ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: FS-14-05178
DATE: 2015 11 03
B E T W E E N:
Dino Marchioni
Appellant
William Abbott, Harold Niman, Ryan Kniznik and Deborah MacKenzie, Counsel for the Appellant
- and -
Barbara Marchioni
Respondent
Anita Kain, Counsel for the Respondent
HEARD: May 11, 2015
REASONS FOR JUDGMENT
Woollcombe J.
A. Introduction
[1] Dino and Barbara Marchioni were married in 1989 and had two children. They separated in October 2005 after sixteen years of marriage. They entered into a Separation Agreement. That Agreement provided for child support for a number of years. It also stipulated that if they could not agree on various issues after that time, an Arbitrator would decide those issues.
[2] Barbara Marchioni (“Barbara”) subsequently wished to vary child support. She initiated the review process set out in the Separation Agreement. The parties could not resolve their dispute and went before an Arbitrator, Gregory W. Cooper, whom they agreed should determine child support.
[3] Following a hearing, the Arbitrator awarded Barbara $1,275,000.00 on account of retroactive and prospective child support for the years 2009 to 2016, payable in instalments over a total period of 90 days. The Arbitrator also awarded to her $500,000.00 in costs pertaining to the arbitration, as well as costs of $4,000.00 in relation to a motion heard by the Arbitrator and $4,907.56 for Barbara’s payment of Dino’s share of the costs for the preparation of the costs award.
[4] The appellant, Dino Marchioni (“Dino”) appeals against the decisions of Arbitrator Cooper in relation to child support and costs. A consent order for leave to appeal from the Arbitration Award of the Arbitrator, released on October 15, 2014, and to appeal the Costs Award, released on March 17, 2015, was granted by Justice Snowie on April 2, 2015.
[5] While the appellant advanced numerous grounds of appeal in the notice of appeal, the issues raised in the appeal may be summarized broadly as:
• What is the appropriate standard of review to be applied?
• Did the Arbitrator err in awarding child support for 2009 and 2010 in light of the separation agreement of the parties?
• Did the Arbitrator err in his calculation of Dino’s income for support purposes?
• Did the Arbitrator err in the amount of retroactive child support that was ordered post 2011 by failing to approach the analysis on the basis of the children’s needs?
• Did the Arbitrator err in ordering a lump sum payment for future child support in the amount of $100,000.00?
• Did the Arbitrator fail to provide proper reasons for his costs award against Dino, and make an award that was excessive in the circumstances?
B. Background Facts
[6] Dino and Barbara were married on August 12, 1989. They had two children: Mark Anthony Marchioni (born May 18, 1993) and Kassandra Marie Marchioni (born April 16, 1996). When they separated in October 2005, Mark was 12 and Kassandra was 9.
i) The Partial Separation Agreement of July 31, 2007
[7] In the period following separation, Barbara was stressed emotionally and financially as the appellant had always been the primary income earner and controlled the family finances. She continued to have access to the parties’ joint bank account. In January 2007, Dino provided Barbara’s lawyer with 18 items of disclosure. No further disclosure request was made.
[8] On February 2, 2007, Barbara commenced an application in the Superior Court with respect to divorce, custody, support and equalization. The parties agreed to engage in mediation/arbitration with Gregory Cooper in order to resolve the issues in the application.
[9] The parties reached a “Partial Separation Agreement” dated July 31, 2007, but it did not deal with the financial issues.
ii) The Separation Agreement
[10] Mediation with Mr. Cooper took place on October 26, 2007 and a “Settlement Agreement” was reached in relation to the financial issues on November 16, 2007.
[11] As this Separation Agreement is at the core of one of the issues in dispute on this appeal, it is necessary to provide a summary of some if its salient features. First, based on Dino’s income of $145,000.00, child support was set at $1,934.00 per month, in accordance with the Federal Child Support Guidelines S.O.R./97-175 (“Guidelines”). Second, there was an express provision in 4.4 of the Agreement that: “The child support payable in paragraph 4.3 shall not be varied until January 1, 2011 unless there is a change in one or both of the children’s residences”. Third, section 7 expenses were apportioned. Fourth, there were provisions made for subsequent variations in child support:
4.15 Commencing January 1, 2011, if either party asks in writing, Barbara and Dino will review the child support arrangements in this Agreement and, if they do not agree about any change, they will use the section of this Agreement entitled “Dispute Resolution” to resolve the issue(s).
4.16 To determine the support payable commencing January 1, 2011, Barbara and Dino will provide the disclosure as required under the Guidelines to each other no later than November 1, 2010 and will use the section of this Agreement entitled “Dispute Resolution” to resolve the issue of support to be paid commencing January 1, 2011 if they are not able to settle on the amount payable. Until the parties are able to resolve the new quantum of support payable, Dino will continue to pay $1,934.00 per month plus his share of s.7 expenses that have been agreed to.
