Lewis v. Ontario (Family Responsibility Office), 2015 ONSC 510

COURT FILE NO.: FS-12-375956-0001

DATE: 20150122

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Kevin Lewis, Applicant

AND:

Ontario (Family responsibility office), Respondent

AND:

YVONNE DWYER, Respondent

BEFORE: C. Horkins J.

COUNSEL: Nancy Iadeluca, for the Applicant

Glenda Perry, for the Respondent Family Responsibility Office

HEARD at Toronto: January 15 2015

ENDORSEMENT

[1] The applicant on this motion (“Mr. Lewis”) seeks an order refraining the Director of the Family Responsibility Office (“FRO”) from suspending his driver’s licence and passport.

[2] FRO is enforcing the temporary spousal support order of Justice Czutrin dated March 8, 2013 and the order of Justice Backhouse dated June 20, 2014. Justice Czutrin’s decision was released on March 8, 2013, but the order was not issued until June 5, 2014.

[3] The first order requires Mr. Lewis to pay Yvonne Dwyer monthly spousal support of $8,500. The second order deals with arrears and does not alter the original interim spousal support order.

[4] The facts before me on this motion are unusual. This is not a typical refraining motion.

[5] I have decided to grant the motion and order that FRO be refrained from suspending the applicant’s driver's licence and passport. My reasons follow.

The Arrears

[6] There is a serious issue as to whether Mr. Lewis owes Ms. Dwyer any arrears of spousal support.

[7] Mr. Lewis says that Justice Czutrin’s order was superseded by final Minutes of Settlement that the parties signed on June 30, 2013. Ms. Dwyer disputes the enforceability of the Minutes of Settlement.

[8] If the Minutes of Settlement are enforceable, the terms of the Minutes of Settlement resolve all of the issues on a final basis. In particular, the Minutes of Settlement provide as follows:

(i) Mr. Lewis has sole custody of the three children ages 16, 14 and 10.

(ii) Ms. Dwyer does not pay any child support. Mr. Lewis is solely responsible for all of the children’s “special and extraordinary expenses and all of the children’s expenses”.

(iii) Ms. Dwyer has access to the children at the discretion of Mr. Lewis.

(iv) Mr. Lewis will pay Ms. Dwyer the following spousal support set out in the following excerpt from the Minutes of Settlement:

…$2,500.00 on June 1, 2013, June 15, 2013, July 1, 2013 and July 15, 2013. These amounts will be tax deductible to [Mr. Lewis] and taxable to [Ms. Dwyer]. Subject to Paragraphs 5, 6 and 7 herein, commencing August 1, 2013 [Mr. Lewis] shall pay monthly spousal support to [Ms. Dwyer] of $5,000.00 for a period of 23 months at which time spousal support payments will reduce to $2500.00 for a period 12 months at which time [Mr. Lewis’] obligation to pay spousal support to [Ms. Dwyer] shall terminate. The monthly support payments shall be paid in two equal installments of $2,500 payable on the 1st and 15th day of the month. The payments shall be tax deductible to [Mr. Lewis] and taxable to [Ms. Dwyer].

(v) Mr. Lewis is given credit for certain third party payments that he is required to make on behalf of Ms. Dwyer.

(vi) Ms. Dwyer is required to refile her income tax return for 2011.

(vii) The parties’ interim agreement dated August 7, 2012 remains in full force and effect (this refers to spousal support payments that Mr. Lewis previously paid to Ms. Dwyer.)

(viii) The parties will execute a spousal support release.

(ix) The parties acknowledge that as of the date of the Minutes of Settlement, “there are no arrears of spousal support owing by [Mr. Lewis] to [Ms. Dwyer] including pursuant to the March 8, 2013 Endorsement of Czutrin J.”.

(x) If the Minutes of Settlement cannot be included in a court order, “it shall be enforceable and treated as a domestic contract” pursuant to the Family Law Act, R.S.O. 1990, c. F.3.

