Ponkin v. Werden, 2015 ONSC 791

COURT FILE NO.: F887/13

DATE: February 10, 2015

SUPERIOR COURT OF JUSTICE – ONTARIO

FAMILY COURT

RE: Susie Ponkin, applicant

AND:

Leonard James Werden, respondent

BEFORE: MITROW J.

COUNSEL: Sharon Hassan for the applicant

Thomas G. Chalmers for the respondent

HEARD: June 25, 2014, October 20, 2014 and December 15, 2014

ENDORSEMENT

INTRODUCTION

[1] The sole issue argued before me is the claim of the applicant (“Ms. Ponkin”) for interim spousal support payable by the respondent (“Mr. Werden”).

[2] The parties were married in September 2007. They began cohabitation in March 2005. The separated on June 1, 2013. The parties’ cohabitation lasted a little over eight years.

[3] Mr. Werden and Ms. Ponkin did not have any children together. However, Mr. Werden was previously married and has three children by that relationship. During the relevant time period for the purpose of the motion, Mr. Werden’s two youngest children, Leah, born April 8, 1992, and Rebecca, born September 28, 1998, were residing with Mr. Werden and at all material times I find that each daughter was a “child of the marriage” within the meaning of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) c.3 [as am. by S.C. 1997, c.1].

[4] I am satisfied on the evidence that the interim spousal support should commence on the date of separation, namely June 1, 2013. Ms. Ponkin’s motion was returnable very soon after separation and has endured numerous adjournments while other matters, and steps in this proceeding, were dealt with.

[5] Leah returned to live with Mr. Werden in April 2013 to attend Western University. Previously, she had been attending university in Ottawa for two years. At all material times, for the purpose of the motion, Rebecca was living with Mr. Werden and was a high school student.

[6] Ms. Ponkin has not worked outside the home for a number of years. She submits that she has health issues and cannot work.

[7] While Mr. Werden does not dispute that Ms. Ponkin has had historical health issues, he challenges Ms. Ponkin’s assertion that she is not able to work and he submits that $35,000 income should be imputed to her.

[8] Mr. Werden is self-employed and has an interest in various corporations. He buys and sells pigs. He has been quite successful in his business and, although his income fluctuates, there have been a number of years, as noted below, where Mr. Werden has been able to generate a very substantial income.

[9] Ms. Ponkin submits that Mr. Werden was a very high income earner, that the Spousal Support Advisory Guidelines (SSAGs) do not apply and Ms. Ponkin submits that she should receive interim spousal support in the amount of $7,500 per month.

[10] The calculation of Mr. Werden’s income is at the center of this motion. The motion material filed by counsel on behalf of their respective clients was substantial.

[11] Both counsel filed extensive briefs, setting out in substantial detail as to how the court should calculate Mr. Werden’s income and his spousal support obligation to Ms. Ponkin. Not all of the briefs were available on the initial date set for the argument of this motion and, as a result, this motion was heard on portions of three separate days during which counsel filed updated documentation. A number of the briefs filed by counsel were marked as exhibits.

[12] Mr. Werden does not dispute Ms. Ponkin’s entitlement to interim spousal support. He disputes the quantum claimed by Ms. Ponkin. Mr. Werden’s submission is that spousal support should be in the range of $3,800 per month.

[13] On separation, Mr. Werden unilaterally determined what he should pay for spousal support and he fixed this amount at $2,666 per month. A consent order was made by Marshman J. dated May 16, 2014 continuing payment of that amount until the issue of interim support was argued.

[14] There are two other noteworthy facts that are not in dispute. Firstly, Ms. Ponkin has retained Mr. James Hoare to provide an expert report that would include money available to Mr. Werden to pay spousal support; Mr. Werden was ordered to pay the costs of that report to a maximum of $8,000 subject to variation by the court or agreement of the parties. Secondly, it was ordered on May 16, 2014 that Ms. Ponkin would proceed with a medical assessment by an assessor of her choice to provide a report that would include the state of her health and the impact of her health on her ability to work. Mr. Werden was ordered to pay for that report to a maximum of $3,500.

[15] The parties further agree that Mr. Hoare’s report was not yet prepared during the course of the argument of the motion; secondly, the parties agree that the medical assessment has not been prepared and, furthermore, Ms. Ponkin admits that she has provided no medical evidence whatsoever on the motion, to corroborate her own affidavit evidence that she is unable to work due to health reasons.

[16] Mr. Werden takes substantial issue with the position taken by Ms. Ponkin on the motion as to her inability to work given the lack of any medical evidence. For reasons explained below, I agree to some extent with Mr. Werden’s position and I impute income to Ms. Ponkin.

DETERMINATION OF MR. WERDEN’S INCOME FOR THE PURPOSE OF INTERIM SPOUSAL SUPPORT

[17] It must be noted at the outset that this is a motion for interim support. It is not a trial. Even though both parties submitted to oral questioning, this court is not in the same position as a trial judge in terms of determining with specific certainty what Mr. Werden’s income is.

