COURT FILE AND PARTIES

COURT FILE NO.: FS-14-19363

DATE: 20151215

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Viviana Punzo, Applicant

AND:

Emanuele Punzo, Respondent

BEFORE: Pollak J.

COUNSEL: Ron Shulman, for the Applicant

Aurelio Pascuzzi, for the Respondent

HEARD: September 24, 2015

ENDORSEMENT

[1] The Respondent brought this Motion to Change on April 23, 2014, requesting that his child and spousal support obligations pursuant to a Consent Order be reduced after he was terminated from his employment in November, 2013. The Consent Order that is the subject of this motion (“the Order”) was made by Justice Daley on January 22, 2013 in Brampton. It reflects the terms of the Minutes of Settlement agreed to by the parties on January 22, 2013.

[2] The Respondent seeks to vary paragraph 7 of the Order regarding child support in accordance with the Child Support Guidelines retroactive to January 1, 2013. He also asks that his share of section 7 expenses be reduced, retroactive to January 1, 2013.

[3] He further seeks to reduce spousal support to zero effective January 1, 2013 or to an amount to be determined, commencing November 1, 2013.

[4] He also asks for an order deleting paragraph 13 of the Order, dealing with the depletion of his RRSP, as well as an order suspending any child support arrears and spousal support arrears.

[5] The Respondent submits that his income was greatly reduced after he lost his job in November, 2013 and had to go on Employment Insurance. He submits that this is a material change which justifies the variation of the support order.

[6] The Moving Party’s evidence is that when he agreed to this Order, he estimated that he would be earning approximately $100,000 per year working for Planet Paper Box Inc., but that his estimate was wrong. His employment was terminated on November 1, 2013. He earned $26,000 in Employment Insurance between November 1, 2013 and October, 2014. He found employment on November 10, 2014, earning a base annual salary of $48,000, with a car allowance of $800 per month and commission.

[7] The relevant terms of the Order are:

1. The child support arrears owing by the Respondent to the Applicant as of December 31, 20 12, shall be set at $20,000 and payable forthwith.

2. The arrears of s. 7 expenses owing by the Respondent to the Applicant as of December 31, 2012, shall be set at $5,000 and payable forthwith.

3. Commencing January 1, 2013, the Respondent shall pay to the Applicant the sum of $1,700 per month on the first of each month as spousal support for the support of the Applicant. This is based on the Applicant's income of $36,000 per year and the Respondent’s income of $105,000 per year, in accordance with the spousal support guidelines at high range of spousal support advisory guidelines.

4. As long as the Applicant has entitlement to receive spousal support from the respondent, spousal support shall always be calculated at high range of the spousal support advisory guidelines. This term shall not be varied under any circumstances whether foreseen, unforeseen, foreseeable and/or unforeseeable events.

5. Unless in the event of a catastrophic circumstances, the Respondent shall not apply to vary the support prior to June 30, 2014. This paragraph should not be read as to direct a review of support or indicate that the parties anticipate a review of Support after that date.

6. The Respondent's fluctuation in income shall not constitute a material change in circumstances unless his true income for support purposes falls below $90,000 per year, or increases above $115,000 per year. For the purpose of this paragraph, the Respondent's true income for support purposes shall mean the average true income of last three (3) full calendar years. This paragraph shall not be read to mean that income below $90,000 will automatically constitute a material change in circumstance.

7. Commencing January 1, 2013, the Respondent shall pay the Applicant child support on behalf of the child, Eric Punzo, in the amount of $919 per month which is in accordance with the Child Support Guidelines and the Respondent’s annual income at $105,000. The parties shall share any ongoing section 7 expenses proportionate to their respective incomes, based on the Applicant's income at $36,000 per year and the Respondent's set income at $105,000 per year, whereby the Applicant’s share is 40% and the Respondent’s share shall be 60%.

[8] The Applicant emphasizes paragraph 6 of the Order, which defines “true income” as an average over the last three years, and not the Respondent’s current or declared income.

[9] The Respondent deposes that his “income” amounts on line 150 of his annual income tax returns since 2010 were as follows:

(i) 2010 - $60,389.00;

(ii) 2011 - $90,876.00;

(iii) 2012 - $60,659.00;

(iv) 2013 - $61,620.22;

(v) 2014 - $25,521.74;

(vi) 2015 - $54,000 - estimated

[10] The Applicant states that her income was $38,225.72 in 2013 and $38,099.99 in 2014.

