ONTARIO

SUPERIOR COURT OF JUSTICE

CITATION: McKenna v. McKenna, 2015 ONSC 3309

COURT FILE NO.: D-821-13

DATE: 20150602

B E T W E E N:

Tanya McKenna

M. Scholz, for the Applicant

Applicant

• and -

Howard Emmett Joseph McKenna

Self-Represented

Respondent

HEARD: April 28, 29, 30, & May 1, 4, 2015

REASONS FOR JUDGMENT

SKARICA J.

OVERVIEW

[1] The parties were married in 1992, when the applicant wife (“Tanya”) was 23 and the respondent husband (“Howard”) was 33. The parents of the wife did not approve of the marriage.

[2] The parties were excellent business partners, in part due to the fact that they reduced their tax burden in a questionable manner by taking cash payments and writing personal expenses through the husband’s business.

[3] On September 16, 2012, after twenty years of marriage, two children and building a model million dollar home, Tanya left the marriage claiming that she was abused by Howard for many years.

[4] Tanya consulted a lawyer. A separation agreement was drawn up, which both parties signed. Tanya claims that she signed the agreement due to duress, threats and fear. Tanya claims she received insufficient disclosure and did not receive independent legal advice. She now wishes to have the agreement set aside, and seeks a greater share of the marital assets and increased spousal and child support.

ISSUES

[5] There are two main issues:

1. Should the separation agreement or any part of it be set aside?

2. If any or all of the provisions of the separation agreement are set aside, what would be a fair result for these parties?

FACTS

[6] The applicant wife, Tanya, testified first.

[7] Her evidence revolved around three main areas:

1. Her personal relationship with her husband, Howard;

2. Her business relationship with Howard, and;

3. The circumstances surrounding the separation agreement.

1. PERSONAL RELATIONSHIP WITH HOWARD

[8] Tanya and Howard were married on November 14, 1992, when Tanya was 23 and Howard was 33. This was Tanya’s first long-term relationship.

[9] Tanya testified that Howard was abusive, but did not abuse her at the beginning of the relationship. Initially, Howard was charming, but over time his sexual addiction and temper became problematic.

[10] Tanya’s parents did not approve of the marriage, but did attend the wedding ceremony. Over time, outside of their business partnership, Howard and Tanya did not get along. Both parties were hard-working and financially responsible. Tanya conceded, in cross-examination, that although Howard could not read or write, he would often work seven days a week and would be out of town for weeks on work projects.

[11] Howard was not educated, but Tanya was. Accordingly, Howard did the physical labour for his business, while Tanya did the bookkeeping, payrolls, invoicing and the general ledger. Tanya was in charge of all of the paperwork as Howard did not know how to do it. Howard made the business decisions regarding the buying and selling of equipment, the arrangement of sub-contractors, the collection of monies, the entering of contracts and the types of work to be done.

[12] Tanya has a college education and works as a traffic planning technologist with the Engineering and Operations section of the Roads and Traffic Division of the city of Hamilton. Her employment with the city of Hamilton appears to require a fair amount of sophisticated expertise. For example, at Tab 7 of Exhibit 2 (the joint document brief) there is a declaration wherein Tanya declares that she has no conflicts of interest with respect to her being a shareholder in 97118 Ontario Inc. o/a T & H Excavating (Howard’s business). In her testimony, Tanya denied being a shareholder, but conceded that she had a financial interest in Howard’s business.

[13] For the last 15 years of the parties’ 20-year marriage, they did not sleep in the same bed. However, they had sex regularly. Tanya stated that there was a schedule in place; the couple had to have sex every second day and on Saturday mornings. If this did not happen, Howard would become enraged and would take it out on the kids. There are two children of the marriage: Calvin, with a date of birth of April 30, 1999, and Rachel, with a date of birth of April 20, 2002.

[14] Tab 6 of the Trial Record (Form 22: Request to admit facts as being true), indicates, at paras. 12-28, that Howard is a recovering alcoholic, has been diagnosed with a sex addiction, and that, in 2005, Tanya learned that Howard was a closeted transvestite. Drugs have not suppressed Howard’s sex urges; he has been diagnosed as having a transvestite fetishism. Howard has attended anger management courses, but has never completed them. He has also attended upon a psychiatrist, but discontinued treatment after a few sessions.

[15] Despite this unhappy state of affairs, the parties’ marriage appeared happy and prosperous for almost 20 years. Tab 6 of the Trial Record indicates that this changed when the applicant wife returned from a 20-hour trip from Holland and on Saturday, September 8, 2012, was required to have sex with her husband in the mid-afternoon. This was the last time that the parties had sexual intercourse. Tanya did not sleep in the matrimonial home after that date.

[16] Tanya thereafter slept in her car in the Walmart parking lot. Finally, on September 16, 2012, she and the two children went to live at her parents’ house. The separation agreement was signed on October 23, 2012, 37 days after Tanya left the matrimonial home with her children for good.

[17] Regarding her husband’s abuse, Tanya testified that over time, Howard became more and more abusive. The abuse was mostly verbal, with some pushing and shoving. Tanya did not take any action.

[18] Tab 21 of Exhibit 2 (the joint document brief) is the Children’s Aid Society (CAS) file on this family. The first entry, dated April 12, 2011, relates to an incident where the parties’ eight-year-old daughter was left alone in the home and received a disturbing phone call from a male. The police and the CAS became involved.

[19] There are no mentions by Tanya or anyone else of any abuse, threats and/or assaults by Howard upon Tanya in 2011. In fact, there are no contacts to the police, the CAS or anyone else regarding abuse of any kind by Howard prior to the parties’ September 16, 2012, separation date.

[20] The next report from the CAS is dated October 20, 2012, which was three days before the parties signed the separation agreement. The report indicates that Tanya contacted the police, who in turn contacted the CAS. Tanya advised the police that in July, Howard had threatened to slit her throat. Tanya reported that two weeks prior, Howard had a rake and threatened to put it between her eyes. Tanya reported that on October 12, 2012, Howard had threatened that there would be a murder/suicide. This threat was made during an incident of berating that took place at a hockey game, according to the CAS/police reports. Tanya also reported sexual abuse by Howard, but provided no further details.

[21] Tanya testified at this trial and confirmed the threats made by Howard that she had told the police about. The CAS reports indicate that the police spoke to Tanya and Howard’s daughter, Rachel. Rachel reported that her mother had been sworn at, but did not recall any threats. The maternal aunt reported that Tanya and Howard had a volatile relationship and she had received hearsay information from Tanya regarding Howard’s threats.

[22] According to the CAS reports, Howard denied having made any threats toward Tanya. In his usual gruff manner, he indicated that the parties had a volatile relationship for ten years and that “they fought and fucked, fought, then fucked.” Howard indicated that this was the nature of their relationship until she got “the balls to leave the relationship.” At p. 93 of Tab 21 of Exhibit 2, the police noted that Howard had no criminal record.

[23] After what appears to be a thorough investigation, the conclusion reached by the police was that “there is insufficient evidence, everyone reports a volatile relationship with no direct confirmation of threats but they have cautioned him.” No charges were laid.

[24] Howard and Tanya’s son, Calvin, was interviewed by the CAS on October 30, 2012, which was seven days after the signing of the separation agreement by the parties. Calvin indicated that his parents fought frequently when they were married. Calvin did not witness the arguments, as his parents always went to their room to fight. Calvin was not fearful of either parent, and their arguments never frightened him.

[25] Tanya was also interviewed by the CAS on October 30, 2012, and she reported that there were no threats made by Howard since the last police contact. Tanya promised to contact the police and the CAS worker if any more threats were made. Rachel, the parties’ daughter, was also interviewed. Rachel changed her previous “story” and was now indicating that she had heard her father at one time threaten her mother with a rake. Rachel apparently had disclosed temper tantrums like her father, and Calvin had threatened another child at school.

[26] After these interviews, the CAS assessed the risk to the parties’ children to be moderate due to adult conflict in the home and current concerns. It was decided by the CAS that Calvin and Rachel were no longer in need of any protection, and the file pertaining to the parties was closed around December of 2012.

[27] On December 6, 2012, prior to closing the file, the CAS reported problems with access as Howard was buying Rachel a cell phone after her mother had objected. Howard was telling the children details regarding the separation agreement, namely the amount to be given to Tanya under the agreement ($600,000). In November of 2012, the CAS had attempted to contact Howard regarding ongoing conflict. Howard made negative comments regarding Tanya, but refused to meet with the CAS.

[28] I note that the CAS, in their reports, repeatedly concludes that no charges could be laid by the police because “the threat was indirect.” This conclusion is simply not true. The police investigation was unable to charge Howard due to insufficient evidence (see, for example, p. 6 of Tab 21 of Exhibit 2).

[29] It would appear that in 2013, Rachel got counselling in the “LEAF” programme. Howard was making negative comments about Tanya during access meetings, and was cancelling plans with the children when he was upset with Tanya. Rachel indicated that she feels “stranded on an island.”

[30] In a safety assessment done by the CAS on January 21, 2014, the only concern named was with Howard making inappropriate comments regarding Tanya to the younger child, Rachel. At p. 48 of Tab 21 of Exhibit 2, Tanya reports to the CAS that Howard had been following the restraining order ordered against him, aside from one occasion during which he dropped off Rachel at Tanya’s home himself. Rachel was not fearful of her father, and spoke of many pleasant visits with him. The CAS concluded that there was no risk of harm to the children. While Howard had said many negative things about Tanya, these comments were not ongoing or regular and Howard agreed not to talk or ask about Tanya during visits. The children were deemed safe, and the file was again closed.

[31] At Tab 15 of the Trial Record, Justice McLaren’s Order, with respect to the restraining order against Howard, appears. It is dated May 17, 2013, and requires Howard not to harass, communicate, molest, or annoy Tanya. It also prohibits him from coming within 500 metres of her home or place of employment.

[32] Tanya testified that Howard had breached the restraining order on numerous occasions. I note again that according to the January 2014 CAS report at p. 48 of Tab 21 of Exhibit 2, the CAS was told by Tanya that Howard was complying with the restraining order except for one occasion where he dropped Rachel off at Tanya’s home, and there were no further conflicts between the parties. Apparently, Howard was charged with breach of the restraining order in August (presumably in 2014), but the charge was dropped and a peace bond was entered into. There was no evidence of any further pending charges.

CONCLUSIONS AS TO THE RELATIONSHIP BETWEEN HOWARD AND TANYA

[33] Tanya attempted to portray Howard as a man who could not control his temper and who abused her by engaging in threats, violence (pushing and shoving) and sexual abuse. Little of this is actually borne out by a detailed analysis of the facts proven at trial.

[34] Howard admits to being a recovering alcoholic and a sex addict whose sexual urges cannot be suppressed by drugs, and also admits to not completing anger management courses. The CAS and police reports indicate that Howard has no criminal record. Even though there was police and CAS involvement in an unrelated incident in 2011, Tanya made no complaints to either the CAS or to the police about her husband at that time.

[35] It was only after Tanya left the house and was negotiating the separation agreement that she reported to the police a number of threats alleged to have been made by Howard, as recently as October 12, 2012, 11 days before the separation agreement was signed. Tanya complained to the police of serious threats and sexual abuse. Howard denied these allegations.

[36] After a thorough investigation, no charges were laid because there was insufficient evidence. The police investigation concluded that “everyone reports a volatile relationship with no direct confirmation of threats.”