[18] An order for interim spousal support can be varied at trial to the date of the commencement of the interim order if the full evidentiary record at trial justifies such an order: see, for example, Fischer v. Fischer, 2008 ONCA 11, 88 O.R. (3d) 241 (Ont. C.A.) at para. 76; see also Louis v. Louis, 2008 27178 (Ont. S.C.J.) at para. 17, where the court indicates that interim orders are subject to variation by the trial judge who will make his or her decision on the basis of a full record.

[19] Mr. Werden is the sole owner and shareholder of Maximum Swine Marketing Ltd. (MSM). This corporation buys and sells pigs. It is through this corporation that Mr. Werden earns the bulk of his substantial income. As discussed below, Mr. Werden also has interests in other corporations. Ms. Ponkin submits that various sums of money paid by MSM to those corporations should be added back to Mr. Werden’s income available for spousal support as those are transactions between related corporations.

[20] I decline to make the adjustments as requested by Ms. Ponkin. For reasons explained below, there is insufficient evidence on this motion to make those types of adjustments and that is an issue best left for the trial judge.

[21] The most important analysis that needs to be done is on the income available to Mr. Werden through MSM.

THE INCOME OF MSM FOR PURPOSES OF INTERIM SPOUSAL SUPPORT

[22] All relevant income tax returns and financial statements for MSM are contained in the applicant’s financial brief filed on the motion.

[23] The proper principles to follow in calculating Mr. Werden’s income from MSM is summarized as follows:

a) Firstly, it is necessary to calculate Mr. Werden’s income from MSM for the years 2013 and 2014. At this point in time, interim support for 2013 and 2014 is being calculated on a retrospective basis. The income from MSM for 2013 and 2014 is a known amount. Accordingly, it is unnecessary to engage in the averaging of income, as would be the case when support is being assessed on a prospective basis and future income is not known and must be calculated based on a preceding fluctuating pattern of income;

b) Both parties take the approach that the starting point in calculating Mr. Werden’s income from MSM is to take MSM’s net pre-tax income and then add to that income any T4 income received by Mr. Werden from MSM. In essence, both parties support the process of piercing the corporate veil and looking at all income within MSM that is available to Mr. Werden to pay interim spousal support. This is a proper approach on the facts of this case; it reflects the evidence that Mr. Werden uses the corporate account as his personal account to pay his personal expenses; and this approach is consistent with Wildman v. Wildman, 2006 33540 (ON CA), [2006] O.J. No. 3966 (Ont. C.A.).

c) Both parties further agree that it is necessary to adjust Mr. Werden’s income by deducting from his income the spousal support that he is currently paying to his first wife;

d) Both parties agree that a further adjustment should be made to Mr. Werden’s income by deducting the notional table amount of child support in respect of those children who are living with him;

e) The parties differ in one main respect regarding the deduction of notional table amount of child support. Mr. Werden’s calculations reflect a gross-up of the child support, whereas Ms. Ponkin’s calculations do not gross-up the child support.

[24] Ms. Ponkin also raises an issue as to whether some of the expenses claimed by MSM should be added back for spousal support purposes because those expenses are not business expenses but are properly characterized as Mr. Werden’s personal expenses. Mr. Werden opposes any such adjustment and submits that the financial statements at this time should be taken at face value and not adjusted.

[25] For reasons set out below, I agree in part with Ms. Ponkin. I find that there are some very unusual facts in this case that merit, even on a motion for interim support, some adjustment of the expenses claimed by Mr. Werden.

(a) Summary of MSM Income for Years 2010 – 2014 Inclusive

[26] The year-end for MSM is August 31st. For the years 2010 – 2014, the table below shows in the last column all the income available to Mr. Werden from MSM for interim spousal support (subject to adding back some expenses, discussed below); the line 150 income from Mr. Werden’s tax return (that includes grossed-up dividends from MSM) is shown for comparison purposes:

Year

2010

2011

2012

2013

2014

Tax Return

(line 150)

$354,256

$443,090

$662,127

$385,822

Tax return N/A

T4 Income

from MSM

$60,506

$49,340

$180,287

$42,072

$190,000*

MSM Net Income Before Taxes

$339,387

$401,693

$490,385

$248,753

$559,381*

Total of MSM Net Income Plus T4 Income

$399,893

$451,033

$670,672

$290,825

$749,381*

• Taken from MSM’s internal statements, as summarized in Mr. Werden’s document brief, Ex. #7, tabs 1 and 3.

(b) Adjustment to Expenses Claimed by MSM

[27] The evidence of Mr. Werden about his knowledge of the financial affairs of MSM was most unusual. As revealed by the transcript of his oral questioning, Mr. Werden professed to have, if he is to be believed, virtually no knowledge of the expenses and other financial details relating to MSM.

[28] A common theme in Mr. Werden’s evidence on his oral questioning was that he “sells pigs,” leaving it to his office manager, Ms. Judy Pegg (“Ms. Pegg”), to pay and manage all the corporate expenses.

