Court File and Parties
COURT FILE NO.: FC-15-2447 DATE: 2016/08/30 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Salwa Elsaid-Yosef, Applicant AND Wael Shabana, Respondent
BEFORE: Justice A. Doyle
COUNSEL: Suzanne Y. Cote, for the Applicant Marc J. Coderre, for the Respondent
HEARD: August 16, 2016
Endorsement
[1] This applicant wife requests an order for child and spousal support on an ongoing and retroactive basis, a determination of the sharing of s. 7 expenses, a non-depletion order, and financial disclosure.
[2] The respondent husband disputes the quantum of support, requests an imputation of income to the wife, and disputes the necessity of a non-depletion order. He agrees to provide a copy of his life insurance policy.
[3] The husband’s motion is requesting a reimbursement from the wife of the amount of $1,815, representing three payments he made on a car loan.
[4] On consent, the Court orders that the husband will maintain the wife as beneficiary of his life insurance policy in the face amount of $750,000. The Court orders that he will provide a copy of the policy to the wife within 30 days.
[5] The issues are:
(i) What is the husband’s income for the purposes of support? (ii) Should income be imputed to the wife? (iii) What is the ongoing child support payable? (iv) What contributions, if any, should each of the parties pay towards the children’s section 7 expenses claimed by the husband? (v) What is the ongoing spousal support payable? (vi) What is the retroactive amount of child support and spousal support payable to the wife? (vii) Should there be a non-depletion order as against W. Shabana Medicine Professional Corporation? (viii) Should there be a disclosure order as requested by the wife? (ix) Should the wife reimburse the amount of $1,815 to the husband?
Background
[6] The parties were married on August 21, 2001 and have two children: Mariam (ten years old) and Omar (eight years old).
[7] Pursuant to an agreement dated May 4, 2016, the parties agreed to joint custody and an equal parenting schedule for the children.
[8] The husband is a 45-year-old radiologist/physician with The Ottawa Hospital. He is also the owner/shareholder of W. Shabana Medicine Professional Corporation (“Corporation”). The Corporation invoices the hospital for the husband’s fees. The wife is also a shareholder.
[9] The husband retained an expert, Mr. Jean-Claude Desnoyers, to prepare an income analysis report and a valuation report of his company. The value of the Corporation at the date of separation was approximately $1.5 million.
[10] For the purposes of determining support, Mr. Desnoyers stated that the husband’s income was as follows:
2013: $566,000; 2014: $563,000; 2015: $485,000.
[11] The wife did not obtain a critique or an expert report to refute Mr. Desnoyers’s findings.
[12] The wife is 38 years old and, during the marriage, she was a full-time homemaker and did not work outside the home. She studied during the marriage and obtained her Masters in Medical and Pharmaceutical Research in Brussels.
[13] She moved with the husband from Brussels to the United States and then to Ottawa so that he could complete his degree and residency.
[14] The parties separated on September 10, 2015 and continued to live under the same roof until the husband moved out of the home in May 2016.
[15] Following a mediation session, the parties agreed that the husband would transfer his half interest in the matrimonial home to the wife. There was no mortgage on the house which was valued at approximately $535,000. In addition, the husband provided an advance of a $50,000 equalization payment, minus the outstanding amount owing on a car loan. The final balance paid to wife was $39,100.
[16] The parties agree that there remains an equalization payment owing of approximately $469,000, but cannot agree on the tax implications if the monies are paid from the Corporation. The wife has retained an expert to provide a recommendation regarding the tax implications.
[17] The current interim and without-prejudice-basis order provides for the following: commencing March 1, 2016, the husband was to pay monthly child support in the amount of $1,000 and monthly spousal support in the amount of $3,695. He was also required to pay for the children’s activities including Kumon, tutoring, and recreational activities (including swimming) along with the utilities on the matrimonial home. This order was based on the husband’s line 150 income and occurred before the release of Mr. Desnoyers’s report, which provided a determination of his income including the Corporation’s earnings.
