Malik v. Malik, 2015 ONSC 2218

NEWMARKET COURT FILE NO.: FC-08-30219-02

DATE: May 15, 2015

SUPERIOR COURT OF JUSTICE – ONTARIO – FAMILY COURT

RE: Deepak Malik, Applicant

and

Anu Malik, Respondent

BEFORE: The Honourable Madam Justice H. McGee

COUNSEL: Vladimira Pavicevic, for the Applicant

Alexandra Abramian, for the Respondent

HEARD: February 23, 24, 25, 26, 27 and March 2, 2015

judgment

Introduction

[1] The applicant husband and father is an insurance broker who made his final departure from the jointly owned matrimonial home on May 22, 2009. He has paid no voluntary child or spousal support.

[2] It was not until the Trial Management Conference of October 4, 2012 that any order was made for child support. At that event, Mr. Malik was prepared to acknowledge income in the amount of $27,000 per annum. On consent, an order was made for monthly table child support of $219 for one child.[^1]

[3] Since June of 2009, the wife and their two now adult children have continued to reside in the home. Over that period, the home has significantly increased in value. The wife hopes to acquire much of the husband’s one-half interest in the home through a set off of his outstanding support obligations to her and the children. She will succeed.

[4] The husband seeks occupational rent, and an order for the sale of the home. Each party is seeking an award of spousal support.

[5] The application was originally to be heard in the May 2013 Trial Sittings, but was subsequently removed from the trial list due to incomplete disclosure. It was reinstated in October, 2013, when Mr. Malik retained his present counsel. The trial was not reached in the November, 2013 sittings or the June, 2014 sittings or the November, 2014 sittings. The trial opened on February 23, 2015.

Credibility and Failure to Disclose

[6] Where the evidence of the husband and wife conflict, the court prefers the evidence of the wife. Her evidence was straightforward, consistent and credible. In contrast, the husband’s evidence was contradictory and evasive. His evidence on financial issues was particularly unreliable. Critical aspects conflicted with that of his own witnesses, such as his accountant, Mr. Ashish Patel.[^2] Where his evidence conflicted with that of his accountant, the court preferred the evidence of the accountant.

[7] The husband’s lack of credibility was underscored by his longstanding failure throughout this proceeding to provide evidence on a timely basis, if at all.

[8] One example stands out. Early in the trial, the husband deposed that he had been unable to produce his Chase Bank statements as previously court ordered, because the statements could only be obtained in person. He had to fly to New York to obtain them. He was only able to do so in November of 2014, and thus, ought to be excused for breaching the order. Only now at trial could he tender statements for the period of November 6, 2013 to November 5, 2014 – which were incomplete.

[9] When he was pressed to produce his passport[^3] later in the trial, respondent’s counsel picked up on the fact that it did not show any travel to New York (or anywhere) in the month of, or after November 2014; making his story of a flight impossible. The need to personally travel to New York to obtain bank statements was revisited.

[10] Over the lunch break, the missing Chase Bank statements were downloaded from the internet, printed in the law library and produced to the court.

Orders on Consent or not Contested

[11] Counsels are highly commended for their diligent approach in resolving many of the issues for trial. By the close of evidence, they had filed:

(a) Statement of an Agreed Net Family Property Statement identifying an equalization payment to the respondent wife in the amount of $15,663. Order to go accordingly.

(b) Agreed Statement of Fact that post separation the respondent wife received the sum of $134,000 which shall be credited against any obligations of the applicant. Order to go accordingly.

(c) Exhibit of agreed post-secondary expenses for the parties’ two adult children.

[12] An order for sale is sought by the applicant and is not contested by the respondent. There shall be an order for the sale of 57 Canyon Hill Avenue, Richmond Hill, effective upon the release of the costs decision in this matter, or the parties resolving the issue of costs. I may be spoken to in regard to any incidents of sale.

[13] The respondent seeks an order for one-half the costs of home insurance and one-half the costs of municipal taxes on the home paid on behalf of the applicant since separation. It is agreed that these amounts were paid, and ought to be shared. Accordingly, there shall be an order that the applicant husband pay to the respondent wife the following amounts:

(a) $21,364: being one-half of the property taxes to December 31, 2014 and one-half of the property taxes paid since January 1, 2015 to the date of the sale or transfer of the home.

(b) $3,432: being one-half of the costs of home insurance to February 28, 2015, and one-half of any ongoing costs of home insurance to the date of the sale or transfer of the home.

Background:

Relevant Financial History during Marriage

[14] The husband came to Canada on September 30, 1987. He held an honours degree in Commerce from the University of Delhi and two post graduate diplomas in business and tourism. He was a very hard worker. Within a short period he had secured a number of employment positions. A year later he was working full-time for the Bank of Nova Scotia. In that position he received comprehensive training in underwriting and life insurance.

[15] He successfully moved on to Sun Life in the early 1990s, worked at TD Canada Trust as a mortgage specialist from 2000 to 2002, and joined the Royal Bank in 2004.

[16] Meanwhile, he had returned to India in April of 1988 to marry. At the time of marriage the wife was 21, and held a Bachelor of Arts and a Diploma in Hotel Management. Their son, Ranveer Malik was born in India in January 1989. In June of 1989, the family immigrated to Canada. Their daughter, Riya was born in Canada in January of 1994.

[17] The wife stayed home with the children until 1999. She had trained during the prior year in computer sciences and quickly secured a position with the City of Toronto. She continues to work full-time for the City and now earns in the range of $88,000 per annum. From the time that she started working, her income was deposited into the parties’ joint account to cover family expenses.

[18] From 1992 to 2007 the husband’s employment was interspersed with periods in which he received accident benefits resulting from a succession of claims: 1992 to 1999, 2002 to 2003 and then again from 2006 to 2007. As each period of benefits came to an end, there was an event which resulted in eligibility for a subsequent period.

[19] Throughout, the husband documented claims of neck pain, back strain, headaches, occasional dizziness, anxiety and joint pain. He would take massages, used various pain creams and used a tens machine.

