CITATION: Michaud v. Kasali, 2016 ONSC 443
NEWMARKET COURT FILE NO.: FC-09-032371-01 DATE: 20160125 CORRIGENDA: 20160208
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Kathleen Michaud (Kasali) Applicant
– and –
Bill Kasali Respondent
Unrepresented
Unrepresented
HEARD: November 16 and December 2, 2015
REASONS FOR DECISION
(TEXT OF ORIGINAL DECISION HAS BEEN AMENDED – CHANGE APPENDED)
McGee J.:
What is the Respondent Father’s Income on Which Support is Calculated?
Rule 19(1) (f) Federal Child Support Guidelines
[1] On December 17, 2010, 58 year old Bill Kasali received a severance package from the Bank of Montreal. The package bridged him to a 2012 retirement date. Since then, his annual retirement income of approximately $10,768 has been the only income that he acknowledges. It is the only taxable income shown in the computer printouts of his 2013 and 2014 Notices of Assessment provided to the court.
[2] No child support is payable on income of $10,768 a year – it is below the statutory floor. Mr. Kasali is not optimistic that he will work again, but as a measure of goodwill he proposes to pay table support based on income of $30,000. He does not explain how he achieves his current lifestyle on his retirement allowance, why he refuses to provide originals of his CRA documents, or why he will not tell the court where he is living.
[3] Kathleen Michaud seeks an order that her former spouse pay monthly table child support of $2,155 from January 2012 forward, based on an income of $162,512; being his 2010 income prior to retirement, adjusted upwards in 2014 by a capital gain realized that year from the sale of a U.S. property.[^1]
[4] She asks that the full table support for two children continue to be paid, even through periods during which their daughter resides away from home to attend university. In addition, she seeks an order that Mr. Kasali pay 75% of those post-secondary expenses, including their daughter’s apartment.[^2] Ms. Michaud did not lead any evidence of her 2014 and 2015 income, necessary to the calculation of proportionate shares.
[5] For reasons that follow, the court finds that Rule 19 (1) (f) opens the door to an imputation of income. But no one walked through it.
[6] There is insufficient evidence on which to make the orders sought by Ms. Michaud. Rather, the court has determined income by examining the unfunded expenses set out in Part 2 of Mr. Kasali’s Financial Statements. Further submissions are required with respect to the treatment of the 2014 capital gain.
Background
[7] The parties married October 2, 1993 and separated September 26, 2006. They were divorced on December 10, 2009. They have two children: their daughter now aged 19 and attending university, and a son aged 16. Both children have lived with their mother since separation.
[8] A Separation Agreement was executed on February 2, 2009. On April 28, 2011 Ms. Michaud issued a Rule 15 Motion to Change to vary the child support provisions of the Agreement. The matter was tried in November 2013. Ms. Michaud was successful.
[9] The Final Order dated December 6, 2013 provides for increases in table support for each of the years following the execution date of the Separation Agreement up to 2012. As of January 1, 2012 child support was set at $890 based on income of $59,838. That income was subject to a review.[^3]
[10] As comprehensively set out in the December 6, 2013 Reasons, Mr. Kasali’s 2012 income remained a bit of a mystery. His assertion that he had no income since December 2010, but for his retirement and severance packages had never quite rung true. Compounding the mystery was Mr. Kasali’s inexplicable pattern of refusing to provide CRA documents, using a fake residential address and denying obvious facts. After considerable judicial admonishment, Mr. Kasali finally filed his 2012 Notice of Assessment showing $59,836 of income. On that basis ongoing support was set at $890, subject to review.
[11] Mr. Kasali was further ordered to provide the originals of his 2009, 2011, 2012 and 2013 Notices of Assessment, as well as his Income Tax Returns for 2011, 2012 and 2013 with attachments.
[12] During this 2015 trial Mr. Kasali filed computer printouts of the 2012, 2013 and 2014 Notices of Assessment, his handwritten “Amended” 2012 T1General and a handwritten 2013 T1general, and a typed 2014 T1General watermarked “File Copy Do Not Submit.”
[13] Neither party filed any SupportMate calculations. No case law was provided.
