Court File and Parties
Newmarket Court File No.: FC-13-00043164 Date: 2016-06-16 Ontario Superior Court of Justice
Between: Karina Cosentino, Applicant – and – Benito Cosentino, Respondent
Counsel: Hugh M. Evans, for the Applicant Margaret Osadet, for the Respondent
Heard: December 1 – 4, 2015, February 19, 2016 and March 15, 2016
Reasons for Judgment
Douglas, J.
Overview
[1] The issues before me were identified by the parties in their opening and closing submissions as follows:
a. child support; b. spousal support; c. the parties’ incomes for support purposes; d. equalization and in particular: i. value of the matrimonial home ii. value of Respondent’s interest in ABC Insurance Brokers Ltd. (hereinafter “ABC”) as of date of separation; iii. value of Respondent’s Personal Book of Business as of date of separation; iv. value of Respondent’s interest in Dagmar Management Group Ltd. (hereinafter “Dagmar”) as of date of separation; v. value of Respondent’s household contents as of date of marriage; vi. value of Respondent’s loans owing to his father as of date of separation.
[2] On October 19, 2015 the court ordered bifurcation of the issues of custody and access from the financial issues. Only the financial issues set out above proceeded before me.
[3] It appears that although the parties have yet to finalize an order with respect to custody and access that it is accepted that the Applicant mother has had primary care of the children. That this will continue indefinitely and that child support should be payable to her for two children based on the Respondent’s income as found by me.
[4] Regarding the issue of equalization the parties supplemented their submissions with proposed Net Family Property Statements (marked as Schedules A and B for the Applicant and Respondent respectively). Those statements, when compared, revealed additional issues beyond those identified to me in submissions. I shall restrict my reasons to those issues identified by counsel in submissions and invite them to calculate the amount owing by way of equalization by either party to the other. If there are lingering issues resulting from this approach same can be addressed.
Background Facts
[5] The Applicant was born August 2, 1974. At trial, she was 41 years of age.
[6] The Respondent was born August 22, 1956. At trial, he was 59 years of age.
[7] The parties married on June 23, 2001. At that time the Applicant was 26 years of age.
[8] The date of separation has not been firmly agreed upon.
[9] The Applicant says the parties separated on March 15, 2013. The Respondent says it was February 28, 2013. The parties did not present any significant evidence on this issue. It does not appear that anything significant either rises or falls on this difference in positions. I am assuming for the purpose of my reasons for judgment that there is no material difference in value of any assets or debts as of the date of separation for equalization purposes.
[10] There are two children of the marriage, namely Gabriella born September 30, 2003 (12 years at trial) and Romina born November 23, 2005 (10 years at trial).
[11] The Applicant has had primary care of the children subject initially to non-overnight access by the Respondent. More recently he has had little if any contact with the children. Pursuant to the consent temporary order of October 19, 2015 the Respondent is currently entitled to access of two hours every two weeks, supervised.
[12] According to the temporary orders of April 16, 2013 and September 15, 2014 the parties shared the matrimonial home following separation until approximately October 1, 2014 after which the Applicant enjoyed exclusive possession of the matrimonial home.
[13] In April 2013 the Respondent was ordered to pay $1,500.00 per month to the Applicant “subject to adjustment with respect to child and spousal support, until further agreement between the parties or court order.”
[14] The matrimonial home is registered in the Respondent’s name alone. The Applicant currently resides there with the children. It appears agreed that he is to resume possession in mid-summer 2016.
Equalization Issues
Value of matrimonial home at date of separation.
[15] There are two competing valuations of the matrimonial home.
[16] Mr. Dimytrishyn testified for the Applicant. He was qualified as an expert. He opined that the value of the matrimonial home was $535,000.00 at September 30, 2013. In his opinion its value in March 2013 would be “at most” two to three percent less. At three percent less the value would be $518,950.00 in March 2013. At two percent less the value would be $524,300.00 in March 2013.
[17] Mr. Somer was called as a witness by the Respondent. He was qualified as an expert. In his opinion the matrimonial home was worth, as of April 29, 2013, $439,300.00 calculated as “market value at $548,500.00 minus the estimated costs to repair… of $109,235.00 equals $439,265.00. Rounded to $439,300.00.”
[18] According to Mr. Somer the estimated costs to repair are:
a. removal and replacing rear enclosed patio and drainage system $73,076.00; b. supply and install new vinyl windows $14,916.00; c. supply and install new furnace and water heater $12,678.00; d. supply and install new roof shingles $5,989.00; e. supply and install new garage door $1,446.00; f. supply and install new exterior plumbing line $1,130.00
Grand total: $109,235.00 (including HST).
[19] In this regard I received evidence from Mr. Roman Ritacca, a contractor, regarding the cost of repair to the rear enclosed patio area. He was not qualified as an expert but indicated that the cost of removing the existing structure, starting again with a full foundation, the resulting product being better than the existing would cost approximately $64,669.00. He described his observations of the rotting supporting joists if the rear enclosure which were readily evident with a superficial external examination.
[20] “Value” is not defined in the Family Law Act. It must be determined on peculiar facts and circumstances presented on the evidence in each case. The objective is ensuring an equitable result (see Rawluk v. Rawluk, [1986] O.J. No. 735 affirmed [1990] SCV No. 4 (SCC)). “Fair market value” should be used as an initial guide, subject to the court’s freedom to depart from this concept in pursuit of an equitable result. The court could use the concept of “fair value” to correct obvious inequities resulting from slavish application of the fair market value approach (see Menage v. Hedges, [1987] O.J. No. 1512 (Ont UFC)).
[21] Fair market value is the price a seller is willing to accept and a buyer is willing to pay on the open market in an arm’s length transaction. Mr. Somer’s approach is different in that he seems to start with “market value” of $548,500.00 and then deducts therefrom, dollar for dollar, the cost of certain repairs, including HST, in order to arrive at what he is suggesting is the fair market value of the home. Mr. Somer’s approach fails to consider betterment of the asset through the improvements that would be effected through implementation of the proposed repairs.