[29] MSM is the source of Mr. Werden’s money. His personal expenses, including spousal support to his first wife and expenses relating to his children, are paid through MSM.

[30] Mr. Werden has an assortment of credit cards that he uses for both business expenses and personal expenses. Mr. Werden prefers using his American Express credit card.

[31] Ms. Pegg, who has signing authority for corporate cheques, pays all Mr. Werden’s credit card bills from MSM’s corporate bank account. As between the credit cards, there does not appear to be a designated credit card for business expenses or personal expenses. All credit card expenses are comingled as to business and personal by Mr. Werden. Mr. Werden was clear in his evidence (see, for example, pages 158 – 160 of the transcript): he hands all the credit card statements to Ms. Pegg; he does not go through any of the statements to delineate which expenses are business or personal; he states that Ms. Pegg “knows” which expenses are personal and which are not, but when pressed as to how Ms. Pegg could possibly “know” all this information without direction from him, Mr. Werden could only muster the unconvincing response that the questioner would “have to ask Judy.”

[32] Further, and quite inappropriately, Mr. Werden’s first two financial statements were prepared in the name of, and signed by, Ms. Pegg (see tabs 6 and 12 of the continuing record). This was pointed out by the court on June 25, 2013 and since then Mr. Werden has filed a sworn financial statement that he has signed.

[33] In buying and selling pigs, Mr. Werden has many contacts. MSM does not house livestock. MSM buys from one source and sells to another source. From Mr. Werden’s oral questioning, it is evident that he does not travel much in his business anymore, other than the odd trade show; any visits with people that he does business with appear to be infrequent as compared to “10 to 12” years ago. When asked whether he goes to his “dealer friends,” Mr. Werden replied “not for a long time” (see transcript pages 29, 78 – 79).

[34] Ms. Pegg did file several affidavits to explain her involvement in the management of MSM. Her evidence generally corroborates Mr. Werden’s evidence in the sense that she writes all the cheques on the MSM business account to pay for business and personal expenses for Mr. Werden and his children.

[35] In her submissions, supplemented by Ex. #5, Ms. Ponkin argues that a number of expenses set out in the MSM financial statements should be added back to Mr. Werden’s income, to the extent of 50% of the expenses. Specifically (see Ex. #5, tab 2), Ms. Ponkin focusses on expenses for professional fees, advertising and promotion, office expenses, vehicle expenses, phone expenses and travel expenses. For the years 2011 to 2013 inclusive, Ms. Ponkin submits that amounts ranging from a low of $65,863 to a high of $71,938 should be added back to Mr. Werden’s income for the relevant years during that period of time. Those amounts represent 50% of the actual expenses shown on MSM’s financial statements.

[36] While generally I would accept Mr. Werden’s submission that the financial statements that have been prepared by the accountants should govern the result on an interim support motion, with any adjustments to be left for trial, I find that some adjustments need to be made, on the facts of this case, even on an interim basis.

[37] For example, the evidence is unconvincing that Mr. Werden can simply hand all of his credit card statements to Ms. Pegg, without giving her any direction or instruction, and assume that she knows which items are expenses and which items are business. Aside from credit cards, there appears to be little oversight by Mr. Werden as to what expenses are personal, with everything being delegated to Ms. Pegg. Accordingly, for the relevant years discussed below, I have added back 50% of expenses for meals and entertainment shown on the MSM financial statements.

[38] The other category where an adjustment should be made is motor vehicle expenses.

[39] During the relevant years discussed below, the financial statements show motor vehicle expenses ranging in the neighbourhood of $25,000 annually. However, MSM financial statements do not disclose that MSM owns any vehicle. The vehicle that Mr. Werden uses is a truck that he owns personally. Mr. Werden’s financial statement sworn July 11, 2014 discloses “transportation” expenses at a little over $2,000 per month.

[40] The totality of the automobile expenses, both personal and corporate, and considering that the vehicle is personally owned, is excessive, even acknowledging that some corporate automobile expenses may be mileage reimbursement for others. Also relevant is Mr. Werden’s evidence as to his limited travel for business purposes. I find that there is a strong inference that motor vehicle expenses on the MSM financial statements are excessive. Accordingly, given the evidence, I find that it is appropriate to add back to Mr. Werden’s income 75% of the motor vehicle expenses shown on the MSM financial statements.

[41] With respect to the other categories of expenses that Ms. Ponkin submits should be added back to Mr. Werden’s income to the extent of 50%, I decline to add any of those expenses back into income. The evidence on the motion does not support making any further adjustments; if such adjustments are to be made, then that will be left to the trial judge.

[42] Ms. Ponkin also added back to income “management bonus” amounts shown in Ms. Ponkin’s calculations (Ex. #5, tab 1). The years that Ms. Ponkin sought to add back management bonus were the years 2011 through 2013 inclusive. However, I decline to make any such adjustment. Ms. Pegg (in her affidavit sworn June 23, 2014) provided some helpful detail and for the purpose of this motion I accept her evidence that all of the management bonuses have been included in the T4 income. Any further exploration of this issue is left for the trial judge.