The Patterns Continue
CRA Documents
[14] The pattern of contradictory CRA documents continued through this trial. Ms. Michaud had been served with a copy of Mr. Kasali’s 2012 Assessment, but not the original as previously ordered. The copy served on her did not show Mr. Kasali’s filing as an Immigrant. That space was blank – or as is now apparent, was whited out.
[15] During this trial, three separate versions of Mr. Kasali’s 2012 filings were marked as Exhibits:
Exhibit #1: A very poor photocopy of a 2012 NOA issued September 19, 2013. Line 150 shows income of $59,836. This was the NOA tendered in the November 2013 trial.
Exhibit #3: A 2012 Assessment dated April 10, 2014, showing line 150 income of $139,679 (severance and pension income totalling $57,104 and other employment income of $82,572).
Mr. Kasali filed this Assessment on August 22, 2013 as an Immigrant. His date of birth is stated as August 20, 1953. His actual birth date is August 20, 1952.
Within this Exhibit is his 2013 Assessment filed April 30, 2014 as an Immigrant. His 2014 Assessment filed March 17, 2015 no longer shows a filing as an Immigrant.
Exhibit #9: A handwritten 2012 T1General showing line 150 income of $142,410, and the attached T4s.
[16] Mr. Kasali testified during this trial, that in November 2013 he knew that he had the bank shares coming to him, but he had not yet decided what to do with them. He testified that he sold the shares after the trial for $82,572; and only then did CRA require that the shares be included in his 2012 Income.
[17] This cannot be true. The evidence in this November 2015 trial shows that three months prior to the November 2013 trial (August 22, 2013) Mr. Kasali filed his handwritten 2012 return showing line 150 income of $142,419 (Exhibit #9 above) subsequently assessed as $139,679 (Exhibit #3 above). The amount of $139,679 includes the $82,572 of shares under “other employment income.” Exhibit #3 was not a reassessment.
[18] He did not list the bank shares in his November 1, 2013 Financial Statement.[^4]
[19] I find that Mr. Kasali’s 2012 assessed income was $139,679 and that he submitted a false 2012 Notice of Assessment into evidence in the November 2013 trial. The submitted copy has a number of different fonts. The actual 2012 Notice now in evidence was not even issued until April 10, 2014.
[20] Ms. Michaud claims that later Notices of Assessment also have suspicious omissions: no SIN #, different fonts, no commission of oath. Mr. Kasali denies anything is out of order. Alternatively he cannot explain it. He blames the CRA website which he stated during this trial “prints differently every time.” None of the Notices are originals. What then is the court to make of the computer print-outs in the absence of the originals?
False Addresses
[21] Mr. Kasali’s false representation of his address continued through this trial. All the 2012 to 2014 CRA documents bear the address of 14 Aukland Lane, King City - a home that he sold on January 31, 2012. When pressed, he testified that he continues to use this mailing address for banking statements and CRA “because of the fluidity of his situation.” He has an agreement with the King City Post Office to forward his mail.
[22] On the second day of this trial, the court directed him to provide his current Driver’s Licence. It also is issued on an address of 14 Aukland Lane. The address on his pleadings is 42 Doncaster Avenue, an address that by his own admission, he only uses as a mailing address for court documents.
[23] Mr. Kasali’s current residence is unknown.
[24] Mr. Kasali’s oral evidence on his residence was evasive. He continues to deny that he has ever resided outside of Canada. He has no explanation why he filed his 2012 and 2013 Income Tax Returns as an Immigrant.
[25] Ms. Michaud does have an explanation. As tendered in the November 2013 trial, and again during this trial, an Internet print-out from www.mycentraljersey.com records the sale of 9 Tiger Dr., Califon, New Jersey to Bill Kasali on June 20, 2012, for $835,000. An Internet print-out from www.zillow.com shows the sale of 9 Tiger Dr., Califon, New Jersey on March 31, 2014, for $964,500.
[26] Almost all of the furniture seen in the on-line interior pictures of 9 Tiger Dr. match furniture shown in the sale brochure for the parties matrimonial home[^5] – including a picture of his two children. Ms. Michaud filed a Carfax report showing that Mr. Kasali’s vehicle was leased in June 4, 2012 in New York, New Jersey. It was registered in Califon in August of 2012. Registration was updated to Ontario in February of 2015.