[22] I prefer Mr. Dimytrishyn’s approach as a result of these concerns. He does not consider the need for repairs, but takes the property as it is at the relevant point in time.
[23] Mr. Dimytrishyn identified a value of $535,000.00 as of September 30, 2013, approximately 6 months after separation. He testified that the value in March of 2013 would be two to three percent less “at most”. Two percent would be less extreme than the three percent and thus I accept the value proposed by Mr. Dimytrishyn in this regard, translating to $524,300.00.
[24] The Respondent submits that disposition costs of the matrimonial home (i.e. real estate commission and legal costs) of $12,000.00 ought to be deducted from his Net Family Property as of date of separation.
[25] The Applicant submits that no disposition costs ought to be deducted.
[26] In Sengmueller v. Sengmueller, [1994] 17 O.R. 3d 208 (OCA) the Ontario Court of Appeal concluded that it was appropriate to take disposition costs into consideration in valuing an asset “if there is satisfactory evidence of a likely disposition date and it is clear that such costs will be inevitable when the owner disposes of the assets or is deemed to have disposed of them.”
[27] In Buttar v. Buttar, 2013 ONCA 517 the Ontario Court of Appeal indicated that it is necessary to determine “whether it is more likely than not that the assets would be sold, at which point disposition costs would inevitably be incurred.”
[28] The Applicant argues that the Respondent has not decided whether he will sell the property and thus there is no evidence of a likely disposition date and thus he is not entitled to deduct disposition costs.
[29] The Respondent argues that he cannot decide regarding sale of the matrimonial home until he knows what he owes by way of equalization.
[30] Given the Respondent’s uncertainty regarding his plans pertaining to the house, I cannot conclude that there is satisfactory evidence of a likely disposition date and therefore I find that the Respondent’s claim for a deduction for disposition costs with respect to the matrimonial home is not made out. There shall be no such deduction in calculating his Net Family Property.
Personal Book of Business at Date of Separation
[31] The parties’ respective proposed Net Family Property Statements both reflect a date of marriage value of the Respondent’s ABC Book of Business in the amount of $97,000.00. There is no issue in this regard.
[32] The issue is in relation to the value of Respondent’s ABC Book of Business as of the date of separation.
[33] The Applicant’s proposed Net Family Property Statement identifies her position as to value of the Book of Business at date of separation as $315,000.00.
[34] The Respondent’s proposed Net Family Property Statement makes no reference whatsoever to the Respondent’s Book of Business as of date of separation.
[35] Mr. Figov gave evidence in this proceeding on behalf of the Respondent, framed by his valuation report dated June 16, 2015.
[36] Mr. Figov expresses the opinion that a fair market value of the Respondent’s Book of Business at date of separation is $110,500.00.
[37] Mr. Figov’s opinion is based upon the following assumptions:
a. a potential purchaser would pay one times gross commission on recurring commission revenue for a Book of Business in an open and unrestricted market; b. there will be substantial constraints and difficulties for the Respondent to sell his Book of Business or transfer his Book of Business to another brokerage business; c. any potential sale of his Book of Business would be structured such that the price paid would be predicated on retention of business.
[38] After calculating total commissions for both personal and commercial insurance products, amounting to $221,144.00 (rounded to $221,000.00) he applied a discount of fifty percent on the gross commissions for the following reasons:
a. policies can lapse from date separation to date of sale of the Book of Business. This occurs where clients do not renew policies for various reasons and can include moving business to another agent. This needs to be factored in for policies renewing from date of separation to ultimate sale of the Book of Business; b. it is not known what the ultimate potential date of sale or retirement would be for the Respondent; c. retention of policies up for renewal during transition period after the Book of Business sold: clients may switch business to another broker once the Respondent ceases to be involved in the insurance business or may not agree to transfer their policies if he moves to another brokerage firm; d. once a transaction is executed and the Respondent sells his Book of Business, he ceases to have any control over his former Book of Business. There may be limited or costly recourse should any dispute arise; e. costs may be incurred in winding down ABC on the sale of the Book of Business.
[39] Applying the discount of fifty percent to the gross commissions rounded to $221,000.00, results in $110,500.00.
[40] The Applicant presented expert evidence from Stephen Kertzman. Mr. Kertzman prepared a report dated December 1, 2015. In Mr. Kertzman’s view, the value of the Book of Business at date of separation is $315,000.00 calculated as follows:
a. gross commissions $251,900.00 b. multiple 1.4 c. estimated enbloc FMV $352,660.00 d. less present value of contingent taxes on disposition ($38,000.00)
Total: $315,000.00 (rounded)
[41] Mr. Kertzman’s conclusion differs from that of Mr. Figov in the following respects:
a. The multiplier of 1.4 is higher than the multiplier of 1.0 used by Mr. Figov. Mr. Kertzman’s multiplier was based on a “review of over 70 somewhat similar comparable North American transactions associated with Insurance Agencies and Brokerages with commissions between $100,000.00 and $500,000.00 per year and discussion with business brokers in the Toronto area…” b. The factors relied upon Mr. Figov in applying the 50% discount are “prevelant in other transactions of books of business and are not unique to the Respondent’s Book of Business; thus, such a discount is not appropriate.” c. Although Mr. Figov addressed disposition costs differently, ultimately the effect was not material. d. Mr. Kertzman used gross commission of $251,900.00 whereas Mr. Figov used $221,144.00. The figure of $251,900.00 is based upon ABC’s gross commission revenue. The figure of $221,144.00 is based upon the same but excluded lines of business that are not subject to renewals at date of separation.
[42] Mr. Kertzman expresses the opinion that the fair market value of the Respondent’s Book of Business in Mr. Figov’s report “appears understated based on actual transactions.” Mr. Kertzman references communication with two insurance brokers and a resultant conclusion that Books of Business similar to the Respondent’s would be purchased at multiples of two to four times gross commissions.