(c) Determination of Mr. Werden’s Income from MSM for 2013

[43] As shown in the above table, the MSM pre-tax income plus T4 income, prior to any adjustments, is $290,825.

[44] The motor vehicle expense for 2013 is $25,349. Seventy-five per cent of that amount is $19,012. The entertainment expenses are $43,395 and 50% of that amount is $21,698. Accordingly, the amount of $40,710 is added to Mr. Werden’s MSM income.

[45] The MSM income is $331,535 prior to adjustments for spousal support and child support.

[46] Both parties agree that the support paid to Mr. Werden’s ex-spouse should be deducted from his income. That amount is $66,637 for 2013.

[47] Both parties also agree that Mr. Werden is entitled to a notional deduction for child support in respect of the children who are in his care. Both parties use the table amount for child support based on his gross income (although the parties differ on the quantum of the gross income).

[48] The table amount for two children on an income of $331,535 is $4,081 per month or $48,972 annually.

[49] Mr. Werden also sought to deduct s. 7 expenses in 2013 representing tuition fees for Leah and hockey expenses for Rebecca.

[50] Leah Werden had filed several affidavits, the latest affidavit being sworn September 17, 2014.

[51] Leah registered fulltime for Western for the calendar year starting September 2013; however, she only took one course in the first semester and then she deposes that she increased her course load to fulltime in the second semester starting in January 2014.

[52] The full tuition for that entire academic year was $7,115.71. There is satisfactory evidence that Mr. Werden paid the first installment of that tuition in the amount of $5,141 (rounded). What is not clear is whether there was any refund or adjustment to the amount paid given Leah’s actual attendance. However, for the purpose of this motion, I allow Mr. Werden a s. 7 expense for Leah for 2013 in the amount of $5,141, being the actual amount paid that year towards the tuition cost.

[53] For the academic year starting September 2014, there is evidence that Leah was attending fulltime at Western. Tuition was paid by Mr. Werden in the late summer of 2014 in the amount of $7,271. Also, Leah attended summer class at Western in 2014 for which Mr. Werden paid $1,195. Therefore, I allow Mr. Werden a s. 7 expense for Leah in the amount of $8,466, as claimed by him for 2014.

[54] There is evidence that Mr. Werden’s oldest child, Spencer, was registered part time in university in the fall of 2013 and that thereafter Spencer withdrew completely from university. However, Mr. Werden has not sought any s. 7 expenses in relation to Spencer for 2013 (or 2014) in his support calculations (see Ex. #7).

[55] For the youngest child, Rebecca, I do not allow account the s. 7 expenses claimed by Mr. Werden in the amount of $4,001 for each of 2013 and 2014 for hockey expenses. Given Mr. Werden’s income, and the notional table amounts imputed to him, I do not regard the hockey expenses as “extraordinary” within the meaning of s. 7>(f) of the Federal Child Support Guidelines, SOR/97-175 as amended. I find that these expenses would be included in the substantial notional table amounts, in particular having regard to definition of “extraordinary expenses” set out in s. 7(1.1) of the Guidelines.

[56] In deducting from Mr. Werden’s income the notional table amounts and the s. 7 expenses, the issue arises whether those amounts should be “grossed-up,” as suggested by Mr. Werden. I agree with Mr. Werden.

[57] There is a specific discussion in the SSAGs regarding adding back spousal support paid to an ex-spouse and notional child support for children in the care and support of the party who is paying spousal support.

[58] In the present case, the applicable SSAG calculation is the “without child support” formula. This means that the theory for calculating ranges of spousal support under the SSAGs is based on the “gross income difference.”

[59] Using the “without child support” formula, the SSAGs stipulate that for a prior child (and this includes a notional deduction for a prior child in the care of the payor spouse), as child support is paid on a net or after-tax basis, that the child support amount must be grossed-up to reflect the payor’s marginal tax rate on the child support amount, and then that grossed-up amount is deducted from the payor’s gross income. However, in the “with child formula,” as that formula works with individual net disposable incomes, rather than gross incomes, the child support amount would not be grossed-up. (See the discussion in the final version of the Spousal Support Advisory Guidelines, July 2008, (s. 12.3.1 to s. 12.3.3). It is noted in the SSAGs that a gross-up for spousal support paid to a former spouse is not necessary because spousal support is paid on a “gross or before-tax” basis (s. 12.3.1).

[60] I do not agree with Ms. Ponkin’s submission (see Ex. #6, page 2) that the child support should not be grossed-up in the present case because Mr. Werden is not actually paying child support. Ms. Ponkin refers to s. 12.3.1 and 12.3.3 of the SSAGs in support of that submission.

[61] Those sections of the SSAGs do not make that specific statement. While s. 12.3.3 gives an example of notional child support that is not grossed-up, it is critical to note that that example deals with the “with child support” formula where there is no gross-up. Whether a payment is “actual” or “notional” is not relevant.