[27] CRA Assessments showing an “Immigrant” filing for 2012 and 2013, support her submission that Mr. Kasali purchased 9 Tiger Dr., Califon, New Jersey in 2012 using the net proceeds of sale from 14 Aukland Lane: $167,598. Those net proceeds of sale do not appear in his November 1, 2013 Financial Statement.
[28] The profit from the 2014 sale of 9 Tiger Dr., Califon would be a capital gain included in his T1General – unless it was his principal residence.
Factors in Determining Income
[29] Section 16 of the Federal Child Support Guidelines provides that a capital gain realized from the sale of property must be included in the calculation of annual income. Section 17 then reads:
Pattern of income
- (1) If the court is of the opinion that the determination of a spouse’s annual income under section 16 would not be the fairest determination of that income, the court may have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years. (emphasis added)
[30] Neither party made submissions on the amount of the gain, to be included in Mr. Kasali’s income, the exact currency conversion on March 31, 2014, the resulting table amount, or whether the amount or a portion of the amount ought to be excluded as a non-reoccurring amount.
[31] It is Mr. Kasali’s obligation to provide accurate financial disclosure. I find that he has failed to do so while under a legal obligation per Rule 19 (1) (f) of the Federal Child Support Guidelines.
Imputing income
- (1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following:
(a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse;
(b) the spouse is exempt from paying federal or provincial income tax;
(c) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;
(d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;
(e) the spouse’s property is not reasonably utilized to generate income;
(f) the spouse has failed to provide income information when under a legal obligation to do so;
(g) the spouse unreasonably deducts expenses from income;
(h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and
(i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.
[32] In consequence of this failure, Ms. Michaud asks the court to impute income to Mr. Kasali in the amount of $162,512 in each of the years of 2012 to present, with the whole of the capital gain (converted to CAD) added to his 2014 income.
[33] The 2013 Notice of Assessment filed by Mr. Kasali shows $10,556 (pension), $281 (dividends), $102 (interest), $199 (taxable capital gains), $275 (other income) and a business loss of $6,715. The loss results from the winding up of his Knightsbridge company – for which no earnings are declared with the 2013 and earlier Returns. Mr. Kasali files no evidence of those expenses, or a Financial Statement for his company.
[34] The 2014 Notice of Assessment filed by Mr. Kasali shows $10,557 (pension) and $211 (other income) for a total of $10,768. The 2015 Assessment of income is not yet available.
[35] Mr. Kasali’s lifestyle is wholly inconsistent with such an income. He has his own residence somewhere, a cell phone, a 2006 Porsche Carrera; he dresses well, travels with the children and pays 55% of their daughter’s $700 a month apartment.
[36] Christmas 2014 he took all four of his children to Hawaii, the year before: Paris. The summer of 2014 saw a trip to the Bahamas, and in May of 2015 he flew the kids to their half brother’s wedding in Puntacoma. He has helped his son out with some bills. He gave their daughter money this past summer to travel to Europe.
[37] Mr. Kasali testifies that he covers his and the children’s, (including his children from another relationship) travel costs through his savings.
[38] To test this assertion, I have compared his November 1, 2013 Financial Statement to that sworn November 9, 2015.[^6] His locked in fund has a $29,000 value which grew to $37,000 in 2015. The children’s RESPs of $5,000 are untouched between the Statements. He shows $27,774 of stocks in 2013, which no longer appear in his 2015 Statement. He has a $3,000 chequing account overdraft in his 2015 Statement not earlier present. His Bank of Montreal MasterCard shows exactly the same balance in 2013 as in 2015 ($22,000). His CIBC Revolving and Visa has been paid down by $3,924 ($27,196 to $23,272).
[39] On the face of his November 1, 2013 and November 1, 2015 sworn Financial Statements, his pre-tax savings have decreased by $27,774. It is therefore quite possible that he has depleted his savings to pay for travel.
[40] One must then ask – how has he been able to maintain annual after-tax spending of over $50,000? The same review of the 2013 and 2015 Statements show respective annual after tax expenses of $55,375 and $48,876.[^7] The latter is exclusive of the $385 per month paid for their daughter’s university apartment. Adding this amount in would bring the 2015 total to $53,496.[^8]
[41] In both statements, the only income shown is the retirement allowance of $10,557.