[20] At the same time, and while receiving disability benefits, the husband actively leveraged various systems that he had developed outside his employment through which he personally, (or indirectly through another person’s licence,) sold mortgage and insurance products. In the same manner, he developed systems for referral fees. He did some day trading.

[21] Through the 2003 to 2007 period of disability, the husband worked long and full weeks from his home office with a business partner, Pratima Singh. Ms. Singh was a licenced mortgage broker. The wife testified that Ms. Singh attended the home five to six days a week to work in the business. The husband solicited and sold mortgages which were then put through Ms. Singh’s licence. Significant commissions were shared. He also sold insurance policies.

[22] Referral fees were received and paid in cash.

[23] As the 2003-2007 benefits period came to an end, the husband signed on to work for the Royal Bank. He did not stop running the home business. Whose client base was being accessed became a source of concern for the Bank. When the out of office pursuits became impossible for the Royal Bank to ignore, the husband was given an opportunity to resign. To this day, he unfairly blames his wife for the loss of that employment.

[24] By this time the family had acquired significant savings in addition to their home. The husband testified that they were “touching three million.” How much of this was and continues to be held outside of Canada may never be known.

Course of Separation

[25] The date of separation has been highly contentious throughout these proceedings. The respondent only learned during the course of the applicant’s opening statement that he consented to her claimed date: December 30, 2007. Previously he had asserted the date of May 22, 2009. Following is a summary of the relevant events over the course of those two years.

[26] Finances had always been a source of tension within the home. As above, the wife’s salary was deposited to a joint account from which household and family expenses were met. The husband also deposited to that account, but neither consistently, nor exclusively. Additionally, he maintained an envelope of cash to supplement daily expenses. The envelope was regularly replenished from non-employment earnings and would hold up to $4,000.

[27] The wife testified that over the course of their 20 year marriage, the husband’s need to control all aspects of their finances became unendurable. He operated his various interests independently and she had little knowledge of their financial circumstances.

[28] In August or September of 2007, she made the decision to cease depositing her paycheque to the joint account. Doing so considerably exacerbated the existing strains.

[29] At the same time, the parties were involved in a rather savvy business opportunity: the purchase of an investment property. The husband took no steps to address the wife’s diversion of her earnings until the sale of the investment property closed in March of 2008. Upon closing, they benefitted from a significant profit which they used in part to pay off their mortgage.

[30] What came next sets a dramatic stage for this proceeding.

[31] The husband’s conduct towards the wife changed dramatically. He took an extensive vacation to India.[^4] Upon his return he was distant and aloof.

[32] On Saturday June 21, 2008 around 2:00 in the afternoon the husband walked down the stairs of their Richmond Hill home with a suitcase. He came into the kitchen, announced to the wife and daughter that he was leaving and wished them well. He then walked to the front door, paused, turned around, and suggested that they “go to the Bank of Nova Scotia – there may be a mortgage waiting for you.”

[33] Despite their shock, and the fact that it was a Saturday afternoon, wife and daughter raced to the Bank. They discovered that the previous month Mr. Malik had placed, and drawn down two lines of credit on their previously encumbrance free home: the first for $451,109.63 and the second for $300,739.56. A whopping interest payment was now due. And where was it to be paid from? The joint bank account had been emptied.

[34] Even the children’s joint Education Savings account had been depleted. $20,000 gone.

[35] And where was Mr. Malik? He had gone to Switzerland. He freely admits to having done so. And he really did put money into a Swiss Bank account.[^5]

[36] The wife immediately retained counsel who on June 24, 2008 issued an Application and brought an emergency order for the return of monies and other corollary relief. She was successful. The matter returned July 9, 2008, for a full day hearing. Mr. Malik returned to Canada to file a response and pursue a sale of the home. He acknowledged that he had taken the monies and placed them in institutions outside of Canada.

[37] Justice Perkins heard the motion, including a motion for a finding of contempt and endorsed in part,

The evidence from both parties now before the court does not lead me to conclude that the RF should have any relief until he has taken all steps within his power to restore the funds he has removed. I am not satisfied that he needs to be allowed to leave the country in order to get the funds back and I agree with the AM that in light of what he has done thus far there is good reason to fear that the will not return and neither will the funds.

[38] On July 29, 2008, the wife obtained an order specifically preserving the Swiss Bank accounts. The monies were returned within weeks. Today Mr. Malik testifies that he had a change of heart in August of 2008, and voluntarily decided to return the monies to Canada. He was prepared to reconcile their marriage.

[39] It is wife’s more credible view that the monies were returned when the husband realized that the preservation order could interfere with his use of the funds, and that it was in his best interests to avoid a finding of contempt. Ms. Malik spoke of the tremendous pressure on her to maintain the family and avoid the embarrassment of a divorce. She was particularly anxious about having enough money for Ranveer to return to university.

[40] The parties negotiated an agreement as to the distribution of the returned monies. The two lines of credit were discharged and the balance of funds: $288,992 was divided between them, $139,000 to the wife - now agreed to be an advance on her equalization payment.

[41] The wife withdrew her application, but the parties did not resume cohabitation. The husband moved in with his parents, Ranveer returned to university and the wife and daughter lived in the home. Conversations continued over the fall, but in the wife’s view, there was no prospect of reconciliation.

[42] On December 24, 2008, the wife and daughter travelled to New York for an annual visit with the wife’s sister. When they returned on January 2, 2009, they were stunned to find the husband comfortably ensconced in the basement. He would not leave. Four months of escalating tensions and disturbances followed. It came to an end on May 22, 2009, when the York Region Police forcibly removed the husband from the home.

Second Application

[43] In an application issued in Toronto in May of 2010, Mr. Malik plead that the parties had separated on May 22, 2009. He sought both custody of the children and access, equalization, sale of the home and occupational rent. The Toronto court quickly identified that it had been issued in the wrong jurisdiction and transferred the application to Newmarket on June 9, 2010.

