Court File and Parties

COURT FILE NO.: 14/D-390 DATE: 2017-05-19 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

KELLY ROSE PERRY Applicant – and – RICHARD TIMOTHY ANDREW PERRY Respondent

Counsel: Mary F.A. Shushack for the applicant. Self-represented respondent.

HEARD: May 15 – 17 and 19, 2017

RAY, J

OVERVIEW

[1] The parties began living together October, 2002, married July 28, 2003, and separated March 9, 2014. They had both been married previously. They each have one child: A.J born May 6, 1998 (19); and C.P. born April 1, 1995 (22). The children are not relevant to these proceedings.

[2] The applicant had been employed as a legal secretary prior to cohabiting with the respondent, and in April, 2003 became employed with Renfrew County Window and Door (“RCWD”) as office manager from April 2003 to March 2014. She became manager of 2119817 Ontario Inc. (“Management Company”) a company owned by both of them equally, after these proceedings were commenced. The respondent who was the sole shareholder of RCWD terminated her employment 3 months after separation.

[3] The parties are equal shareholders of 2119817 Ontario Inc. which in turn owns two parcels of real estate in Renfrew. One of the parcels has two commercial tenants: RCWD, and Serco Des. Both parcels contain residential units.

[4] Currently, by agreement between the parties, the applicant resides rent free in of the properties owned by the management company, while the respondent resides in the matrimonial home he owns.

[5] A temporary consent order for spousal support was made in favour of the applicant July and August, 2014 in the amount of $612. Currently the respondent is in arrears in the amount of $5,340 according to a statement from FRO.

POSITION OF THE PARTIES

[6] The applicant seeks spousal support, equalization of net family property (“NFP”), security for the NFP equalization, transfer of a life insurance policy on the applicant’s life payable to the respondent, and continuation of a restraining order as against the respondent. The applicant’s evidence was that the respondent’s drinking and ultimately an assaultive incident caused the separation. His drinking later caused further problems for him, including two serious car accidents and a period in jail. They have divided their personal and household property by agreement.

[7] The respondent’s position is that he is not liable to pay spousal support, that his income is half of the applicant’s and the assets the applicant seeks to divide are worth half the value ascribed by the applicant. He disputes that money is owed by RCWD to the management company. The car accidents the respondent was involved in caused him to suffer serious injuries, including a head injury that prevents him from doing physical work.

[8] The evidence included the vive voce evidence of the parties, 4 volumes of documents submitted by the applicant and the trial record. The respondent seemed to have difficulty following the evidence from time to time. This was particularly acute when he gave evidence himself.

ANALYSIS

[9] Divorce: Subject to receipt of a clearance certificate, I am satisfied the requirements have been met for separation in excess of one year. The requirement for an affidavit for divorce is waived since I heard the applicant’s evidence under oath. Subject to the above, the divorce may issue.

[10] Spousal Support: The applicant had been earning $42,000 as a legal assistant in Ottawa while she was living in Renfrew before moving in with and then marrying the respondent. She had moved from Montreal and her prior marriage to Renfrew to be closer to her family. After marrying the respondent, she began working for his company doing administrative and customer relations type work. She earned $23,000 per annum but of course was saving her commuting costs. She assessed the commuting costs at $800 per month or $9600 per annum. To compare apples with apples, her employment in Ottawa pre-marriage would have been the equivalent of $32,400. Her current employment with Centennial Glass is $23/h at 42 hours per week or $48,300 per annum. Less her travelling costs, her net is about $38,700. After separation, she tried different types of work including a home based employment. I heard no evidence as to why she did not go back to legal work in Ottawa. She said she had looked for legal work in Pembroke, but not in Ottawa. She was trained and educated to do legal work. Her last year of employment with the respondent’s company showed her line 150 income for 2013 to be $30,600. A consent order was made that she receive $612 per month spousal support from July 1, 2014. Since then her income annually by her line 150 was: 2014-$30,600, 2015- $25,406, 2016-$11,259. These incomes included support and EI where relevant. Meanwhile the respondent’s income tax line 150 was: 2014-$53,635., 2015-$39,480, 2016- $8,500. He had a disastrous year in 2015 because of being jailed following a driving offence. He has not earned income since. He is not asserting a claim for spousal support from the applicant. According to FRO, under the existing temporary order, his arrears are $5,345.01.