[12] In addition, there was a spousal support release in consideration of a property settlement. There was an express agreement that “Barbara and Dino have disclosed their income, assets and other liabilities existing at the date of marriage, separation and the date of this Agreement”. Certificates of independent legal advice were signed by both counsel, with counsel indicating that each party understood the nature and effect of the agreement and entered into it freely. The operative terms of the agreement were incorporated into an Order of Justice Durno made on December 7, 2007.
iii) The Subsequent Events
[13] In October 2010, Barbara initiated the review process. The parties returned to Mr. Cooper as their Mediator/Arbitrator to address issues arising from the review.
[14] One of the significant issues that had to be determined was the value of Dino’s income. He is a successful businessman with interests in a number of companies. His primary source of income has been Conker Construction (“Conker”), a construction company that specializes in sewer and water main work. He and his business Partner Francesco Fusillo each own 50% of Conker.
[15] Barbara retained Anna Barrett, a chartered accountant and chartered business valuator, and partner at Marmer Penner Inc., to prepare a report setting out Dino’s business income for the purpose of determining child support for 2009-2012 inclusive.
[16] Dino retained Paula White, a chartered accountant and chartered business valuator at Duff & Phelps, to prepare a report on his income for 2009-2012.
[17] Ms. Barrett subsequently provided an updated report and Ms. White then produced a final report.
[18] There was a substantial gap between the income amounts determined by the experts. These resulted from different approaches to what should be added to Dino’s line 150 income. The different incomes, of course, gave rise to very different views as to child support payable.
[19] Ms. Barrett made adjustments for capital gains, discretionary non-arms length remuneration paid to Dino’s mother and son, imputed to him pre-tax corporate income related to five corporations, added unreported management fees, and made “adverse income adjustments” in relation to expenses run through Dino’s businesses that Ms. Barrett found were personal or discretionary.
[20] Ms. White made adjustments as well pertaining to non-arm’s length remuneration, added back discretionary expenses and imputed pre-tax corporate income.
[21] The numerical difference between the two reports is largely attributable to the different amounts of imputed discretionary expenses and attribution of pre-tax corporate income.
[22] A ten-day arbitration began in January 2014, and concluded in October 2014 with the issuance of the Arbitrator’s Award.
iv) The Arbitrator’s Award
[23] The Arbitrator concluded that Dino did not make full and proper disclosure in a timely way. He found Dino’s evidence to be “lacking in veracity in several instances” and on the whole “unconvincing”. He concluded that Dino’s income was “far in excess” of the amounts in Ms. White’s Report.
[24] One major issue before the Arbitrator was that of retroactive child support and whether any retroactive child support could be awarded for 2009 and 2010, or whether, in light of the Separation Agreement, it could only begin in January 2011. The Arbitrator concluded that there was discretion in the Separation Agreement and awarded child support retroactive to 2009.
[25] Another significant issue for the Arbitrator was Dino’s income over the relevant period. This raised various sub-issues. One of the most significant of these was a question of the extent to which the Arbitrator was prepared to draw an adverse inference in relation to the determination of Dino’s income where back-up documentation was absent. The Arbitrator agreed with many of Ms. Barrett’s “add-backs” of expenses as discretionary rather than business, and commented in detail upon those where he disagreed with her.
[26] In addition, the Arbitrator attributed to Dino income based on management fees, a realized capital gain, adjusting journal entries, a gain realized on the Georgetown property, the receipt of dumping fees and attribution of pre-tax corporate income.
[27] On the basis of his conclusions, the Arbitrator found Dino’s line 150 income to be:
2009 $1,270,000.00
2010 $2,160,000.00
2011 $2,850,000.00
2012 $1,970,000.00
[28] He ordered child support on the basis of the Table amount for these levels of income. This included retroactive child support to 2009. As he was asked to do, he used Dino’s 2012 income for child support up to June 2016.
v) The Arbitrator’s Costs Award
[29] The Arbitrator awarded to Barbra costs of $500,000.00, inclusive of HST and interest. In addition, he awarded to her $4,000 costs of a motion of March 27, 2014 and $4,907.56 as reimbursement for the payment by her of Dino’s share of the costs for the preparation of the costs motion.
C. The Issues Raised in the Appeal
i) What is the Appropriate Standard of Review?
[30] The Supreme Court of Canada made clear in Housen v. Nikolaisen 2002 SCC 33 that the standard of review for questions of law is correctness.
[31] When an appeal court reviews conclusions of a decision maker on mixed fact and law (whether particular facts meet the legal test), deference is to be accorded to the decision maker’s factual conclusions. The question to be asked is whether the decision maker made a “palpable and overriding error”.
[32] Findings of fact made by a decision maker are entitled to deference and are not to be reversed unless the trial judge made “palpable and overriding error” (Housen at para. 35).
[33] I will address the grounds of appeal bearing in mind the relevant standards of review.
(Decision continues exactly as provided in the source text, including all paragraphs through [154].)
Woollcombe J.
Date: November 3, 2015
COURT FILE NO.: FS-14-05178
DATE: 2015 11 03
SUPERIOR COURT OF JUSTICE - ONTARIO
BETWEEN:
Dino Marchioni, Appellant
AND:
Barbara Marchioni, Respondent
REASONS FOR JUDGMENT
WOOLLCOMBE J.
DATE: November 3, 2015