[18] The order also provided that the husband would transfer the vehicle to the wife and she would then assume responsibility for all expenses associated with the vehicle. She would also be responsible for her own credit card, cell phone, and arrange for the removal of her name from the joint credit card and joint bank account.
[19] The order also provided for financial disclosure to be exchanged between the parties.
What is the husband’s income for the purposes of support?
Wife’s position
[20] In accordance with section 17 of the Federal Child Support Guidelines (“Guidelines”), the wife submits that the husband’s current and 2015 income of $485,000 is not a fair determination of his income. She suggests that, for the purposes of determining interim support, the husband’s income for 2013, 2014, and 2015 should be averaged. This would represent an income of $538,000.
[21] She submits the following reasons why the Court should average his income:
(i) he lent $150,000 after separation without interest and she questions whether this is a non-arms’ length transaction, (ii) he is a shareholder of North Gower Pharmacy Inc. (“Pharmacy”) and there is documentation addressed by the Pharmacy sent to the matrimonial home regarding HST payment. Even though the husband is not a director of the Pharmacy, he is likely receiving money from it. The financial statements are not before the Court and he has refused to produce them; and (iii) the wife is concerned about the number of charitable donations made by the husband without any explanation over the last four years. The unexplained donations are $20,000 in 2012, $25,000 in 2013, $32,000 in 2014, and $35,000 in 2015. She queries whether these are personal expenses.
Husband’s Position
[22] The husband’s position is that, in accordance with s. 2(3) of the Guidelines, the Court should use the “most current information”. The husband indicates that he expects his income to decrease this year as a result of having the children half time. For the purposes of the motion, he is prepared to use the $485,000 figure earned in 2015 in accordance with Mr. Desnoyers’s report.
[23] With respect to North Gower Pharmacy Inc., he indicates that he is not a director and does not earn any income from that company. He merely lent monies to the Pharmacy, which is reflected in his Corporation’s financial statements and included in the valuation prepared by Mr. Desnoyers.
[24] In addition, there has been a drop in his income due to the fact that physician’s fees were reduced by the Ontario government in 2015 without any input from physicians.
Legal principles
[25] Section 2(3) of the Guidelines states:
Where, for the purposes of these Guidelines, any amount is determined on the basis of specified information, the most current information must be used.
[26] Coghill v. Coghill (2006), 2006 ONSC 21778, 27 RFL (6th) 434, confirms that, in the determination of a payor’s income for the calendar year in which the application is heard, the current income should be used.
[27] Section 17 of the Guidelines reads as follows:
(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.
(2) Where a spouse has incurred a non-recurring capital or business investment loss, the Court may, if it is of the opinion that the determination of the spouse’s annual income under section 16 would not provide the fairest determination of the annual income, choose not to apply sections 6 and 7 of Schedule III, and adjust the amount of the loss, including related expenses and carrying charges and interest expenses, to arrive at such amount as the Court considers appropriate.
[28] Section 18 of the Guidelines states the following:
(1) Where a spouse is a shareholder, director or officer of a corporation and the Court is of the opinion that the amount of the spouse’s annual income as determined under section 16 does not fairly reflect all the money available to the spouse for the payment of child support, the Court may consider the situations described in section 17 and determine the spouse’s annual income to include:
(a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or (b) an amount commensurate with the services that the spouse provides to the corporation, provided that the amount does not exceed the corporation’s pre-tax income.
(2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm’s length must be added to the pre-tax income, unless the spouse establishes that the payments were reasonable in the circumstances.
Analysis
[29] In accordance with section 2(3) of the Guidelines and Coghill, the Court should use the current income to determine support. At this time, on an interim basis, the Court finds that the 2015 income of $485,000 per year is a fair determination of his income for the determination of support.
[30] With respect to the wife’s concerns, at this interim stage, the Court does not have sufficient evidence to make adverse inferences regarding the payments to charities, the provision of a loan without interest for three years, and his failure to provide the Pharmacy’s financial statements.
[31] In addition, there is no evidence that the husband ever received monies form the Pharmacy. At least, no dividends have been declared to him or his wife. Once disclosure has been completed, then the husband’s income can be reviewed based on any new evidence.