[11] The applicant’s position is that the respondent’s annual income as above needs to be restated to account for the retained earnings of the company, and then recalculated to increase the spousal support. The respondent was questioned closely on these income tax returns. He was unable to explain the entries that had been prepared by his accountant, and specifically was unable to address the income/expense statements. In light of the other evidence, there were clearly major misstatements. For example, the last statement shows the owner of RCWD to be the management company. No one agrees with that entry. The applicant’s complaint that the respondent never responded to disclosure requests so she would have any other information is understandable. However, from seeing the respondent in the witness box, I have serious concerns that he understood the disclosure requests. In any event, it is for the applicant to prove her case on this point. She could have subpoenaed the accountant but chose not to do so. The evidence the applicant relies upon in the income tax returns is very weak. The applicant is entitled to an appreciation in the value of the company, but I am not prepared to order the retained earnings entries be used to recalculate his income from year to year. This is not a case where the respondent would have had the wherewithal to consciously misstate his income tax returns to gain an advantage. Pure and simple, he does not understand them.

[12] It was an 11 year marriage without children. The spousal guidelines suggest a range of $317 to $422 for 2014; and $194 to $258. The applicant suffered no disadvantage from the marriage. The respondent’s company had value, to which the applicant has a claim, at the time of the separation. The company is virtually worthless now because of the respondent’s incapacity since the beginning of 2015. This gives rise to a benefit to the applicant that seriously disadvantages the respondent. Had he made a claim for spousal support, I would have entertained it.

[13] Assuming spousal support was payable from April 1, 2014 through June 30, 2015 when the respondent was incapacitated, at the mid-point $370, the total spousal support payable by the respondent would have been $5,550. In fact he has paid $15,503, leaving him with an overpayment of $9,953. The spousal support order is cancelled. The arrears calculated by FRO are declared cancelled. He is therefore entitled to a credit in the amount of $9,953.

[14] Restraining order: I am satisfied from the evidence of the respondent’s defamatory and critical postings on the front of his business premises concerning the applicant that an order is necessary to prevent him from contacting or otherwise harassing her. It shall continue. In particular, the respondent is enjoined from posting either in a public place, online, or anywhere, any information concerning the applicant. They have no reason to communicate. Clearly his postings have been unnecessarily upsetting to the applicant – which is precisely what was intended. It will stop.

[15] Equalization of Net Family Property: Exhibit 11 was filed during the applicant’s evidence. The various items and entries were agreed to by the respondent during his evidence with the exception of the following items. I accept the calculations subject to the following revisions.

a. Renfrew County Window and Door valuation (part 4e): The applicant put in evidence a valuation of the company at $351,600. While it was incorporated shortly after their marriage, the respondent had bought out his then partner (partnership) and then incorporated it. A valuation of the respondent’s company by Sunbelt is shown as $326,500 as at the end of 2006, and a valuation day value of $351,600. Inexplicably Sunbelt was not asked to prepare a valuation as at the date of marriage. But it had been a sole proprietorship since 1998.The applicant’s position is that the value of the company when it was incorporated was zero; and in fact, has adopted the respondent’s valuation in a statement of <$90,000 at that date, but not his valuation of <$175,000 as the valuation day value. The company had been in existence since 1998, and clearly had value. Its goodwill alone would have had considerable value. The respondent’s NFP statement values the company at $317,088 at the time of marriage, and he accepts the current value as $351,600. The respondent was not very helpful in his evidence since he did not understand valuations. The professional valuation puts the value of the company in 2006, 2 ½ years after marriage at $326,500 and $351,600 as the valuation date value. I accept the appreciation in value is approximately $34,512, of which the applicant is entitled to credit for one half.