[43] Mr. Figov notes in this regard that Mr. Kertzman is mistaking a broker for a sub-broker and notes there is a distinction between the two. The Respondent, as a sub-broker, does not have the freedom that a broker has to transfer his Book of Business in a number of ways, instead, he must approach each client individually and apply for new policies and this is a much more cumbersome undertaking.
[44] I note that Mr. Figov has a history of working in the insurance industry and of performing valuations of brokerages and sub-brokerages.
[45] Mr. Kertzman also expresses concern regarding the gross recurring commissions in the amount of $221,000.00. Mr. Kertzman indicates that these gross commissions appear understated when referencing gross commissions reported in the ABC financial statements in 2012 of $256,000 and in 2013 of $232,000.00.
[46] Mr. Figov explains the differences relating to non-renewable or non-recurring policies of insurance. Also, life insurance commissions were excluded but were not material as they only amounted to $7,000.00 per year and he was uncertain as to what value there would be for such policies for sale purposes.
[47] I find Mr. Figov’s analysis more reliable for the following reasons:
a. Mr. Figov has experience within the insurance industry and preparing valuations in that context; b. Mr. Kertzman has apparently conflated “broker” and “sub-broker”. Based on the evidence, I am satisfied that the distinction is a material one in the context of the insurance industry, particularly in reference to the transferability of a book of business, and that such would influence the value of the book of business. c. I find that the gross commissions figure of $221,144.00 relied upon by Mr. Figov is the more appropriate figure given the non-renewable nature of some of the income included in the figure of $251,900.00 utilized by Mr. Kertzman. d. Mr. Kertzman’s “indication of value” of the Book of Business set out in his report does not rise to the level of Mr. Figov’s “opinion of value.” e. In formulating his “indication of value” Mr. Kertzman relies in part upon “somewhat comparable transactions, “and somewhat similar transactions.” While I appreciate that a more detailed comparison of the comparable or similar transactions may not be possible (depending upon the availability of the transaction details) this adds an element of vagueness to Mr. Kertzman’s “indication of value.” f. Regarding the multiplier, Mr. Figov’s 1.0 is rooted in the practical difficulty in transferring a book of business as a sub-broker. It is meant to reflect the difficulty in having to approach each client individually, in addition to natural attrition. g. The discount of 50% is reasonably grounded, in Mr. Figov’s opinion, in the factors outlined above, and addresses concerns not reflected in the 1.0 multiplier.
[48] I therefore conclude that the value of the Respondent’s Book of Business at date of separation is $110,500.00.
[49] While the experts are agreed that this value should be reduced by notional disposition tax, (Mr. Kertzman calculates $23,735.00 and Mr. Figov calculates $25,636.00, the difference appearing to be in Mr. Kertzman’s discount of “7% for timing, deferrals, etc.”) I received no evidence as to a likely date of disposition. As a result it is not possible to assess the likelihood of applicable marginal tax rates. Also, neither party addressed this issue in submissions and neither Net Family Property Statement refers to such a deduction as a consequence of this uncertainty there will be no deduction for notional disposition costs on this asset.
Personal Property Owned by Respondent on Date of Marriage
[50] Although in his Financial Statement sworn June 2015 the Respondent indicated that the value of his personal property at date of marriage was $50,000.00, he has presented a proposed Net Family Property Statement identifying the value of his “personal property – home contents” as $13,500.00. I am proceeding on the assumption that it is the latter figure upon which he relies.
[51] I am presuming that this figure includes a value of the Respondent’s 1990 Celica motor vehicle to which reference was made in his evidence, given that there is no specific reference to same under “general household items and vehicles.”
[52] The Applicant in her proposed Net Family Property Statement refers to a value of $16,700.00 for the Respondent’s motor vehicle and $15,000.00 “home furnishings”.
[53] There was no expert evidence regarding the value of any personal property owned by the Respondent at date of marriage.
[54] The date of marriage deduction is a claim advanced by the Respondent and from which he benefits. He is seeking $13,500.00. The Applicant was prepared to accept a figure beyond that but as the Respondent is only claiming $13,500.00, I find that the value of the Respondent’s “personal property – home contents” owned on date of marriage to be $13,500.00.
Value of Respondent’s Loans from his Father at Date of Separation
[55] The Respondent claims a deduction of $54,000.00 as of date of separation (€40,000.00 at an exchange rate of 1.35%.) He says this represents money owed by the Respondent to his father as of the date of separation.
[56] The Applicant ascribes no value to this alleged debt.
[57] In this regard the Respondent testified that his father was in the habit of not depositing money in a bank. He described this as a not unusual practice in Italy where his father resides in a small village with no bank and where the local post office often acted as a banking facility in some limited way.
[58] The Respondent testified that in 2008 his father gave him €25,000.00 to hold for him for when he needed it. He says that his father gave a further €5,000.00 to the Applicant.
[59] The €25,000.00 was spent over the years on things including a new driveway the Respondent kept the money in his residence. The monies were also used for travel. He exchanged it into Canadian funds but never deposited the funds in a bank.
[60] He said he received a further €15,000.00 in 2011.
[61] On August 20, 2012 the Respondent’s father executed a promissory note evidencing €40,000.00 provided by the Respondent’s father to the Respondent “to hold in custody” for the Respondent’s father with the obligation to repay upon demand without interest. The Respondent testified that he had this promissory note prepared “to make it official”. The Respondent further testified that when his father passed away on June 13, 2013 at 90 years of age he spent about half of the money he owed his father on the funeral, the grand total cost of which was €44,043.00.
[62] I also received evidence from a long-time friend of the Respondent, Louis Argentiri who was in Italy and present in 2011 when he says €15,000.00 was provided by the Respondent’s father to the Respondent. Mr. Argentiri says he saw the Respondent’s father give him the money with the words “in case something happens to me”. Mr. Argentiri was a little inconsistent on his understanding of the Italian language. His first language is Spanish. The Respondent and his father conversed in Italian He variously indicated that he understood Italian “a little bit” and “a lot” and conceded that he did misunderstand sometimes; as a consequence, I ascribe little weight to this testimony.