Analysis
[42] Mr. Kasali recognizes his obligation to provide support for his children. He has been generous to them in terms of travel, helping with education costs and emergency assistance. The court accepts that his age and the terms of his departure from his prior employment may be barriers to reentering the workforce at his prior level of income.
[43] There is no credible explanation for Mr. Kasali’s refusal to disclose his address, or to provide originals of tax documents. Perhaps it is for some collateral purpose unrelated to this proceeding. A comparison of his 2013 and 2015 sworn Financial Statements show significant unfunded expenses.
[44] Ms. Michaud believes that Mr. Kasali must have a very large income indeed, to go to this much trouble to hide it. Sometimes she doubts that he is even retired. Five years of litigation have brought no certainty to his circumstances. She has been told that he lives in a grand four garage home with a swimming pool.
[45] She has not investigated further, trusting that a revelation of Mr. Kasali’s falsehoods would be sufficient to win a continuation of support at his preretirement income.
[46] This is a most unusual case.
[47] Ms. Michaud has caught Mr. Kasali in the proverbial “catch-me-if-you-can” litigation chase. Section 19 (1) (f) of the Guidelines allows the court to impute income to a payor when he fails to disclose income while under an obligation to do so.
[48] At the same time, it is not enough to say “I gotcha.” The law requires that there be some evidentiary basis for imputation.
[49] Rule 19 (1) (f) of the Rules is no more an invitation to fill in the blank when a payor fails to provide income information, as it is when a payor is in default, or his pleadings are struck. The amount to be imputed must still be grounded in the evidence. The question to be asked is: what amount is reasonable in the circumstances?
[50] The relevant factors to consider are the age, education, experience, skills and health of the payor, as well as the availability of job opportunities, the number of hours that could be worked in light of the payor’s overall obligations, and the hourly rate that the payor could reasonably be expected to obtain.[^9]
[51] The evidentiary basis may be less than satisfactory, provided that it is sufficient for a court to judicially exercise its discretion.[^10]
[52] There was little to no exploration of any of the relevant factors during the trial. There was no cross examination of Mr. Kasali on his November 9, 2015 Financial Statement. Only in considering these reasons has the comparison of 2013 and 2015 Financial Statements been undertaken.
[53] It might have been instructive for Mr. Kasali to produce his Passport, a list of job applications, his resume, his current banking statements, credit card statements, utility bills, or a cell phone account. If Mr. Kasali wanted to credibly deny his ownership of 9 Tiger Dr. (also asserted during the 2013 Trial) he could have obtained a title abstract.
[54] This new trial was remitted on March 3, 2015. The Trial Management Conference was conducted June 29, 2015. In the interim, questioning could have been conducted. An order for disclosure, and the remedies in Rule 1 (8) and 31 might have been pursued on the 2013 order to produce original CRA documents. Perhaps an investigator engaged to do a report on his residence?
[55] The court must work with what it has.
[56] First, I do not find that it is reasonable to impute income in the 2010, preretirement amount of $162,512.
[57] Second, I am persuaded that Mr. Kasali enjoyed a capital gain in 2014. At the same time, I did not receive adequate submissions on the amount, if any, to be included in his income per section 16 and 17 of the Federal Child Support Guidelines.
[58] Third, I cannot rely on the computer printed Notices of Assessment for 2013, 2014 and 2015. Since my 2013 Final Order Mr. Kasali has been required to file only original CRA Statements.[^11] His CRA documents have the Aukland address. He testified that he redirected mail to that office and picks it up at King City post office. He provides no credible explanation why originals are not available for filing with the court. He has demonstrated an ability and willingness to file a false Return.
[59] Rule 19 (1) (f) is invoked. On the paucity of evidence available to me, I find that the unfunded expenses are the most appropriate basis upon which to impute income to Mr. Kasali. I determine that amount to be $44,000. In rounded figures, this is the average of the 2013 and 2015 annual expenses ($54,500) less the retirement income of $10,557. As an after-tax amount, it must be grossed up to reflect a pre-tax amount, which I calculate as $54,909.[^12] Table support for two children on income of $54,909 is $800.
Section 7 Expenses
[60] The parties’ daughter started university in September of 2014. It is agreed that she resides with her mother during the summers. Ms. Michaud testified that she maintains a home for her daughter during the school year, and that she is frequently home on weekends, and sometimes during the week.