[44] The application proceeded through the usual conferences, with particular attention to disclosure issues. Throughout, the husband maintained that he had become too ill to work, that he suffered from diabetes, fibromyalgia, depression and anxiety. Much of his testimony at trial beseeched the court to appreciate and accommodate his physical, mental and emotional limitations.

[45] In keeping with his vulnerable state, the applicant husband seeks significant spousal support from the respondent wife.

[46] The husband recognizes, and has agreed to contribute to the children’s post-secondary expenses in accordance with his means – which he states are nominal. He acknowledges that Ranveer has asked him for financial assistance with educational expenses, and that he has had to refuse, given his modest means.

[47] The wife continues to be employed by the City of Toronto. She has maintained all the home expenses and those of the children, including post-secondary expenses. To assist her with those expenses, she began renting the basement in 2009. All her rental income has been fully disclosed in this proceeding.

[48] The husband’s sworn Financial Statement of February 15, 2012, states his income as $65,174. Within that document he lists his last three years actual income as:

2008 - $16,880

2009 - $17,852

2010 - $65,174

2011 - $65,174

[49] The applicant husband called at trial his family physician to give evidence as to his health. She was not tendered as an expert witness. She had not conducted an assessment of his ability to earn income or perform in the workplace. Rather, the physician deposed that Mr. Malik had been her patient since 1991 and that as recently as January 15, 2015; he had been in her office reporting chronic pain, emotional sadness and anxiety.

[50] The physician listed the medications currently taken by Mr. Malik to manage his diabetes, blood pressure and cholesterol. She has recommended the use of Advil or Tylenol for joint pain, and a nasal spray as needed. She advises that Mr. Malik does receive medication for a mood disorder through a psychiatrist. The psychiatrist was not called during the trial.

[51] The physician’s evidence was most helpful in understanding the particular health challenges faced by Mr. Malik. At the same time, none of her evidence measured, or even connected such challenges to his ability to earn income: prospectively or retrospectively.

Meanwhile…. What was Really Going On

[52] In February of 2012, Mr. Malik was pressing for the sale of the matrimonial home. By pure inadvertence, Ms. Malik opened the mail one morning to find Mr. Malik’s personal T4A. It reported 2011 self-employment commissions of $521,604.96.

[53] A new round of disclosure requests followed. As a result of those inquiries, it was ultimately discovered that Mr. Malik was the sole shareholder of 2153454 Ontario Ltd., a company which had never been disclosed. And there was more that had not been disclosed. Much more.

Issues for Trial: Determination of Income for Support Purposes

Overview

[54] The primary issue for this trial is the determination of the husband’s income for support purposes. Throughout, he has maintained that he is unwell, has no financial means and is a hapless victim within a confusing, and out of control court proceeding.

[55] The respondent husband is a qualified insurance broker who has held a number of positions of trust within Canada’s banking and insurance industry. In 2005 and 2006, he received T4s from the Royal Bank for $160,452 and $125,674 respectively. At the same time he was operating various systems for the sale of mortgage and life insurance products which resulted in both taxable and non-taxable income.

[56] When he resigned his employment with the Royal Bank in June 2007, Mr. Malik continued to operate his business from home. He also worked as a T4 insurance salesman. In 2009, he incorporated his company and began to focus on an alternative form of income that was improper, highly lucrative and perfectly suited to his extensive client base. During the trial he referred to it as “the scheme,” and it works as set out below.

[57] Mr. Malik freely admits to the scheme. He does not wish to pay support from the monies received. During his examination in chief on the first day of trial he expressed dismay that, “they want me to pay from dirty money.” In the alternative, he states that he has never earned the amount of monies alleged by the wife, and puts her to the strict test of demonstrating otherwise.

The Scheme

[58] A policy of whole life insurance is sold, earning the salesman a significant commission paid in two parts. The larger second part is only payable if the policy is maintained for two years. The purchaser of the policy is a “straw man” who does not pay the premiums on the policy, but who nonetheless benefits from having the life insurance coverage.

[59] The first part (or so) of the salesman’s commission is used to pay the premiums for two years. At the end of the two year period the balance of the commission is received and the policy lapses. The salesman has a profit equal to the difference between his commission and the cost of 24 months of the premiums.[^6]

[60] Spouses, adult children, parents, aunts and uncles, cousins, friends and community contacts can all be sold a policy[^7] of whole life insurance.

[61] Mr. Malik has never been charged with a criminal offence. He did not invent the scheme. It was suggested during the trial that there was a law suit involving others who participated, but no specific evidence was received. The scheme is no longer available. The insurance company involved in these events took steps in 2012 to prevent its operation. Mr. Malik has never had to remit any of the monies earned.

[62] Mr. Malik was an enthusiastic participant in the scheme from 2009 to at least 2012. At the same time, he continued to operate his home business in mortgages and other insurance products. From 2009 forward, all recorded monies resulting from the scheme and the home business were run through the husband’s corporation for which he is the sole shareholder.

Applicant Husband’s View of Income

[63] Mr. Malik submits that his income from the scheme should not be part of his income for support purposes. Alternatively, if it is to be included, then the entire “Cost of Sales”: being the payment of the premiums on each policy for two years, and all the other expenses listed in the general ledger ought to reduce the amount of income.

[64] Understanding what expenses ought to be deducted was indeed a challenge. During cross examination, Mr. Malik went out of his way to feign surprise over the most straightforward of accounting devices, such as a general ledger, an expense category, or a T4A.

[65] At one point he suggested that it was Ms. Malik’s counsel who had informed him of the T4As – he had no independent knowledge of such things. Counsel then present him with a copy of his Corporate Tax Returns for the matching year. Each clearly showed inclusions of the amounts within the corporation’s revenues. His surprise turned to concern – he would have to look into such matters.

[66] His February 15, 2012 Financial Statement was then placed before him. Within it, he had wholly omitted his numbered company. Annual personal expenses for rent, utilities, and auto expenses totalling $40,100 were set out in his Part 4 expense budget, when in fact; they were being paid by the company. This created even more concerns. He had not been informed by the accountant that such expenses were being paid on his behalf!