[37] After the police investigation was complete, it was found that there was no evidence of any violence or threats of violence or sexual abuse. The children do not fear Howard. Their evidence was that their parents would argue, but the arguments took place in the parents’ bedroom. The daughter initially denied hearing any threats, but later stated that she heard one of the threats. This evidence does not satisfy me that, on a balance of probabilities, any threats were made by Howard toward Tanya.

[38] The bottom line is that Tanya claims that Howard engaged in sexual abuse, physical violence and threats. When the police investigated these claims, nothing could be confirmed except that the parties had a volatile relationship. Accordingly, I find that, while Howard has a number of deficits as outlined, the independent evidence confirms a volatile relationship between the parties but does not confirm Tanya’s allegations of sexual abuse, violence and threats of violence.

2. BUSINESS RELATIONSHIP WITH HOWARD

[39] Howard ran an excavating business. It was incorporated as 987118 Ontario Inc. in 1992 (see Tabs 56 and 57 of Volume 3 of Exhibit 20). The corporation profile report lists Tanya as Administrator and president of the corporation (see Tab 57 of Volume 3 of Exhibit 20). Howard was the sole shareholder of the company.

[40] Tab 7 of Exhibit 2 (the joint document brief) is a letter dated September 11, 2007, wherein Tanya declares to the city of Hamilton that she is a shareholder in 987118 Ont. Inc. o/a T & H Excavating and has a pecuniary interest in snow cleaning contracts between the company and the city of Hamilton since 1992 and ongoing. Tanya indicates that, due to her position as Traffic Technologist within the Engineering and Operations section of the Roads and Traffic Division of the city of Hamilton, she is required by Hamilton by-law policy to declare her pecuniary interest. Tanya testified at trial that she is not a shareholder of the business, but she does have a financial interest in the company.

[41] Tanya has a college education and a three-year college diploma. Howard has very little education – Grade eight – and has difficulty reading and writing. Accordingly, Tanya did all of the bookkeeping and paperwork for the company and Howard was the labourer. Howard testified that he does not know how to do the paperwork.

[42] However, Howard negotiated the contracts, set the rates and bought and sold the equipment that the company used. Tanya took his rough work and did the bookkeeping, payrolls, general ledger and invoicing. An example of an invoice that she would have prepared appears at Tab 10a of Exhibit 2. It is dated November 14, 2011, and is addressed to the city of Hamilton. The invoice lists the equipment to be used and the hourly rates.

[43] Tanya paid the bills, did the payroll, and did the quarterly GST and HST accounts. She downloaded all of this information onto discs, which were provided to the accountant. She was, simply, in charge of all the paperwork for the business because Howard did not know how to do it.

[44] Tanya did the bookkeeping on a computer. She attended Mohawk College and took a course regarding quick books and GST for the business. Tanya testified that the business generates a lot of cash. The company did pool excavations and customers would simply pay in cash without paying for GST or HST. She cited an example where Howard was paid $12,000 in cash for an excavation, which he told her about.

[45] Attached to Exhibit 4 is a Land Transfer document pertaining to Howard and Tanya’s 2003 purchase of 1404 Shaver Road, Ancaster for $415,000. The property has two large former chicken barns, which have been renovated so that the company can obtain up to $50,000 in rental from various businesses for storage. The land also contains 25 acres of farmland, which is rented to Ray Butler for $800 per year.

[46] Tanya testified that she put an income level on Howard’s tax forms that would entitle him to the maximum CPP deduction. Volume 3 of Exhibit 20 shows the following employment income levels for Howard up to the time of separation: $36,400 (2007), $36,400 (2008), $36,400 (2009), $37,100 (2010), $36,400 (2011), $41,600 (2012).

[47] After separation, consistent employment income levels were reported as outlined in Exhibit 19: $44,000 (2013) and $44,000 (2014).

[48] Tanya explained that these reported income levels on the income tax forms were just “paperwork.” According to her, Howard made much, much more. The money stayed in the company. As well, the company was used to pay for a wide variety of personal expenses that benefitted both Howard and Tanya. They had access to a lot of cash and a VISA card, which the company paid for.

[49] Tanya provided a number of examples of the couple’s personal expenses that the company paid for. They included:

1. Property taxes on the residence.

2. Utilities on the residence.

3. Howard’s three Harley Davidson motorcycles.

4. Gas and insurance costs on the parties’ various vehicles.

5. Vacations, some of which were paid for in cash. A trip to Mexico was put on the credit card and paid by the company, and many trips to the Caribbean were paid by the company.

6. The nanny, who was paid by the company.

7. The original house on Shaver Road was ripped down in 2008 and a new, spectacular version was built in its place. In 2009, Howard and Tanya moved into this new house. It was Tanya’s dream home. She went through the design plans and decorated it room-by-room. It was a significant project. It was paid for in large part by the company. Tanya indicated that $200,000 in cash was paid to contractors from monies produced by the company. Howard did not dispute these statements.

[50] Essentially all of the payments for personal expenses paid by the company were organized by Tanya, as she was in charge of paying the bills, while Howard authorized that the expenses be paid as such. The newly renovated spectacular dream home, valued at over $1 million, was completely paid for; there was no mortgage on it.

[51] In addition to all of these personal expenses paid by the company, there was a safety deposit box where large amounts of cash were kept. Around the time of separation, Howard told Tanya that $77,000 was in it. In cross-examination, Howard suggested that $40,000 of it came from an inheritance of his and the other $30,000 came from “bits and pieces of things.”

[52] This $40,000 inheritance cannot be found in the voluminous materials filed by both parties at this trial. Given the way that the company was run by the parties over their 20 years of managing it, I do not believe that any of the monies in the safety deposit box came from an inheritance. I can safely infer that the money in the safety deposit box came from monies skimmed from the company.

[53] I further infer that the safety deposit box was the second to final resting place of cash and other payments which were made to the company, but which were not officially recorded in the books. The key to the safety box appears to have been kept in a drawer in the house, and this key was accessible to both Tanya and Howard.

[54] Obviously, no tax was paid on these slush fund monies in the safety deposit box. I can safely say that legitimate business practices do not normally incorporate large amounts of unreported cash in a safety deposit box.

[55] Tanya agreed that on a Friday night, May 9, 2014, Howard provided her with $35,000 in cash, presumably from the safety deposit box slush fund that had approximately $70,000-$77,000 cash in it at the time of the parties’ separation in 2012.

[56] Tanya admitted that she used this $35,000 in cash to build a driveway on her new $617,000 home in Ancaster. Tanya’s 2014 income tax summary appears at Tab 22 of Volume 2 of Exhibit 20. There is no inclusion in her tax return of the receipt of this $35,000 payment. In the same volume at Tabs 23 and 24, Tanya’s income tax summaries appear for 2011 and 2012. At Tab 25 of the same volume, Tanya’s income tax summaries appear for the five-year period from 2007-2011. There appears to be no inclusion in her tax forms of any of the significant but unspecified personal benefits provided to her and Howard during that period by the company. The same can be said for Howard’s tax forms.

[57] The company’s corporate income tax forms appear in Volume 3 of Exhibit 20. The company paid the following amount of taxes in the years stipulated: $3915 for 2006-2007, $20,693 in 2007-2008, $29,762 for 2008-2009, zero for 2009-2010, zero for 2010-2011, $8730 for 2011-2012, and $9,882 for 2012-2013. Post-separation, Exhibit 19 shows the company losing significant amounts of money in 2013-2014 and 2014-2015, and no tax was paid for those fiscal years.

[58] As Tanya put it, the couple had financial utopia. They had big cars, a big home, Caribbean vacations and financial freedom. By 2012, they were millionaires, living a lavish lifestyle paid by the company by way of cash slush funds and significant but unspecified amounts of undeclared income, which both Tanya and Howard were aware of, participated in and benefitted from.

[59] Howard stated that he and Tanya were a great business team. The trial testimony and exhibits reveal a much darker reality. The only reasonable inference from an analysis of the exhibits and sworn testimony is that Howard and Tanya were also co-conspirators in maximizing their lifestyle while arranging their affairs with the company to avoid paying tax on income generated by the company. This arrangement unleashed funds which were used to facilitate their lavish lifestyle.

[60] When it was to her benefit, Tanya, with Howard’s approval, underestimated and underreported Howard’s real income to tax authorities. Now, when it is in her interest to maximize Howard’s real income, she “guesses” his true income to be in the $200,000 to $250,000 range.

[61] When it comes to financial matters, I find that Tanya will do and say whatever she feels is in her financial interest. Accordingly, I find that her evidence regarding Howard’s current income levels is not reliable, and I reject it.

[62] Alas, for Howard, what is “sauce for the goose is sauce for the gander.” I make similar findings regarding Howard’s income claims. His income tax forms in Volume 3 of Exhibit 20 and Exhibit 19 show a consistent reported income in the $35,000 to $45,000 range from 2007 to 2014. This supposedly was his income while the couple were amassing significant wealth and leading a lavish lifestyle. When I asked him what he currently made, he said $80,000 to $100,000.

[63] At Tab 3 of the Trial Record, Howard’s sworn 2013 financial statement states that he makes $41,600 per year with yearly expenses of $58,305, which includes a mortgage payment of $2583.60 per month. This is the mortgage payment that he is required to make due to the $600,000 he has paid over to Tanya for her share of the matrimonial home, pursuant to the separation agreement.

[64] At Tab 33 of Volume 3 of Exhibit 20 is Howard’s mortgage application for the mortgage which he eventually received. In the application, Howard lists his monthly income as $10,833, or approximately $130,000 per year. Howard’s explanation for the $130,000 figure is that the amount is not his income, but was the figure that the bank needed from him to make the mortgage application work – the application is for a mortgage loan of $552,500. The bank would not loan over a half a million dollars to him due to his reported income of $41,600 to Revenue Canada.

[65] Howard’s explanation regarding the $130,000 figure is in these circumstances, believable and I find that it does have the ring of truth to it. However, it is a two-edged sword. The mortgage application and the income figure within it is yet another example of how Howard, not unlike Tanya, will state whatever personal income level is necessary to suit his interest at any particular time.

[66] In cross-examination, Howard essentially admitted that he had made child support payments out of the business. Howard was continuing to pay property taxes, utilities, gas, insurance, and a host of personal expenses through the business. There was cross-examination on a number of other financial matters, but there is no need to review it.

[67] I find that Howard, like Tanya, will declare income that suits his best interest at any particular time. Accordingly, Howard, like Tanya, is not a credible witness regarding his current income level. In the result, I am left in the unique position that neither Tanya, the applicant, nor Howard, the respondent, are credible or reliable witnesses regarding Howard’s current income level.

3. CIRCUMSTANCES SURROUNDING THE SEPARATION AGREEMENT

a. The Evidence of Tanya

[68] As indicated earlier, Tanya left the matrimonial home on September 16, 2012. According to her, later that week, Howard handed her a pamphlet from a lawyer and instructed her to get a separation agreement. Tanya testified that she took his orders because she always did so.

[69] On September 20, 2012, Tanya contacted Angeline Clark. Ms. Clarke e-mailed Tanya on September 20, 2012, to set up an appointment (see Exhibit 3).

[70] Tanya testified that she attended the meeting with Howard on September 25, 2012, with Ms. Clarke. Tanya and Howard both indicated to Ms. Clarke what terms they wanted in the separation agreement. Tanya said it was a joint meeting, with all three individuals present.

[71] Tanya testified that there was no discussion regarding disclosure, spousal support or equalization. Tanya was told to prepare a list of how she wanted the assets to be split up. A retainer was signed by both Tanya and Howard on September 29, 2012. The retainer and list, and the transfer document of the matrimonial home, were entered as Exhibit 4.