[63] I also received evidence from the Respondent’s sister Maria Paoli who testified that she saw their father give the Respondent money to hold for him. She says this was in December of 2007. She says their father gave the Respondent the money “for when I need it”.
[64] The issue is what the Respondent owed his father as of the date of separation.
[65] As noted above the Respondent’s father passed away in June 2013, several months following the date of separation and accordingly the expenditure of monies by the Respondent regarding his father’s funeral is not relevant. Debts are to be assessed as of the valuation date (see Menage v. Hedges, [1987] OJ 1512 (Ontario UFC) and DeFaveri v. Toronto Dominion Bank, [1999] OJ 822 ONT CA).
[66] It is settled law that even though a debt may have a specified face value, the value of the debt should be discounted to reflect the reality that it is unlikely that the promisor will ever be called upon to pay the debt (see Cade v. Rotstein, [2004] OJ 286 ONT CA). In LeVan v. LeVan, [2006] OJ 3584 (ONT SCJ) affirmed [2008] OJ 1905, 2008 ONCA 388 (ONT CA) leave to appeal refused [2008] SCCA 331 (SCC) a $1,000,000.00 ostensible loan by the husband’s parents could be discounted to zero where the parents were extremely wealthy, had gifted the same amount to the husband’s siblings, had not referred to the loan in the father’s Will and there appeared to be no intention that the loan be repaid.
[67] Discounting debt is not an exact science. Where the probable repayment date of an amount advanced to pay off a couple’s mortgage was about 10 years after the parties’ separation, a 25% discount was appropriate (see Traversy v. Glover, [2006] OJ 2908 (ONT SCJ).
[68] In Salamon v. Salamon, [1997] OJ 852 (ONT Family Court) a 50% discounting was appropriate to reflect the fact that a debt may not be payable for many years.
[69] In the case before me there is no evidence that the Respondent’s father ever asked for repayment of the monies or that his estate ever sought repayment.
[70] Further, it appears that the monies were at least in part representing repayment of the Respondent’s expenditures for the Respondent father’s airline tickets. Such being the case there could be no expectation that these monies would be repaid by the Respondent to this father.
[71] I note that the Respondent’s evidence and that of his sister are consistent in that the money was to be held by the Respondent for his father for when his father needed it. Thus absent an expression of need it would appear to have been the understanding that the Respondent was entitled to retain the money. Indeed, the Respondent in his evidence testified that his father told him that he was entitled to spend it on expenses and that is exactly what the Respondent did.
[72] Mr. Argentiri’s evidence to the effect that the money was paid to the Respondent in case something happened to the Respondent’s father, suggests an even more minimal expectation of an obligation to repay.
[73] While the preponderance of the evidence satisfies me that monies in the approximate amount of €40,000.00 had been provided to the Respondent by his father and that none of those monies had been repaid by the Respondent to his father as of the date of separation, I am not satisfied that there was any reasonable expectation that the monies would be repaid, as of the date of separation.
[74] For these reasons, I discount the debt to zero as of date of separation.
Value of the Respondent’s Interest in ABC at Date of Separation
[75] The Applicant submits that the value of the Respondent’s interest in ABC at separation was $98.000.00.
[76] The Respondent, in his Net Family Property Statement, makes no reference to his interest in ABC at date of separation.
[77] The Respondent relies upon the evidence of Mr. Figov. It is common ground that the Respondent had a 100% interest in ABC as of date of separation.
[78] Mr. Figov opined that the value of the Respondent’s interest in ABC at date of separation is $98,766.00.
[79] Mr. Kertzman agrees with this figure.
[80] The experts disagree on notional disposition costs. Mr. Figov assumes the company would be would up and the proceeds distributed as a dividend. With taxable dividends of $98,766.00 and a tax rate of 32.6%, the notional tax on disposition would be $32,165.00, which, after accounting for present value of tax payable, is reduced to approximately $29,779.00, resulting in a value of $68,987.00.
[81] Mr. Kertzman assumed the Respondent would use a more tax beneficial approach. He assumed the Respondent would withdraw from ABC in small amounts to be used by the Respondent to fund his retirement and to take advantage of income taxes at low marginal rates. He used on average of the disposition costs calculated in his approach and in the Figov analysis. In the result, $22,700.00 is deducted resulting in a value of $76,300.00.
[82] Neither party led any evidence to assist me regarding the issue of disposition costs relating to ABC including timing. Neither party advances any submissions on this particular issue. Neither party made reference to disposition costs regarding ABC in their Net Family Property Statements.
[83] This is an issue which potentially benefits the Respondent and it relates to an asset in his name. He bears the burden of proof.
[84] In my view the Respondent has failed to discharge this burden by failing to adduce evidence of likely date of disposition and the mechanism by which he might realize this asset. My conclusion is bolstered by the Respondent’s failure to make any reference to disposition costs in his submissions and Net Family Property Statement.
[85] Therefore, the value of the Respondent’s interest in ABC at date of separation is $98,766.00.
Value of Respondent’s Interest in Dagmar at Date of Separation
[86] The Applicant submits that the Respondent’s interest in Dagmar at separation is $1,900.00.
[87] The Respondent in his Net Family Property Statement again makes no reference to this asset. Also, no specific reference to the asset was made in submissions.
[88] The Respondent relies upon the evidence of Mr. Figov.
[89] It is common ground that the Respondent held a 25% interest in Dagmar at separation.
[90] Mr. Figov opined that the value of the Respondent’s interest in Dagmar at separation was $2,646.00. After deducting notional cost of disposition (32.6% tax), the net amount is $1,785.00.
[91] Mr. Kertzman arrives at a value of $1,960.00 after accounting for notional disposition costs.