[67] Alternatively, Mr. Malik professed ignorance and disbelief during his cross examination. When questioned on his business expenses, he would deny any knowledge of the expense, or how it was calculated. He answered on one occasion that he had no idea what an expense was. He stated several times that counsel was asking “the wrong guy” and that his accountant would have the answers.

[68] Mr. Patel did have all the answers. He testified in a direct and credible manner that he took his instructions from Mr. Malik and acted only on information received. He advised the court that Mr. Malik would write the nature of the expense, in pencil, on cancelled cheques, receipts and bank statements. If there was nothing written on a document Mr. Malik would be asked directly. Mr. Patel never questioned an expense, and just listed it as directed by his client.

[69] Mr. Patel testified that ATM deposits were recorded as income, without any other source document indicating the origin of the money. Mr. Patel accepted the information and did not question it. Cash receipts were never tracked, and simply recorded as revenue or expense – when it was recorded. Cash was extensively used in late 2012 to compensate Mr. Malik when it became known that the insurance company was on to the scheme.

[70] When questioned on the scheme, Mr. Patel freely acknowledged his role, the personal benefits which he has enjoyed to date, and the diversion of referral fees. His client list was used as a source of purchasers. The referral fees to Mr. Patel were recorded as received by Mr. Patel’s wife, or a company controlled by his elderly father-in-law.

[71] Mr. Patel’s role in the scheme does draw the court’s disapprobation. At the same time, I prefer the evidence of Mr. Patel that Mr. Malik was the operating mind of the scheme and the opaque financial transactions within his corporation.

Respondent Wife’s Position

[72] Counsel for the respondent wife seeks a finding that the total gross fees earned by the corporation be the husband’s income for support purposes. She argues that the costs of the premiums should not be a deduction, as they were improperly paid by the vender of the policy, and were in fact, the expense of the purchaser.

Finding on The Scheme

[73] I find that the gross fees ought to be reduced by the cost of the premiums. The policies would not have been sold but for the promise to pay the premiums on behalf of the purchasers.

[74] At the same time, I find that Mr. Malik had the expertise and opportunity to sell some whole life insurance policies on a proper basis, (the owner of the policy paying his or her own premiums. It is not credible that Mr. Malik would have been unable to sell any policies, but for the scheme. This was his profession, in which he had almost two decades of experience. And he was still selling mortgage and other insurance products as demonstrated by the general ledger expense of paying for another’s mortgage licence fee, and the unidentified deposits to his corporate and personal bank accounts.

[75] I therefore exercise my discretion to reduce the “Cost of Insurance” expense as set out in the general ledger by 30% to recognize that some policies could have been sold through legitimate means.

[76] I also reduce items found within the “Cost of Insurance” expense category by items which are clearly not business expenses, such as family law legal fees, Royal Bank memos, auto care and unassigned debit memo expenses.

Deduction of Expenses

[77] Section 18 of the Federal Child Support Guidelines, provides that

Shareholder, director or officer

18. (1) Where a spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the spouse’s annual income as determined under section 16 does not fairly reflect all the money available to the spouse for the payment of child support, the court may consider the situations described in section 17 and determine the spouse’s annual income to include

(a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or

(b) an amount commensurate with the services that the spouse provides to the corporation, provided that the amount does not exceed the corporation’s pre-tax income.

Adjustment to corporation’s pre-tax income

(2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm’s length must be added to the pre-tax income, unless the spouse establishes that the payments were reasonable in the circumstances.

[78] As best stated by Justice Kiteley in Meade v. Meade 2002 CanLII 2806,

It is inherent in the circumstances of those who are self-employed or have irregular income and expenses, that they have a positive obligation to put forward not only adequate but comprehensive records of income and expenses. That does not mean audited statements. But it does mean a package from which the recipient spouse can draw conclusions and the amount of child support can be established. Where disclosure is inadequate and inferences are to be drawn, they should be favourable to the spouse who is confronted with the challenge of making sense out of financial disclosure and against the spouse whose records are so inadequate or whose response to the obligation to produce is so unhelpful that cumbersome calculations and intensive or costly investigations or examinations are necessary.

[79] Mr. Malik operated his business out of his personal rental accommodation, in a personal vehicle, and with a laptop. He carried no inventory or equipment. He employed no one but for an occasional assistant and his accountant. The nature of his business allowed for almost pure profit, but for the costs of paying the premiums on behalf of clients.

[80] There are certain legitimate expenses such as bank fee charges, office and computer expenses and corporate tax fees. Any management salary paid to Mr. Malik remains as an expense and is then included in his income for the year.

[81] The business structure allowed Mr. Malik to accumulate monies within a corporation which paid him directly (or reimbursed him) for all his personal expenses, while claiming such expenses as a repayment of a shareholder’s loan, or as an expense for the corporation. He would then double count those expenses on the Form 13.1 Financial Statement within this proceeding.

[82] No documentary evidence was provided to support certain of those expenses, such as advertising and promotion,[^8] automotive, dues and subscription, bank charges, office and general expenses, professional fees, rent, repairs and maintenance, telephone, and utilities, despite long standing requests to do so.

[83] I have reviewed the reasonableness of the claimed expenses, whenever such expenses can be ascertained. For example, expenses posted to “Cash” cannot be determined and have not been deducted. Overall, I have also looked at the proportion of claimed expenses as against the total revenue received.

[84] I have also added back one half of the following general ledger expenses which are acknowledged as also being personal expenses.

(a) All auto expenses for Mr. Malik.

(b) All apartment rent and cleaning.

(c) All telephone and internet expenses.

(d) All meals and entertainment.

[85] The above formula has been applied in each of the years in which the scheme has operated within the corporation. Below is the court’s resulting determination of income. For each year, I have reviewed both the documentary and the oral evidence of Mr. Malik to determine whether he has met the onus of demonstrating his net income by providing adequate supporting documentation. Where he has not, I have made an adverse inference.