[11] The Respondent argues that as he is not earning the amount of income that the Order is based on ($105,000), this constitutes a material change in circumstances and the amount of child support and spousal support payable should be varied. The variation should be based on his true income as defined in the Order. He relies on the cases of: Savoia v. Santaera 248 A.C.W.S. (3d) 405; Walters v. Walters 2010 BCSC 828; Kajorinne v. Kajorinne, 2008 35686 (Ont. S.C.); and MacPherson v. MacPherson, 2005 28543.

[12] The Respondent relies on paragraph 3 of the Order:

3. Commencing January 1, 2013, the Respondent shall pay to the Applicant the sum of $1,700 per month on the first of each month as spousal support for the support of the Applicant. This is based on the Applicant's income of $36,000 per year and the Respondent’s income of $105,000 per year, in accordance with the spousal support guidelines at high range of spousal support advisory guidelines.

[13] He submits that a “material change” took place in November, 2013, when his employment was terminated. He submits that for the purposes of support, his “true income” for the years 2012, 2013, and 2014 (as defined by the Order), is the average of his annual income in the last three calendar years:

(i) True income for 2014 (average of 2014, 2013, and 2012 income): $51,313.00

(ii) True income for 2013 (average of 2013, 2012, and 2011 income): $75, 598.00

(iii) True income for 2012 (average of 2012, 2011, and 2010 income): $78,141.33

[14] The Applicant, however, submits that in the Order, income of $105,000 was “imputed” to the Respondent as a result of his refusal to produce full disclosure, the findings of forensic financial experts, his standard of living, and his history of self-employed business, which earned him additional undeclared income.

[15] The Applicant submits that as the Order was based on an imputed income for the Respondent, this court must consider:

(a) Why did income have to be imputed in the first instance? Have those circumstances changed? Is it still appropriate or necessary to impute income, to achieve a fair result?

(b) How did the court quantify the imputed income? What were the calculations and are they still applicable?

[16] She submits that the Respondent has not dealt with why income had to be imputed in the Order. The Respondent has not adduced any evidence to show:

(a) It is no longer necessary or appropriate to impute income. The payor’s representations regarding his income should not be accepted, even if they weren’t accepted before;

(b) That even if it is appropriate to impute income, changed circumstances suggest a different amount is more appropriate.

[17] The Applicant submits that the Respondent has the burden of proving the circumstances resulting in the original imputation of income, why they no longer apply and has not done so.

[18] The Respondent denies this. He emphasizes that there is no reference to imputed income in the Order.

[19] Our courts recognize consent agreements between the parties to corollary relief, and do not “look behind” the terms of those agreements. In Lashko v. Lashko, Horkins J. reviewed the test for variation of a support order. She followed the test set out by the Supreme Court in Willick v. Willick, 1994 28 (SCC), [1994] 3 S.C.R. 670 and in G.(L.) v. B.(G.), 1994 24 (SCC), [1995] 3 S.C.R. 367. “A court is not to consider the correctness of an existing order, and shall not depart from it lightly” (Willick at p. 688).

[20] Both parties in the case were represented by counsel when the terms of the Order were agreed to.

[21] The terms of the Order do not bar the Respondent’s motion for a variation. They do not, however, necessarily entitle him to succeed on this motion. The terms of the Order only define what would not amount to a material change in circumstances.

[22] The Court must consider, on the basis of the wording of the Order and on the basis of the evidence before it, whether the Respondent has experienced a “material change in circumstances”.

[23] The parties agree that the Respondent must show that a change in his condition, means, needs or other circumstances has occurred since the making of the spousal support order. The change must be a material change of circumstances that, if known at the time of the court Order, would likely have resulted in different terms.

[24] The Applicant seeks to rely on evidence in this Application which the parties had relied on and which was disputed, before the terms of the Order were agreed to. She seeks to interpret the terms of the Order with the aid of extrinsic disputed evidence. This approach would necessitate judicial consideration of all of the disputed evidence the parties were relying on prior to their agreement. I do not accept that this approach is appropriate in the circumstances. There is no suggestion that the Applicant did not appreciate what she was agreeing to. She had counsel representing her. If such an approach were to be accepted by the Court, there would be no incentive for partiers to reach agreements. The Applicant has not sought to vary the terms of the Order.