[92] Again, no evidence was led regarding timing and mechanism of disposition of this account. Again, it was the Respondent’s burden to prove this component of the equalization calculation.
[93] As the Applicant concedes a value of $1,900.00, that is the value I find for equalization purposes.
Support Issues
Applicant’s Income
[94] Prior to marriage the Applicant mother was living with her family in Ecuador. She was still at University in a program regarding foreign trade (import/export). She was not working except in telemarketing and filing. The program of study was five years in duration and she has secured her degree.
[95] The parties married on June 23, 2001 in Ecuador. The Respondent sponsored her immigration to Canada and she moved into the matrimonial home in July of 2002 after completing her degree.
[96] When the Applicant met the Respondent she spoke no English.
[97] The Applicant testified that she intended to work in her area of study upon becoming established in Canada; however, the Respondent told her that would not work in Canada. He made inquiries regarding the Applicant securing her Canadian qualifications and subsequently told her that it would be too expensive and too time consuming for her to pursue that. The Respondent denies these allegations.
[98] The Respondent suggested that she start working with him.
[99] In September 2002 the Applicant started ESL courses and then she got pregnant with Gabriella.
[100] In 2004/2005 she began pursuit of her Canadian High School equivalency taking courses two days per week, two to three hours each day.
[101] The Applicant testified that the Respondent had promised that she would help in his business but that never happened. The Respondent testified that she worked in his office performing administrative functions.
[102] In 2005 she started receiving a salary from ABC in the amount of $2,000.00 per month, representing an increase from the original level of $1,600.00 per month. She testified she did not do any actual work for the company and that when she started to receive the salary her English remained limited. She testified that in 2005 the parties usually spoke Spanish at home and some Italian. She testified she was learning more Italian than English.
[103] She testified that the Respondent took her to find a job at the Toronto Dominion Bank prior to the date of separation. She met someone there that the Respondent knew through a business contact. This was in the fall of 2012. Nothing came of this.
[104] At separation, she had no job training and had never been employed in Canada.
[105] Following separation she did not go searching for employment as she was under “a lot of stress”. She experienced “migraines almost every day”.
[106] At separation her English was still not very good. She did take some customer service training for a few weeks.
[107] She sent out resumes and had an interview for a night shift position in Newmarket. She could not accept it because of her childcare responsibilities.
[108] She was also called for two or three interviews with respect to employment involving weekend work but she was not prepared to sacrifice this time with the children.
[109] She did a telephone interview for a receptionist position but they never called her back.
[110] Starting in the fall of 2014 she started pursuing English upgrading. Further upgrading is needed for her to pursue college level courses. She has interest in pursuing a career for a position as a medical assistant. She acknowledges proficiency in English is the main objective at this stage.
[111] The Applicant’s income tax returns are summarized as follows:
a. 2002 line 150 total income per her Notice of Assessment $12,690.00 b. 2003 line 150 total income per her Notice of Assessment $13,980.00 c. 2004 line 150 total income per her Notice of Assessment $14,580.00 d. 2005 line 150 total income per her Notice of Assessment $15,000.00 e. 2006 line 150 total income per her Notice of Assessment $22,000.00 f. 2007 line 150 total income per her Notice of Assessment $24,000.00 g. 2008 line 150 total income per her Notice of Assessment is $24,000.00 h. 2009 line 150 total income per her Notice of Assessment $24,000.00 i. 2010 line 150 total income per her Notice of Assessment is $27,000.00 j. 2012 line 150 total income for per Notice of Assessment $25,000.00 k. 2014 line 150 total income per her Income Tax Return is $6,250.00 (RRSP income), confirmed by Notice of Assessment
[112] The Applicant’s Financial Statement for November 29, 2015 shows no income in the year prior to swearing the Financial Statement nor at the time of swearing the Financial Statement. She continues to live alone apart from the two children in her care.
[113] In Cross-Examination the Applicant acknowledged that with her education and experience she could work in business or in airport customs. Her program of studies started in 1996 and she graduated in 2001. Following completion of her education in Ecuador she was working with a friend doing filing work and telephone work on a volunteer basis.
[114] She used computers in University. She can type. She has used word processing programs. She is somewhat familiar with Microsoft Word.
[115] After coming to Canada she finished two English classes within six months of arrival. She did not continue the classes because of morning sickness from her pregnancy with Gabriella. She became pregnant with Gabriella in January 2003.
[116] The Applicant testified that the Respondent basically kept her “prisoner in the home” after her first ESL course following Gabriella’s birth. The Respondent wanted her to stay at home to care for the baby. He did not allow her to work outside the house. The Respondent denies these allegations.
[117] After Gabriella was born she stayed home to care for the baby. She had morning sickness with Gabriella.
[118] She testified that she could not do anything without the Respondent’s consent. The Respondent prepared the Applicant’s income tax returns. Although the Respondent eventually provided her a credit card, she needed the Respondent’s approval for purchase with it. The Respondent denies these allegations.
[119] She has never hired a babysitter as she has no money with which to do that.
[120] She has had exclusive possession of the matrimonial home since September 30, 2014.
[121] The Applicant submits that I should treat her income as “zero” for support purposes.
[122] The Respondent submits that income of $40,000.00 should be imputed to the Applicant.
[123] Section 19 of the Child Support Guidelines permits the court to “impute such amount of income to a spouse as it considers appropriate in the circumstances...” Such circumstances include intentional under-employment or unemployment. While there is no similar provision under the Divorce Act in relation to determination of income for spousal support purposes, the Divorce Act does permit the court to make such order for spousal support “…as the court thinks reasonable for the support of the other spouse.” Determination of what is reasonable must start with determination of the parties respective incomes. The terms of s.19 of the Child Support Guidelines, while not applicable to spousal support per se, nevertheless represent a useful guide in considering whether to impute income for spousal support purposes as well.