[72] Tanya knew that she was entitled to half the house, as title to the house was in both parties’ names as joint tenants. Tanya agreed to transfer the house to Howard. Howard’s business was valued at $500,000. Howard gave her that figure.

[73] Tanya testified that she knew nothing about spousal support, and that there was an agreement that there would be no spousal support by Howard. One thousand was agreed to as a suitable child support figure. Section 7 expenses were agreed to be split equally.

[74] On October 18, 2012, Ms. Clarke met with Tanya and gave her a draft agreement. Ms. Clarke put in a proviso for an extra $50 per month, per year, for child support.

[75] On October 23, 2012, Howard and Tanya were both at Ms. Clarke’s office to sign the agreement. Tanya arrived earlier. Tanya had gotten the police involved by that time, and indicated that she only signed the document because she was afraid. Howard was present when she signed – there was no possibility of a private conversation after Howard arrived, due to the open concept of Ms. Clarke’s office.

[76] Tanya testified that Howard had told Tanya, “this is the way we are doing it and that’s it.” Tanya further testified that money was no good to her if she was dead. Tanya stated this to Ms. Clarke. Tanya testified that her fear is what drove her. Howard had abused and manipulated Tanya for years. However, after the last occasion when he had assaulted her on her bed before she left, she felt she could not even sleep anymore.

[77] Howard did not retain a lawyer. Tanya stated that Ms. Clarke billed both Tanya and Howard. Tab 17 of Exhibit 2 contains a bill, dated September 25, 2012, to Mr. and Mrs. Howard and Tanya McKenna at 1404 Shaver Road for $698. There is also a further account in Tab 17, dated November 21, 2012, billed directly to Tanya McKenna at 811 Smith Road, Ancaster for $400.

[78] The separation agreement appears at Tab 14 of Exhibit 2 (the joint document brief). Paragraph 16.1 on p.19, relating to both parties receiving independent legal advice, is scratched out. Attached to the agreement is a Waiver of Independent Legal Advice signed by Howard on October 23, 2012.

b. The Evidence of Angeline Clarke

[79] Angeline Clarke was called by Ms. Scholtz, counsel for the applicant Tanya, as her witness.

[80] Ms. Clarke portrayed a very different picture from the one provided by Tanya.

[81] Ms. Clarke was called to the bar in 2006. From 2006-2012, Ms. Clarke operated a general practice in Hamilton. She was a sole practitioner, with 25% of her practice being in family law. For personal reasons, she left the practice in 2012-2013.

[82] Ms. Clarke testified that she got an initial call from Tanya. Ms. Clarke confirmed the Exhibit 3 e-mail. Tanya had called and explained that she and her husband were separated. They had had a tumultuous relationship. Tanya had left the matrimonial home, and they decided it was best for them to separate.

[83] Ms. Clarke asked Tanya to bring documents to the initial meeting, as confirmed by the Exhibit 3 e-mail.

[84] Ms. Clarke met with Tanya on September 25, 2012. Ms. Clarke had notes of their meeting, which she referred to as she testified. The notes were entered as Exhibit 9. Tanya told her that they had separated the week before. Tanya stated that there was some abuse during the relationship. Tanya did not elaborate or give any details regarding how recent the abuse was.

[85] Tanya indicated that there was some urgency. Tanya stated, “I’ve had enough of Howard.” Tanya wanted out of the relationship, and Howard agreed with her decision. Ms. Clarke testified that she never met with Howard. Howard came to the door when Tanya was seated in Ms. Clarke’s office. Ms. Clarke told Howard that she was representing Tanya and never spoke to him further. The telephone and social insurance number of Howard in her notes were provided to her by Tanya.

[86] There were discussions regarding financial disclosure. Tanya stated that she did not need financial disclosure because she was taking care of the books and finances, and was fully aware of Howard’s financial situation. Tanya knew what the situation was with reference to Revenue Canada, and she did not want financial disclosure.

[87] Tanya was asked about the value of Howard’s business. Tanya again indicated that she was fully aware of her and Howard’s finances and was okay with what she knew. Equalization was explained to Tanya by Ms. Clarke, and the relevant section of the Family Law Act (FLA) was read and explained.

[88] The gist of what Tanya was told was that Tanya was entitled to equal division of assets. Ms. Clarke had a detailed precedent, and she and Tanya went through it together. The template that Ms. Clarke used was eventually entered at the trial as Exhibit 11. As indicated at p. 89 of Exhibit 11 and as testified to by Ms. Clarke, Tanya was told that it was in her best interests to get financial disclosure.

[89] Tanya maintained that she wanted to conclude the separation agreement as soon as possible and did not need financial disclosure. Ms. Clarke had a Certificate of Independent Legal Advice, regarding Tanya McKenna, in her file. It was entered at the trial as Exhibit 10. This certificate had not been included in the file turned over to Ms. Scholtz, pursuant to Justice MacPherson’s Order (see Tab 11 of the Trial Record – Order dated July 29, 2013 at para. 2) because, as Ms. Clarke put it, “It must have been missed.”

[90] Ms. Clarke testified that Tanya was given a copy of the Exhibit 10 Certificate of Independent Legal Advice. It was prepared that day – October 23, 2012. I note that Exhibit 10 is dated October 23, 2013 and not October 23, 2012, and I infer that there was a typo and that October 23, 2013 should read October 23, 2012.

[91] Ms. Clarke explained that the provision of independent legal advice at para. 16.1 at p. 19 of the separation agreement was struck out because para. 16.3, indicating that Howard would execute a Waiver of Independent Legal Advice, was inserted into the agreement.

[92] Both Howard and Tanya got a copy of the separation agreement and reviewed it with minimal changes. Ms. Clarke indicated that she advised Tanya regarding equalization and net family property.

[93] Regarding child support, Tanya was referred to the guidelines and was shown the tables. Tanya had decided that child support would be in the amount of $1,000 and she wanted to stick with this figure. Ms. Clarke confirmed by e-mail the proposed yearly increase. Tanya stated that $1,000 was what she wanted based not on the guidelines, but on discussions with her husband. Ms. Clarke did not recall the s. 7 discussions, but the discussions they – Ms. Clarke and Tanya - had were included in the agreement.

[94] There was no income or asset information from either party. Tanya provided the values of the items that are included in Tab 16 of Exhibit 2. That tab lists the matrimonial home as having a value of $1.2 million and Howard’s business as having a value of $500,000. Tanya’s Part II FLA rights were discussed, and the substance of what was discussed was included in the separation agreement.

[95] Ms. Clarke indicated that Tanya had come pre-prepared and specifically set out what she wanted. Tanya was advised regarding her rights, but Tanya had her own ideas and the separation agreement was prepared accordingly.

[96] Even though the first bill was addressed to both Howard and Tanya (see Tab 17 of Exhibit 2), Tanya was the client. Howard was only to pay 50 per cent of the fees. The second bill was billed to Tanya alone because it regarded the title transfer of the home.

[97] Ms. Clarke testified that Tanya worked for the city of Hamilton and was a project manager. Tanya told Ms. Clarke that Howard operated an excavation business. The $600,000 payment to Tanya was based on Tanya’s evaluation of 50% of the matrimonial home. There was no formal valuation of the business or home.

[98] Ms. Clarke testified that Tanya was very adamant that she, Tanya, knew the status of the business and did not want it valuated. Tanya wanted out of the marriage. Tanya wanted her $600,000, wanted it quickly and wanted to move on. Whatever values were in the separation agreement, Tanya provided them. Tanya knew the financial status of the business and valued it at $500,000. Divorce Mate calculations were discussed.

[99] The original document was 80 pages in length. The final document was 20 pages, and Ms. Clarke went through it with Tanya page-by-page. Ms. Clarke met with Tanya on three occasions – September 25, October 18 and October 23, 2012.

[100] Tanya was not interested in splitting pensions. She was advised to get a valuation of the matrimonial home. Tanya stated that she would talk to the accountant. The bottom line was that Tanya was fully aware and sure of Howard’s assets. Tanya did not want spousal support.

[101] Exhibit 12 is a letter dated September 29, 2012, sent by Ms. Clarke to Tanya requesting details and lists of all assets and other details as outlined in the letter. Tab 16 of Exhibit 2 contains a variety of e-mails. On October 4, 2012, Tanya responded to Ms. Clarke’s September 29 letter by e-mail and provided details regarding a number of assets. In that e-mail, Tanya indicates, “We would like to get the Separation Agreement done as quickly as possible.”

[102] On October 9, 2012, Ms. Clarke e-mailed Tanya requesting the name of Howard’s lawyer. On October 10, Tanya indicated in her e-mail sent at 11:39 a.m., “We are satisfied with financial disclosure.”

[103] On October 18, 2012, Tanya met with Ms. Clarke and took the draft agreement with her. Howard received the draft agreement as well.

[104] On October 23, 2012, Tanya came in to sign the agreement. Howard also came in to sign. Ms. Clarke had not seen him since he tried to come into her office after the first meeting with Tanya. Howard came in and signed the agreement and the waiver of independent legal advice, with Ms. Clarke’s student present.

[105] Ms. Clarke recalls no conversations regarding any police involvement. Joint custody was discussed, but Ms. Clarke could not remember what was said about custody and access. Tanya was asked about family counselling. Ms. Clarke did not remember the discussions about the safety deposit box. Tanya did not mention what was in it.

[106] Ms. Clarke was read portions of Howard’s questioning conducted on November 6, 2014. At the questioning, Howard testified that he had attended at three meetings with Ms. Clarke and had signed the agreement at the third meeting. During the second meeting, Howard stated that he went by himself and met with Ms. Clarke.

[107] Ms. Clarke testified that she never met with Howard alone and denied ever representing him at all. At the first meeting, he stood at the door and was told to get his own lawyer. Exhibit 13 was entered and this exhibit is a response by Ms. Clarke to a Law Society complaint made against her by Ms. Scholz, counsel for Tanya. Exhibit 13 outlines in detail Ms. Clarke’s dealings with the two parties, and the letter is consistent with the testimony of Ms. Clarke and supporting documents filed at this trial. Ms. Clarke confirmed that her instructions came only from Tanya.

[108] Ms. Clarke recalls telling Tanya to take her time to think about the separation agreement. Tanya stated that she wanted the separation agreement “right now.” At p. 21 of the Exhibit 11 draft agreement, there is a note that Tanya “does not want the guideline amount, they agreed to $1,000 per month.” Ms. Clarke testified that Tanya was shown the guideline amounts and tables. Tanya had knowledge of Howard’s income, and after the meeting wanted the child support amount increased. P. 21 of Exhibit 11 indicates, with reference to income amounts for child support, that “Tanya has chosen not to provide this information.”

[109] Howard did not cross-examine Ms. Clarke, stating that “She told the truth.”

[110] Tanya was recalled in reply, and denied ever seeing excerpts of the guidelines or excerpts of the FLA. Tanya denied ever receiving a copy of Exhibit 10, the Certificate of Independent Legal Advice.

ASSESSMENT OF THE EVIDENCE REGARDING THE CIRCUMSTANCES SURROUNDING THE SIGNING OF THE SEPARATION AGREEMENT

[111] Ms. Clarke’s personal situation was not discussed or revealed.

[112] I found Ms. Clarke to be an honest and credible witness. She maintains that she acted for Tanya alone and only took instructions from her. She did not meet with Howard after sending him away after he showed up at the door of her office at the first meeting with Tanya. Ms. Clarke had notes of her first meeting with Tanya (see Exhibit 9). This meeting took place on September 25, 2012. There was a retainer signed by both parties dated September 29, 2012 (see Tab 15 of Exhibit 2). This retainer, at the first paragraph, specifically states that Tanya McKenna has retained Ms. Clarke and that Howard is to seek independent legal advice.