b. Rent collected by RCWD re Serco Des (part 4e): One of the disputes involves the failure of the management company to have the benefit of rents paid by Serco Des, one of the tenants; and thereby distorted the value of the management company which was half owned by the applicant. The applicant’s position is that the respondent had hidden the rent payment from the management company. The respondent’s evidence is that RCWD had leased the whole building and had sublet a portion to Serco Des as is evident from the tax returns for 2010. He claims that he personally, and RCWD, paid for the renovations, and wants his money back since the incurred debt continues to be outstanding. When asked, he said he didn’t have the documents with him - and that the applicant had taken his documents. He did agree with the notes and calculations the applicant discussed in her evidence, but said that the labour cost incurred by RCWD in the amount of $200,000 had not been included, but he has no proof. A note in the 2010 financial statements identifies a $207,983 debt owing by the management company to RCWD which he says confirms that amount. The applicant’s position is that the rent collected in the amount of $140,272 is owed to the management company. I accept the respondent’s evidence that RCWD leased the entire space and sublet the portion to Serco DES. The management company and the arrangements were created well prior to the relationship beginning to fail. There is no evidence, as suggested by the applicant, that this arrangement was designed to conceal rent payments by Serco Des from the applicant. That was the business arrangement and it is confirmed by statements and documents that exist. RCWD paid and still pays rent to the management company for the entire leased space, even though it has no employees and is essentially inoperative.

c. Management Company (part 4e): The respondent claims the applicant overvalued the properties owned by the management company to the tune of about $200,000. The properties were appraised by the applicant. The respondent has no evidence. He just disagrees. That is insufficient. I accept the applicant’s valuation of the properties owned by the management company. I do accept the respondent’s evidence that the management company owed RCWD $207,983 for work done on renovations as is noted in the 2010 RCWD income tax statements. I note that the debt suddenly vanished from the tax statements for 2015. There is no reason, nor did the respondent know why it disappeared. With the lack of documentary evidence, I find I do not have enough evidence to find the debt to RCWD must be taken into account. I also accept his evidence that RCWD leased the entire building and sublet a portion to Serco Des.

d. 2007 Yukon Denali (part 4b): The applicant took the car by agreement after the separation and has claimed a value of $8,500. The respondent’s position is that $20,000 is the fair value since it was purchased new 6 years earlier at approximately $37,000. I accept the respondent’s evidence on this point.

e. Having recalculated the NFP statement in accord with the above findings, the final calculation requires the respondent to pay the applicant $70,641.10 less the credit for the spousal overpayment of $9,953 for a payment of $60,688.10.

CONCLUSION

[16] Form of the final order: I accept the applicant’s submission that I should consider an order under s.9 of the Family Law Act, and make an order to facilitate the division of assets of the parties on a working go forward basis. In general, the outline of a framework for possible orders is as follows: ($60,688.10 to go the applicant)

a. I would have liked to have been able to see the management company, #2119817 Ontario Inc,: 729 Fourth Street, Renfrew property vested in the applicant (1/2 $140,000 =$70,000). However, the applicant persuades me that the capital gains consequences would not make that a useful solution.

b. For the respondent to retain the management company it would require that he pay the applicant her interest of $211,253.50 plus the NFP equalization of $60,688.10 for a total of $271,941.60. This could be secured with a blanket mortgage against the properties by the management company payable to the applicant with terms for payment. As mortgagee, the applicant would have her remedies in the event of non-payment.

c. I would like the parties to consider and suggest the forms of order to effect the equalization payment in paragraph 15 (e), and provide me with their written submissions of 5 pages or less. It will probably be necessary for them to obtain accounting advice. I would like written submissions within 30 days, and a reply from each if they feel it necessary. If they require an extension of time, they can let me know in writing to the Trial Coordinator at Pembroke.

[17] Costs: After I have given my final decision on the form of the order, I will at that time request written costs submissions.

Honourable Justice Timothy Ray

Released: May 19, 2017