CITATION: Meth v. Barrenechea, 2016 ONSC 1415
COURT FILE NO.: FS-15-124-00
DATE: 2016-02-26
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: TARA MARIA METH – and – AGUSTIN BARRENECHEA
BEFORE: Tzimas J.
COUNSEL: Susan Berry, for the Applicant Robert A. Otto, for the Respondent
HEARD: December 30, 2015
ENDORSEMENT
INTRODUCTION
[1] The Respondent, Mr. Barrenechea, sought various relief in relation his spousal and child support obligations, the payment of s.7 special extraordinary expenses, various adjustments to the accumulated support arrears currently with the Family Responsibility Office, (FRO), and the recognition that a mortgage he granted to his parents is valid and stands in priority to the FRO’s lien for outstanding payments to the Applicant, Ms. Meth. The basis for most of the relief sought is the allegation that there have been material changes to Ms. Meth’s circumstances such that the final order of July 28, 2011 ought to be varied, and other adjustments to the accumulated arrears ought to be made.
[2] Mr. Barrenechea brought his motion to change the final order of July 2011 in July 2015. That eventually resulted in Minutes of Settlement of October 22, 2015 and December 10, 2015, both of which were incorporated in Justice Donohue’s endorsement of December 10, 2015. The balance of the outstanding issues was adjourned to December 18, 2015. On that date the motion was adjourned to December 30, 2015 to a long motion hearing.
[3] Ms. Meth agreed to certain of the relief sought as it related to spousal support, s.7 extraordinary expenses and the determination of child support. She opposed the balance of the relief sought, the most significant being her submission that the mortgage granted to the Barrenechea parents by Mr. Barrenechea amounted to a fraudulent conveyance designed to defeat or postpone Mr. Barrenechea’s payment of his FRO arrears.
[4] The overriding material change in Ms. Meth’s circumstances arises out of her marriage in the fall of 2014. I find that the change is material and has implications for the continued payment of spousal support and section 7 extraordinary expenses, as such relate to childcare costs. It is appropriate that Ms. Meth agreed to adjustments in relation to those particular issues.
[5] Most of the other relief sought is cast as “adjustments”. Coincidentally, if they were to be accepted, they would cancel out Mr. Barrenechea’s support arrears and related costs. They do not arise from any material change in the parties’ circumstances. Instead, they represent yet another flawed attempt by Mr. Barrenechea to revisit final orders of the court that were neither set aside nor appealed. That relief is therefore dismissed.
[6] The issue concerning the mortgage to Mr. Barrenechea’s parents is new and arises as a result of Mr. Barrenechea’s accumulating arrears with FRO. This too is nothing more than attempt by Mr. Barrenechea to find an alternative way to postpone or avoid the payment of his arrears owed to Ms. Meth and his children. The chronology of proceedings, outlined below and Mr. Barrenechea’s pattern of “non-engagement” with court-orders and proceedings is especially relevant to the court’s rejection of Mr. Barrenechea’s contention that the mortgage granted to his parents is valid and should stand in priority to FRO’s lien.
[7] As outlined more particularly below, the absence of any direct evidence from Mr. Barrenechea or his parents concerning the loan, including the existence at all of any loan, the question of whether the funds were even advanced, the sum of such an advance, if it occurred, any re-payment terms, combined with the court’s outright rejection of the only other evidence before the court, that being counsel’s two affidavits that were fundamentally flawed and therefore inadmissible, leads the court to conclude, on a balance of probabilities, that the mortgage to Mr. Barrenechea’s parents was nothing more than a fraudulent conveyance by Mr. Barrenechea designed to avoid or postpone his court-ordered payment obligations towards Ms. Meth and his children.
BACKGROUND
[8] The chronology of proceedings, which is foundational to the court’s findings and orders made is as follows:
(a) The parties separated on January 4, 2011 and soon thereafter the Ms. Meth commenced an Application for various relief. Mr. Barrenechea did not file an Answer and the application proceeded to an uncontested trial. Justice LaFreniere issued a final order on July 28, 2011.
(b) On October 27, 2011 Mr. Barrenechea brought a motion to set aside the order.
(c) On November 25, 2011 the court ordered Mr. Barrenechea to pay costs of $1,500 to Ms. Meth and adjourned the hearing of his motion to allow him to make proper financial disclosure. Mr. Barrenechea did not comply with this order. He did not make any disclosure and he did not pay costs.
(d) On December 20, 2011, the court ordered that Mr. Barrenechea would be permitted to reopen the case only on the issues of custody and spousal support, provided that he paid all the support arrears and all outstanding costs within a period of twenty days. Mr. Barrenechea did not satisfy these conditions.