2008

[86] In 2008, Mr. Malik declared total income of $96,772, $54,978 of which was from a RRSP[^9] leaving earned income of $41,974. That same year he deposited $105,575.04 into his RBC account in addition to his employment earnings. These deposits were acknowledged as commission earnings from AXA Insurance (a brokerage through which he and Ms. Singh worked from his home).

[87] Mr. Malik provided no evidence of business expenses for the year of 2008, and declared none of the non-employment monies deposited into his RBC account. It is Ms. Malik’s position that the sum of $63,601.04 - being the difference between the total deposits of $105,575.04 and the declared earned income of $41,974.00 - should be added to the applicant’s income and grossed up to $219,039 for Income Tax purposes.

[88] Mr. Malik’s counsel acknowledges that the RBC deposits were not included in his reported taxable earnings, but she proposes that only $72,290 of the deposits were earned through AXA, and calculates a gross up figure of $229,817.

[89] The balance of monies is from unidentified sources which may include transfers from other bank accounts. The other accounts are no longer available given the passage of time. As a result, the court cannot determine whether it is double counting certain deposits, so a middling figure of $222,000, will be found as Mr. Malik’s income for support purposes in 2008.

2009

[90] Mr. Malik declared taxable income in 2009 of $16,891.60.

[91] That same year, he earned commissions from the following companies:

Equitable Life Insurance Company of Canada $298,320.06

RBC $212.33

Mortgage Diligent Ltd. $5,349.52

Industrial Alliance Pacific $4,233.10

Total: $308,115.01

[92] In 2009, Mr. Malik incorporated his company: 2153454 Ontario Ltd. The above T4A commissioned earnings were all deposited into the company, as well as other small amounts of income, the sources of which could not be identified at trial. It is noteworthy that in 2009, there was a deduction for a “Mortgage Delegent – licence fee” within the general ledger for a company purportedly selling life insurance.

[93] The year end for the company is October 31, which creates timing issues when comparing figures to a calendar year. In these reasons, I shall use the figures within the Corporate Return as equivalent to the calendar year.[^10] Over the period of 2008 to 2012, the total income for support purposes is ultimately accounted.

[94] The corporate general ledger for 2009 confirms that the deposits into the corporate account for 2009 calendar year total $452,459.

[95] The general ledger for the corporate year end October 31, 2009, indicates operating expenses totalling $300,466. No supporting documentation for the items listed in the ledger was provided by Mr. Malik, although requested by Ms. Malik throughout the proceeding.

[96] In applying the formula set out in paragraphs 77-79 above, I reduce the “Cost of Insurance” expense of $246,312 by the family law legal fees, Royal Bank memos, auto care and debit memo expenses ($27,837;) and then by a further 30% ($65,542) for a “Cost of Insurance” expense for 2012 of $152,933.

[97] The balance of expenses is relatively straightforward. There are certain legitimate expenses such as bank fee charges ($94), office expenses for a computer ($2,835) and corporate tax fees ($11,349). The management salary of $16,891 paid to Mr. Malik also remains as an expense.

[98] One half of the auto expenses, apartment rent and cleaning, telephone and internet expenses, meals and entertainment is $12,000.

[99] By reducing the total expense of $300,466 by $93,378 (the difference between $246,311 and $152,933) and $12,000; total expense reduces to $195,000 on corporate income of $452,459 for income of $257,459.

[100] This is money available within the corporation, to be drawn as dividends. What actually occurred in 2009 according to the ledger is that the corporation paid for all of Mr. Malik’s expenses directly, and for those items which he paid personally, he was reimbursed through his shareholder’s loan account.

[101] The result is net earnings of only $57,436 which are available for distribution as dividends, and appear to have been declared in 2010.

[102] I, therefore, add to 2009 income only the non-taxable amount of $200,023 ($257,459 less $57,436) so as to not double count the dividends which are distributed in 2010.

[103] Income for 2009 is thus calculated as:

Taxable $ 16,891

Non-taxable $ 200,023

Total income with gross-up: $ 366,423

2010

[104] In 2010, Mr. Malik declared $65,174 on his personal Tax Return, $64,800 of which was dividends, the nominal balance being interest.

[105] That same year, he earned commissions from the following companies which were deposited to the corporation:

Equitable Life Insurance Company of Canada $116,901.84

RBC Life Insurance Co. $621.39

Total $117,523.23

[106] Total deposits to the corporate account total $169,411.04. The additional sources of income could not be identified during the trial. Total expenses are $135,408.

[107] Using the same approach as employed for 2009, I reduce the “Cost of Insurance” expense of $108,644 by those items which are clearly not. In this year, those amounts are six Royal Bank amounts, legal fees, two debit memo expenses and a “Br. To Br. Transfer” for a total of $45,291 and then by a further 30% ($19,006) for a “Cost of Insurance” expense of $44,347[^11]

[108] The personal expenses paid by the corporation in 2010 were consistent with the prior year. Mr. Malik continued to operate out of his apartment and drive the same vehicle. There are additional accounting fees which are accepted as corporate expenses. In this year, there is no management fee.

[109] By reducing the total expense of $135,408 by $64,297 (the difference between $108,644 and $44,347) and then by $12,000; total expense reduces to $59,111 on deposits of $169,411 for total income of $110,300.

[110] Mr. Malik’s 2010 income is:

Taxable dividends: $ 64,800

Total income to be grossed up: $110,300

Total 2010 income (with gross-up): $239,034

2011

[111] In 2011, Mr. Malik declared dividends of $70,500. This amount exceeds the net earnings of $42,120 in 2010. I will treat the monies as accumulated in 2011. The Return also shows employment income of $11,000, interest of $330 and business income of $2,042 for a total of $83,871.91.

[112] Corporate revenue was reported as $420,444,[^12] and Cost of Insurance as $209,339. Different from prior years was an additional category of “Commission Expense” which shows four line items listed as “Cash” and another four as a numbered Canadian Corporation.

[113] Again, using the same approach, I reduce the “Cost of Insurance” expense of $209,339 by the following: monies to corporations and legal fees ($6,735) and then by a further 30% ($62,802) for a “Cost of Insurance” expense of $139,802.