[62] The “without child support” formula is grounded on the gross income difference approach; it is the same approach as the formula for spousal support paid by the custodial parent. Example 8.7 of the SSAGs clearly illustrates that the notional child support for the custodial parent who is paying spousal support must be grossed-up. There is no distinction, in principle, in example 8.7 and the situation that Mr. Werden is in.

[63] In his spousal support calculations (Ex. #7), Mr. Werden has shown the details of all of the calculations and I adopt the methodology set out by Mr. Werden in Ex. #7, in particular at tabs 3 and 4.

[64] Accordingly, for 2013, Mr. Werden’s table amount of child support is $48,972 and the s. 7 amount is $5,141, for a total of $54,113 for child support.

[65] In order to calculate the gross-up, I adopt the methodology and the marginal tax rates set out in Mr. Werden’s calculations (but subject to the caveats set out below).

[66] Using Mr. Werden’s methodology, the child support amount of $54,113 is multiplied by the marginal tax rate of 40.16%, for a total of $27,732 (which is the gross-up), yielding a grossed-up child support amount of $81,845. When this amount, together with the spousal amount paid to his ex-spouse is deducted from his gross income, this yields adjusted gross income of $183,053 for 2013 ($331,535 - $66,637 - $81,845).

[67] In dealing with the formula for the gross-up, I suspect that the formula used by Mr. Werden may not be correct. The purpose of the gross-up is to calculate the amount of income that Mr. Werden has to earn, which after applying the relevant marginal tax rate, equals the child support amount. The calculations used by Mr. Werden do not appear to accomplish this result.[^1]

[68] The formula used by Mr. Werden would impact unfavourably on him as it would tend to produce lower amounts for grossed-up child support than the method used in the footnote referred to in the preceding paragraph. Although the apparent formula used by Mr. Werden might not be the correct mathematical formula, I use that formula because there was no other evidence presented, no other submissions were made and also because Mr. Werden chose this formula.

[69] Also, the marginal tax rates used by Mr. Werden appear to be on the low side; however, I use those rates because that was the evidence provided by Mr. Werden; those rates were provided to him by Ms. Pegg and he was satisfied to rely on them; no submissions were made as to any other marginal tax rates; and finally, the use of a marginal tax rate that is too low affects only Mr. Werden adversely because it reduces the deduction for grossed-up child support.

(d) Determination of Mr. Werden’s Income from MSM for 2014

[70] Both parties agreed as to the income to use for 2014 and that income was based on MSM’s internal financial statements for the year ending August 31, 2014. As indicated in the table, that income was $749,381.

[71] It was also agreed by Ms. Ponkin that she was content to use that amount for the purposes of interim spousal support without adding back any expenses of MSM to Mr. Werden’s income.

[72] The calculation of Mr. Werden’s income and the adjustments as set out in Mr. Werden’s calculations at tab 3 of Ex. #7 is accepted, subject to disallowing the sum of $4,001 for hockey expenses. Therefore, Mr. Werden’s income from MSM for 2014 would be reduced by the $67,629 paid to his ex-spouse for spousal support. The total child support is $106,140 (monthly table amount of $8,845 x 12) plus the tuition ($8,466 as discussed above), for a total of $114,606. Applying the marginal rate used by Mr. Werden of 42.16% yields a gross-up of $48,318. The total grossed-up child support is $162,924.

[73] The result is that Mr. Werden’s adjusted gross income for 2014 (after deducting spousal support and grossed-up child support) is $518,828 ($749,381 - $67,629 - $162,924).

(e) Determination of Mr. Werden’s Income from MSM for 2015

[74] In my view, it would be inappropriate to use 2014 income to calculate interim spousal support for 2015.

[75] Given that interim spousal support for 2015 is a prospective amount, and given the historic fluctuating income that Mr. Werden has had from MSM, I find that the best approach for 2015 is to average 2012, 2013 and 2014.

[76] This requires a calculation of Mr. Werden’s income from MSM for 2012.

[77] MSM’s net pre-tax income plus the net T4 income paid to Mr. Werden for 2012 totals $670,672, as confirmed in the table above.

[78] Similar to 2013, the vehicle and entertainment expenses need to be adjusted. The vehicle expenses for 2012 are $24,568 and 75% of that amount is to be added back: $18,426. The entertainment expense is $29,970 and 50% of that amount is to be added back: $14,985. The total adjustment for expenses is $33,411. This produces an income for spousal support purposes for 2012 in the amount of $704,083.

[79] Taking the average of 2012, 2013 and 2014 results in $594,999 for 2015, which I round to $595,000 (($704,083 + $331,535 + $749,381) ÷ 3).

[80] Child support for two children on the 2015 projected income is $7,085 per month or an annual equivalent of $85,020. Using 42.16% for a gross-up calculation (assuming the same marginal rate used by Mr. Werden for 2014), the gross-up is $35,844, which results in total grossed-up child support of $120,864.