[32] Also, the Court notes that there has been a reduction of physician’s fees as a result of government changes.
Should income be imputed to the wife?
Wife’s Position
[33] The wife submits that spousal support is based on a compensatory element. The parties were together for 14 years and she did not work during the marriage. She followed the husband from Brussels to the United States to Ottawa for his career.
[34] The parties had agreed that she would stay home, and a great deal of effort was made by the parties to have a child. She had three miscarriages. She does not have a PhD as the husband claimed.
[35] She did want to pursue a dental hygienist course, but the husband would not pay the expenses. She has few funds remaining from the advance of the equalization payment and, although she has a home and the car transferred to her, she must pay property taxes and utilities.
[36] She intends to return to school and obtain some training.
Husband’s position
[37] The husband believes that the wife should be making more effort at this time. He is not aggressively pursuing an imputation of income.
[38] In addition, he does not agree with her suggestion that she take care of the children before and after school to avoid daycare costs. She should be making efforts to retrain or to find employment.
[39] If income is to be imputed, it should be $35,000 per year. There was no analysis provided by the husband of how he arrives at $35,000 per year.
Legal Principles
[40] Section 19 of the Guidelines reads as follows:
(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.
(2) For the purpose of paragraph (1)(g), the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act.
Analysis
[41] At this stage of the proceedings, the husband has not met the onus of proving that the wife is intentionally unemployed to justify an imputation of income.
[42] The wife has not worked during the marriage and has stayed home with the children. The parties have recently separated in September 2015 and she intends to take training.
[43] At this interim stage, the Court notes that based on the role during the marriage and the economic disadvantage to the wife, income should not be imputed at this time.
[44] For the purpose of determining support, the wife’s income is nil.
What is the ongoing child support payable?
[45] Based on the Husband’s income of $485,000 and the wife’s income of nil, the set off table amount of child support is $5,831. The parties have not provided submissions on s. 9, nor the analysis in Contino v. Leonelli-Contino, 2005 SCC 63, [2005] 3 S.C.R. 217, and appear content to use the tables to determine child support.
[46] Given the shared custody arrangements, the parties’ financial statements, and the increased costs of shared parenting, the Court finds that the set off table amount of $5,831, payable by the husband to the wife, is appropriate on an interim basis.
What contributions if any should each of the parties pay towards the children’s section 7 expenses claimed by the husband?
Wife’s position
[47] The wife is prepared to pay the following s. 7 expenses directly to the third parties: Tutoring (French and Arabic), swimming, and Kumon.
[48] She states that the husband has presented a list of s. 7 expenses in a schedule to his financial statement. No receipts have been provided for any of the s. 7 expenses and these expenses must be necessary and reasonable and should not be a shopping list.
[49] She disputes the following expenses:
- Nanny ($14,400): currently the husband has a housekeeper twice per week;
- Before and after school daycare is not needed as the mother is available; and
- The RESP is not a s. 7 expense, as it is for a future benefit and not a proper s. 7 expense.
[50] She does see the need for dental care, medication, or eye care. She is not certain the children will continue with Kumon.
Husband’s position
[51] The husband has provided his list of s. 7 expenses and the previous interim order confirmed that he would continue paying for swimming, tutoring and Kumon.
[52] He has been paying for these expenses and requests that the wife contributes to those payments by paying him her proportionate share.
[53] The section 7 expenses must first be dealt with before the Court considers the quantum of spousal support.