[114] In looking at the additional category of commission expense, I reduce that by the amounts payable to cash – all of which are rounded figures: three amounts of $2,000 and one of $5,000, for a total of $11,000. I maintain the personal expense add back of $12,000.

[115] By reducing the total expense of $327,095 by $69,537 (the difference between $209,339 and $139,802) and $11,000, and $12,000; total expense reduces to $58,111 on deposits of $169,411 for total income of $234,558, less the $70,300 declared dividends for non-taxable corporate income of $164,258.

[116] Mr. Malik’s 2011 income is:

Taxable dividends: $ 70,300

Taxable income $ 11,000

Business and interest income $ 2,372

Non-taxable income $164,258

Total 2011 income (with gross-up): $362,138

2012

[117] On January 31, 2012, Equitable Life notified Mr. Malik that his contract would be terminated, effective March 2, 2012.

[118] On February 6, 2012, Mr. Malik secured a position as a mortgage advisor with CIBC, and his 2012 Income Tax Return indicates taxable commission income from CIBC of $23,332.85. It also shows a claim for deductible employment expenses of $14,506, leaving Line 150 income at $8,826. No Statement of Business expenses is attached to his Return to identify the nature of the deductions.

[119] By letter, dated March 7, 2014, CRA brought to Mr. Malik’s attention that he had failed to include in his personal Income Tax Return, T4As for commissioned sales on behalf of RBC Life Insurance, Industrielle Alliance and Equitable Life Insurance, totalling $53,395.19. His income was reassessed at $61,446 after deduction of $15,794 in employment expenses.

[120] No Financial Statement was completed for the corporation in 2012. The corporate general ledger from November 1, 2011 to October 31, 2012, shows gross revenues of $189,085. Of this amount, the sum of $67,853.53 is the balance of revenue from Equitable Life which was not accrued prior to the October 31 year end for 2011. None of this amount was declared in his Income Tax Return, including the reassessment. There was no evidence that a Corporate Tax Return captured the monies.

[121] The expenses shown in the general ledger are:

-corporate taxes of $14,435

-Costs of Insurance of $99,328,

-Salary to A. Shah of $8,136, to Mr. Malik of $5,000 (which does not appear on his Income Tax Return) and cash withdrawal of $13,000.[^13]

-payment to CRA of $4,481 (which appears to be for personal taxes)

-bank charges of $1,235

-rent of $11,958

-commission expense of $37,237 all paid in cash, but for $6,887 paid to the same Canadian corporation as the prior year.

[122] There is a difficulty in taking the same approach to calculating income as in the prior years. The commission expenses are wholly unverifiable. Personal tax deductions (the $14,500) duplicate those included in the general ledger, and the relationship between the corporate accounting and personal tax accounting has been made deliberately unclear. Much disclosure is missing for the year of 2012. I was not provided with any evidence that a Corporate Income Tax Return was filed for 2012.

[123] On the evidence available, I reduce the revenue of $189,085 by the corporate taxes, costs of insurance of $69,530 (two-thirds of $99,328) the salary to A. Shah, and bank charges. I do not reduce it by the salary to Mr. Malik, the cash withdrawal, the personal payments to CRA or rent (as rent is most likely included in the personal return). I also decline to reduce the revenue by the commission expenses payable to cash.

[124] The above calculation results in non-taxable income of $106,434.

[125] I make my finding on the evidence available as follows:

Taxable Line 150 income of $61,446

Gross up on personal income of $7,897 (2/$15,794)

Non-taxable income of $106,434

Total income after gross-ups $266,963

Determination of Income after 2012

[126] Mr. Malik’s 2013 Tax Return shows earnings of $17,263. The corporation became permanently inactive in 2013. Counsel for Ms. Malik points out that in 2013, the applicant deposited an additional sum of $24,147.32 into his[^14] TD Canada Trust account and $2,500 into his CIBC account, the sources of which are unexplained.

[127] Mr. Malik’s counsel advises a 2014 T4 has been issued to him in the amount of $20,291.55. Available bank records for 2014 show that Mr. Malik deposited $25,391.35 into his TD Canada Trust account and $1,490 into his CIBC account, the sources of which are unknown and can’t be accounted for by the applicant. When asked about the source of the deposits, Mr. Malik answered, “I myself am a little bit confused, we have to look at this…maybe from father, or mother, investments, or cash.”

[128] Mr. Malik’s income for the years of 2013 forward will not be easily ascertained. The necessary disclosure for this trial was not addressed at an earlier stage given the expectation that the matter would proceed to trial in 2013. Since that time, Mr. Malik’s disclosure of income in sworn Financial Statements has proved most unreliable. There is no reason to believe that Mr. Malik does not continue to earn monies that are not reported for tax purposes, and are sheltered from disclosure.

[129] Moreover, since he has been forced to disclose his corporate records, he has had the time, the opportunity and the incentive to do a better job of shielding his income. He gave evidence during the trial that he solely manages his parents’ financial affairs, and now uses their account as a personal account. He was quick to point out that he is wholly justified in doing so, and that their account is protected by privacy.

[130] The company has not been wound up, despite being inactive since 2013. Mr. Malik testified that he did not want to wind it up because “he might get better and start again.” This statement was independently confirmed by Mr. Patel as the reason why he has not been instructed to wind up the company.

[131] There was much evidence led at trial as to the husband’s significant savings in the State Bank of India, and their questionable sources. Within a 2012 Financial Statement he disclosed $250,000 of savings in the Bank of India. No savings were disclosed in subsequent sworn Financial Statements. On the first day of trial, he gave evidence that bank statements could not be accessed without travelling to India. The next day, when confronted with an internet print-out from the bank, he indicated that he could get access, but did not have the password to his own account – but that he would contact his brother who lives in India who could get the statements. The day after, he indicated that his brother could not access the funds, and then, that his brother could, but was unavailable to do so.