[124] The Applicant is 41 years of age and university-educated. The children are 12 and 10 years and thus not in need of a constant parental presence at home. While the Applicant asserted in her evidence that the Respondent was controlling and insisted that she stay at home to care for the children, the Respondent asserted that he was not controlling and that he encouraged the Applicant to pursue employment outside the home. I have no reason to prefer the evidence of either party over the other on this point. I treat such evidence as neutral.
[125] The Applicant’s income history prior to separation confirms that she has never declared income in excess of $27,000.00. Her peak of $27,000.00 was achieved about six years ago. In 2014 soon after separation, she collapsed $6,250.00 in RRSPs and declared no other income in that year.
[126] The Applicant has standard skills including word processing. She was limited work experience in telemarketing and office administration-type positions. She is well-educated at university level.
[127] In my view, while the Applicant possesses many of the antecedents to a promising employment career, she is seriously impeded by her lack of fluency in English.
[128] The Applicant pursued English as a Second Language courses promptly after arriving in Canada but she discontinued due to morning sickness while pregnant with Gabriella. She pursued upgrading in English in the fall of 2014 as this is required for her to pursue college level courses. She is interested in a career as a medical assistant.
[129] The Applicant has never been employed in Canada outside administrative work for the Respondent’s business. She has expended some effort in finding work, but not to a substantial degree.
[130] There is no evidence of any health-related reasons for the Applicant’s lack of employment beyond her evidence of stress-related migraines.
[131] I am mindful that a fulltime job at minimum wage in Ontario would provide income of about $23,000.00 per year.
[132] I see no reasonable explanation for the Applicant not having pursued English as a Second Language upgrading more diligently than she has. Had she done so I think it likely that she would be earning at least minimum wage. The level of income submitted by the Respondent is clearly unrealistic at this time.
[133] I therefore impute income of $23,000.00 to the Applicant.
Respondent’s Income
[134] The Respondent testified that he came to Canada in 1973. He started in insurance in 1974 with Canada General Insurance Company, delivering the mail.
[135] In 1980 he worked as a customer service representative for an insurance broker.
[136] In 1985 he commenced employment as a customer service representative with Reed, Reed and Yates Insurance Brokers. He was compensated on a commission basis.
[137] In 1998 he moved to Dagmar Insurance Brokers as a producer working on commission.
[138] The Respondent relies upon the opinion of Mr. Figov as contained in his report of June 19, 2015 regarding calculation of his income for support purposes for the years 2012 and 2013.
[139] According to Mr. Figov the Respondent’s income for spousal support purposes:
a. 2012 $74,497.00 b. 2013 $93,393.00
[140] According to Mr. Figov the Respondent’s income for child support purposes is:
a. 2012 $98,869.00 b. 2013 $97,927.00.
[141] The factual assumptions underpinning Mr. Figov’s opinion include:
a. The Respondent is a sub-broker with Dagmar; b. the Respondent beneficially owns 100% of ABC; c. ABC is not a registered brokerage company since it does not have any direct contracts with any specific insurance companies to sell their insurance products; consequently, ABC does not have any direct contract with insurance companies; d. the Respondent conducts his business through ABC which works as a producer for Dagmar. Dagmar has the direct insurance contracts with insurance companies to sell specific lines of business for specific companies; e. the Respondent has a 25% interest in Dagmar Management which was incorporated in 2012 to act as a conduit for the producers of Dagmar.
[142] The Respondent’s sources of income are his salary from ABC and a small amount of commission from life insurance sales that is shown on his personal income tax returns.
[143] The Respondent has no contracts with insurance companies.
[144] The Respondent testified that the Applicant helped him from home when she came to Canada in July 2002. She was inputting data in his office at home. She used her own laptop in this regard.
[145] Mr. Figov attributed pre-tax profit for 2012 and 2013 as income to the Respondent for child support purposes because the company has substantial amount of cash on-hand. On the other hand, he attributed $22,670.00 of pre-tax income representing the period from March 1, 2013 to December 31, 2013 as income for spousal support purposes as the Applicant will participate in the division of the value of ABC Brokers up to the date of separation which Mr. Figov assumed to be February 28, 2013.
[146] Mr. Figov added back certain written off expenses for business use of home in the amount of $3,200.00 in 2012 and $2,400.00 in 2013. These items were not grossed up for tax purposes as they had been declared for tax purposes.
[147] Mr. Figov added 10% of the total vehicle operating costs to the Respondent’s income for personal use of automobile as the Respondent estimated he used his vehicle 90% for business purposes.
[148] Mr. Figov did not adjust for the salary paid to the Applicant as she maintained the books of accounting for ABC Brokers and the Respondent has had to replace her services with a third party who is remunerated at a higher rate than what the Applicant received.
[149] At date of separation he was with Dagmar Insurance and at the peak of his business. He had some large long term clients.
[150] The Respondent’s income tax information is summarized as follows:
a. Line 150 per 2014 Notice of Assessment $73,009.00 (being comprised of employment income of $65,000.00, interest and other investment income of $85.59 and net self-employment income of $7,924.09) b. Line 150 per 2013 Notice of Assessment revised amount $68,677.00 (being comprised of employment income of $60,000.00, interest and other investment income of $135.00, net business income of $8,542.00) c. Line 150 per 2012 Notice of Assessment $68,507.00 (being comprised of employment income of $60,000.00, interest and other investment income of $83.00, net business income of $8,424.00) d. Line 150 per 2001 Notice of Assessment $42,827.00 (representing net self-employment income) e. 2014 Notice of Assessment for ABC Insurance Brokers Ltd. shows total net income of $34,262.00; f. 2013 Corporation Notice of Assessment for ABC Insurance Brokers Ltd. shows total net income of $29,051.00; g. 2012 Corporation Notice of Assessment for ABC Insurance Brokers Ltd. shows total net income of $26,323.00;
[151] The financial statements for ABC for the period ending December 31, 2014 show gross revenue of $180,904.00, net income for the year of $27,562.00 and retained earnings at the end of the year of $144,545.00. Cash is shown as $131,681.00.