(e) On March 21, 2012, Ms. Meth brought a motion to have Mr. Barrenechea’s motion to set aside the final order, dismissed. The relief was granted and the court ordered costs of $17,283 against the Respondent to be enforceable as support by the Director of the FRO.
(f) Approximately one month following the court’s dismissal of Mr. Barrenechea’s motion to set aside the court’s final order of July 28, 2011, Mr. Barrenechea and his parents registered a mortgage in favour of his parents against the condominium he purchased after the separation. The narrative contained in one of the affidavits that was sworn and filed by Mr. Barrenechea’s counsel’s advanced the explanation that the mortgage was registered “in April 2012, approximately one year after [the Respondent] actually purchased the property, when it became clear of the significant continuing conflict between the Applicant and the Respondent”, (my emphasis).
(g) FRO registered a lien against Mr. Barrenechea’s condominium in March 2013 for the sum of $51,700.
(h) Mr. Barrenechea brought a Motion to Change the Final Order of July 28, 2011 in September 2014. Following a couple of adjournments, the motion came before Justice Pazaratz who refused to consider or accept Mr. Barrenechea’s evidence because it was advanced by way of an affidavit sworn by counsel’s legal assistant, which was “filled with hearsay”. It is apparent from the court’s endorsement that in the matter was held down briefly and the parties resolved some of their differences. Regarding the outstanding issues, the court dismissed the Respondent’s motions without prejudice to him bringing a motion in Peel, on account of the change of the Applicant’s address, and without prejudice to the Respondent “advancing whatever arguments he wants”.
(i) Mr. Barrenechea paid $19,238 in costs, through FRO to be able to proceed with the current motion. The FRO deducted this sum from the arrears of support and not from the outstanding costs. As a result, according to the FRO statement of Arrears of October 1, 2015 there are $17,283 in costs and $34,777.56 in support arrears.
(j) The Applicant’s Statement of Money Owed as of December 21, 2015 is $48,430.57 and consisted of the following:
Unpaid period payments: $36,849.52
Interest on unpaid amounts: $9,148.58
Unpaid lump-sum debt, (costs): $303
Interest on unpaid lump-sum debt: $2,129.47
With this chronology as the backdrop to the issues before me, I turn to the specific issues that were put before this court.
ISSUES
[9] The issues before the court, as outlined by the parties in their respective factums concerned the treatment and consideration of the following issues:
(a) Discontinuation of spousal support payments;
(b) The calculation of child support payments;
(c) Netting down the arrears of support payments
(d) The payment of section 7 expenses;
(e) Adjustments to reduce arrears;
(f) The payment of costs and interest payments; and
(g) The relationship between the FRO lien and the Parents’ Mortgage.
I propose to address each of these issues below.
(a) The discontinuation of spousal support payments
[10] Counsel for both parties advised the court that the parties agreed that spousal support be terminated as of October 1, 2014. They also agreed that spousal support should be adjusted in accordance with Mr. Barrenechea’s actual income and calculated at the low end of the Spousal Support Advisory Guidelines. They disagreed on the subject of netting down the arrears. I address that as a separate issue below. Apart from the netting down, given the parties’ agreement, there is nothing further for this court to review.
(b) The calculation of child support payments
[11] The parties advised the court that they agreed to the payment of child support on the basis of Mr. Barrenechea’s 2014 income. The terms of their agreement are outlined in the Minutes of Settlement of December 10, 2015. The parties agreed that the Minutes of Settlement had a calculation error and that the correct monthly sum ought to be $1,423. Here too, apart from the noted correction, there is agreement and therefore no need for this court to make any additional order.
(c) Netting down the arrears of support payments
[12] The parties disagreed on the netting down of the retroactive lump sum spousal support payments. They agreed that there should be a balanced approach to the determination of a lump sum support payment that took into account the parties’ tax positions and the ability of the payor to take advantage of a tax deduction.
[13] Counsel for Ms. Meth acknowledged that the netting down of a support payment occurs in instances when a payor had no opportunity to pay and claim the support payments in accordance with the income tax rules. However, in this instance the problem was not one of a court’s retroactive order but rather a failure by Mr. Barrenechea to pay in accordance with the July 2011 Final Order. Had Mr. Barrenechea complied with that order, he could have claimed the payments and obtained the appropriate income tax deduction to which he would likely be entitled. Instead, as noted by Ms. Meth, “[Mr. Barrenechea] has assiduously avoided his spousal support obligations”. In contrast to Mr. Barrenechea’s conduct, Ms. Meth declared the support payments that she expected to receive in the years 2010 – 2014 in accordance with Justice LaFreniere’s Order of July 28, 2011.