[9] Shortly after Justice Czutrin released his decision on March 8, 2013, the parties began to talk about final settlement of their dispute. Mr. Lewis explains in his affidavit that his business was experiencing significant financial difficulties and he could not afford to pay Ms. Dwyer $8,500 a month. Details of his financial difficulties are set out below.

[10] Ms. Dwyer was represented by counsel off and on during the negotiations leading up to the signing of the Minutes of Settlement. The parties had direct communications concerning the Minutes of Settlement. Mr. Lewis’ affidavit details the extensive negotiations leading up to the signing of the Minutes of Settlement and the involvement of Ms. Dwyer’s father (now deceased) in the negotiation process.

[11] Ms. Dwyer had an opportunity to seek independent legal advice and chose to sign the Minutes of Settlement without such advice. Paragraph 20 of the signed Minutes of Settlement states as follows:

[Ms. Dwyer] has been told to obtain independent legal advice and has declined it. Mr. Lewis’ counsel made Mr. Lewis’ entire file available to Evelyn Rayson, counsel retained by [Ms. Dwyer], with the exception of privileged communication. [Ms. Dwyer] subsequently informed [Mr. Lewis] that she has terminated Ms. Rayson’s retainer and had no intention of retaining alternate counsel.

[12] The Minutes of Settlement and a Spousal Support release were signed by both parties on June 3, 2013.

[13] In summary, if the Minutes of Settlement apply, the dispute between the parties was settled on a final basis and there no arrears of spousal support are owed. Mr. Lewis did not initially pay the spousal support as and when directed under the Minutes of Settlement, because of his financial difficulties. He has now paid what is owed and continues to pay spousal support pursuant to the Minutes of Settlement.

[14] On August 12, 2014, Ms. Dwyer delivered an Application to Mr. Lewis seeking to set the Minutes of Settlement aside. This Application has the same court file number as the previous Application between the parties. It is unclear if Ms. Dwyer intended to start a new Application or amend her relief in the existing Application. She alleges that she signed the Minutes of Settlement under duress and had no independent legal advice. As a result, she alleges that the order of Justice Czutrin continues to apply and Mr. Lewis is in default.

[15] Mr. Lewis filed an Answer on September 30, 2014. He pleads that the Minutes of Settlement are final and binding. He also undertakes to amend his Answer to plead in the alternative that if the Minutes of Settlement are not set aside, that there be a retroactive adjustment to the arrears he owes based on a reduced spousal support order reflecting what he can afford to pay, with credit for what he has paid to date.

[16] If the Minutes of Settlement are set aside, then the interim spousal support order of Justice Czutrin applies. This raises two issues. First, there is a dispute about the calculation of what arrears are owed under that order. Second, Mr. Lewis states that he cannot afford to pay the arrears and the ongoing monthly spousal support of $8,500. He seeks a retroactive variation of the spousal support order.

[17] The interim spousal support order requires the applicant to pay $8,500 a month. Justice Czutrin states in his reasons that “[c]ertain interim financial arrangements had been made by the parties. They were not to be disclosed to the court. I ordered that those arrangements continue”.

[18] Justice Czutrin ordered that the spousal support was retroactive to July 1, 2012 “with credit for any payments he made to [Ms. Dwyer] from July 1, 2102 forward.” This credit referred to the payments that Mr. Lewis made to Ms. Dwyer that were not disclosed to the court. On the refraining motion, Mr. Lewis provided particulars of the previously non-disclosed payments.

[19] I appreciate that on this refraining motion I do not have any evidence from Ms. Dwyer regarding these payments. That said, it is clear from Justice Czutrin’s reasons that such payments exist and that Mr. Lewis must be given a credit what was paid.

[20] On September 5, 2104, FRO wrote to Mr. Lewis and notified him that he owed arrears of $130,876.57. On September 20, 2014, FRO sent Mr. Lewis a second letter and advised him that he owed arrears of $115,411.57.