[81] Using as an approximation the spousal support paid to his ex-spouse for 2014, Mr. Werden’s income of $595,000 is adjusted by deducting the spousal support ($67,629) and grossed-up child support ($120,864) for a total adjusted gross income for 2015 in the amount of $406,507.

[82] This amount could be somewhat overly generous to Mr. Werden if Leah finishes her fourth year in April 2015. However, as Leah only took one course for one of her semesters at Western, it is unclear on the evidence that Leah will finish fourth year in April 2015.

(f) Income from Mr. Werden’s Other Corporations

[83] Mr. Werden is a 49% shareholder of Maximum Technology Management Inc. (MTM).

[84] According to Ms. Pegg’s most recent affidavit, MTM sells and installs computer equipment, and provides maintenance and technical services.

[85] For the fiscal year ending December 31, 2012, MTM had revenue of a little over $200,000 and income before taxes of $11,072. There was a little over $73,807 paid in salary and wages. For the purpose of the motion, I accept Ms. Pegg’s evidence that Mr. Werden receives no salary or other payments from MTM and that all compensation is received by the other shareholder who does all the work.

[86] There were no financial statements contained in the financial brief for MTM for 2013 and 2014.

[87] There is insufficient evidence to include any amounts paid by MSM to MTM, or any salaries paid by MTM, or any pre-tax income from MTM in Mr. Werden’s income for the purposes of interim spousal support. Further, although Ms. Ponkin raised during argument the issue of some of MTM’s income being included, no income from MTM was included in her calculations (see Ex. #5, tab 1).

[88] Mr. Werden is the sole owner of 1664300 Ontario Inc. (“1664300”).

[89] I accept Ms. Pegg’s explanation in paragraphs 27 to 32 of her most recent affidavit as to why none of the money paid by MSM to 1664300 should be included in Mr. Werden’s income for the purposes of interim spousal support.

[90] This corporation is described having carried on the business of installing home entertainment systems. It had incurred losses and ceased operation.

[91] On the advice of the accountant, this company contracted with MSM to furnish marketing services to use up the losses. In 2012, MSM paid $66,000 and in 2013, MSM paid $54,805. This resulted in 1664300 paying out marketing fee expenses.

[92] Mr. Werden was not paid any money out of the company. The transactions were described as “financial engineering” to use up the business losses incurred by 1664300. It was explained by Ms. Pegg that if the money paid by MSM would have remained with MSM, then gross profit would have increased but that the expenses absorbed by 1664300 would have been expenses of MSM, which would have impacted MSM’s net profit.

[93] On the evidence available on this motion, it would not be appropriate to increase Mr. Werden’s income by the amounts paid by MSM; this is the type of inquiry that needs to be explored more fully at trial.

DISCUSSION AS TO QUANTUM OF INTERIM SPOUSAL SUPPORT

(a) Ms. Ponkin’s Background

[94] Ms. Ponkin was previously married and divorced but had no children.

[95] Ms. Ponkin completed high school, attended Fanshawe College and completed some courses for work as a dental assistant in or about 1989.

[96] The evidence appears to be that Ms. Ponkin worked as a dental assistant until approximately 2000 when she took some courses to learn some esthetic skills and opened a hair salon.

[97] She worked at the hair salon for a year-and-a-half or so until 2002, when she was diagnosed with endocarditis.

[98] Ms. Ponkin explains that her heart had become “severely congested and could not function.” The condition she deposes was caused by a virus in her heart which had almost completely destroyed her heart valve by the time she was diagnosed. She described herself as being in the early stages of heart failure at that time.

[99] In 2002, Ms. Ponkin underwent open heart surgery and had her heart valve replaced with a titanium valve.

[100] The surgery as described by Ms. Ponkin was very invasive and her recovery was slow, taking approximately two-and-a-half years.

[101] Ms. Ponkin described the surgery as a success but she deposes that, although her artificial valve is functioning, her heart and her overall health have been permanently compromised.

[102] Ms. Ponkin describes a number of specific limitations and conditions as a result of her illness, and the medication that she takes, in paragraphs 29 and 30 of her affidavit sworn February 4, 2014 (tab 16 of the continuing record).

[103] Ms. Ponkin deposes that because of the diagnosis, she had to discontinue her hair salon business.

[104] Ms. Ponkin described that after her surgery, her friend, one Mr. Warden, assisted her in obtaining her “disability support.” Mr. Warden apparently had a company called “Steam Pro” which did clean-up work and fire restoration. He also had a company called “Maids on Wheels.” Ms. Ponkin explains that, at times, when she was feeling up to it, she would go to the sites with Mr. Warden to do “inventories of rooms.”

[105] When Ms. Ponkin’s relationship with Mr. Warden deteriorated, she deposes that Mr. Warden notified her disability provider and reported to the disability provider that Ms. Ponkin had been running a business with him while receiving disability benefits.

[106] At this point, Ms. Ponkin’s affidavit evidence becomes vague and a little sparse; she deposes her recollection of that time in her life was “foggy,” but she does acknowledge that she was charged and eventually convicted of fraud.