[14] Mr. Barrenechea did not deny his failure to pay spousal support. Nonetheless, his counsel submitted that his client should have the benefit of an adjustment to his arrears on account of the deduction he would have had if he had paid on time and declared his payments to the Canada Revenue Agency. Based on his client’s marginal tax rate, counsel argued that the outstanding arrears of $52,060.00 reflected in the Director’s Statement of the Family Responsibility Office, ought to be reduced by twenty five per cent. The Respondent relied on cases such as Hume v. Tomlinson, 2015 ONSC 843. Counsel for both parties referred Patton-Casse v. Casse, 2011, ONSC 6182 and 2012 ONCA 709, in support of their respective positions.
[15] In my review of the parties’ submissions and the case law on this issue, I find that Mr. Barrenechea is trying to find ways to reduce his support arrears with FRO. Mr. Barrenechea’s situation is distinguishable from the cases that were referenced in his counsel’s submissions. The case law relied on by Mr. Barrenechea’s counsel contained examples of a payor who was ordered to make a retroactive lump sum support payments but who, because of the late date of the order, was not able to engage the CRA process for a corresponding retroactive deduction. The case law does not deal with a payor who ignores a court order and by implication, who then does not identify the support payments in his tax returns. Mr. Barrenechea falls in the latter category. He would not be in his current position if he had respected the Orders of Justice LaFreniere and Steinberg and made his support payments in a timely fashion.
[16] Ms. Meth submitted that based on Hume v. Tomlinson, supra., Mr. Barrenechea may still be able to seek retroactive consideration of his support payments from the Canada Revenue Agency, (CRA) by applying for a “qualifying retroactive lump-sum payment”, a QRLSP. The evidence and the legal submissions on how the CRA might or might not treat an application by Mr. Barrenechea is not before me and the submissions are insufficient for me to be able to agree with that particular submission. There is also no other evidence or legal argument to identify other possible approaches Mr. Barrenechea might take to claim his deductions. As unexplored possibilities, it is for Mr. Barrenechea to pursue them, if he wishes, with the assistance of an accountant and the guidance of the CRA. It may well be that if he chooses to refile his income tax returns, he may obtain his credit. In the meantime, Ms. Meth should not be penalized financially with a reduction of almost $13,000 in outstanding support payments on account of Mr. Barrenechea’s failure to pay his support obligations in a timely manner. A reduction as requested would have the effect of rewarding Mr. Barrenechea for his delinquent conduct.
(d) The payment of section 7 expenses
[17] The parties disagree on how their children’s section 7 special and extraordinary expenses are to be treated.
[18] Mr. Barrenechea asked that the total arrears owing to Ms. Meth be reduced by $8,400, representing forty-eight months at $175 per month, on the view that Ms. Meth did not comply with the requirements of the Child Support Guidelines. Mr. Barrenechea questioned whether Ms. Meth actually incurred such expenses. Mr. Barrenechea’s counsel doubted that Ms. Meth, who stayed at home when her children were born, would have had any need for baby-sitting support. He was dismissive of the suggestion that in fact, Ms. Meth would have required some additional help to care for the two children because she was already separated when the second child was born and had to care for both an infant and a very young child on her own.
[19] Mr. Barrenechea’s counsel also submitted that Ms. Meth would not have incurred childcare costs once her new partner, who is from South Africa immigrated to Canada. The move occurred in the fall of 2014. Since the new partner could not work, he was in a position to care for the children.
[20] Ms. Meth acknowledged that she did not keep an accounting of all the section 7 extraordinary and special expenses that she incurred for the relevant years. She also acknowledged that she did not require childcare once her partner came to Canada. But prior to his arrival in the fall of 2014, Ms. Meth’s evidence before the court was that she paid cash for baby-sitting expenses when she went out to look for employment and other day-to-day activities. She said that she also incurred expenses for the children’s dental, medical and eye care, as well as some other activities.
[21] Ms. Meth agreed that the section 7 extraordinary and special expenses of $175 per month provided for in Justice LaFrenier’s Order be terminated as of October 1, 2014 because as of that date, she acknowledged that her new husband, who was otherwise unemployed because of his immigration status and corresponding employment limitations, cared for the children.
[22] Going forward, Ms. Meth asked that she be able to claim section 7 special and extraordinary expenses on account of child care, summer day camps, and medical and dental expenses as they might come up. She explained that although her husband was limited by immigration restrictions in his ability to work, once those restrictions were lifted and he obtained employment, he would no longer be in a position to provide childcare. In addition, Ms. Meth anticipated various medical, dental and health-related expenses.