[21] Mr. Lewis’ counsel delivered a lengthy letter to FRO dated September 30, 2014. The letter advised FRO that Mr. Lewis disputes the calculation of the arrears. The letter reviewed the provision in Justice Czutrin’s order directing that credit be given to Mr. Lewis for past payments, it details the various payments that Mr. Lewis made under written agreements between the parties and explains the Final Minutes of Settlement that provide no arrears are owed. Extensive documentation is enclosed with the letter to support Mr. Lewis’ position.

[22] FRO has never replied to this September 30 letter. Instead, it notified Mr. Lewis of its intention to proceed with the suspension of his driver's licence and passport, failing payment of the arrears.

[23] As of January 12, 2015, FRO states that the arrears total $212,820.47. The quantum of the arrears is in dispute. The applicant says that if the Minutes of Settlement are set aside and if the spousal support is not varied then he owes $112,832.

Mr. Lewis’ Financial Circumstances

[24] Mr. Lewis’ affidavit explains the nature of his business and the decline in his income since Justice Czutrin granted the temporary spousal support order.

[25] Mr. Lewis is a self-employed business man. When the interim spousal support order was made, he carried on business as Voltage Pay, operating in partnership with another person. Income received by Voltage Pay was split equally between his holding company, Jety Holdings, and his partner’s holding company.

[26] The motion before Justice Czutrin was heard on December 18, 2012. At that time the evidence before the court showed that Mr. Lewis’ income was between $597,000 and $1,000,000 per annum (the range from the two expert opinions).

[27] Voltage Pay is an online payment processing business. When payments are made online, a payment processing company is responsible for processing that payment. Voltage Pay introduces the online merchant to a bank or other institution. Voltage Pay receives a payment for every transaction between the merchant and the bank or other institution. This is Mr. Lewis’ only source of income.

[28] The nature of this business is extremely high risk. Few banks want to engage in these types of transactions. Consequently, when doing well, the returns are high, but they are equally bad when not doing well.

[29] Voltage Pay had a very lucrative client (Ideal Financial Solutions Inc.) situated in the United States that ran afoul of the Federal Trade Commission. On February 1, 2013, the Federal Trade Commission put Voltage Pay on notice that on January 30, 2013, the U.S. District Court for the District of Nevada had issued a Temporary Restraining Order with an Asset Freeze and Appointment of Receiver ("Freeze Order") against this client.

[30] The impact of Ideal being shut down was profound on Mr. Lewis’ business. For the fiscal year ending January 31, 2013, the Jety Holdings gross revenue declined from $1,063,713 to $249,754 in the fiscal year ending January 31, 2014.

[31] Using the same methodology employed by the two experts (Ranot and Freedman) to determine Mr. Lewis’ income for support purposes, Feldstein and Associates has calculated Mr. Lewis’ business income in fiscal 2014 at $60,000.

[32] For fiscal 2015, Mr. Lewis and his partner no longer operate Voltage Pay for two reasons. One is to cut down on the accounting fees to prepare three financial statements and corporate tax returns and two, because of Voltage's prior business dealings with Ideal. Instead, Mr. Lewis’ company, Jety Holdings receives his share of the commissions and fees paid by the banks.

[33] Mr. Lewis does not operate a bookkeeping system that would allowed him to generate an interim financial statement quick enough to allow his accountant to prepare an interim statement for this motion. Mr. Lewis provides all of his business records to his accountant at year end and from that he generates his annual financial statement. His fiscal year end is January 31, 2015. Up to date year end results will be available shortly.

[34] Based on gross revenue for the 11 month period ending December 31, 2014 and historical expenses, Mr. Lewis’ best estimate of his income (inclusive of grossed up discretionary expenses) from Jety Holdings for fiscal 2015 (i.e. most of calendar 2014) will be $185,000.

[35] Mr. Lewis provided Spousal Support Advisory Guideline calculations (“SSAG”). The SSAG present an upper spousal support range of $404 a month for a payor (who is the custodial parent) earning $185,000 per annum. This is significantly less than $8,893 a month for a payor earning $798,000 (the average earnings from the two expert's opinions).

[36] In June 2014, the Royal Bank of Canada provided notice to Mr. Lewis that they are terminating his banking services because his account is in constant overdraft. The bank cancelled access to his line of credit and three Visas which he used to pay for living expenses and pay support.