[132] Given the poor quality of the husband’s evidence, the court must look to section 19 of the Federal Child Support Guidelines to impute income for the period after December, 2012. In making such an analysis, the court will employ a cautious approach, recognizing that Mr. Malik may have difficulty in establishing a future material change of circumstances from the time of this determination.

[133] The unexplained deposits to his bank accounts in both 2013 and 2014 result in income calculations in the range of $55,000.[^15] I find this to be a minimum income range for consideration. A continuation of his income as found in these reasons for the period of 2008 to 2012 would suggest a high range of $289,000 (rounded average). A review of his legitimate T4 earnings prior to separation results in an income range of $125,674 to $160,452.

[134] There is no evidence that Mr. Malik’s professional status has changed since 2005. He maintains his licence to sell insurance, is employed by a chartered bank, has no criminal record, nor was there evidence that he has been or is a defendant in any civil proceeding. There was no evidence that he has lost his trusted position in the community, that any prior clients were dissatisfied, shortchanged, or with respect to the whole life insurance: unaware of the nature of the scheme, or unwilling to participate.

[135] In blending these considerations, recognizing that he may have some genuine advancing health limitations, his current age of 54, his historical ability to earn income and the nature of those earnings; I impute ongoing income for support purposes to him of $95,000 per annum, commencing January 1, 2013, forward.

Summary of Findings on Income

[136] Thus, income for support purposes is determined as:

2008: $222,000

2009: $366,423

2010: $239,034

2011: $362,138

2012: $266,963

2013: $ 95,000

2014: $ 95,000

Child Support

[137] Child Support was payable for two children until April 30, 2012, when Ranveer completed university. Riya completed her second year of university at the end of April, 2014, and has since taken time off from her undergraduate program. Accordingly, child support for Riya is suspended as of April 30, 2014, until further court order, or the agreement of the parties.

[138] Child Support is calculated as follows:

Monthly table amount # Eligible Annual

2008: $2,827 2 $33,924

2009: $4,503 2 $54,036

2010: $3,025 2 $36,300

2011 $4,453 2 $53,436

2012: $3,345 2 until April 30 $13,380

$2,129 1 May – Dec 30 $17,032

2013: $ 840 1 $10,080

2014: $ 840 1 until April 30 $ 3,360

Total to April 30, 2014 $221,548

[139] Counsel has calculated the credit to be applied to this total, as Mr. Malik paid support of $219 per month from October 1, 2012, to December, 2014 ($5,913) and an additional amount of duplicated support paid directly from January 1, 2013, to June, 2013 ($1,314). Thus, total child support arrears are fixed at $214,321 as of April 30, 2014.

[140] Order to go fixing arrears of child support at $214,321 as of April 30, 2014. Support Deduction Order to go accordingly.[^16]

Spousal Support and Section 7 Expenses

[141] The principles regarding imputation of income for child support purposes apply equally to imputation of income for spousal support purposes, Lahar v. Lahar, [2014] O.J. No. 621.

[142] Since separation, the respondent has been employed as an IT specialist with the City of Toronto. Her income, inclusive of rental income is not in dispute and is as follows:

2008 $84,510

2009 $82,028

2010 $94,225

2011 $93,092

2012 $92,492

2013 $94,718

2014 $88,167

[143] Counsels made submissions for spousal support, and the proportionate sharing of post-secondary education expenses based diverse views of Mr. Malik’s income for support purposes. For example, Ms. Malik seeks a lump sum of $284,032. Mr. Malik’s counsel proposes that no spousal support is payable to Ms. Malik, and that he is owed a pre-tax figure of $49,700.[^17]

[144] Given the findings on Mr. Malik’s income, there is no time at which he has had income less than that of his former spouse. I decline to make an award for spousal support.

Post-Secondary Education Expenses

[145] In September, 2007, Ranveer was accepted at the University of Western Ontario in the undergraduate sciences program from which he graduated in April, 2012. He is presently 25 years of age and independent. When not at school, he resides in the home with his mother and sister.

[146] In September, 2012, Riya commenced full-time studies at York University in the undergraduate sciences program. By April, 2014, she had completed her second year at the York University program. Riya did not return to York University for the 2014/2015 academic year. She intends to return to her studies in September, 2015. She is 21 years of age, and has benefitted from the stability of residing in the home since her parents separated.

[147] Both adult children have had a difficult experience of the separation and are presently estranged from their father. It is hoped that the conclusion of this litigation will bring some certainty to each of the children and the parties’ individual circumstances, and allow for a more stable future.

[148] Ms. Malik has paid all of the children’s section 7 expenses, including post-secondary expenses; the amounts of which are not in dispute and are compiled within the 74 tabs within Exhibit 46. The totals are:

2008 $15,931

2009 $16,806

2010 $21,869

2011 $14,958

2012 $10,360

2013 $ 2,100

[149] Spousal Support cannot be calculated independent of the proportionate sharing of the section 7 expenses. The court requires fresh Supportmate calculations using the above findings of income.

[150] Counsels are reminded to include the calendar amounts for child support as found above, and submissions on the net of tax amount claimed for support prior to December 30, 2013.

[151] The matter is to return to me at a time to be scheduled by the Trial Coordinator, preferably during the spring or summer sittings. Supportmate calculations are to be filed in advance with a one page summary of the amounts sought for section 7 expenses and spousal support. It is suggested that counsels first serve a separate Offer to Settle on these additional submissions, as

(a) the amounts may not be in dispute, given that Mr. Malik’s income has been determined and the amount of section 7 expenses are not in dispute; and

(b) costs on these submissions will be calculated independently from the costs of the trial.

Claim for Occupational Rent

[152] Mr. Malik claims occupation rent on the matrimonial home from June of 2009 to present, in the amount of $128,100. He states that he has been unjustifiably deprived of his equity in the home. The amount is calculated by multiplying half of a proposed fair market rent of $3,050 by 84 months. This figure was presented by the applicant’s expert as the fair market as of November, 2014.

[153] The amount has not been reduced by the tax payable on occupational rent.