[25] Notwithstanding the fact that the Applicant has not sought to vary the terms of the Order, the Applicant further submits that throughout this Application, the Respondent continued to be in breach of his disclosure obligations as more than half of the materials requested have not been produced. She submits that she could not do a comprehensive analysis of the Respondent’s income. Furthermore, she submits, the disclosure that was provided raised extremely troubling new facts regarding the Respondent’s true income, which now necessitated even further disclosure based on these new issues. The Applicant relies on a Statement of Claim (which was disclosed by the Respondent regarding an action by the former Employer of the Respondent) which pleads that:

(a) During the period January 25, 2010 to November 21, 2013, Planet Paper Box paid the Respondent compensation in the sum of $520,773.80 (or $135,854.03 per year);

(b) The Respondent earned additional undeclared income, beyond the realm of his employment with Planet Paper Box, through various side business activities wherein he acted as a consultant to other companies. This additional income earned is over and above the $135,000 per year he earned from his employment with Planet Paper Box;

(c) Before he was terminated from Planet Paper Box, the Respondent was offered an opportunity to continue working for Planet Paper Box at arm’s length, as an independent sales agent. This arrangement would have been more lucrative to the Respondent as it would have allowed him the flexibility to continue being a sales consultant for other companies, while earning commissions on products sold for Planet Paper Box;

(d) The Respondent’s misconduct in willfully beaching his employment contract with Planet Paper Box caused his own termination.

[26] The Respondent’s defence to that Statement of Claim pleads that:

(a) In addition to his employment with Plant Paper Box, the Respondent had a continuing business relationship as a consultant with another company, namely DW Plastics;

(b) Throughout his tenure with Planet Paper Box, the Respondent also provided consulting services to at least two other companies, namely Astra Packaging and Guycan Plastics;

(c) The Respondent was entitled to a base salary of $108,000 per year, plus commissions of 2%-4% of his net sales, a vehicle allowance of $10,800, amongst other benefits;

(d) In 2013, the Respondent earned approximately $180,000 from his employment with Planet Paper Box alone, and in 2014 anticipated making in excess of $250,000 with Planet Paper Box.

[27] The Applicant submits that these pleadings show that there are significant issues with respect to the amount of the Respondent’s income. She argues that although the pleadings are allegations, the information contained is so specific that such is enough to show that the Respondent earned $520,773.80 from January 25, 2010 to November 21, 2013. This also shows that he has filed false income tax returns and sworn false financial statements in this Application.

[28] The Applicant further submits she has made several attempts to get disclosure from the former employer and the Respondent.

[29] She submits that they are in breach of a disclosure order. It has therefore been impossible to determine the income received by the Respondent.

[30] The Applicant states that she cannot financially pursue the disclosure obligations any longer.

[31] It is important to emphasize that the Applicant has not challenged or sought to vary the Order.

[32] The Applicant emphasizes that the Order states that the Respondent’s “average over 3 years” is to be considered “true income”, as opposed to his declared income. The Applicant submits that “it is historically clear that the Respondent’s declared income cannot be believed to be the reflection of his true income for support purposes”. She relies on the pleadings referred to above, which show that the Respondent’s average income for the years 2012 to 2014 was approximately $113,791.67. She submits that the following is accurate:

Year Respondent’s Income

2012 $135,854.03 (per Statement of Claim)

2013 $135,854.03 (per Statement of Claim)

2014 $20,002 (2014 T4E) plus $5,519.52 (2014 T4, Seydaco Packaging Corp.)

3-year average: $99,076.53

[33] Further, she submits that if the Respondent’s pleading in his Statement of Defence that he earned $180,000 in 2014 makes the three-year average is significantly higher.

[34] The Applicant submits there has been no material change. She further argues that this average income does not include additional undeclared income earned by the Respondent. Further, relying on the Respondent’s Statement of Defence, his commissions would equal $137,500 (calculated at 2.75% of sales as indicated in the Offer of Employment) -- his total income would be around $185,500 (including base salary of $48,000).

[35] I do not accept the Applicant’s submissions that the pleadings (referred to above) relied on are evidence, in this motion, of the earnings of the Respondent – they are only pleadings in litigation between different parties who are not involved in this proceeding.

[36] The Applicant argues that the Respondent’s declared income is not his “true income” as he is hiding income. The Court, however, has no evidence on this motion of such hidden income or of excessive spending by the Respondent, which would support a finding that the Respondent is now hiding income. Absent such evidence, the submissions of the Respondent with respect to his income can be accepted.