[23] Having regard for all the circumstances on this issue, I am not persuaded by Mr. Barrenechea’s arguments and allegations in support of a credit of $8,400 for the section 7 special and extraordinary expenses. The order of July 2011 did not require Ms. Meth to produce any receipts in support of such expenses as a precondition to such payments. Moreover, Mr. Barrenechea had no evidence before the court to support his contention that Ms. Meth did not incur such expenses; it was conjecture on his, and possibly his counsel’s part, based on particular views of what support a single parent might or might not need when caring for very young children. I am satisfied with Ms. Meth’s explanation of her expenses regarding this subject.
[24] I also find it quite appropriate for the Applicant to agree to the discontinuation of the section 7 expenses given her change in circumstances and the care provided by her new partner. However, such a discontinuation should not preclude her from claiming contribution from Mr. Barrenechea for such future expenses. Going forward, given the children’s young age and their anticipated growing needs, as well as the expectation that Ms. Meth’s husband will eventually be permitted to work in Canada, it is reasonable to expect that Ms. Meth will have to incur future section 7 special and extraordinary expenses.
[25] The most prudent way forward is to have a transparent arrangement in place that gives Mr. Barrenechea a sense of the anticipated expenses as well as confirmation that the expenses are being incurred. To be clear, it will not be open to Mr. Barrenechea to question or refuse the expenses, provided they are reasonable. That should not be difficult since the anticipated expenses fall into three predictable categories: childcare expenses, summer day camp or related extra-curricular activities, and medical and dental expenses. The latter costs would be net of reimbursement from any benefits plans either or both parties may have. On the basis of these basic principles, the section 7 special and extraordinary expenses are to be approached in the following manner:
For childcare expenses: Ms. Meth shall give Mr. Barrenechea at least thirty days’ notice of any childcare arrangements that might be required once her husband obtains employment. Such notice should include information about the type of childcare arrangements, the anticipated childcare schedule, and the fees anticipated for such expenses. Ms. Meth will be free to decide between licensed childcare, before and after school programming offered by or under the auspices of the school the children attend, other home childcare arrangements, or informal care. Ms. Meth shall also provide Mr. Barrenechea with copies of the invoices for such care. In the event of informal childcare, it will be incumbent on Ms. Meth to obtain some form of confirmation of the care from the caregiver. The expenses shall be calculated on a net after tax basis.
Summer day camps: Ms. Meth shall give Mr. Barrenechea at least thirty days’ notice of the summer camp arrangements for the children. Such arrangements are not to exceed six weeks. The expenses are to be calculated on a net after tax basis.
Medical and dental expenses: Ms. Meth shall give Mr. Barrenechea reasonable notice of such expenses. Unlike childcare and camp arrangements, some such expenses might be routine but others may result from the need for some urgent intervention. Ms. Meth shall provide Mr. Barrenechea with copies of any invoicing and his contributions shall be net of any reimbursement from benefits plans.
[26] Insofar as the respective contributions are concerned, the parties shall contribute to the special and extraordinary expenses in proportion to their respective incomes. The proportions shall be reviewed every June 1 along with the annual review of Mr. Barrenechea’s income and child support contributions.
(e) Adjustments to support payments
[27] Mr. Barrenechea sought a number of other credits and adjustments against the support arrears he owes to Ms. Meth. In the submissions contained in the factum, Mr. Barrenechea’s counsel suggested that Ms. Meth received the benefit of full access to his savings account in lieu of support payments, in the sum of approximately $7,238.15, that he paid for Ms. Meth’s mobile phone usage and car insurance from July 2010 to November 2010 of approximately $1,500, that he transferred approximately $7,980 in lieu of support payments to Ms. Meth, and that Ms. Meth continued to draw down on the joint line of credit to approximately $8,500. In support of the proposed adjustments, Mr. Barrenechea also advanced bald allegations to the effect that Ms. Meth deliberately misled the court with respect to the funds to which she had access. Combined with the requested adjustment of $8,400 for the section 7 expenses, Mr. Barrenechea’s counsel concluded that the current arrears of $39,045.42 would be reduced to an outstanding obligation of $5,427. Mr. Barrenechea did not file any direct evidence in support of his position.
[28] In response, Ms. Meth submitted that all of these issues were previously before the court and were addressed by Justice Steinberg. In her submissions before this court, Ms. Meth’s counsel advised that Ms. Meth is prepared to pay for half of the balance of the joint line of credit upon the payment of support but that such reconciliation should not result in a further adjustment of arrears to the support owed. On the subject of the electronic transfers, Ms. Meth confirmed that they were acknowledged as direct payments on her Statement of Money owed and that these payments were also acknowledged before Justices LaFreniere and Steinberg. In other words, they were sums that were already before the courts and considered accordingly.