Legal Principles
[54] S. 7 of the Guidelines states as follows:
(1) In a child support order the Court may, on either spouse’s request, provide for an amount to cover all or any portion of the following expenses, which expenses may be estimated, taking into account the necessity of the expense in relation to the child’s best interests and the reasonableness of the expense in relation to the means of the spouses and those of the child and to the family’s spending pattern prior to the separation:
(a) child care expenses incurred as a result of the custodial parent’s employment, illness, disability or education or training for employment; (b) that portion of the medical and dental insurance premiums attributable to the child; (c) health-related expenses that exceed insurance reimbursement by at least $100 annually, including orthodontic treatment, professional counselling provided by a psychologist, social worker, psychiatrist or any other person, physiotherapy, occupational therapy, speech therapy and prescription drugs, hearing aids, glasses and contact lenses; (d) extraordinary expenses for primary or secondary school education or for any other educational programs that meet the child’s particular needs; (e) expenses for post-secondary education; and (f) extraordinary expenses for extracurricular activities.
[55] As discussed in Krislock v. Krislock (1997), 34 R.F.L. (4th) 420 (Sask. Q.B.), the party claiming a s. 7 expense should provide sufficient details to satisfy the Court that the expense is being or will be incurred. Particulars should be provided, along with evidence that the expense meets the criteria of necessity and reasonableness as set out in s. 7(1).
Analysis
[56] The May 2016 parties’ agreement provides that the husband will have final decision authority in relation to French-language training, Arabic-language instruction and medical-dental decisions. Paragraph 18 of the agreement provides that the mother can take care of the children during the summer when the father is at work during his scheduled time.
[57] The interim order provides that the children will be attending activities of Kumon, tutoring, swimming, and French.
[58] The husband has not provided receipts, and there is a question of whether some of the activities will continue into the future.
[59] Therefore, the Court finds that the following are s. 7 expenses: tutoring; swimming; medical, dental, and eye care; before and after school daycare; and Kumon. If they are incurred, they should be shared in proportion to the parties’ respective incomes.
[60] Therefore, the husband will continue to pay these s. 7 expenses and, on a quarterly basis commencing September 30, 2016 (for the preceding three months in each case), he will provide receipts for those payments to the wife. She will be responsible for her proportionate share of the after-tax cost and will reimburse the husband for that share within 30 days of receiving the receipts and accounting.
[61] The husband’s contribution to the RESP is not a s. 7 expense as it is an investment for a future expense. Also, there is insufficient evidence to establish the current “nanny” actually completes caregiving roles for the children. The children are in school full time and a nanny is not necessary during school days.
What is the level of spousal support?
[62] At an interim stage, the Court agrees with the parties’ submissions that since the children reside 50/50 with each parent they should each receive 50% of the NDI.
[63] On an interim basis, the Court has made its ruling on s. 7 expenses that are to be assumed will be incurred before determining spousal support.
[64] At this time, on an interim basis only, the Court orders that spousal support will be such that each party receives 50% of the NDI. Therefore, based on the SSAG’s received, the amount of spousal support payable will be $6,630 per month.
[65] This level of spousal support is on an interim basis and is meant to meet the wife’s needs until the trial of this matter.
[66] This is without prejudice for the wife to request a retroactive amount of an adjustment of spousal support if the s. 7 expenses projected are not in fact incurred.
Retroactive support
Wife’s position
[67] The wife is claiming retroactive child and spousal support:
(i) from December 2015 (the date of separation) to February 29, 2016, during which time the husband was paying the household expenses; (ii) from March 1, 2016 to May 16, 2016, when the parties were cohabitating in the matrimonial home and the husband was paying support, and (iii) from May 17, 2016 onwards, when the husband left the matrimonial home and the parties started in equal shared parenting.
Husband’s position
[68] The husband submits that, on an interim stage, the Court does not have all the evidence necessary to make a determination of what support is owed. During part of the period the parties were living under the same roof, the husband was paying all the expenses. In addition, the wife had access to a number of credit cards.
[69] In addition, the Court should avoid a redistribution of wealth by providing a lump sum at this stage.
Analysis
[70] With respect to retroactive support, the Court must consider payments made by the husband and expenses incurred by the wife on the cards, and provide an accounting of payments up to May 2016, when the husband moved out.
[71] At an interim stage, the Court is providing an interim solution to meet the needs of the wife and the children pending the finalization or trial of the matter.
[72] In addition, since the husband has been paying the s. 7 expenses since separation, those payments must also be factored into the equation. An accounting cannot be completed without the receipts of the s. 7 expenses.