[37] When the “true income”, based on the evidence of the moving party, as defined by the Order, for 2012, 2013 and 2014, is compared to the “set” income of $105,000 as defined by the Order, there has been a significant decrease in income, which would support a finding that a material change has occurred.

[38] The difficulty with the Applicant’s position on this motion is that the Order does not provide that the income of $105,000 is imputed to the moving party. For the Applicant to be successful, the Court must examine the evidence which existed prior to the negotiated agreement. Had the Applicant produced evidence to support the finding that the Respondent is now hiding income or that there should now be “imputed income”, the Court could have considered the Application’s submissions.

[39] As there was no such evidence, the Court must consider on the basis of the evidence on this motion, whether the Respondent is earning undeclared income and that his “true income” as defined by the Order is not as he has submitted and referred to in paragraph 31 above.

[40] In accordance with the jurisprudence relied on by both parties, I must then ask, if the parties had known at the time of the Order that the Respondent would not earn $105,000, would the negotiated terms of the Order have been different? I find that the “true income” of the Respondent as defined by Order has been significantly decreased, and that the resulting negotiated terms would have been different had the parties known this. I therefore find that the Moving Party has met his burden of proving that a “material change” in circumstances has occurred.

[41] The Moving Party has requested the following order if he is successful on this motion:

(a) An order to vary paragraph number 7 of the Honourable Mr. Justice Daley’s court order dated January 22, 2013 whereby the child support amount payable by the Respondent on behalf of the child of the marriage should be amended/reduced in accordance with the Child Support Guidelines retroactive to January 1, 2013 and the Respondent’s share of section 7 expenses shall be reduced retroactive to January 1, 2013.

(b) An order to vary paragraph number 4 of the Honourable Mr. Justice Daley’s court order dated January 22, 2013 whereby the spousal support amount payable by the Respondent to the Applicant should be reduced to zero effective January 1, 2013 or an amount to be determined and/or no spousal support payable commencing November 1, 2013.

(c) An order to delete paragraph number 13 of the Honourable Mr. Justice Daley’s court order dated January 22, 2013.

(d) An order to suspend the payment of any existing child support arrears and spousal support arrears owing by the Respondent and to pay ongoing child support in accordance with the Child Support Guidelines subject to a further agreement between the parties or court order.

(e) Such further and other relief as the Honourable Court deems just.

(f) Costs on a solicitor and client basis plus applicable Federal Goods and Services tax.

[42] Child support is calculated based on a party’s income as reported on his or her income tax return as a starting point, and in this case the income pursuant to s. 16 of the Federal Child Support Guidelines, (SOR/97-175). The “true income” of the Moving Party as defined in the Order is not the benchmark for the calculation of support; it is a defined term in the consent order for the purposes of determining, whether there has been a material change.

[43] The evidence of Mr. Punzo’s income is set out in his affidavit evidence. I have already found that I cannot accept the evidence of the responding party to challenge this evidence.

[44] As I have found that there has been a material change in circumstances, the Court grants Mr. Punzo’s requested Order as follows:

(a) to vary paragraph number 7 of the Honourable Mr. Justice Daley’s court order dated January 22, 2013 whereby the child support amount payable by the Respondent on behalf of the child of the marriage should be amended/reduced in accordance with the Child Support Guidelines retroactive to January 1, 2013 and the Respondent’s share of section 7 expenses shall be reduced retroactive to January 1, 2013.

(b) to vary paragraph number 4 of the Honourable Mr. Justice Daley’s court order dated January 22, 2013 whereby the spousal support amount payable by the Respondent to the Applicant should be reduced to zero effective January 1, 2013 or an amount to be determined and/or no spousal support payable commencing November 1, 2013.

[45] I do not order a deletion of paragraph 13 of the Order with respect to arrears. The Respondent is directed to pay any such arrears to the date of this Order.

Costs

[46] The Respondent, Mr. Punzo has been the successful party on this Application. He is therefore entitled to an appropriate cost award. If the parties are unable to agree on the cost award, they may make brief written submissions (three pages or less) as follows:

The Respondent’s costs submissions must be delivered by 12:00 p.m. on December 22, 2015; and the Applicant's costs submissions must be delivered by 12:00 p.m. on December 30, 2015.

Pollak J.

Date: December 15, 2015