[37] Mr. Lewis states that he does not have the ability to pay $8,500 a month in ongoing support and absolutely no ability to pay any of the arrears. He says it is a struggle to keep up with the $5,000 monthly payments he has been making.

[38] Mr. Lewis states that the decline in his business has required him to significantly change his lifestyle, decrease his expenses, deplete capital and incur additional debt. Mr. Lewis gave up his office space in January 2014 because he can no longer afford the rent.

[39] He sold all of his RRSPs in February and April 2013. Between March and May 2013, he sold all of his investments with RBC. Mr. Lewis also depleted the children's educational savings funds and trust accounts, valued at approximately $95,000.

[40] Mr. Lewis also took out a second mortgage of approximately $150,000 on his residence in June 2013. He also sold two watches in March 2013 for $3,500.

[41] Mr. Lewis is solely responsible for the three children. At the time of separation until June 2013, all three children were attending private schools. Mr. Lewis could not afford to continue paying the fees for these schools. Two of the children have moved to a less expensive private school and the other attends a public school. Currently, Mr. Lewis owes the private school $16K in 2014 tuition.

[42] Mr. Lewis is also involved in a dispute with the Canada Revenue Agency (“CRA”) as a result of Ms. Dwyer’s failure to comply with the First Agreement they signed. She was required to refile her personal income tax return for 2011 and reflect the amounts she acknowledged by the Agreement as being periodic spousal support. She never did so nor has she filed a tax return for 2012 and 2013. For this reason, CRA is disallowing Mr. Lewis’s deduction for spousal support for those years. Mr. Lewis currently owes CRA $203K.

[43] In September 2013, following the execution of the Minutes of Settlement, Mr. Lewis was unable to pay all of the monthly support, but he continued to make partial payments of $2,500 a month.

[44] In October 2013, Mr. Lewis says that accommodations were made with Ms. Dwyer through her father that allowed him to pay at least $2,500 a month (under the Minutes of Settlement) until the arrears under the Minutes of Settlement were paid. He continued to pay $2,500 a month until June of 2014. At this point, he sold his last liquid investment and paid the accrued arrears of $36,000 owing under the Minutes of Settlement. The spousal support payments under the Minutes of Settlement are now current.

[45] In Mr. Lewis’ January 9, 2015 sworn financial statement, he lists total assets of $1,560,540 and total debts of $2,219,847. The only significant asset is his current house that is valued at $1,550,000 and heavily mortgaged. There is very little equity in the house. He has a negative net worth of $659,307.66. He has also produced his income tax returns for 2011, 2012 and 2013 and unaudited financial statements for Jety Financial and Voltage Pay Inc. for the years ending January 31, 2013 and 2014. All of these documents support Mr. Lewis’ evidence that he has experienced a significant downturn in his financial circumstances.

Impact of a Licence and Passport Suspension

[46] Mr. Lewis states that he requires his passport to travel to prospective and existing clients in the United States. He typically travels to Boston, New York and Florida every two months to attend conferences, run by the Online Lenders Association, the Tribal Lenders Association and the National Automated Clearinghouse Association. He relies on these conferences to secure clients. He also needs to travel to the US to meet his business banking partners that are located in San Antonio, Las Vegas and Ohio. As a result, Mr. Lewis says that the suspension of his passport will have a devastating effect on his business, specifically his ability to generate new revenue and maintain existing client relationships.

[47] Mr. Lewis’ business partner has two young children and he relies on Mr. Lewis to do his share of the traveling to meet existing and new clients. If Mr. Lewis is unable to do his share of the business travel then the he says the partnership will dissolve, severely affecting his ability to earn a living.

[48] Mr. Lewis drives to Oakville and Montreal frequently for meetings with their two Canadian clients. The balance of the company's clients is US or European based.

[49] Mr. Lewis also requires the use of vehicle to transport his children to school, their medical and dental appointments, their activities and the children's tutoring and therapy appointments. As noted, the children live with him and Ms. Dwyer does not pay any child support.