[29] In my review of these proposed set-offs and adjustments, I find that Mr. Barrenechea’s submissions, as advanced by his counsel, amounted to no more than an attempt to reopen issues that were clearly considered and determined by previous courts and those conclusions should not be disturbed. They are not adjustments that would follow a material change. There was nothing before the court, other than innuendo against Ms. Meth, to suggest that the proposed set-offs were not addressed appropriately or that Ms. Meth misled the court. Mr. Barrenechea could have brought forward his records through proper disclosure, and indeed was given several opportunities to do so. He failed to take up any of those opportunities without any explanation for such failure. The principle of res judicata applies to preclude any adjustments to the arrears that have accrued.
[30] To the extent that the court, in its order of March 25, 2015 gave Mr. Barrenechea leave to advance any argument he wished if he satisfied a substantial cost award, even if res judicate were not to apply, Mr. Barrenechea’s continued failure to submit any direct evidence in support of the adjustments being sought is highly problematic. It represents yet a fourth instance where he was given a chance to advance his evidence in support of the relief he is seeking, only to squander it by failing to advance the appropriate evidence. The failure to substantiate the repeated allegations that Ms. Meth deliberately misled the court through her misrepresentations was especially troubling.
[31] In reaching this conclusion, I expressly reject as inadmissible the affidavits of Mr. Barrenechea’s junior counsel who purported to put Mr. Barrenechea’s evidence before this court. More seriously, I find it astonishing that counsel would reintroduce Ms. Howard’s affidavit as exhibit 1 to his affidavit sworn on December 4, 2015 when that affidavit was previously held by the court to be fundamentally flawed and inadmissible. Such conduct is highly problematic and amounts to nothing short of an attempt to mislead this court. If junior counsel was unaware of the flaws with Ms. Howard’s affidavit senior counsel was certainly aware of the court’s March 2015 order and rejection of that evidence. An affidavit held to be inadmissible will not become admissible merely by attaching it as an exhibit to a lawyer’s affidavit. Apart from the impropriety of such a step, the hearsay difficulties are compounded and reduce the lawyer’s affidavit to double-hearsay.
[32] This last observation brings me to the concern that apart from the pronounced difficulties related to the inclusion of the Howard affidavit, counsel’s affidavits are based, almost entirely on hearsay. They also include legal argument and advance a number of unsubstantiated allegations against Ms. Meth. These problems are also highly problematic and raise serious professionalism issues. To be clear, there may be instances where counsel may swear an affidavit that puts before the court particular evidence. That may include an uncontested chronology in a case, it may attach uncontested documents, or include evidence that is within counsel’s direct knowledge and belief. The source of any knowledge cannot be based on hearsay. The hearsay rules apply absolutely to all affiants, whether they are counsel or not.
[33] In this case, reduced to their essence, the two affidavits by junior counsel amount to a submission to the court that counsel believes his client and therefore so should the court. There is no evidence of misconduct by Ms. Meth, of payments form the cell phone, or of other advances from Mr. Barrenechea’s savings account. Nor is there any admissible evidence of money transfers from Mr. Barrenechea’s parents to him, of any loan agreement, of any repayments by Mr. Barrenechea to his parents, or other related evidence that could allow the court to draw the appropriate inferences. Simply put, there is no admissible evidence from Mr. Barrenechea that would allow this court to consider his allegations.
[34] I strongly reject counsel’s submission that Mr. Barrenechea could not file his own affidavit because he lives in Calgary and was unable to meet the court’s timelines. It is disingenuous to suggest that Mr. Barrenechea had very little time to prepare his own affidavit to support the relief that he was seeking to obtain. Mr. Barrenechea was the one to initiate the motion to change. He controlled the timelines and should have been fully prepared with the evidence he needed to support the relief he was seeking. The court provided him with repeated opportunities and generous timelines to produce his disclosure and his supporting evidence. If there were any doubts about admissibility issues, his counsel knew as early as March 2015 that there was a problem because that is when the court dismissed the original motion for change because of the legal assistant’s inadmissible affidavit. Even then, the court gave Mr. Barrenechea leave to return to court with the appropriate supporting evidence. That is almost nine months’ notice of the need to arrange for an affidavit from Mr. Barrenechea, and possibly his parents.
[35] Additionally, Calgary is not some remote location without any access to services or technology that would impede Mr. Barrenechea’s ability to file the appropriate supporting evidence. Much like he had his Motion to Change signed and witnessed in Calgary, Mr. Barrenechea could have done the same with an affidavit; he could have sworn an affidavit and had it scanned or sent out by courier to his counsel to meet the evidentiary requirements of his own motion.