[73] The Court does not have sufficient information necessary to provide the husband proper credits for payments that were made.
[74] As stated in Letourneau v. Letourneau (1998), 131 Man. R. (2d) 123 (C.A.), the purpose of an interim award is to make a temporary provision for the children. There should not be lump sum awards that may be described as a redistribution of wealth until all material facts are known.
[75] The retroactive support payable from the date of separation is reserved to the trial judge.
Should there be a non-depletion order as against W. Shabana Medicine Professional Corporation?
Wife’s position
[76] The wife is concerned that the husband took money from his corporation since separation, including buying a home and lending $150,000 to a third party without interest payable. This was done without her knowledge.
[77] He owes her almost $500,000 in an equalization payment and there should be a preservation order preventing him from depleting the Corporation’s assets.
Husband’s position
[78] The husband disputes that there is a need for a non-depletion order.
Legal principles
[79] Section 12 of the Family Law Act, R.S.O. 1990, c. F.3, provides that, in an application under s. 7, if the Court considers it necessary for the protection of the other spouse’s interests, the Court may make an interim or final order restraining the depletion of a spouse’s property.
Analysis
[80] The husband owes the wife approximately $500,000. The Corporation has been valued at $1.5 million.
[81] The husband has taken monies from the Corporation since the date of separation. The wife should have some protection and security with respect to what is owed to her.
[82] Therefore, there will be a non-depletion order in the amount of $500,000 which must be retained in the husband’s Corporation until trial of this matter or settlement.
Should there be a disclosure order as requested by the wife?
[83] Regarding North Gower Pharmacy Inc., the resolution indicates that both parties own common shares in the company.
[84] As a shareholder, the husband may have received payments from the Pharmacy.
[85] Therefore, in determining the income, the Court orders that the husband provides proof of all monies and/or loans received by the husband (directly or indirectly) from the Pharmacy since April 1, 2015.
[86] The husband is not a director of the Pharmacy, and does not have control over it. If the wife wishes to have the financial statements and the bank records of the Pharmacy, then the mother can bring a motion for third-party records.
Should the wife reimburse the husband the amount of $1,815?
[87] The husband made three payments on the wife’s car loan and deducted those amounts from support. Hence, FRO shows the husband in arrears of $1,815.
[88] The wife admits that she was responsible for those payments and that the husband made them on her behalf. She suggests it can be considered an advance of the equalization payment.
[89] The Court finds that the most expedient and practical manner in dealing with these payments is to order that the wife reimburse the husband the amount of $1,815. He can in turn pay FRO, so that their records show no arrears owing by the husband.
Summary
[90] Therefore, the Court orders the following:
- commencing May 1, 2016, the husband will pay to the wife the monthly amount of $5,831 as child support, reserving for the wife the right to claim retroactive child support from the date of separation;
- commencing May 1, 2016, the husband will pay the monthly amount of $6,630 as spousal support, reserving for the wife the right to claim retroactive spousal support from the date of separation and a further adjustment if s. 7 expenses are not incurred as set out in this order;
- the husband will continue to pay s. 7 expenses of tutoring; swimming; medical, dental, and eye care; before and after school daycare; and Kumon. On a quarterly basis commencing September 30, 2016 (for the preceding three months in each case), he will provide the wife with receipts for those payments. She will be responsible for her proportionate share of the after-tax cost. The wife will reimburse the husband for her share within 30 days of receiving the receipts and accounting;
- there will be a non-depletion order against the Corporation in the amount of $500,000;
- within 30 days, the husband will disclose any payments and/or loans received by the husband from the Pharmacy from April 1, 2015 to present;
- the wife will pay $1,815 to the husband by September 30, 2016; and
- if the parties cannot agree on the issue of costs, the wife is to provide her two-page submissions along with the bill of costs and offers to settle by September 9, 2016, and the husband is to provide his two-page response with the bill of costs and offers to settle by September 16, 2016.
Madam Justice A. Doyle Date: August 30, 2016