[61] The Trial Management Endorsement Order did not list section 7 expenses as an issue for trial. Ms. Michaud did not file a Financial Statement or lead evidence of her income. She did not file a budget for claimed section 7 expenses, but for an account invoice from the University of Toronto for September 2014 to April 2015, and September 2015 to April 2016.
[62] There is no evidence of their daughter’s ability to contribute to her post-secondary expenses. The parents agreed during submissions that she works part time and pays for many of her expenses herself, such as her TTC pass, food and living expenses. There is a small RESP which does not appear to have yet been accessed.
[63] It is agreed that Mr. Kasali has been voluntarily paying for 55% of their daughter’s rent of $700 per month and contributing directly from time to time with additional expenses; while paying the table amount of $890 previously ordered.
[64] No order for the payment of a proportionate share of section 7 expenses can be made absent an after-tax budget for those expenses, proof of the mother’s income, and evidence as to the daughter’s means to contribute.
[65] However, the court is prepared to make an order for continuing table support. The daughter is in full time education and frequency resides with her mother and brother during the school year. She has the ability to commute to school from her mother’s home should the apartment no longer be a viable expense.
Order
[66] I make a Final Order that:
Mr. Kasali pay child support from January 1, 2012 to December 31, 2012 in the amount of $1,893; the table amount for two children on income of $139,679.
Mr. Kasali to pay child support from January 1, 2013 to December 31, 2013 in the amount of $800; the table amount for two children on income of $54,909.
[67] I make a Temporary Order that:
Mr. Kasali pay child support from January 1, 2014 forward in the amount of $800; the table amount for two children on income of $54,909.
Parties shall file further submissions in writing on the capital gain, if any, to be included in Mr. Kasali’s 2014 income for support purposes. Ms. Michaud by February 22, 2016, response from Mr. Kasali by March 18, 2016 and any reply by Ms. Kasali by March 31, 2016. Submissions in writing, and limited to three pages exclusive of a required Supportmate calculation. A final Support Order from January 1, 2014 forward will follow.
Support Deduction Order to issue.
[68] Costs submissions will be invited following the release of the final Support Order.
Justice H.A. McGee
Date Released: January 25, 2016
AMENDMENT
PAGE 1 – Has been amended to reflect that Rule 19 (1) (f) is of the Federal Child Support Guidelines, not the Family Law Rules.
[^1]: Ms. Michaud is unclear as to the amount of table child support sought for 2014. Her submissions evolved over the course of the trial. [^2]: In her closing submissions Ms. Michaud also sought an Order that Mr. Kasali maintain the children on benefits coverage. That Order was previously made in a prior proceeding (see paragraph 87 and 88 of the December 6, 2013 Reasons) and remains enforceable. [^3]: This trial is in effect, the contemplated review, albeit through a circuitous route. Ms. Michaud retained counsel and appealed the Final Order of December 6, 2013. In the endorsement of March 3, 2015 the Divisional Court permitted the appeal with respect to the payment of support from January 1, 2012 forward. That issue was returned to me for trial. [^4]: $27,774 of other stocks were included in his November 2013 Financial Statement – see paragraph 38 below. [^5]: The proceeds of which were divided between the parties. Mr. Kasali used his share to purchase 14 Aukland Lane, King City. [^6]: These are the only two Statements filed in the proceeding (both in a Trial Record) but for that filed in his 2011 Response to Motion to Change, i.e. his pleading. [^7]: A line by line comparison shows exactly the same expenses within Part 2 of the 2013 and 2015 Statements but for entertainment ($200 a month higher in 2013) gifts ($200 higher) debt payments ($100 lower) and support payable ($909 higher). [^8]: $48,876 plus ($385 x 12) [^9]: Katarzynski v. Katarzynski, 2012 ONCJ 294 [^10]: As explained by Professor Rollie Thompson in Slackers, Shirkers and Career Changers, Imputing Income for Underemployment and Unemployment, Law Society of Upper Canada, Special Lectures, 2006 Family Law Paper, there is no specific formula employed in this exercise. The exercise is discretionary and fact specific. [^11]: Notarial copies of the originals can be served on Ms. Michaud. [^12]: Using SupportMate software: “Other non-taxable income (auto gross-up)” on $44,000.