[107] Ms. Ponkin then describes her relationship with Mr. Werden. She deposes that he told her not to work, that he was supportive of her not working and, without getting into a lot of unnecessary detail in these reasons, Ms. Ponkin in essence describes a somewhat affluent lifestyle where Mr. Werden made a lot of money and they enjoyed life, including taking various vacations.

[108] For his part, while Mr. Werden does not quarrel with the background of Ms. Ponkin’s heart surgery, Mr. Werden disputes as an exaggeration the lifestyle described by Ms. Ponkin.

[109] Mr. Werden’s version is that, despite his income, they lived a reasonably modest lifestyle, had some vacations but not to the extent as described by Ms. Ponkin.

[110] There is also evidence that Mr. Werden was involved in lengthy and acrimonious litigation with his first wife that cost him a lot in legal fees and required him to pay substantial amounts of child support and spousal support to his ex-wife (the order made in that proceeding in 2006 required Mr. Werden to pay spousal support for a minimum of ten years).

[111] Mr. Werden is most skeptical about Ms. Ponkin’s claim that she cannot do any work at all. The evidence is clear that Ms. Ponkin feels that she cannot work and she has in fact not looked for any work. She is looking for financial support from Mr. Werden.

[112] It was Ms. Ponkin’s evidence that in 2013 she had her titanium stitches removed and that she was, as she puts it, “laid up the entire summer” as a result of that procedure.

[113] Given that Ms. Ponkin’s inability to work is a live issue on the motion for interim support, I draw an adverse inference against Ms. Ponkin for her failure to provide any medical report at all from any medical practitioner corroborating her self-described inability to work.

[114] I do accept that for 2013, given her surgery that summer, Ms. Ponkin may not have been in a position to work that year following separation in the beginning of June 2013.

[115] However, effective 2014, I find it appropriate to impute some income to Ms. Ponkin. I impute the annual amount of $20,000 commencing in the year 2014. I am not prepared to impute $35,000 as urged by Mr. Werden on the motion, but the amount that I am imputing is a little less than minimum wage at close to fulltime hours.

[116] Mr. Werden also took significant issue with Ms. Ponkin’s expenses and pointed to a transcript of her oral questioning as to what he submits is corroboration of the unreasonableness of some of her expenses claimed in her budget.

[117] Mr. Werden took particular issue with the proposed budget of expenses claimed by Ms. Ponkin that was appended to her financial statement sworn February 3, 2014; the proposed budget was also marked as Ex. #8 at the hearing of the motion.

[118] That budget shows $10,975 for monthly expenses. I do agree that the budget contains some excessive and/or inappropriate amounts for interim spousal support. The monthly expense of $3,000 for legal fees is not an appropriate deduction. Monthly expenses for almost $1,400 for a motor vehicle seem inflated; Ms. Ponkin has a proposed expense for housing of a little over $2,000 per month and, in my view, that seems on the high side. It is noted that, since separation, Ms. Ponkin has been residing with her mother as she claims that she cannot afford to live on her own on the basis of insufficient spousal support provided by Mr. Werden ($2,666 per month).

[119] While some expenses claimed by Ms. Ponkin are excessive, I find on the evidence that Mr. Werden has failed to provide adequately for Ms. Ponkin’s interim support considering in part the standard of living and taking into account Mr. Werden’s income.

[120] Although Mr. Werden urged this court to find that, despite his income, they lived a “simple” or “modest” lifestyle, that submission is belied to some extent by Mr. Werden’s own financial statement where he shows annual expenses of a little over $449,000.

(b) Interim Spousal Support for 2013

[121] As set out above, Mr. Werden’s adjusted gross income is $183,053 for 2013.

[122] The without child support formula is simple and is as follows: gross income difference x number of years of co-habitation x percentage factor. The percentage factor is 1.5%, 1.75% and 2% to represent the low-mid-high ranges of the SSAGs. Given the eight years of co-habitation, the percentage factors times the years of co-habitation are 12%, 14% and 16%, for the low-mid-high ranges, respectively.

[123] I accept that Ms. Ponkin’s income for 2013 is zero. Accordingly, the monthly amounts produced by the SSAG ranges are $1,831, $2,136 and $2,441 for low-mid-high.

[124] The authors of the Spousal Support Advisory Guidelines do recognize that there may be situations in marriages that are not lengthy where the gross income difference approach may produce spousal support that can be regarded as too low.

[125] For example, in s. 7.4 of the SSAGs, the authors state the following:

… We do recognize, however, that there is a specific problem for shorter marriages where the recipient has little or no income. In those shorter marriage cases, the formula may generate too little support for the low income recipient even to meet her or his basic needs for a transitional period. …

(See also the discussion under “Exceptions” in s. 12.1 of the SSAGs.)

[126] In dealing with spousal support, and this includes interim spousal support, the court is required to consider the factors in s. 15.2(4) of the Divorce Act and objectives of spousal support set out in s. 15.2(6).

[127] The factors include the condition, means, needs and other circumstances of each spouse, including the length of the co-habitation.