[113] On September 29, 2012, Ms. Clarke wrote Tanya by e-mail and again reiterated that Ms. Clarke is acting on Tanya’s behalf and that Howard needs to obtain independent legal advice or else he will have to sign a waiver (see Exhibit 12).

[114] As indicated at Tab 16 of Exhibit 2, Tanya responded to this September 29 letter by sending an e-mail, dated October 4, 2012, outlining a list of assets indicating that the retainer is signed and states “we would like to get the Separation Agreement signed as quickly as possible.”

[115] On October 9, 2012, Ms. Clarke e-mailed Tanya asking if Tanya can meet with her, and further asks for the name of the lawyer that Howard will obtain independent legal advice from as Ms. Clarke wants to send a draft to that lawyer once “you and I have met.”

[116] On October 10, 2012, at 8:59 a.m., Tanya sent an e-mail to Ms. Clarke indicating that Howard is being difficult and may not agree to a May 19 meeting. May 18 is suggested instead. Ms. Clarke responded to this e-mail by indicating that Ms. Clarke can meet “with you independently. Once he gets legal counsel, I can forward a copy for him to review with counsel.” Ms. Clarke further asked in that same e-mail if the parties will be getting “detailed financial disclosure from each other or are you both satisfied with the information that you already have?” Tanya responded on October 10, 2012 at 11:39 a.m. that, “we are satisfied with the financial disclosure.”

[117] Tanya e-mailed Ms. Clarke on October 11, 2012, stating that Howard is able to meet at 11 a.m. tomorrow. Ms. Clarke responded later on October 11, 2012, and indicates, “I have booked another client for that time. However, I could meet with you at 9 a.m. if you are available then.”

[118] In my opinion, all of the e-mails and trial exhibits, as well as Ms. Clarke’s Exhibit 13 letter to the Law Society stating that she acted only for Tanya, confirm Ms. Clarke’s testimony. The Exhibit 11 draft document is very comprehensive and addresses spousal support at p. 34 (Tanya states that she knew nothing about spousal support). At p. 21, the draft document also refers to table amounts for child support, which Tanya states were not referred to or discussed. Page 24 of the Exhibit 11 draft document makes reference to disclosure and there is a note that, “this section is to be reviewed with Tanya.”

[119] Tanya testified that she was operating out of fear, and told Ms. Clarke that money was no good to her if she was dead. Ms. Clarke’s evidence is that Tanya told her there had been some abuse, but provided no details about the abuse or the recency of it.

[120] Ms. Clarke testified that she gave Tanya a copy of the Exhibit 10 Certificate of Independent Legal Advice on October 23, 2012, the day that the separation agreement was signed by Tanya and Howard. The Certificate indicates that Tanya knew what she was doing and acted of her own volition without fear, threats, compulsion or influence by Howard or any other person. Tanya denies receiving it.

[121] Ms. Clarke testified that her copy of the Certificate was not sent with the original file because it was missed by her. I accept this explanation, particularly in light of the fact that all of the notes, documentation, e-mails and exhibits filed at this trial are consistent with Ms. Clarke’s testimony and the Exhibit 10 Certificate.

[122] In the result, I accept Ms. Clarke’s testimony in its entirety as it is supported by the documentation presented at this trial and not contradicted by any credible evidence. Ms. Clarke’s evidence is contradicted by Tanya’s evidence and Howard’s cross-examination taken prior to trial.

[123] Regarding Tanya’s contradictory evidence, this litigation is about Tanya’s financial interest in setting aside the separation agreement. I have already previously found that parts of Tanya’s evidence cannot be relied upon where her financial interest is affected. Further, the e-mails and documents generated around the signing of the separation agreement that I have reviewed do not confirm that Tanya was acting out of fear. They are consistent with an individual who knew what she was doing, who was aware of what she was entitled to, and who simply wanted to get the separation agreement signed as quickly as possible so that she could move on with her new life.

[124] Therefore, I do not accept Tanya’s evidence where it conflicts with Ms. Clarke’s evidence. I find that the e-mails and documentation that I have reviewed do not show a person acting out of fear and ignorance. Rather, they show Tanya to be a person who was determined to get Howard out of her life as soon as possible, with the separation agreement being an integral part of that plan.

[125] Howard did not cross-examine Ms. Clarke, stating that her evidence was the truth. I agree. Regarding Howard’s previous testimony in his cross-examination, which was put to Ms. Clarke, I find it not to be truthful. It is inconsistent with the Waiver of Independent Legal Advice which he signed and which appears at Tab 14 of Exhibit 2.

[126] Further, the documentation filed at this trial does not confirm Howard’s previous testimony. His previous testimony is inconsistent with both Ms. Clarke’s testimony and the trial exhibits, and I reject it and find it to be untruthful.

[127] In the result, I accept Ms. Clarke’s testimony in its entirety and again reject both Tanya and Howard’s evidence where it is contradicted by Ms. Clarke.

VALUATION OF THE BUSINESS

[128] Howard never provided a valuation of his business by a professional valuator.

[129] The applicant wife attempted to provide a valuation of the business in her net family property statement (NFP), dated May 30, 2014, which appears at Tab 5 of the Trial Record.

[130] The value of the business was estimated at p. 3 of the NFP to be $1,349,351.00 on September 16, 2012. This is dramatically higher than the approximate $500,000 value assigned to the business in Tanya’s October 4, 2012, e-mail.

[131] Howard cross-examined Tanya extensively on this NFP valuation. Page 2 of the NFP lists the paid share capital (shareholder’s equity) and adds the assets. I made the comment that this appears to be double counting, as shareholder’s equity is normally determined by adding up a company’s assets, deducting the liabilities and calculating the remainder.

[132] Regarding the list of the company’s equipment in the NFP, in cross-examination, Tanya made the following concessions:

1. The 1990 International front end loader was sold in August, 2011 (for $21,000; see Exhibit 5). This would reduce the equipment value in the NFP by $20,000.

2. The 1990 John Deere 544H loader was sold in April 20, 2012 (for $45,000; see Exhibit 6). This would reduce the equipment value in the NFP by a further $50,000.

3. The 2000 Sterling dump truck was sold in January 12, 2010 (for $41,000; see Exhibit 7). This would reduce the equipment value in the NFP by a further $50,000.

4. Three trackless machines were listed in the NFP. Tab 13 of Volume 1 of Exhibit 20 lists only one as of July 2012. Removal of two of the machines from the list would reduce the equipment value in the NFP by $28,000. Ms. Scholz pointed out that Howard had previously stated that he did have two of the three machines. This would add $8,000 back to the list. The net effect would be to reduce the NFP equipment value by $20,000 if Howard retained two of the machines.

5. The 2004 Kenworth dump truck had an appraisal value of $45,000 (see Exhibit 18b, 2013 appraisal, in Volume 1 of Exhibit 20). This valuation would reduce the equipment value of the NFP by another $95,000.

6. The John Deere 544H loader was sold on November 1, 2012, for $50,000. This would reduce the NFP equipment value by another $10,000.

7. The 2006 John Deere 160 LC Excavator was sold on May 28, 2012 for $60,000 – see Exhibit 8. This would reduce the NFP equipment value by another $45,000.

8. The 2007 Bobcat 205 skid steer may have been traded in. This would reduce the NFP equipment value by $25,000.

9. The 2007 Bobcat 371E Mini Excavator does not exist. This would reduce the NFP equipment value by $22,000.

10. The 2007 331E Extended Hoe Bobcat was appraised at Exhibit 18c of Volume 1 of Exhibit 20 at $22,000. This would reduce the NFP equipment value by another $3,000.

11. The 2010 Milano Trailer was bought new for $30,000 (see Tab 12 of Volume 1 of Exhibit 20, fourth page in). By 2012, this item would be worth less due to depreciation and wear and tear by some undetermined amount.

12. The 2011 John Deere 624 was appraised at Tab 18c of Volume 1 of Exhibit 20 at $150,000. This would reduce the NFP equipment value by another $35,000.

13. The 2011 T190 Bobcat was appraised at Exhibit 18c of Volume 1 of Exhibit 20 at $27,000. This would reduce the NFP equipment value by another $8,000.

14. The Craig snow plow was sold on November for $28,000 (see Tab 11c of Volume 1 of Exhibit 20). This would reduce the NFP equipment value by another $3,640.

[133] If the double counting of the shareholder’s equity is removed and if the reductions outlined above and conceded to by Tanya are taken into account, the value of the business interests in the NFP by Howard would be approximately $600,000 after this cross-examination of Tanya.

[134] In her submissions, Ms. Scholz produced a further trial version of the NFP. The trial version takes out the shareholder’s equity and puts it in the category of money owed to Howard. The value of the equipment is listed at $749,749, but this figure does not deduct the values conceded to by Tanya in her cross-examination. The $749,749.00 should be reduced to $600,000. This raises the question of whether the shareholder’s equity of $299,801 should be added in. If the assets of the business were sold, is there an additional almost $300,000 left over? Exhibit 19 contains the most detailed corporate tax information filed at this trial. Exhibit 19 relates to the years 2013-2014 and 2014-2015. The 2014 year-end balance in Schedule 100 shows total assets after depreciation to be $383,331. It lists the amount due to the shareholder to be $463,559. It lists retained earnings (shareholder equity) to be negative $86,898. Accordingly, what I interpret from this document is that if all of the assets of the company were sold, Howard would only receive a total of $383,331 (minus $6,670 bank loan) of the $463,559.00 that he has invested in the company. This would be the situation as of March 2014, approximately eighteen months after the date of separation.

[135] Mr. McKenna’s accountant, Anil Goyals, at Tab 10 of Volume 1 of Exhibit 20 indicates that the RE (retained earnings) of the company, as of March 31, 2012 is $299,801. Exhibit 17 is a letter to Howard’s accountant from Ms. Scholz. At paragraph 10 of Exhibit 17, Mr. Goyal asserts, to Ms. Scholz, that Mr. Goyal simply relies on information provided by Howard. Mr. Goyal does not prepare financial statements or business plans or business or tax advice. Paragraph 37 of Exhibit 17 indicates that RE is the cumulative net income of the company that belongs to the company. It is noted that RE does not include “(b) the value of equipment, (c) the value of the inventory, [or] (d) the value of accounts receivable,” and that “(e) the RE is no indication of the valuation of a business. A much better indicator of value is the total gross sales in addition to things set out in (b) (c) (d) above.” I note that in Schedule 125 of Exhibit 19, gross sales for the year ended March 2014 are $172,793, with a total revenue of $185,855.

[136] Given the comments in Exhibit 17, I have come to the conclusion that it is impossible for me to accurately value this business on the NFP date on the evidence presented at this trial. Expert evidence would be required from a proper business valuator to give a fair and accurate value.

[137] However, on the evidence before me, I believe that I can infer that if Howard sold everything in the business within a year of separation, he would have received anywhere from approximately $400,000 to $600,000, perhaps a bit more or perhaps a bit less. Of course, the business would be at an end and Howard would be unemployed, and we would finally have a clear picture of his actual income.