[152] The final statements for ABC for the period ending December 31, 2013 shows gross revenue of $231,726.00 net income of $22,617.00, and retained earnings at the end of the year of $116,983.00. Cash is shown as $187,772.00
[153] The final statements for ABC for the period ending December 31, 2012 show gross revenue of $255,974.00, net income of $20,372.00 and retained earnings at the end of the year of $94,366.00. Cash is shown as $161,550.00.
[154] The ABC Insurance Brokers Ltd. financial statements for the year ending December 31, 2011 show gross revenue of $145,152.00, net income for the year of $1,354.00 and retained earnings at the end of the year of $74,045.00.
[155] Regarding rental income, Mr. Laviola resided in the basement at the matrimonial home with his wife for six months but paid no rent. After Mr. Laviola and his wife vacated the basement an Argentinian couple moved in for a couple of months. They paid $700.00 to $800.00 per month in rent.
[156] After the departure of the Argentinian couple, another person moved in and paid $600.00 to $800.00 per month in rent.
[157] Following that person’s departure a woman and her daughter moved in and paid roughly the same for rent.
[158] There were no other tenants that the Respondent could recall.
[159] The Respondent stopped renting because the Applicant no longer wanted him to make the basement available for rent and he moved his office to the basement.
[160] The Respondent denied income splitting with the Applicant.
[161] While I received some evidence from Mr. Kertzman by way of critique of the Figov analysis of the Respondent’s income, I attach little weight to such evidence. I say this on Mr. Kertzman’s engagement in this regard was for the purpose of providing a limited critique and as such, it does not rise to the same level of due diligence as in the Figov analysis. Also, in M. v. F., [2015] Carswell Ont 5630 (ONCA) the Court of Appeal concluded that critique evidence is generally not admissible.
[162] The Applicant submits that the Respondent’s income for support purposes is as follows:
a. 2012 $98,869.00 (per Mr. Figov, for child support); b. 2013 $97,927.00 (per Mr. Figov, for child support); c. 2014 and ongoing $120,000.00 (being $107,318 based on the Figov approach regarding child support and $12,000.00 imputed rental income)
[163] The Applicant submits that the Respondent’s income for ongoing support purposes ought to be set at $107,318.00 being comprised of his total income from all sources in 2014 ($73,011.00) plus pre-tax income earned through the wholly owned corporation of ABC Insurance Brokers Ltd. ($32,873.00) plus 10% of the 2014 figure for vehicle and travel to reflect personal use ($1,434.00).
[164] The Applicant does not submit that a lower income ought to be attributed to the Respondent for spousal support purposes in order, arguably, to avoid double-dipping.
[165] The Respondent relies upon the Figov report referenced above and summarized as follows:
| Child Support | Spousal Support | |
|---|---|---|
| a. 2012 | $98,869.00 | $74,497.00 |
| b. 2013 | $97,927.00 | $93,393.00 |
[166] The Respondent submits that his income for ongoing support purposes is $78,000.00. This sum is comprised of employment income of $70,000.00 plus net self-employment income of $8,000.00. On this basis he submits that guidelines child support is payable at the rate of $1,148.00 per month.
[167] The parties appear ad idem that child support be determined based upon Mr. Figov’s analysis regarding 2012 and 2013.
[168] There is a dispute is about whether any of the Respondent’s income should be excluded when determining his income for spousal support purposes in order to avoid double-dipping.
[169] I do not accept the submission that the Respondent’s income should be fixed at a lower level for spousal support.
[170] In Serra v. Serra, [2007] O.J. No. 446 (Ont SCJ), varied on other grounds 2009 ONCA 105, [2009] O.J. 432 (Ont CA), the court concluded that spousal support payments can be suspended while equalization instalment, are being paid. Thus, the support payments are not necessarily suspended and upon equalization being satisfied they may resume. I have yet to determine what is owing to who in this proceeding regarding equalization and indeed I am restricting my involvement in equalization to determination of a few constituent elements thereof. The Respondent referred in his evidence to retaining earnings in anticipation of paying the Applicant her equalization entitlement. It therefore appears unlikely that there will be any instalments of equalization as in Serra.
[171] In Mason v. Mason, [2014] O.J. No. 3417 (Ont SCJ) the husband’s business, which he retained following separation, was the source of the family’s income. The court concluded that equalization of this asset did not disentitle the wife to spousal support. It was only the parties’ respective incomes, not the divided asset, which were considered for the purposes of fixing spousal support (see also Poirier v. Poirier, [2005] O.J. No. 4471 (Ont SCJ)).
[172] While double-dipping is to be avoided where it arises reasonably on the facts, I conclude that it does not arise here. The concern expressed by the Supreme Court of Canada in Boston v. Boston, 2001 SCC 43, [2001] SCJ No. 45 (SCC), appears likely to have been influenced by the very nature of a pension as an asset, contrasted with a business interest on the facts before me.
[173] As to the issue of rental income the parties’ evidence was mostly consistent as to the history of rental income at the matrimonial home of about $800.00 per month. This income, according to the Respondent, ended because the Applicant no longer wished to rent out the basement apartment. When the Respondent resumes possession of the matrimonial home this summer, the Applicant’s position will no longer represent an impediment to this income stream. I find it probable that, going forward, this will be a source of income for the Respondent. If he does not pursue this income stream it should nevertheless be imputed to him given the prior history. The sum of $12,000.00 is a reasonable figure to impute to the Respondent as gross rental income. This should be added to the figure of $107,318.00 being an amount calculated using the Figov approach but utilizing the most recent income information available for the Respondent.
[174] The parties did not address the possible issue of retroactivity in their submissions. I therefore assume that the order sought is to be prospective in nature, and not retroactive. Accordingly, it is not necessary for me to make findings regarding the Respondent’s historical income.