The Statutory Framework

[50] The Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31 deals with the suspension of a driver’s licence (“the Provincial Act”) and the Family Orders and Agreements Enforcement Assistance Act, R.S.C., 1985, c. 4 (2nd Supp.) (“the Federal Act”) deals with the suspension of a federal licence (this includes a passport).

[51] Part V of the Provincial Act sets out the procedure to be followed for the suspension of driver's licences due to non-payment of support. This Act also provides for the granting of refraining orders.

[52] Pursuant to s. 34 of the Provincial Act, when a support payor is in arrears the Director may serve the payor with the First Notice that the payor's licence may be suspended if one of the following three steps is not taken within thirty day of service. Section 34 states as follows:

34. When a support order that is filed in the Director’s office is in default, the Director may serve a first notice on the payor, informing the payor that his or her driver’s licence may be suspended unless, within 30 days after the day the first notice is served,

(a) the payor makes an arrangement satisfactory to the Director for complying with the support order and for paying the arrears owing under the support order;

(b) the payor obtains an order to refrain under subsection 35 (1) and files the order in the Director’s office; or

(c) the payor pays all arrears owing under the support order.

[53] The payor may apply for a refraining order provided he has brought or undertakes to bring a motion to change the support order (ss. 35(1) and (4)). Sections 34 and 35 therefore make clear that a payor in receipt of a notice has the option of seeking a refraining order, as one way to prevent the licence suspension.

[54] In this case, a First Notice of Intention to Suspend the Driver's Licence ("the First Notice") was issued on December 18, 2014. The First Notice advised Mr. Lewis that one of the above three actions was required by January 31, 2015 to avoid the suspension of his driver's licence. Mr. Lewis exercised option (b) and brought this motion for a Refraining Order. It is accepted that Mr. Lewis’ September 30, 2014 Answer covers his obligation to bring a motion to change the spousal support order.

[55] FRO also issued a First Notice on December 18, 2104 under the Federal Act that notified Mr. Lewis of FRO’s intention to initiate a Federal Licence (i.e. the passport) Denial Application.

[56] Under the Federal Act, FRO applies to the federal Minister for a suspension of the passport. Part III of the Federal Act deals with “Licence Denial”. Details of the process that FRO must follow are set out in ss. 66-75 of the Federal Act. A Licence Denial application is made and an affidavit must accompany the request. Where a debtor is in “persistent arrears”, suspension of a passport may be requested.

[57] It is FRO’s position that this court has no jurisdiction to issue a refraining order, directing that the passport not be suspended or that FRO not submit a Federal Licence Denial Application. FRO’s counsel offered no authorities to support her position. FRO argues that while the Provincial Act gives the support payor the option to seek a refraining order, the Federal Act dealing with the passport does not and therefore this court has no jurisdiction to make such an order.

[58] In fact, the Federal Act does not state that a refraining order cannot be made. It is silent on the question of whether a support payor can seek a refraining order dealing with a possible passport suspension. Case law supports my conclusion that this court has authority to issue a refraining order dealing with the passport.

[59] The only limitation in the Federal Act on a support payor deals with an appeal. Section 71 of the Federal Act states that “no appeal lies from any action taken under this Part”. This section does not apply to the motion before this court that seeks a refraining order.

[60] In Horner v. Benisasia, 2013 ONSC 5081 at para. 65 the court confirmed it has jurisdiction to issue a refraining order under the Federal Act. The court also explained that s. 71 only restricts appeals. The Court stated as follows:

I disagree with counsel for the FRO that I lack jurisdiction to order the FRO to withdraw any federal licence denial application. Section 71 of the federal legislation merely prohibits an appeal "from any action taken under this part;" (re. Licence Denial) the provision does not apply to a motion. Director, Family Responsibility Office for the Benefit of Sylvie Langlois and Melonie Herb, 240, 29 (Ont C.A.) para. 28. However, while I conclude that I have the discretion to order the FRO to refrain from asking the Federal Government to suspend and or refuse to renew Mr. Benisasia's passport, I refrain to do so for the reasons noted above.