[138] Tanya did all of the bookkeeping and paperwork for the company. She told her lawyer, Ms. Clarke, that she was satisfied that she did not need further disclosure as she felt that she was aware of the status of the business value. Her estimate of $500,000 appears to be right at the midpoint of the liquidation value of the company. Her estimate is certainly not inconsistent with the limited information before the court at trial and is certainly in the ballpark of what the true value of the business could be. As Tanya stated to Ms. Clarke, she knew the status of the business and valued it at $500,000. The evidence at this trial does not refute that estimate. Tanya knew the business better than anyone, except perhaps her husband, and her estimate cannot be said to be unfair or inaccurate.

HOWARD’S INCOME SINCE SEPARATION

[139] What is Howard’s current income? I am faced with the unique situation that neither Howard or Tanya are credible witnesses regarding Howard’s income, and I am not prepared to accept either Tanya or Howard’s estimates of what Howard’s income currently is.

LAW REGARDING IMPUTATION OF INCOME

[140] Section 19(1) of the Federal Child Support Guidelines permits a court to impute income to a spouse as it considers appropriate in the circumstances. The list of circumstances listed in s. 19(1) is not exhaustive and the court has discretion, on a principled basis, to impute income to a payor parent to establish fair support based on the means of the parents in an objective manner – see Bak v. Dobell, 2007 ONCA 304, [2007] O.J. No. 1489 (C.A.) at paras. 33-36.

ONUS OF PROOF

[141] The court cannot arbitrarily select an amount as imputed income.

[142] In Drygala v. Pauli, 2002 CanLII 41868 (ON CA), [2002] O.J. No. 3731 (C.A.), Gillese J.A. indicated at paras. 43-44:

QUANTUM OF INCOME TO BE IMPUTED

43 The trial judge imputed an annual income of $30,000 based on s. 19.(1)(a) of the Guidelines. No reasons are given for the choice of amount. All that is said is that it is not unreasonable to believe that lucrative part-time employment was available to A.J.P.

44 Section 19 of the Guidelines is not an invitation to the court to arbitrarily select an amount as imputed income. There must be a rational basis underlying the selection of any such figure. The amount selected as an exercise of the court's discretion must be grounded in the evidence.

[143] In Homsi v. Zaya, 2009 ONCA 322, the Ontario Court of Appeal declared, at para. 28, that “the onus is on the person requesting an imputation of income to establish an evidentiary basis for such a finding.”

[144] In Lo v. Lo, [2011] O.J. No. 6120 (S.C.J.), Justice McDermot held at paras. 57-60:

57 If, however, Mr. Feldstein is stating that these cases mean that the onus is on the support claimant to provide in evidence all of the facts in order to prove imputation of business income to the support payor, I respectfully disagree. It is my view that once a party seeking the imputation of income presents the evidentiary basis suggesting a prima facie case for imputation of income, the onus must shift to the individual seeking to defend the income position he is taking. There is good reason for this. The information which can be used or obtained to properly determine the income of that person is in his or her hands and no one else's. To expect the person seeking imputation of income to bear the entire onus of proving imputation of income would thrust an unfair burden of proof on him or her as they do not have in their possession the information necessary to satisfy that onus; only the putative support payor does. Accordingly, once an inference or prima facie case of income imputation is made out by the applicant, the onus must shift to the respondent to justify and provide some clarity as to what his or her income actually is.

58 This is confirmed by several cases, including Bekkers v. Bekkers, supra. In that case, R.J. Smith J. later states at para. 25 that once support claimant presents evidence that the "benefit was paid for or by the company, the value of such benefit, and that the expense paid was unreasonable" the onus then shifts to the controlling shareholder spouse to prove that the payments were reasonable. See also Joy v. Mullins, [2010] O.J. No. 4202 (S.C.J.) wherein M.J. Nolan J. stated that the onus was on the claimant to "establish the claim on the balance of probabilities." [para. 15]. However, once the claim is so established, M.J. Nolan J. states, following Bekkers, "there is an onus on the moving party who alleges that deductions are unreasonable to introduce evidence that establishes, if believed, that the expense deductions claimed were unreasonable which then shifts the burden onto the claiming party." As stated in Homsi, the claimant need not prove all of the facts leading to imputation of income; she needs only provide an "evidentiary basis."

59 It is acknowledged that the evidence provided by the applicant lacks specificity and is unfocused in nature. There was no specific allegation made or evidence led by the applicant that would indicate that any particular expense written off as against income within the corporation was improperly taken (other than payments made to Beacon, as will be discussed below). Mr. Feldstein is correct when he states that there was no detailed cross-examination on expenses deducted in the financial statements for Altech as filed by the respondent. No expert evidence was called by the applicant for the purpose of analysis of the respondent's income, a fact which was similarly bemoaned by M. J. Nolan J. in Joy, supra. Accordingly, I am not in a position, as noted by Mr. Feldstein, to make a finding that (other than the payments made to Beacon which were the subject matter of cross-examination) any of the specific expenses written off as against income within Altech were improperly taken or to impute income based upon improper deductions taken against income as set out in the financial statements of Altech. I cannot be expected to examine the financial statements of Altech in detail when the applicant did not otherwise do so in cross examination or otherwise.

60 However, the issue of the propriety of deductions taken by the respondent or his business is only one basis of imputation of income. Lifestyle enjoyed by one or both parties can be a ground for a finding that a party's income is in excess of that declared. Statements made by a party as to their income as disclosed in loan applications can also be evidence allowing for imputation of income. The way business was conducted by a party may also be compelling; was business conducted in a transparent manner, or were there attempts to hid income from the taxation authorities? Was income split between the parties, thereby reducing the income of the respondent? All of these are factors which may go to a finding of imputation of income in the hands of one party or another.

[145] Further, in the very recent case of Izyuk v. Langley, [2015] ONSC 2409 (S.C.J.), my colleague Justice Chappel indicated at paras. 84-87:

84 The onus is on the party requesting the court to impute income to establish the grounds for this request (Homsi v. Zaya, 2009 ONCA 322, 2009 CarswellOnt 2068 (C.A.), additional reasons 2009 Carswell Ont 3112 (C.A.); Drygala v. Pauli, 2002 CanLII 41868 (ON CA), 2002 CarswellOnt 3228 (C.A.), additional reasons 2003 CanLII 48241 (ON CA), 2003 CarswellOnt17 (C.A.)). However, this principle pre-supposes that the person against whom it is sought to impute income has satisfied their obligation to provide full financial disclosure respecting their income. A payor parent has a duty to provide full and frank disclosure of all information required to properly assess their income. Furthermore, where it is alleged that income should be imputed to them, the payor parent cannot simply make bald assertions regarding their financial circumstances and hope that the recipient parent will not uncover evidence to support an imputation of income argument. Rather, the payor has a positive obligation to produce evidence within their possession, power or control that is relevant to the imputation of income issue.

85 It follows from the foregoing general comments that a party who claims that business expenses are being unreasonably deducted from income has the burden of proving that the expenses are unreasonable (Szitas v. Szitas, 2012 ONSC 1548, 2012 CarswellOnt 3501 (S.C.J.); Desormeaux v. Beauchamp, 2009 CarswellOnt 747 (S.C.J.); Bekkers v.Bekkers, 2008 CarswellOnt 173 (S.C.J.); Joy v. Mullins, 2010 CarswellOnt 7477 (S.C.J.)). However, the parent who seeks to deduct business expenses from their income for child support purposes has an obligation to explain the reasons for the expenses and how they were calculated, and must provide documentary proof of significant expenses in an organized manner so that the court can make a proper determination as to the reasonableness of the expense from the standpoint of the child support calculation (Szitas, ibid; MacGillivray v. Ross, 2008 CarswellNS 631 (S.C.); R.(P.C.J.) v. R. (D.C.), 2003 CarswellBC 788 (C.A.); Manchester v. Zajac, 2011 CarswellOnt 13546 (S.C.J.); Joy v. Mullins, supra.; Williams v. Williams, 2011 CarswellOnt 6588 (S.C.J.); Wilson v. Wilson, 2011 ONCJ 103, 2011 CarswellOnt 1630 (O.C.J.).; Meade v. Meade, 2002 CanLII 2806 (ON SC), 2002 CarswellOnt 2670 (S.C.J.); Wilcox v. Snow, 1999 NSCA 163 (C.A)). If the party seeking to deduct business expenses from income fails to provide meaningful supporting documentation or other evidence in respect of those deductions, an adverse inference may be drawn by the court in making the income determination (Orser v. Grant, 2000 CarswellOnt 1354 (S.C.J.) ).

86 In order to impute claimed business expenses back into a parent's income pursuant to section 19(1)(g) of the Guidelines, it is not necessary to establish that the party who has claimed the deductions has acted improperly or outside the norm for claiming expenses in the income tax context. Rather, the issue is whether the full deduction of the expense results in a fair representation of the actual disposable income that is available to the party for personal expenses (Hauger v. Hauger, 2000 CarswellAlta 598 (Q.B.); Williams, supra.). In determining whether business expenses claimed by a party are unreasonable, the court must balance the business necessity of the expense against the alternative of using those monies for the purposes of child support (Osmar v. Osmar, 2000 CanLII 22530 (ON SC), 2000 CarswellOnt 1928 (S.C.J.)). In carrying out this analysis, the court must keep in mind that principle which the Supreme Court of Canada established in D.B.S., supra., that payor parents should not be permitted to manipulate their financial affairs so as to prefer their own interests over those of their children.

87 As I noted in the case of Szitas, supra., a review of the case-law respecting business deduction claims reveals a general theme that in determining whether expenses should be added back into a parent's income for child support purposes, an important consideration is whether there is a benefit derived from the business expenses that employed people would have to cover from their personal income (see Szitas, supra.; Sobiegraj v. Sobiegraj, 2014 ONSC 2030 (S.C.J.); Durakovic v. Durakovic, 2008 CarswellOnt 5329 (S.C.J.); Wawin v. Wawin, 2008 CarswellNS 589 (S.C.); Kardash v. Kardash, 2008 CarswellSask 582 (Q.B.); Lemmon, supra.; R.(P.C.J.) v. R. (D.C.), supra.; Manchester, supra.; Cook v. Cook, 2011 CarswellOnt 10276 (S.C.J.); Osmar, supra. In Wilson, supra., the court added the amount claimed for work-space-in-the-home expenses back into the party's income, since the party did not adduce any evidence showing that he needed a larger home to carry out his work as a commissioned salesman. The court concluded that the party would have likely incurred these same household expenses even if he did not require a home office.

[146] Justice McDermot in Lo v. Lo indicated at para. 60 that statements made in a loan application can be evidence for imputation of income.

[147] As previously discussed, Howard testified that the $130,000 annual income figure placed on his loan document, in order for him to get his mortgage and pay Tanya her $600,000, was artificially arrived at. The banks would not loan him that amount of money based on his declared income to Revenue Canada of approximate $40,000. As I have indicated, I accept this explanation as it appears reasonable in the circumstances and is consistent with both parties’ past conduct of estimating Howard’s income to suit their particular interests at any given time. This finding, however, does not assist me in arriving at the true figure of Howard’s current income.

[148] Ms. Scholz submits that I should look at the deposits made into the corporate bank account in order to determine a fair approximation of Howard’s actual yearly revenues and, hence, his income. I have examined the deposit summaries in Ms. Scholz’ document briefs, and have encountered the following concerns:

1. Regarding 2012, the deposit total is $689,111.87 according to the summary at Tab 35 of Volume 3 of Exhibit 20. The largest amount on the summary is a deposit of $105,707.69 allegedly made on May 7, 2012. An examination of the actual records shows that the amount was entered as a correction to a debit amount and no $105,707.69 deposit was ever made. Further, by my calculation, there was approximately $272,840 worth of equipment sales (see previous discussion pertaining to the cross-examination of Tanya regarding her NFP) and these sales would not be part of the ongoing business of excavating and snow plowing. Accordingly, the $689,111.87 figure would have to be reduced by almost $400,000. Further, there is no detailed information in the deposit summaries as to what the deposits actually reflect. Further still, the deposit summaries contain none of the detailed information that appears in the Exhibit 19 corporate tax returns for the tax years 2013 and 2014.