[175] Therefore, for both child and spousal support purposes I find the Respondent’s income to be $119,318.00 going forward.
Child Support
[176] This is a divorce proceeding and accordingly the Federal Child Support Guidelines apply.
[177] Although the financial issues have been bifurcated from the custody and access issues and there is no final order for custody of which I am aware, the parties seek a final order for child support based on the current circumstances. There is no dispute that the children are primarily in the care of the Applicant.
[178] Having found the Respondent’s income to be $119,318.00, pursuant to the Federal Child Support Guidelines the Respondent shall pay $1,652.00 per month to the Applicant for the children Gabriella and Romina, commencing July 1, 2016.
[179] Regarding s.7 expenses, I received little evidence beyond receipts for piano, voice and dance lessons and orthodontics. These are appropriate s.7 expenses and they shall be shared proportionately to the parties’ incomes as set out below.
Spousal Support
[180] Section 15.2 of the Divorce Act applies to this issue. I am to take into consideration the condition, means, needs and other circumstances of each spouse, including:
a. length of time the spouses cohabited; b. the functions performed by each spouse during cohabitation; and c. any order, agreement or arrangement relating to support by their spouse.
[181] Pursuant to s. 15.2(6) a spousal support order should:
a. recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown; b. a portion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage; c. relieve any economic hardship of the spouses arising from the breakdown of the marriage; and d. insofar as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.
[182] While there are three conceptual bases for spousal support, only two are relevant to the case before me: compensatory and non-compensatory spousal support.
[183] Compensatory spousal support is grounded in the need to consider the “condition” of the spouse, the “means, needs and other circumstances” of the spouse, and “the functions performed by each spouse during cohabitation”. These compensatory statutory provisions can be seen to embrace the independent, clean break model of marriage and marriage breakdown (see: Bracklow v. Bracklow, [1999] SCJ 14 SCC).
[184] Where compensation is not indicated and self-sufficiency is not possible, a support obligation may nonetheless arise from the marriage relationship itself. Subparagraphs (c) and (d) of s.15.2(6) speak to non-compensatory factors. Economic hardship arising from the breakdown of the marriage is capable of encompassing not only health or career disadvantages arising from the marriage breakdown properly the subject of compensation, but the mere fact that a person who formerly enjoyed intra-spousal entitlement to support now finds herself or himself without it. Permitting recovery for the economic disadvantages of a marriage breakdown as distinct from “the disadvantages of the marriage” is an explicit recognition of non-compensatory support. The goal of promoting economic self-sufficiency is not necessarily tied to compensation for disadvantages caused by the marriage or its breakdown (see: Bracklow v. Bracklow, supra).
[185] The Applicant seeks spousal support at the high end of the Spousal Support Advisory Guidelines range, for an indefinite period, subject to review in three years.
[186] The Respondent concedes entitlement on both compensatory and non-compensatory grounds. He submits that spousal support at the low end of the range for a maximum of four years is appropriate.
[187] This is a relationship of eleven years duration. It is not a long-term marriage but as the Applicant moved from her native Ecuador to be with the Respondent, the breakdown of the marriage has visited some economic disadvantage upon her, the primary of which is she finds herself in a country where she is not fluent in either official language, and not in the language predominant where she resides. While I find she could and should have applied herself more diligently in pursuing her language classes, I am satisfied that a further period is necessary for the Applicant to upgrade her English skills and pursue her intended courses of study at college.
[188] I note as well that the Applicant absented herself from the workplace to care for the parties’ children, something from which the Respondent has benefitted, to the economic disadvantage of the Applicant.
[189] Mid-range spousal support based upon the Applicant’s income imputed at $23,000.00 and the Respondent’s income at $119,319.00 is $1,589.00 per month. This results in the Applicant retaining 55% of the parties’ net disposable income versus the Respondent’s 45%. I find this to be a reasonable amount of spousal support.
[190] As to duration, the parties separated over three years ago. The Respondent has been paying $1,500.00 per month since May 1, 2013 plus the expenses to maintain the home. During this time the Applicant has had possession of the matrimonial home (to be returned to the Respondent in summer 2016). In my view a duration of spousal support of nine years following separation is appropriate. The parties having separated in March, 2013, spousal support shall continue through February 28, 2022 and thereupon terminate.
Conclusion
[191] For all of the foregoing reasons, judgment to issue as follows:
For equalization purposes the following findings are made: a. Value of matrimonial home at separation: $524,300.00 b. Value of Respondent’s interest in ABC at separation: $98,766.00 c. Value of Respondent’s personal Book of Business at separation: $110,000.00 d. Value of Respondent’s interest in Dagmar at separation: $1,900.00 e. Value of Respondent’s household contents at marriage: $13,500.00 f. Value of Respondent’s loan owing to his father at separation: $0.00
The parties shall calculate the amount owing by way of equalization and submit same to me with their costs submissions.
Commencing July 1, 2016 the Respondent shall pay to the Applicant the sum of $1,652.00 per month by way of base child support for the children Gabriella and Romina, based upon income for the Respondent of $119,318.00.
Commencing July 1, 2016 the Respondent and Applicant shall share the children’s reasonable and necessary special and extraordinary expenses as they agree, or failing agreement as ordered by the court, such expenses including: a. Piano lessons; b. voice lessons; c. dance lessons; d. orthodontic expenses not covered by benefits.
The s.7 expenses shall be shared: a. 30% Applicant b. 70% Respondent
Commencing July 1, 2016 and through February 28, 2022 the Respondent shall pay to the Applicant the sum of $1,589.00 per month by way of spousal support.
For so long as child support is payable the parties shall exchange complete copies of their Income Tax Return and attachments by May 31 each year, and copies of their Notice of Assessment and Reassessment forthwith upon receipt.
If unable to agree on costs, parties to make written submissions through my assistant at Barrie as follows: a. Applicant within 30 days of today; b. Respondent within 45 days of today; c. Reply by Applicant, if desired, within 60 days of today.