[36] Only Mr. Barrenechea really knows why he avoided all the opportunities that were given to him to put his best foot forward before the court. A reasonable inference to be drawn is that he wanted to avoid the prospect of being cross-examined and wished instead to hide behind his counsel. What is absolutely certain is that time could not have possibly been a factor.
[37] In the result, apart from the issue of the joint line of credit, there is no basis for the court to order any downward adjustment to the support arrears. On the subject of the joint line of credit. I accept that Ms. Meth’s agreement to pay $8,500 on account of her share of the joint line of credit be treated as a separate issue. That was addressed by Justice Steinberg’s court order. There is therefore no need for any additional adjustment or variation.
(f) The costs and the interest payments
[38] Mr. Barrenechea raised concerns about outstanding costs and the appropriateness of claiming the accrued interest on account of the arrears. As of the argument of this motion before this court, the parties agreed that the outstanding costs were reduced to $300.
[39] On the subject of the forgiveness of the interest sought by Mr. Barrenechea, Ms. Meth submitted that there was no basis for such forgiveness. She did not cause the delays that might explain the accumulation of arrears. Mr. Barrenechea caused the delay because he did not want to pay. For Ms. Meth, that meant that she had to borrow from family, live off credit cards and deny the children privileges that they might otherwise have had if she did not have to incur legal costs of $20,000 on account of the Respondent’s intransigence.
[40] I agree with Ms. Meth’s submissions that there is absolutely no basis for any interest waiver. Mr. Barrenechea was given repeated opportunities to address his concerns, to put his case forward, and to adjust, if necessary his obligations. Not only did he ignore those opportunities, he failed to meet court-ordered obligations and caused significant delays. He too, in a sense deprived his children of funds that they could have enjoyed together by incurring significant costs and taking up the court’s resources with what proved to be at least three or four largely unproductive court appearances. In my enumeration of such opportunities, I do not include the repeated adjournments between motions that were intended to allow Mr. Barrenechea to prepare his evidence and his corresponding submissions.
(g) The relationship between the FRO lien and the Parents’ Mortgage
[41] The parties submitted that this was the most important issue to be determined by this court. Counsel for Mr. Barrenechea suggested that this issue would be moot if the court were to accept the proposed set-offs and adjustments and reduced the support arrears to virtually nil. Alternatively, he submitted that the mortgage was the result of a bona fides loan from Mr. Barrenechea to his parents, that it predated FRO’s lien and should therefore stand in priority to any accumulated arrears owed to Ms. Meth.
[42] In support of the priority argument, Mr. Barrenechea’s counsel submitted that once Mr. Barrenechea’s parents realized that their son was in trouble with the court order of March 21, 2012 they moved to protect their own loan. Although there was no evidence before the court to support this argument, counsel submitted that the parents did not require any security for their loan to their son until they appreciated that the finality of the court order stood to jeopardize their position. Leaving aside for a moment the issue and implications of the inadmissibility of counsel’s affidavits on this point, the Court cannot ignore counsel’s explanation offered on behalf of Mr. Barrenechea for the registration of the mortgage which expressly confirmed a deliberate attempt to give a preference to the parents’ loan, assuming the loan was real, over multiple court orders in favour of Ms. Meth and Mr. Barrenechea’s children. Oblivious perhaps to the implications of his submission, counsel expressly denied the existence of any badges of fraud in relation to the mortgage and argued that Ms. Meth, who had the onus of proving such badges failed meet that burden.
[43] In response, Ms. Meth submitted that the granting of a mortgage in favour of Mr. Barrenechea’s parents was a blatant attempt by Mr. Barrenechea to avoid paying the court-ordered support and costs. Such conduct amounted to a fraudulent conveyance by Mr. Barrenechea to his parents. Counsel listed a number of indicators in support of her position. First, Mr. Barrenechea’s explanation for the mortgage registration, as articulated by his counsel amounted to an admission by Mr. Barrenechea that he gave to a preference to his parents over his court-ordered obligations. Second, Ms. Meth’s counsel noted that Mr. Barrenechea’s parents habitually gifted them monies during the course of their marriage and never sought repayment. Counsel suggested that even if the Barrenechea’s advanced funds to their son, in keeping with past behavior, that would have been a gift and not a loan. Third, there was no evidence whatsoever of a loan agreement, a promissory note or some type of documentation of the loan agreement between Mr. Barrenechea and his parents, outlining the terms of the loan and its repayment. Finally, there was no evidence that monies were actually loaned to Mr. Barrenechea or that he made any attempt to repay his parents. Even the suggested transfer of funds outlined in the letter from the bank did not shed any light on the nature or the reason for such transfers. Describing those funds as loans, in the absence of objective and reliable evidence, could not convert the monies to loans just because that was the description given to them.