2. Howard claimed employment income in 2013 of $44,000 (see Exhibit 19). Regarding the tax year of 2013, Exhibit 19 includes the March 2014 year-end corporate tax return for the period March 2013 to March 2014. In Schedule 125 of that return, the income statement revenues are listed at $185,855. The company reports a loss of $86,898. The 2013 deposits for the company are listed at Tab 30A and 31 of Volume 2 of Exhibit 20. The deposit summaries list the total as $295,515.81, plus $71,671.25, for a total of $367,187.06. On May 24, 2013, the respondent was ordered by Justice Pazaratz not to deplete his assets pending further order (see Trial Record at Tab 14). Accordingly, for all of April and most of May, Howard was still able to sell equipment. The largest deposit in the summaries consists of a deposit of $100,000 in Tab 30A on April 12, 2013. The actual records show a $100,000 cheque clearing in Tab 31 on April 15, 2013. Howard indicated that the $100,000 was a deposit from the old company to his new company. The old company was officially dissolved in July 2013 (see Tab 57 of Volume 3 of Exhibit 20). Removing this $100,000 deposit would reduce the deposit total to $267,187.06, which may or may not include the selling of equipment before the May non-dissipation order of Justice Pazaratz. Again, there are no details of what these deposits actually consist of.

3. Regarding the 2014 tax year, Howard again claimed employment income of $44,000 (see Exhibit 19). Included in that exhibit is the corporate tax return. Schedule 125 of the corporate year-end in 2015 (covering March 2014 to March 2015) lists revenues at $106,495 with a loss of $93,531. Ms. Scholz reports in her summary that the deposit total is $434,688.81 in that year (see Tab 28a of Volume 2 of Exhibit 20). Given the problems with the largest amounts listed in the two preceding summaries, I again searched for the largest sum in the summary. The largest sum listed is again $100,000, allegedly deposited on March 11, 2014. A search of the actual record reveals only that a $10,000 deposit was made on March 11, and not a $100,000 deposit. The account shows that for the entire month of March 2014, the total deposits were $40,241.30. I do not know what other errors have or have not been made in the summary, but at a minimum, the $434,688.81 deposit total must be reduced to $344,688.81. Again, there is no evidence as to what these deposits consist of.

[149] Accordingly, the approach to imputing income suggested by Ms. Scholz – imputing income by adding up the corporate deposits – is problematic for at least four reasons:

1. The deposits include sales of hundreds of thousands of dollars of equipment, which is not part of the ordinary course of business.

2. The deposits include deposits from other bank accounts, i.e. the $100,000 transfer of funds from the old company to the new company.

3. The summaries contain at least one significant error – $90,000 and perhaps more. I will deal with the law regarding my obligation to review this evidence in detail.

4. There are no specific details in the summaries/statements that indicate what the deposits actually consist of.

[150] Accordingly, I find the “corporate deposit” approach suggested by the applicant not to be a reliable indicator of what Howard’s income actually is, and I reject this approach.

[151] Howard has responded to the claim of imputation by filing Exhibit 19, which consists of his personal income tax returns (which indicate his 2013 and 2014 income to be an identical $44,000) backed up by corporate returns for the fiscal years ending March 2014 and March 2015.

[152] I find the $44,000 income claims in Howard’s personal income tax returns to be merely a continuation of his claiming income to maximize his CPP contributions, which is consistent with the system implemented by Howard and Tanya many years ago and which is not, according to the evidence at this trial, a true reflection of his actual income.

[153] The 2014 corporate return, which includes nine months of the 2013 deposits, indicates revenues of $185,855 and ultimately a loss of $86,898. The 2013 personal NOA in Exhibit 19 indicates Howard’s income to be $44,000. The federal child support guidelines at this income level would require Howard to pay approximately $650 per month. Paragraph 5.4 at p. 9 of the separation agreement indicates that child support payments for 2013 are to amount to $1,000 per month.

[154] Howard’s personal savings account for 2013 shows only two $1,000 support payments (paid in August and November; see Tab 30B of Volume 2 of Exhibit 20). There are numerous $1,000 withdrawals from the corporate accounts at Tab 30A and Tab 31 of Volume 2 of Exhibit 20. I infer that Howard is again using the company to pay for his personal obligations – in this case, child support.

[155] Regarding the 2015 fiscal year, Schedule 125 in Exhibit 19 shows total revenues of $106,495. The deposit summary filed by Ms. Scholz shows deposits of $434,688.81 (which includes a $90,000 error). Deducting the $90,000 error leaves deposits of $344,688.81, which is approximately three times the amount recorded in revenues in Schedule 125.

[156] Given all of the conflicting totals regarding corporate income and revenue totals, including the claiming of questionable deductions, I have come to the conclusion that only an expert – a certified accountant, for example – can accurately determine what the respondent’s actual income is from an analysis of the corporate accounts and corporate tax returns. I have tried to analyze the documents as best I can, but have just come up with confusion. To quote Justice McDermot in Lo v. Lo, at para. 59, “I cannot be expected to examine the financial statements…in detail when the applicant did not otherwise do so in cross-examination or otherwise.”

[157] The following comments of Justice McDermot at para. 60 of Lo v. Lo are applicable to this case: “[T]he issue of the propriety of deductions taken by the respondent or his business is only one basis of imputation of income. Lifestyle enjoyed by one or both parties can be a ground for finding that a party’s income is in excess of that declared…were there attempts to hide income from the taxation authorities?”

[158] Howard testified that he currently eats two dollar TV dinners and spends little money on toiletries, clothes and the like. His attire at this trial certainly was not inconsistent with this claim.

[159] Howard’s latest Financial Statement, dated June 7, 2013 lists his employment income to be $41,600 but his expenses to be $58,305 (see Tab 3 of the Trial Record). There is no deduction for utility expenses such as water, hydro or heat. It would appear that the company pays for all of these expenses. There is no deduction for property taxes. There is also no deduction for gas, oil or car insurance. While my estimates are somewhat arbitrary, I believe that I can safely add to Howard’s personal expenses, on a monthly basis, $500 for utilities, $500 for property taxes and $500 for gas, oil and car insurance, for a total of $1500 per month in unclaimed expenses, or $18,000 per year. I infer that the company pays for all of these expenses, and while some of these payments may be legitimate, Howard’s complete lack of payment for these personal expenses is not. Further, I would add to Howard’s income the $10,000 child support payments paid by the company in 2013. Howard has paid no tax on this extra $28,000 per year of undeclared income. The federal child support guidelines base support on the payor’s gross taxable income. Where the parent arranges his affairs to pay substantially less tax on income, the income must be grossed up before the table is applied – see Riel v. Holland, 2003 CanLII 3433 (ON CA), [2003] O.J. No 3901 (C.A.) at para. 32. According to Exhibit 19, Howard paid approximately $4,000 in taxes on his alleged 2013 income of $44,000. Adding in the extra undeclared $28,000, Howard had an income of $72,000 and paid only $4,000 in tax. This left him with a net after-tax income of $68,000. Applying the 36 per cent gross up to his net after-tax income (see Riel v. Holland at para. 33), Howard’s gross income would be $106,250. I impute this income to him for 2013.

[160] The table amount in the guidelines for child support at this level, for two children, would be approximately $1492 per month or $17,904 annually. Howard paid $1000 per month, or $12,000 total, for 2013, and accordingly underpaid child support in 2013 by $5904.

[161] Regarding the 2012 tax year, Howard was required to pay child support of $1,000 per month for two months – November and December. I note that the two child support payments came from his company account (see Tab 35 of Volume 3 of Exhibit 20). His declared gross income for 2012 was $41,600 with taxes paid of $4273.78. I infer that the company was still paying for his personal expenses as outlined in the 2013 income calculation in para. 159 above. Accordingly, I find that Howard’s gross income was $41,600, plus $18,000 (undeclared personal expenses paid for by company), plus $2,000 (undeclared child support paid by company), for a total of $61,600. Net income after tax would be $61,600 minus $4273 (taxes paid), for a total of $57,327. With the 36 per cent gross up, Howard’s gross income would be $89,573.44. I impute this income to Howard for 2012. The table amount for two children at this income level would be $1288 per month, or $2,576 for two months. Howard paid $2,000 for the months of November and December 2012, and accordingly underpaid child support in 2012 by $576.

[162] For the 2014 tax year, Howard again claimed income of $44,000 (see Exhibit 19). The corporate return lists a loss for the year at $93,531 on revenues of $106,495. His personal account for 2014, at Tab 28 of Volume 2 of Exhibit 20, shows deposits of $54,851.62. The withdrawals show both the mortgage and child support payments now coming from Howard’s personal account. The corporate revenues for the 2014 fiscal year were lower than the corporate revenues for the 2013 fiscal year, but expenses in 2014 were also lower. Howard’s lifestyle did not appear to change significantly in 2014, and there was no evidence that it had changed. There do not appear to be any significant asset or debt changes other than a reduction in Howard’s total mortgage debt due to his ongoing mortgage payments. The major difference between the 2014 and 2013 fiscal years is that the company no longer paid for Howard’s child support in 2014.

[163] I would impute Howard’s 2014 income as follows: $44,000 declared income, plus $18,000 undeclared income (for utilities, property taxes and car expenses), for a total gross income of $62,000. Deducting from this total approximately $6,000 in income tax, Howard’s total net income after taxes is $56,000. Adding in the 36 per cent gross up, Howard’s gross taxable income for 2014 amounts to $87,500. I impute that income to Howard for 2014 and 2015, as I have no other recent information on which to base a different amount for 2015.

[164] The table amount of child support payable on gross income of $87,500 is $1263 per month, or $15,156 for the year 2014. Paragraph 5.5 of the separation agreement required Howard to pay $1050 per month, or a total of $12,600, for 2014. Accordingly, Howard underpaid child support in 2014 by $2,556.

[165] For 2015, Howard is required to pay $1100 per month, or a total of $6600 for the first six months of 2015. The table amount required is $1263 per month, or $7,578 for six months. Accordingly, Howard has underpaid child support for the first six months of 2015 by $978.

SETTING ASIDE THE SEPARATION AGREEMENT

[166] I will deal with the child support provisions in the separation agreement after dealing with the applicant’s other arguments.

[167] Apart from child support considerations, the applicant wife argues that there are three reasons why the separation agreement should be set aside.

ARGUMENT 1 – LACK OF DISCLOSURE

[168] The Ontario Court of Appeal in Virc v. Blair, 2014 ONCA 392, sets out the test to set aside a separation agreement at paras. 51-52 and 76:

Test to Set Aside a Separation Agreement

51 The applicable test to set aside a separation agreement is found in s. 56(4) of the FLA, which provides: A court may, on application, set aside a domestic contract or a provision in it, (a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made; (b) if a party did not understand the nature or consequences of the domestic contract; or (c) otherwise in accordance with the law of contract.

A domestic contract includes a separation agreement.

52 In LeVan, at para. 51, this court held that s. 56(4) comprises a two-stage analysis: (i) Can the party seeking to set aside the agreement demonstrate that one or more of the s. 56(4) circumstances is engaged? (ii) If so, is it appropriate for the court to exercise its discretion to set aside the agreement?