[61] In Lemieux v Lehane, 2014 ONSC 4462, the support payor requested an order that FRO withdraw its federal licence denial application. The court rejected FRO’s position that it lacked jurisdiction to make an order directing the withdrawal of the federal application. At para. 22, the court in Lemieux relied on the above para. 65 from Horner.

[62] In the case before me, the federal application has not yet been made. The distinction between an application that has been made and one that is about to be made makes no difference to the issue of jurisdiction. I find that if the court has jurisdiction to direct that the federal licence denial application be withdrawn, it logically follows that the court also has jurisdiction to direct that FRO not make such an application.

The Refraining Order is Granted

[63] Both the Federal and the Provincial Acts have the same objective, the enforcement of support. They contain similar requirements to avoid a suspension. In practice, FRO will often, as in this case, move to suspend both licenses at once.

[64] Mr. Lewis requires his driver's licence and passport to travel for the purpose of earning an income. The above evidence establishes the need for the refraining order.

[65] FRO advised the court that if a refraining order is made dealing with the driver's licence, then it typically does not take steps to request the suspension of the passport. In other words since the court, according to FRO, has no jurisdiction to issue the refraining order for the passport, Mr. Lewis must rely on the past practice of FRO and hope that they will hold off in this case as they typically do. This assurance is not confirmed in writing.

[66] The rationale for issuing a refraining order is the same for the driver's licence and the passport. Mr. Lewis says that the Minutes of Settlement are binding and this signed agreement states that he owes no spousal support arrears. He has provided a prima facie case for this position.

[67] Alternatively, if the Minutes of Settlement are set aside then Mr. Lewis seeks a variation of the spousal support order and arrears because of the negative change in his financial circumstances. He also requests a credit for past payments as directed by Justice Czutrin. Once again, he has provided a prima facie case to support this alternative position.

[68] As well, the children live with their father full time and he is solely responsible for their care and financial well-being. This reinforces the need for the refraining order and Mr. Lewis’ prima facie case. The children rely on their father to earn an income and they will be at risk if the licence and passport are suspended.

[69] Mr. Lewis has filed an up-to-date financial statement with copies of his income tax returns and financial statements for his business. He has filed an Answer to Ms. Dwyer’s new (or amended) Application in which she seeks to set the Minutes of Settlement aside. He has undertaken to amend his Answer to request alternative relief if the Minutes of Settlement are not set aside (correction of the arrears and a retroactive adjustment of the interim order based on his inability to pay).

[70] FRO argues that the test requires the support payor to come to court with clean hands. The case law dealing with refraining orders does not always describe a two part test: a prima facie case and clean hands. There is no debate that a prima facie case is required. I agree that the support payor’s conduct may mitigate against a refraining order. However, on the evidence before me, I am not satisfied that there is any such conduct. It seems that FRO is relying on the failure to pay the arrears as evidence of unclean hands. However, Mr. Lewis has provided a prima facie case for no arrears owing, together with evidence of the change in his financial circumstances. When his sole responsibility for the children is added to the consideration, I find that there is no conduct to suggest that the refraining order should not be issued.

[71] In conclusion, the refraining order is granted and I make the following orders:

(1) I order that the Director of the Family Responsibility Office is refrained from taking the following steps:

(a) Directing the Registrar of Motor Vehicles to suspend Mr. Lewis’ driver's licence pursuant to Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31; and

(b) Making a Licence Denial Application for the suspension of Mr. Lewis’ passport pursuant to s. 67 of the Family Orders and Agreements Enforcement Assistance Act, R.S.C., 1985, c. 4 (2nd Supp.).

(2) It is a term of this order that Mr. Lewis shall continue to pay the spousal support to Ms. Dwyer as required in the Minutes of Settlement dated June 3, 2013.

(3) If the parties cannot agree on costs they shall exchange brief written submissions and provide them to the court no later than February 23, 2015.

C. Horkins J.

Date: January 22, 2015