[44] Counsel identified the following test to be met to determine whether or not a transaction is fraudulent:
“The crucial question in any fraudulent conveyance action is whether the plaintiff has provided the fraudulent intent of the debt. While the legal burden to prove fraudulent intention remains on the plaintiff throughout the trial, the plaintiff can raise an inference of fraud sufficient to put a “burden of explanation” on the defendant debtor. The plaintiff typically raises an inference of fraud by putting forward “badges of fraud”. These ‘badges of fraud” vary from case to case.”, see FL Receivables Trust 2002-A(Administrator of) v. Cobrand, 2007 ONCA 425 at para. 39.
[45] In my review of this issue, I have no evidence before the court of any loan from Mr. Barrenechea’s parents to their son. Having rejected counsel’s two affidavits as fundamentally flawed and inadmissible, what the court has is a narrative and legal submissions that amount to a bald allegation that Mr. Barrenechea’s parents advanced a total of $75,000 to their son. However, there was:
(i) No evidence of any actual transfer of funds from Mr. Barrenechea’s parents to Mr. Barrenechea. One would expect even some basic tracing of accounts to show the various alleged transfers and the movement of funds from the parents’ bank account to their son’s bank account;
(ii) No evidence of any actual loan agreement, promissory note, or other document describing the loan and identifying the payment terms;
(iii) No evidence of any payments by the parents after December 28, 2011. The mortgage was registered four months after the last payment with no new consideration;
(iv) No evidence of any concern by the parents to secure their alleged loan to their son;
(v) No direct evidence from the Barrenechea parents about the loan particulars, or even their concern to protect their funds; and
(vi) No direct evidence from Mr. Barrenechea about any of the above information and documentation.
[46] Compounding these very basic deficiencies are the serious suspicions over the timing of the mortgage registration on account of the alleged loan. As noted in the chronology above, Mr. Barrenechea granted his parents a mortgage about a month after the court’s order of March 21, 2012 that dismissed his motion to set aside the court’s Final Order of July 28, 2011. That date is crucial because the dismissal of Mr. Barrenechea’s motion to set aside the final order reinforced the finality of his court-ordered obligations of July 28, 2011. Having failed to take advantage of the court’s conditional willingness to revisit that final order in both November and December 2011, Mr. Barrenechea’s court-ordered obligations crystallized in March 2012 when his motion to set aside the Final Order of July 2011 was dismissed. Mr. Barrenechea exhausted his court avenues to have that Final Order set aside. The only other way to postpone his compliance was to give a preference to his parents and likely work towards becoming judgment-proof.
[47] The only explanation and evidence concerning the rationale behind the timing of the mortgage registration was advanced by Mr. Barrenechea’s counsel, both in the inadmissible affidavits filed, and in legal argument. In legal argument counsel expanded on the rationale and argued that of course the parents would step in to protect their loan to their son after they realized that their ability to collect would run the risk of being compromised by a crystallized court order. The reference in the affidavit to the “significant continuing conflict between the Applicant and the Respondent” spoke to the finality of the court order. Remarkably, the legal argument came down, not only to an admission to a preference, but to a full justification for that preference.
[48] Counsel for Ms. Meth suggested that I need not go much further in my consideration of this issue given this argument and the underlying admission. She went as far as to suggest that I could take that admission into account even if the affidavits were otherwise inadmissible.
[49] Counsel’s suggested approach is not as easy as she thought. Having rejected counsel’s affidavits as inadmissible for being fundamentally flawed, the court cannot then rely on an inadmissible narrative and treat it as an admission merely because it would simplify the analysis and allow for a decision that is favourable to Ms. Meth. More fundamentally, there was no evidence of a loan between the Barrenechea parents and Mr. Barrenechea. To accept the admission would be to implicitly find that there was a loan. While it is not inconceivable that these parents might have helped out their son, there is simply no evidence of that. In the absence of such evidence the mortgage registration cannot stand.
[50] I take this opportunity to make the observation that Mr. Barrenechea would not be in any better position even if I were to extract the explanation proffered by Mr. Barrenechea’s counsel for the registration of the mortgage, or if I were to deem the affidavits admissible, which I reiterate, they are not. Then, there would be no way of getting around the admission and express legal argument that the express purpose of the mortgage registration was to respond to the finality implications of the court order of March 21, 2012. What would also come into focus would be the observation that Mr. Barrenechea had equity in his condominium at the time the court orders were made such that he could have satisfied his court-ordered obligations but chose not to do so. Similarly, the funds, if they were transferred at all by his parents, were also received after the Final Order of July 28, 2011. Those could also have been used to satisfy Mr. Barrenechea’ court-ordered obligations. The court can infer that if he received such funds, he used them for other purposes.