[128] In arriving at the spousal support set out in these reasons, I have considered the factors and also the objectives of an interim spousal support order.

[129] In relation to 2013, given the fact that Ms. Ponkin had no income and, given the somewhat shorter duration of the co-habitation, I find that the upper range of the SSAGs is not adequate.

[130] I do need of course to consider that in that year, Mr. Werden, for him, had a relatively low income, but nevertheless the gross income difference is still substantial. I find that for 2013, the appropriate amount of interim spousal support would be in the range of $3,500 to $4,000 and I order Mr. Werden to pay $3,750 per month interim spousal support commencing June 1, 2013 up to and including December 1, 2013.

(c) Interim Spousal Support for 2014

[131] As noted above, for 2014 Mr. Werden’s gross annual income adjusted for spousal support is $518,828. Imputing an income of $20,000 to Ms. Ponkin leaves a gross income difference of $498,828.

[132] Although Mr. Werden’s income exceeds the $350,000 ceiling, it is instructive first to look at the ranges generated by the SSAGs.

[133] Multiplying $498,828 by 12%, 14% and 16%, and dividing by 12, respectively, translates to monthly support of $4,988, $5,820 and $6,651 representing the low-mid-high SSAG ranges. This is Mr. Werden’s highest income earning year; yet the application of the SSAGs to all the income (ignoring the ceiling) shows that the amount sought by Ms. Ponkin of $7,500 per month is well outside the upper range.

[134] Although for 2014 Mr. Werden’s gross adjusted income does exceed the $350,000 “ceiling” discussed in the SSAGs, it is important to note that the authors of the SSAG state in s. 11.3 as follows:

To repeat, the ceiling is not a “cap” on spousal support, nor does it bar the continued use of the formulas as one method of arriving at an amount in a particular case. …

[135] I find on the facts of this motion, considering in particular that it is interim spousal support, that it is appropriate to consider the SSAG ranges for 2014 in arriving at an appropriate amount of spousal support.

[136] For 2014, I order Mr. Werden to pay interim spousal support to Ms. Ponkin in the amount of $5,500 per month commencing January 1, 2014 up to and including December 1, 2014.

(d) Interim Spousal Support for 2015

[137] For 2015, Mr. Werden’s adjusted gross annual income was found to be $406,507. Imputing $20,000 of income to Ms. Ponkin results in a gross income difference of $386,507.

[138] Multiplying $386,507 by 12%, 14% and 16%, and dividing by 12, results in monthly SSAG amounts of $3,865, $4,592 and $5,153, representing the low-mid-high SSAG ranges.

[139] The averaging of Mr. Werden’s incomes to arrive at an income to use for prospective interim spousal support for 2015 was designed to avoid the necessity of another motion to deal with interim spousal support for 2015 if this matter does not soon go to trial.

[140] Commencing January 1, 2015, I order Mr. Werden to pay interim spousal support in the amount of $4,500 per month.

INTERIM SPOUSAL SUPPORT OF $2,666 PER MONTH PAID BY MR. WERDEN AND INTERIM SPOUSAL SUPPORT ARREARS

[141] Any payments that Mr. Werden has made since June 1, 2013 in the amount of $2,666 per month shall be credited towards the interim spousal support order made above.

[142] This order will result in spousal support arrears. Those arrears shall be paid within ten days of the date of this order.

[143] If counsel are unable to agree on the arrears, I may be spoken to at an appointment at 9:45 a.m. arranged by counsel with the trial coordinator.

ORDER AND COSTS

[144] An interim order shall issue requiring Mr. Werden to pay interim spousal support as set out in these reasons.

[145] The order shall specify that interim spousal support is ordered pursuant to the Divorce Act.

[146] If the parties are unable to agree on the costs of the motion, then written costs submissions may be filed with the trial coordinator. Ms. Ponkin shall serve her submissions first, then Mr. Werden shall serve his responding submissions and Ms. Ponkin shall then serve her reply, if any. Counsel shall agree as to the timing of the submissions such that all the submissions are served and filed within 30 days. The costs submissions shall be limited to three typed pages, double spaced, minimum font size 12, plus copies of any orders and authorities. The reply submissions, if any, are limited to two typed pages.

[147] Finally, I would thank both counsel for their diligent efforts; the detailed briefs that were filed by counsel containing various calculations were of substantial assistance to the court.

“Justice Victor Mitrow”

Justice Victor Mitrow

Date: February 10, 2015

[^1]: For example, if a spouse had a child support obligation for children of a prior relationship in the amount of $60,000, and if that spouse had a 40% marginal tax rate, then the amount of income to produce a net income of $60,000 would be $100,000. Accordingly, the “gross-up” would be $40,000, not 40% x $60,000 equals $24,000, according to Mr. Werden’s calculations; the grossed-up child support would be $100,000, not $84,000.

In the example shown, the formula is: grossed-up child support equals child support ÷ (1 - .40), where the “.40” is the marginal tax rate expressed as a percent ÷ 100.