Spousal Support, Undue Influence, Duress, and Unconscionability

76 Miglin requires the Court to consider the extent to which a separation agreement takes into account the factors and objectives listed in the Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.). This analysis requires the court to look at the agreement in its totality. The spousal support provisions cannot be considered in isolation as they are inextricably linked to other aspects of the agreement. The property settlement and spousal support provisions in this agreement were negotiated in tandem and, given the potential extent of the respondent's misrepresentations, a court would need to review both aspects of the agreement together. Under these circumstances, assessing whether the agreement with respect to spousal support complies with the objectives of the Divorce Act is a genuine issue requiring a trial. I am additionally of the view that given the unresolved issues, the allegations of undue influence, duress and unconscionability should also be left to be determined by the trial judge on a full factual record.

[169] In Rick v. Brandsema, 2009 SCC 10, Justice Abella indicated at paras. 39-40, 50 and 61 as follows:

39 While Miglin dealt with spousal support agreements in the context of a divorce, it nonetheless offers guidance for the conduct of negotiations for separation agreements generally, including negotiations for the division of matrimonial assets.

40 There is no doubt that separation agreements are negotiated between spouses on the fault line of one of the most emotionally charged junctures of their relationship - when it unravels. The majority in Miglin concluded that because of the uniqueness of this negotiating environment, bargains entered into between spouses on marriage breakdown are not, and should not be seen to be, subject to the same rules as those applicable to commercial contracts negotiated between two parties of equal strength: The test should ultimately recognize the particular ways in which separation agreements generally and spousal support arrangements specifically are vulnerable to a risk of inequitable sharing at the time of negotiation and in the future. Negotiations in the family law context of separation or divorce are conducted in a unique environment ... [at] a time of intense personal and emotional turmoil, in which one or both of the parties may be particularly vulnerable [paras. 73-74]

50 In other words, the best way to protect the finality of any negotiated agreement in family law, is to ensure both its procedural and substantive integrity in accordance with the relevant legislative scheme.

61 This passage indicates that when vulnerabilities have been compensated for by the presence of professionals, the agreement should be respected. This is an important observation. Given that vulnerabilities are almost always present in these negotiations, the parties' genuine wish to finalize their arrangements should, absent psychological exploitation or misinformation, be respected. One way to help attenuate the possibility of such negotiating abuses is undoubtedly through professional assistance. But exploitation is not rendered anodyne merely because a spouse has access to professional advice. It is a question of fact in each case.

[170] In Quinn v. Epstein Cole LLP, 2007 CanLII 45714 (ON SC), [2007] O.J. No. 4169 (S.C.J.), Brown J. outlined the general obligation to disclose at para. 48:

48 Finally, formal disclosure by way of sworn financial statements prior to executing an agreement is not necessary to meet the obligation to disclose. A general awareness of the assets of the other party may be sufficient to avoid setting aside an agreement. Parties are expected to use due diligence in ascertaining the facts underlying their agreements; a party cannot fail to ask the correct questions and then rely on a lack of disclosure. One must inquire whether the responding party withheld information or whether the information was available to the party seeking to set aside the agreement. [Footnotes omitted.]

See also Duncan v. Duncan, [2012] O.J. No. 5783 (S.C.J) at paras. 48-53

[171] I find that, for reasons already outlined, Tanya was fully aware of her right to disclosure as indicated in the e-mails in Tab 16 of Exhibit 2 and by the testimony of Ms. Clarke, which I accept.

[172] Further, I find that Tanya, being the bookkeeper and beneficiary of the income being drawn from the company, was fully aware of the assets of the company and the income that it generated. She was advised of her rights to disclosure by her lawyer, but was satisfied with the disclosure that she had.

[173] In my opinion, Tanya is an extremely intelligent, articulate, educated woman who knows what she wants. She wanted out of this marriage and wanted the separation agreement done as quickly as possible (see Tab 16 of Exhibit 2). Tanya was advised by Ms. Clarke to be patient and to wait. Tanya chose to ignore this advice.

[174] As well, Tanya was remarkably astute in her valuation of the family assets. Her estimate of the matrimonial home’s value was $1.2 million. Howard subsequently received a market offer of $1.25 million in June of 2013 – see Tab 1 of Volume 1 of Exhibit 20. Her valuation of the business of $500,000 was reasonable and right in the ballpark of a figure that was impossible to determine at this trial. Her OMERS pension, valued at approximately $400,000, was also in the ballpark of what the business was worth.

[175] The basic deal which Tanya wanted, and which she got, was to receive half of the value of the matrimonial home; she would keep her pension, and Howard would keep the business so that he could pay child support. Even the figures which Tanya sought for child support are not far off from what Howard was required to pay after income was imputed to him.

[176] All of this evidence establishes that Tanya was and is a shrewd, highly intelligent person who, just as she did with the home renovations, knows what she wants and then goes and gets it. Her only real weakness is that she is prepared to do whatever it takes to provide herself with a lavish lifestyle. This includes under- and overestimating Howard’s income when it is in her interest to do so.

[177] To conclude, I am satisfied on the evidence before me that Tanya was aware of her rights to disclosure and was fully aware of what the matrimonial assets were and what their approximate value was. She was also fully aware of Howard’s income status.

DURESS AND UNDUE INFLUENCE

[178] Tanya states that she was in fear and this motivated her to sign the separation agreement. She states that she told her lawyer, Ms. Clarke, that money was no good to her if she was dead.

[179] As reviewed earlier, Ms. Clarke’s evidence, which I accept, was that Tanya had told her there had been some abuse, but provided no details and failed to reveal any recent incidents of any abuse. Tanya states that Howard threatened her, but the police conducted a thorough investigation and ultimately had insufficient evidence to lay any charges. The police conclusion was that this was a volatile relationship. And so it was. Howard is an uneducated, unrefined and inarticulate man. Tanya, on the other hand is a sophisticated, educated and articulate woman. Tanya states that she was abused for years. Howard has no criminal record. No complaints were made to authorities until the separation agreement was being negotiated. Tanya’s lawyer dealt with Tanya during these negotiations and met with her regularly, and certified that Tanya acted of her own volition without fear, threats or compulsion by Howard or any other person – see Exhibit 10. I note that in an e-mail contained in Tab 16 of Exhibit 2, Tanya writes to her lawyer that Howard is being difficult. No mention is made of abuse, threats or violence. I accept the Exhibit 10 opinion of Ms. Clarke who was a professional lawyer with six years of experience doing 25 per cent of her practice in family law.

[180] In Ludmer v. Ludmer, 2013 ONSC 784, Justice Penny indicated at para. 53:

53 Duress involves a coercion of the will or a situation in which one party has no realistic alternative but to submit to pressure. There can be no duress without evidence of an attempt by one party to dominate the will of the other at the time of the execution of the contract. To prove duress, the applicant must show that she was compelled to enter into the marriage contract out of fear of actual or threatened harm of some kind. There must be something more than stress associated with a potential breakdown in familial relations. There must be credible evidence demonstrating that the complaining party was subject to intimidation or illegitimate pressure to sign the agreement.

[181] I have found Tanya not to be a credible witness with respect to Howard’s income, her dealings with Ms. Clarke and the alleged threats from Howard. The evidence establishes only that the parties had a volatile relationship. I find that there is no credible evidence that Tanya was subjected to intimidation or illegitimate pressure to sign the agreement. I find the contrary. Tanya wanted rid of Howard and wanted a separation agreement as quickly as possible in order to move on. Her lawyer urged her to wait, but this advice was ignored. The separation agreement was not unconscionable or even unfair, as Tanya was remarkably astute and prescient as to what the assets were worth and what she was entitled to under the agreement.

LACK OF INDEPENDENT LEGAL ADVICE

[182] In Mantella v. Mantella, 2006 CanLII 10526 (ON SC), [2006] O.J. No. 1337 (S.C.J.), Justice Corbett made the following observations at para. 31:

31 Payor spouses have a strong interest in finality and thus in "inoculating" separation agreements from attack. Thus it is commonplace to require that both parties obtain independent legal advice respecting a separation agreement, a policy reflected in the Family Law Act.

[183] I find that Ms. Clarke’s evidence clearly establishes that Tanya received independent legal advice. Exhibit 10 is a written declaration of Tanya receiving such advice, which I find was provided to Tanya when the separation agreement was made.

CONCLUSION

[184] I conclude that Tanya was fully aware of what her legal rights were at the time that she signed the separation agreement. She was aware of Howard’s income status. She was aware of what the matrimonial assets were and what they were worth. Tanya herself told her lawyer that she did not require further disclosure. Tanya was not intimidated or under duress to sign the agreement. She received independent legal advice. None of the s. 56(4) FLA circumstances have been engaged. Accordingly, the separation agreement is valid and there is no good reason to set it aside on the grounds advanced by the applicant wife.

[185] However, I believe that the case law still requires me to conduct a Miglin analysis on the separation agreement in its totality (see Vric v. Blair at para. 76).

MIGLIN ANALYSIS

[186] In Kelly v. Kelly, 2004 CanLII 4328 (ON CA), [2004] O.J. No. 3108, Justice Laskin at paras. 15-21 provided a concise roadmap as to how to conduct an analysis pursuant to the leading case of Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303:

(a) – Support under the Divorce Act

15 Section 15.2 of the DA governs Mrs. Kelly's claim for spousal support. Section 15.2(1) states: A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse.

16 Section 15.2(4) of the DA spells out the factors a court must consider in ordering support: In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including (a) the length of time the spouses cohabitated;

(b) the functions performed by each spouse during cohabitation; and (c) any order, agreement or arrangement relating to support of either spouse [emphasis added].

(b) – The analysis in Miglin

17 Miglin focusses on the third of the factors in s. 15.2(4): "any order, agreement or arrangement relating to support". The judgment discusses how courts should exercise their discretion under s. 15.2(1) of the DA when a party initially applying for support has already signed an agreement waiving any claim to support. The majority judgment of Bastarache and Arbour JJ. prescribes a two-stage analysis.

1.) – Stage one

18 Stage one has two components: the circumstances of the execution of the agreement and the substance of the agreement.

(i) – Circumstances of execution

19 The court must assess whether there is any reason to discount the agreement because of the circumstances under which it was negotiated and executed. In doing so, the court must consider whether "there were any circumstances of oppression, pressure or other vulnerabilities" that flawed the negotiations (para. 81). Professional assistance - the advice of a lawyer - may compensate for or overcome any vulnerability or power imbalance but will not automatically do so. If the power imbalance vitiates the bargaining process, the court should give the agreement little weight. (ii) – Substance of the agreement

20 If the conditions under which the agreement was negotiated cannot be impeached the court must assess the substance of the agreement. It must decide whether the agreement substantially complies with the objectives of the DA. These objectives include those expressly listed in s. 15.2(6)[^1] as well as those of certainty, finality and autonomy.

2.) – Stage two

21 If the agreement satisfies both components of stage one, the court should give it great weight. Still, stage two of the analysis recognizes that because of "the vicissitudes of life" the parties may find themselves in circumstances that they did not contemplate at the time they signed their agreement. Some change is inevitably foreseeable. The court must assess whether the new circumstances of the parties could not reasonably have been anticipated at the time of execution of the agreement; and whether in the light of these new circumstances the agreement no longer reflects the parties' intentions or substantially complies with the DA, thus producing a situation that the court cannot condone.

[187] I have already held that the conditions under which the agreement was reached cannot be impeached. I go on to consider the substance of the agreement.

