amount of monies. This must however be weighed against his failure to disclose his true income for the past four years and his attempt to “hide” income by the creation of SQP. It is clear that he failed to inform his own lawyer about his true financial situation and his attempt to hide income. His lawyer withdrew from acting for him at the opening of trial. Leo failed to provide financial information until during the trial which information was allowed in with the consent of counsel for the applicant. This included information about the contracts SQP has for 2014. Although Leo had no income for late 2013 and January 2014, it is clear that that was a choice not a requirement. The financial non-disclosure which rests solely at the feet of Leo will lead to a very substantial arrears burden for him but I find that he is the reason for such burden, not the applicant or the children. There may be legitimate expenses that should be deducted as a cost of doing business and earning income, such as flights out west, hotels, etc., but Leo’s attempt to disguise his income through the corporate façade and to only reveal the “true” situation of his income at trial has resulted in an inadequate disclosure of information for the court to properly assess such expenses and, as such, must be weighed against him.
20The second major factor on this trial is the “child” Cameron. I find that Cameron cannot withdraw from parental control and, as such, under the Divorce Act is entitled to ongoing support. Both parties acknowledge that fact. Leo suggests that the behaviours his son displays have lessened in the past two years. However, we have only his reported information resulting from his limited interaction with the “child”.
21Cameron is just now 18. His birthday was May 31st, just prior to the trial. The Bethesda assessment, dated April 15, 2013, noted that “he [Cameron] has severe Autism with an Intellectual Disability causing marked impairment in communication, social interaction, adaptive functioning and behaviour” (page one, tab 17, Exhibit 1). According to the testimony I heard at the trial Cameron has very aggressive behaviours and he is medicated continually to control these behaviours. He is very tall, over six feet, and weighs over 200 lbs. He will never be self-sufficient or employed. Cameron is aggressive towards his mother who is frightened by his behaviour. She has provided almost all of the parenting for the child since Leo left the home in 2009 to seek employment in Alberta. Sheri-Lee is exhausted by her care for her “busy boy”, driving for miles after school in the car to calm him. She is on call from the school where Cameron attends and is in grade 12. He is allowed as a special needs child to attend school until he is 21. He has at least one and sometimes two special educational assistants. Cameron needs to be placed outside the home as soon as possible and has been on a waiting list for such placement for a period of time.
22As a special needs child, Cameron was provided with respite care and other benefits which as an 18-year-old adult he will no longer receive. During the trial Sheri-Lee had no idea where she could place her son for the summer since she knew of no adult programs available to him.
23Cameron will receive ODSP but the amount he will receive was unknown as at the time of trial. The applicant argues that the additional costs she will incur without the programs and subsidies she had received prior to his reaching the age of majority will decrease any amount she receives from ODSP as she will have to pay out more of her own monies for them. The respondent argues that from the one cheque for one day received by the applicant to date Cameron could be given $800 a month by the disability program. I have no factual basis for either proposition. It is and will have to be a wait and see situation. I also do not know if Cameron will be placed in a group home changing again the child support obligation. At the present time I base the child support for Cameron as if he remained at home, dependent and without ODSP. In terms of child support and ODSP, I note the case of Senos v. Karcz, 2014 ONCA 459, a recent decision in the Ontario Court of Appeal, the principles of which may impact Cameron’s child support. At this point, however, I do not have the amount of support he will receive and cannot begin to do the calculation.
24There are two other issues in this case to be decided. The applicant had requested coverage from the respondent under medical health and dental care if it is available to her but prior to the trial she was able to arrange coverage under her boyfriend’s plan at work. Leo argued that such made her a spouse but I find that not to be the case in law. Their relationship is brief, being less than two years, and they do not cohabit.
25The second issue is Brittany. Brittany attended university for one year and part of a second year. During this time period she resided alternatively with her mother, her boyfriend, her father and a relative giving rise to issues about her entitlement to child support. The applicant suggests that to deal with the issues of conflicting credibility about this time period noted above, a $10,000 deduction - “the Brittany adjustment” - in support payments should be given to Leo and I accept that as a fair solution. Brittany is now pregnant and residing with her mother. She is out of school and over 18, so is no longer entitled to child support. Given Cameron’s potential for violent behaviours, Sheri-Lee has told Brittany that she will need to reside elsewhere once the child is born.