[51] The alleged transfer of funds after the July 28, 2011 order further undermines the legal argument that the parents sought to secure the loan once they appreciated their jeopardy. Their alleged loan would have been in jeopardy immediately because it post-dated the order of July 2011. The parents knew or ought to have known the risk to their loan, since their support post-dated the July 2011 Final Order. Counsel’s legal argument about the parents’ motivation to secure their alleged loan, at a later point in time does not make any sense because Mr. Barrenechea was already facing a judgment when some of the funds were allegedly advanced. There was risk from the get go but the Barrenechea’s did not seek any security then. What changed between July 2011 and March 2012 was Mr. Barrenechea’s ability to set aside the July 2011 order. When he exhausted the court avenue, he registered a mortgage in his parents’ favour to soak up the equity in his condominium.
[52] Similarly, even if counsel’s affidavits were admissible, I am not able to place any weight on the letter from the portfolio manager of RBC, included in one of the affidavits because his information amounts to hearsay. The letter purported to outline the movement of funds to and from accounts connected to the Barrenecheas. But there was nothing in the Bank’s information to allow for the author of the letter to conclude that the Barrenecheas loaned their son any money. It is not even clear as to whom the accounts referenced in the letter belong. On his own admission contained on the face of the letter, the Bank manager stated that the information in the letter was based on the information he received from the Barrenecheas. The author effectively undermined even the prospect of the letter’s limited usefulness by expressly indicating that Mr. Barrenechea’s parents asked him to prepare the letter.
[53] The reality is that I do not need to admit counsel’s evidence regarding the mortgage registration to conclude that the mortgage is invalid. The circumstances surrounding Mr. Barrenechea’s conduct or lack thereof, combined with the timing of the registration, and Mr. Barrenechea complete avoidance of any disclosure and any production of evidence to support his contention that he obtained a loan from his parents collectively take on the character of badges of fraud and a fraudulent intent. The inference to be drawn on a balance of probabilities is that Mr. Barrenechea registered a mortgage in favour of his parents, to postpone or avoid his court ordered obligations. Nothing in Mr. Barrenechea’s submissions meets the burden of an explanation. There is no explanation coming from him. The only explanation, if it were admissible, comes through his counsel and amounts to an admission of a preference to avoid the court’s Final Order of July 28, 2011.
[54] Accordingly, the proceeds from the sale of the condominium, currently held by the FRO in trust, are not to be released to Mr. Barrenechea’s parents. On the basis of Ms. Meth’s Statement of Monies Owed dated December 21, 2015, estimated to be $48,430.57, FRO shall release the net funds to Ms. Meth. If there is any balance, it shall be released to the Barrenechea parents.
CONCLUSION
[55] Based on my findings and conclusions outlined I make the following orders:
a) Spousal support payable by Mr. Barrenechea to Ms. Meth is terminated as of October 1, 2014;
b) Child support payable by Mr. Barrenechea is to be calculated on the basis of Mr. Barrenechea’s 2014 income and as more particularly laid out in the Minutes of Settlement of December 10, 2015. The monthly sum referenced in those minutes is corrected to $1,423.
c) Section 7 extraordinary and special expenses of $175 per month provided in the Court’s Final Order of July 2011 are terminated effective October 1, 2014.
d) Future section 7 extraordinary and special expenses are to be paid by Mr. Barrenechea in accordance with the terms more particularly set out in paragraph 25 of this endorsement.
e) Subject to any need for an updated reconciliation of accounting from FRO, the proceeds of sale from Mr. Barrenechea’s condominium currently held in trust by FRO are to be paid out in accordance with the specific terms contained in paragraph 54 of this endorsement.
[56] In light of the findings and corresponding orders outlined above, the parties are strongly encouraged to resolve the issue of costs for this motion. Should they be unable to settle costs, the Applicant shall have until March 18, 2016 to file her submissions and the Respondent may have until April 1, 2016 to respond. Submissions by both parties are to be limited to three pages, double-spaced, using 12 pt. sized font, as well as a Bill of Costs.
Tzimas J.
Date: February 26, 2016
CITATION: Meth v. Barrenechea, 2016 ONSC 1415
COURT FILE NO.: FS-15-124-00
DATE: 2016-02-26
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: TARA MARIA METH and AGUSTIN BARRENECHEA
BEFORE: TZIMAS J.
COUNSEL: Susan Berry, for the Applicant Robert A. Otto, for the Respondent
ENDORSEMENT
Tzimas J.
DATE: February 26, 2016