[154] An award of occupational rent is an equitable remedy that will only be awarded in exceptional cases; see Foffano v. Foffano, [1996] O.J. No. 3284, and Rezel v. Rezel, 2007 CanLII 12716 (ON SC), [2007] O.J. No. 1460, McColl v. McColl, 1995 CanLII 7343 (ON SC), 13 R.F.L.(4th) 449 and Higgins v. Higgins, 2001 CanLII 28223 (ON SC), [2001] O.J. No. 3011.

[155] The relevant factors as to an award are set out in Higgins v. Higgins. These factors include:

(a) The conduct of the non-occupying spouse including the failure to pay support;

(b) The conduct of the occupying spouse including the failure to pay support;

(c) Delay in making the claim;

(d) The extent to which the non-occupying spouse was prevented from having access to his or her equity in the home;

(e) Whether or not the non-occupying spouse moved for the sale of the home and, if not, why not;

(f) Whether the occupying spouse paid the mortgage and other carrying charges of the Matrimonial Home;

(g) Whether the children resided with the occupying spouse and, if so, whether the non-occupying spouse paid, or was able to pay, child support;

(h) Whether the occupying spouse increased the selling value of the property.

[156] The husband’s conduct since 2007 has been highly problematic. The agreements reached during trial, particularly agreements to pay post-secondary expenses and one half of the insurance and municipal tax costs, do not diminish the outrageous conduct of this non-occupying spouse in pre-taking the family’s equity and absconding the jurisdiction in 2008, and making no voluntary child support payments since his return - when there was clearly an ability to do so.

[157] A non-occupying spouse ought never receive occupational rent for a period in which he or she has deliberately avoided the payment of child support.

[158] Mr. Malik has not been timely in his requests for sale. He first moved for the sale of the home on March 7, 2012, some four years post separation. The motion was dismissed by Mr. Justice Kaufman as a result of a critical failure to disclose. At no time thereafter did the applicant again move for an order for sale, or provide adequate disclosure to determine the equalization payment or issues of support.

[159] From 2008 until March, 2012, the equalization and income claims could not have been determined. Mr. Malik only provided his personal Income Tax Returns and Notices of Assessment which showed modest T4 income.[^18] He did not disclose his T4A income (commission income) payable through his corporation, or the existence of the corporation. He did not fully disclose his U.S. or overseas savings accounts.

[160] In counsel’s opening statement, she did not seek an order for sale. Rather, she asked for an equalization payment as a result of the wife retaining possession of the home. Only with the court’s prompting was this claim refashioned as a submission for sale. The respondent wife was not opposed to the sale of the home - provided the balance of entitlements was first determined.

[161] Finally, although Mr. Malik has had no access to his equity in the home, he will significantly benefit from its increase in value since the date of separation. Much of the increase is the result of market forces, but some of the increase is attributable to Ms. Malik’s financial tenacity. Over the past seven years it was she who maintained all the expenses of the home, without contribution, through debt, while meeting the children’s expenses.

[162] Some of those expenses have been assisted through the renting of the basement, for which Mr. Malik will receive indirect credit by operation of the rent increasing Ms. Malik’s income, and thus, reducing her claim for spousal support and increasing her proportionate share of section 7 expenses. In these circumstances, such credit and the increase in the value of the home is a full answer to any harm occasioned by a delayed sale.

[163] In assessing the husband’s claim and the legal tests set out above, I decline to make an award of occupational rent.

Costs

[164] A hearing for costs is to be scheduled upon the conclusion of these reasons, per paragraph 151 above.

Justice H. McGee

Date Released: May 15, 2015

[^1]: Support was only ordered for one child, as the oldest had completed his post-secondary education in April of 2012.

[^2]: The accountant has not completed his professional qualifications, and describes himself as a student with certain outstanding courses. For purposes of these reasons, I will refer to him as the accountant.

[^3]: This had also been ordered to be produced – and had not been. Facing jeopardy from a different direction, he decided to produce his passport, but only the passport renewed in September of 2014. A copy of his passport for the prior period remains outstanding.

[^4]: The husband states that he travelled to India. The actual travel itinerary is unknown, as his passport was never produced, despite him being under a legal obligation to do so. For purposes of these reasons, it will suffice to find that India was his destination.

[^5]: The wife believes that he also travelled to a number of other countries in May and June of 2008. Again, because he has never produced a copy of his passport, his travels are not known for certain.

[^6]: Which varies based on the age and risk factors of the purchaser of the policy. Younger non-smokers preferred.

[^7]: Or two!

[^8]: This is a particularly interesting line item as by definition, this is not a scheme that one would risk promoting. Rather, all sales appeared to be to persons known to Mr. Malik, or known through another referral source, who would often receive a referral fee – which was recorded under a separate category.

[^9]: Corresponding with the cash out of the joint accounts, REP and drawing down of the lines of credit just before leaving for Switzerland.

[^10]: Although one-sixth would be allocated to the year following on a strict comparison.

[^11]: I recognize that the result is disproportionate to 2009, largely due to significant amounts listed as paid to the Royal Bank, but as a bank cannot purchase a whole life insurance policy, there is no other way to interpret the figures, but to conclude that the money is being improperly allocated as a cost of selling a policy.

[^12]: A T4A from Equitable Life Insurance Company of Canada indicating self-employed commission income of $521,604.96 was issued to Mr. Malik in 2011. Because of timing differences (calendar v. year end of October 31) it is not all reported in the 2011 statement.

[^13]: It is acknowledged by Mr. Malik that he withdrew $18,000 (5+13K) from the company and that no T4 or dividend was issued.

[^14]: For neither 2013 nor 2014 were the disclosed bank records complete.

[^15]: By adding to declared employment income the unexplained amounts, grossed up.

[^16]: Parties may withdraw from the FRO is payment is set off against the husband’s one half interest in the matrimonial home.

[^17]: Counsel’s calculation is pre-tax, as it was not recognized that support paid prior to the end of the previous calendar year cannot be treated as tax deductible periodic support per the Income Tax Act.

[^18]:Being the management fee that he paid to himself from his corporation.