Analysis and Decision
26In final argument the applicant put forth a chart showing the income of the respondent, the child and the spousal support obligations and the payments that the respondent alleged were made accepting them as received. The chart filed as Exhibit 5 on the trial reflects firstly the two children, then the one child Cameron situation and a midrange figure for spousal support. Pursuant to these calculations, Leo, at the date of trial, owes in total $173,043.50 being made up of arrears from 2011 in the amount of $22,380; $37,834 for 2012; $55,809.50 for 2013 and $57,020 for 2014 up to and including June. From this the applicant proposes we deduct the Brittany adjustment noted above for a total amount owing by the respondent to be $163,043.50. This is based upon his projected 2014 income being the same as 2013, which I accept as a fact given his income to date.
27The respondent argues that the amount should be based upon the income of $84,000 he draws from his corporation, which argument I refute for the reasons noted above.
28I do acknowledge that Leo needs to travel to the west and incur expenses for motels and food to earn his income, which I find are legitimate expenses, albeit not quantified. According to Leo, he has a schedule where he flies to Alberta, works for several days and then returns to Ontario for a few days and returns to Alberta again on a repetitive basis.
29According to Leo’s CIBC credit card statement of June 2014, in March Leo spent $862 on a flight and in February 2014, $1,309; and in January $605. Some of the statements had redacted entries which made it difficult to determine exact information and Leo did not provide any accounting of employment expenses for the court over the past three years. Leo also failed to provide any copies of contracts which he has obtained presently or in the past so I am left unable to determine what, if any, expenses are covered by his employer. We, however, do have his gross employment income up to the end of 2013 and we are using that to base support upon and we are using the gross amounts received to date for 2014. Accordingly, if reimbursements for expenses are included as part of his contract, I find these are accounted for by the taking into my calculations his gross income. In any event, I take judicial notice that there are at least 20 flights a year (or two a month) at the cost of $650 each, as this was the cost of at least one flight based upon his credit card expense - some $13,000 should be deducted from income as a legitimate expense. He may have additional expenses for food and lodging, but I cannot calculate that expense. Accordingly, based albeit on incomplete information, I am prepared prima facie to give Leo a $15,000 deduction from his income for travel expenses. From this I would deduct $5,000 as I find it reasonable that an average person would spend at least $2,000 a year on gas and $3,000 a year on insurance, carrying costs and repairs. Accordingly, I will grant Leo a $10,000 deduction for each year for this expense.
30Accordingly, in calculating child and spousal support I fix Leo’s income for 2011 at $194,258; for 2012 $242,188; for 2013 $320,000 and the same amount, being $320,000, for 2014. The arrears of child support and spousal support shall be calculated using these figures with spousal in the midrange. Given the obligation of Cameron I find there is some reason for pushing the spousal amount into the higher range but, given the need and the income, it is not I find required here at this time. The parties shall calculate the appropriate support arrears amount using the credits in Exhibit 5 and the $10,000 credit for Brittany. If the parties cannot agree upon these amounts, I may be spoken to. The usual order shall issue as to exchange of income tax returns and notices of assessment. Ongoing child and spousal support shall be paid on income of $320,000 per year.
31If the parties are unable to agree upon a payment plan for the arrears, I may be spoken to.
32I order ongoing disclosure from Leo and SQP to be provided to Sheri-Lee for so long as either child/spousal support is payable. The amounts owing for spousal/child support will be payable jointly and severally by Leo and SQP for the reasons noted above.
33If the parties are unable to agree upon costs, I may be spoken to.
Tucker J.
Released: August 6, 2014
COURT FILE NO.: 3120/11
DATE: 2014/08/06
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Sheri-Lee Walsh
Applicant
and
Leo Walsh
Respondent
D E C I S I O N
Tucker J.
Released: August 6, 2014