[188] In Fisher v. Fisher, 2008 ONCA 11, the Ontario Court of Appeal outlined the factors and objectives of the Divorce Act regarding an order of spousal support at paras. 33-34:

Application of the law

Factors and objectives

33 It is helpful to begin by setting out the factors and objectives of ss. 15.2(4) and (6) of the Divorce Act regarding an order of spousal support. Factors (4) In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including (a) the length of time the spouses cohabited; (b) the functions performed by each spouse during cohabitation; and (c) any order, agreement or arrangement relating to support of either spouse.

Objectives of spousal support order (6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should (a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown; (b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage; (c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and (d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.

34 I will deal with each of the relevant factors and objectives in turn, mindful, as was the trial judge, of the admonition that no one objective predominates; rather, it is important to balance all four objectives in the context of the circumstances of the particular case: See Moge v. Moge at para. 52; Bracklow v. Bracklow at para. 35 and Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303 at para. 39. After this, I will balance the considerations that emerge to determine an appropriate quantum of support.

FACTORS

15.2(4) (a) LENGTH OF THE COHABITATION

[189] This was a 20-year marriage. Tanya Mckenna was 43 years old at the time of separation. She is and was fully employed as an engineer at the city of Hamilton, was earning an income of $84,421.43 per year (see Tab 4 of the Trial Record) and has a pension valued at almost $400,000.

[190] She has received $600,000 from her share of the matrimonial home and currently lives in an expensive Ancaster home valued at over $600,000 with a $150,000 mortgage (see Tab 4 of the Trial Record). She also recently received $35,000 from Howard’s slush fund, which she used to upgrade the driveway of her current home.

[191] This is not a situation where the wife has any difficulty achieving self-sufficiency (see Fisher at paras. 35-36).

15.2(4) (b) FUNCTIONS PERFORMED DURING MARRIAGE

[192] Tanya did the bulk of the housework and child raising. However, she was assisted by a nanny whom the business paid for. She did the bookkeeping for the business. She admits that Howard worked seven days a week and would be out of town for weeks on work projects. Tanya has a college education and works as a traffic planning technologist with the city of Hamilton. Both parties were hard working and responsible with their finances. It appears that during the marriage, they were true partners and Tanya’s responsibilities did not negatively affect her own career goals (see Fisher at para. 37).

15.2 (4) OTHER CIRCUMSTANCES

[193] From the evidence before me, both spouses maximized their earning potential by working outside the home and splitting their domestic duties in such a fashion that the economic potential of the couple could be maximized. Neither had to forego educational or economic opportunities to benefit the other. From an economic point of view, this marriage comes close to the utopian scenario described in Moge v. Moge, 1992 CanLII 25 (SCC), [1992] 3 S.C.R. 813, at para. 74. These two spouses are one of few couples that will be able to make a clean break and continue on with their lives following separation (see Moge at para. 74).

OBJECTIVES – SECTION 15.2 (6)

SECTION 15.2 (6) (a) – ECONOMIC ADVANTAGES OR DISAVANTAGES FROM THE MARRIAGE BREAKDOWN

[194] From the trial evidence before me, neither party was economically disadvantaged from the marriage or its breakdown.

[195] During the marriage, both parties were responsible and worked hard. They led a very comfortable lifestyle – they financed Caribbean holidays, a nanny and a $1.2 million home, and both had successful, relatively lucrative careers. Their accumulation of wealth was in part financed by Howard not paying appropriate levels of income tax. This was a situation which both parties were aware of, equally participated in and benefitted from.

[196] The breakdown of the marriage has, of course, had its economic consequences, but these consequences seem to have been equally shared. Howard still lives in the $1.2 million dream home, but he was obliged to pay Tanya $600,000 and, for the first time, must make significant monthly mortgage payments. He states that he eats two dollar TV dinners. The Caribbean vacations have disappeared for both.

[197] The wife no longer lives in her dream home, but she has received $600,000 for her share in it. She lives in an expensive Ancaster home valued at $617,000, with a relatively low mortgage of $150,000. She has a good secure job, receives regular child support from Howard and has an excellent pension valued close to $400,000. Howard has a business, whose value is difficult to determine but Tanya’s estimate of $500,000 is in the ballpark.

[198] In my opinion, the breakdown of the marriage has impacted the parties equally – their former extravagant lifestyle has become a very comfortable lifestyle, shared by both.

[199] I might add that the parties’ former lifestyle was in part funded by the evasion of tax payments, and I know of no precedent that requires either separating party to expect to maintain a lifestyle that is in part sustained by what appears to be illegal activity.

15.2 (6) APPORTIONMENT OF FINANCIAL CONSEQUENCES FOR CARE OF CHILDREN

[200] After imputation of income, Howard’s current income is in the high $80,000 range, while Tanya’s income is in the middle $80,000 range. Howard will continue to pay child support, but with the adjustments I have outlined. Given that the parties’ current incomes are roughly equal, and given the adjustments to child support and the parties’ equal sharing of the s. 7 expenses as outlined in the separation agreement, the financial burden of caring for the two children is adequately apportioned.

15.2 (6) (c) – ECONOMIC HARDSHIP

[201] Neither party suffers from any economic hardship. Basic needs are easily met and both parties continue to maintain a comfortable lifestyle.

15.2 (6) (d) – SELF SUFFICIENCY

[202] Self-sufficiency has been held to be a relative concept, and relates to the ability to support a reasonable standard of living. It is to be assessed in relation to the economic partnership that the parties enjoyed and could sustain during cohabitation, and what they can reasonably anticipate after separation (see Fisher and Fisher at para. 53). Lang J.A. in Fisher makes this observation at para. 56:

56 The relevance of standard of living as a measure of dependency in long-term marriages is best encapsulated by L'Heureux-Dubé J. in the following passage from Moge:

Although the doctrine of spousal support which focuses on equitable sharing does not guarantee to either party the standard of living enjoyed during the marriage, this standard is far from irrelevant to support entitlement (see Mullin v. Mullin (1991), supra, 1991 CanLII 12956 (PE SCAD), [1991] P.E.I.J. No. 128 , and Linton v. Linton, supra). Furthermore, great disparities in the standard of living that would be experienced by spouses in the absence of support are often a revealing indication of the economic disadvantages inherent in the role assumed by one party. As marriage should be regarded as a joint endeavour, the longer the relationship endures, the closer the economic union, the greater will be the presumptive claim to equal standards of living upon its dissolution (see Rogerson, "Judicial Interpretation of the Spousal and Child Support Provisions of the Divorce Act, 1985 (Part I)", supra, at pp. 174-75). (p. 870)

[203] The evidence before me establishes that post-separation, Howard and Tanya enjoy relatively equal, comfortable standards of living. Given that their previous lifestyle was in part funded by prima facie income tax evasion, neither can expect that it continue indefinitely. One would hope that Howard will from now on file income tax returns that accurately reflect his income.

SUMMARY OF FACTORS AND OBJECTIVES

[204] Balancing all of the factors and objectives, I find that the separation agreement meets the objectives listed in s. 15 of the Divorce Act, subject to an adjustment being made regarding child support in order to ensure that the child support payments conform to the child support guidelines.

STAGE TWO OF MIGLIN ANALYSIS

[205] The evidence at this trial reveals no new circumstances that the parties did not contemplate or foresee when they signed the separation agreement. The agreement continues to reflect the parties’ intentions, and substantially complies with the Divorce Act.

CONCLUSION

[206] Both of the parties, post-separation, lead comfortable lifestyles. Their lifestyles are relatively equal, as are their assets and incomes. I have imputed Howard’s income to be in the range of $85,000 to $105,000, with current income at $87,500. Tanya’s income is in the mid-$80,000 range and with child support, she lists her annual income as approximately $97,000 (see Tab 4 of her Financial Statement).

[207] The law is clear that a slight disparity of income does not provide a basis for the awarding of spousal support. The recent comments of the British Columbia. Court of Appeal in Lee v. Lee, 2014 BCCA 383, at para. 60, are appropriate to the situation before me:

60 We have not been referred to any decision of this court, however, in which spousal support was awarded solely on the basis of disparity in incomes, or even solely on the basis of the non-compensatory model. (Here I am setting aside cases such as Hodgkinson, supra, in which one spouse is very wealthy or earns a very high income and can easily contribute to the other's support without affecting his or her standard of living in any significant way.) I do note one decision of the Ontario Court of Appeal, Farrar v. Farrar (2003) 2003 CanLII 15943 (ON CA), 63 O.R. (3d) 141, in which the husband claimed spousal support for a period of approximately 12 months between the date of separation and his wife's retirement. (See para. 55.) During that period, he was living in a one-bedroom basement apartment on pension income of $37,000 per year while his wife was still earning approximately $74,000 as a teaching instructor. The trial judge had ordered the wife to pay her former husband the sum of $12,000 solely on the basis that Mr. Farrar "was in need and [the wife] had the ability to pay." The Court of Appeal, per Charron J.A., as she then was, allowed the wife's appeal from this part of the award, stating that "the differential in income alone did not provide a basis for awarding spousal support." (See para. 60.)

[208] In the circumstances, I find, after conducting a Miglin analysis, that the separation agreement signed by the parties meets the objectives of the Divorce Act. It is clear from Miglin that the objectives of autonomy, finality and certainty are important objectives which can justify departures that a court would have ordered (see S.E. v. J.E., [2013] BCCA 540, at para. 57 and Miglin at para. 66).

[209] Accordingly, it follows that the separation agreement signed by the parties on October 23, 2012, as reproduced at Tab 14 of Exhibit 2, is fair, valid and enforceable by both parties subject to the adjustments for child support to be made regarding the child support provisions at paras. 5.4 and 5.5 of the separation agreement. As noted in Kerr v. Baranow, 2011 SCC 10, at para. 208, the right to support is the child’s right and depends on the income of the payor parent. The payor parent is deemed to be aware of the obligation to support his or her children, and the payee cannot contract it away.

ORDER

[210] The following order is made:

1. The separation agreement signed by both parties on October 23, 2012 is valid and enforceable by both parties, subject to the variation regarding child support as set out below.

2. Paragraph 5.4 of the separation agreement is varied, and Howard is ordered to pay child support of $1288 per month for November and December of 2012, and child support of $1492 per month for all of 2013. After deducting amounts already paid, Howard is to pay a further retroactive amount of $576 for 2012 and a further retroactive amount of $5904 for 2013.

3. Paragraph 5.5 of the separation agreement is varied, and Howard is ordered to pay $1263 per month for 2014 and 2015 and ongoing for child support, subject to a further order of this court. After deducting amounts already paid, Howard is ordered to pay a further retroactive amount of $2,556 for 2014 and a further retroactive amount of $978 for the first 6 months of 2015. Commencing July 1, 2015, Howard is ordered to pay child support in the amount of $1263 per month.

4. The total of the retroactive amounts listed in paras. 2 and 3 above, from the period November 2012 to June 30, 2015, amounts to $10,014, which is to be paid by July 31, 2015.

5. Within 30 days of the anniversary date of this order, the parties shall exchange true copies of their income tax returns, enclosures and notices of assessment (if applicable) for the prior calendar year.

6. Costs of this trial will be awarded to Howard McKenna subject to my reviewing any offers to settle provided to Howard by Tanya McKenna.

Justice Skarica

Released: June 2, 2015

CITATION: McKenna v. McKenna, 2015 ONSC 3309

COURT FILE NO.: D-821-13

DATE: 20150602

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Tanya McKenna

Applicant

• and –

Howard Emmett Joseph McKenna

Respondent

REASONS FOR JUDGMENT

Justice Skarica

Released: June 2, 2015

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