Poulin v. Poulin, 2017 ONSC 64

COURT FILE NO.: FS 13-121

DATE: 2017May31

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Claudia Poulin

Applicant

– and –

Peter Poulin

Respondent

Birkin Culp, for the Applicant

Howard Staats, for the Respondent

HEARD: April 3, 4 and 5, 2017

The Honourable R. J. HARPER

Issues

[1] The following represent the issues:

a. Nature and extent of any contact between the child and her father;

b. Child support; life insurance to secure any child support;

c. Spousal support sought by the Respondent, Peter Poulin; (Peter)

d. Whether income should be imputed to Peter;

e. Whether there are arrears of child support; and

f. Mechanism of payment of equalization payment.

Background

[2] Claudia is 43 years old. She was born February 16, 1974. Peter is 50 years old. He was born December 16, 1966. They were married on June 3, 2000 and separated on February 16, 2013. Their period of cohabitation is 13 years.

[3] They have one child of the marriage, namely Meagan Peters, born December 19, 2003. She is 13 years old. She has resided with her mother, Claudia, since separation.

[4] Meagan has not seen her father since August 2013. There was an incident when Peter was arrested while Meagan was in his care. Following that incident, an order was made that stopped access.

[5] For a period of time Meagan was receiving and sending cards from and to her father. This stopped after yet a further incident when her father was convicted of breach of probation by contacting Claudia against the terms of his probation.

[6] Peter has admitted difficulties with alcohol in the past.

[7] Any order that I make with respect to contact I intended to preserve any relationship the child might have with her father in future that would be in her best interest.

Claudia’s Work and Income History

[8] Claudia works for Hamilton Health Sciences. She is a respiratory therapist. She worked her way up from a bedside therapist in 1999 to presently being a supervisor of some 60 staff. She earned approximately $91,000 in 2016.

[9] She admitted that during the marriage she always had more income than Peter as declared on his income tax return. She testified that Peter did many jobs for cash and did not report that income. According to Claudia, he often came home with large sums of cash. They would count it and then place it in envelopes and put the cash envelopes in a compartment in an armoire in their bedroom. Peter would instruct her on what the money could be spent on. Claudia stated that she was instructed by Peter to pay for all groceries and other discretionary expenses, such as vacations and entertainment with that cash.

Peter’s Work and Income History

[10] Peter has worked in the field of residential construction renovation for approximately 29 years. For many years he has been self-employed. His business is a sole proprietorship. Peter claims that he has not been able to earn any significant income from his business. His income tax line 150 income from 2010 to 2015 is as follows:

2010 $26,324

2011 $39,491

2012 $68,411

2013 $32,969

2014 $17,199

2015 $4,147

[11] Prior to Claudia and Peter moving to Brantford in 2007, Peter had a contract to do construction renovation work with a company called Woodcraft. He claims that 80 to 90 per cent of his work came from Woodcraft. He states that it was Claudia’s idea to move to Brantford and he just went along with it. Claudia states that they both made the decision to move to Brantford.

[12] According to Peter, the move to Brantford required him to start his business all over. He did not continue working with Woodcraft. He claimed that he had to develop new contacts in a difficult and new market area. I will comment further on the development of his business later in these reasons.

Equalization Payment

[13] At the outset of the trial the parties agreed to the quantum of the equalization payment. Their agreement results in Claudia having to pay Peter the sum of $70,000. How that payment is to be made was left up to the trial judge.

Position of the Respondent Peter on Mode of Payment

[14] Peter submits that the payment of the $70,000 must be made immediately. He takes the position that Claudia did not plead that she should be granted an order to delay the payment of the equalization nor did she request security or any other order pursuant to section 9 of the Family Law Act. Peter takes the position that as a result of this lack of pleading, the court cannot use the powers that are set out in the Family Law Act in section 9.

[15] Peter submits, in the alternative, that if the court feels that it has jurisdiction to make such any order pursuant to section 9, there is no evidence to justify such an order.

Position of the Applicant Claudia on Mode on Mode of Payment

[16] Claudia takes the position that there does not have to be a specific pleading in order for the court to exercise its discretion to make an order pursuant to the Family Law Act s. 9 or the powers of the court that are set out in the Family Law Act s. 34. She submits that the evidence is clear that subsequent to the date of separation, Peter conducted himself in a manner that demonstrates that he cannot be relied upon to pay child support regardless of the existence of an order requiring such payment. He let significant arrears of support accumulate. As a result this placed economic stress on Claudia and the child. It is the position of Claudia that Peter simply cannot be trusted to pay child support. As a result, she seeks an order that the court secure the child support against the equalization payment that she agrees that she owes.

[17] Peter was ordered to pay child support in February 2014. He did not comply with that order. He simply let the arrears of child support build up to an amount in excess of $12,000 by November 2015. It was only as a result of FRO having a lien on his property that the arrears in child support were finally paid when he sold his home in November 2015.

[18] He claimed that his business was not increasing despite his best efforts. He stated that he simply could not pay the support that was ordered as he was not making the income imputed by Justice Lococo in February 2014. Claudia takes the position that not only did he not make best efforts to increase his business; he purposely acted in a manner that would yield little discoverable income since he did not record and declare much of what he earned.

[19] As a result of the manner in which Peter conducted himself, Claudia submits that her standard of living and that of her child was severely and negatively impacted.

[20] Three issues present themselves given the positions of the parties:

a. Can the court access the “Powers of the Court” in either sections 9 or 34 of the Family Law Act without a party pleading a particular subsection?

b. If a party must plead a subsection in order to access one of the powers, what amounts to a proper pleading in the family law context?

c. If either s.9 or s.34 can by utilized by the court what is the appropriate order in the circumstances of this case?

The Law and Analysis Relating to Pleadings and Powers of the Court in Family Law

[21] The Family Law Act Section 9 reads:

Powers of court

9. (1) In an application under section 7, the court may order,

(a) that one spouse pay to the other spouse the amount to which the court finds that spouse to be entitled under this Part;

(b) that security, including a charge on property, be given for the performance of an obligation imposed by the order;

(c) that, if necessary to avoid hardship, an amount referred to in clause (a) be paid in instalments during a period not exceeding ten years or that payment of all or part of the amount be delayed for a period not exceeding ten years; and

(d) that, if appropriate to satisfy an obligation imposed by the order,

(i) property be transferred to or in trust for or vested in a spouse, whether absolutely, for life or for a term of years, or

(ii) any property be partitioned or sold. R.S.O. 1990, c. F.3, s. 9 (1); 2009, c. 11, s. 25.

Financial information, inspections

(2) The court may, at the time of making an order for instalment or delayed payments or on motion at a later time, order that the spouse who has the obligation to make payments shall,

(a) furnish the other spouse with specified financial information, which may include periodic financial statements; and

(b) permit inspections of specified property of the spouse by or on behalf of the other spouse, as the court directs. R.S.O. 1990, c. F.3, s. 9 (2).

Variation

(3) If the court is satisfied that there has been a material change in the circumstances of the spouse who has the obligation to make instalment or delayed payments, the court may, on motion, vary the order, but shall not vary the amount to which the court found the spouse to be entitled under this Part. R.S.O. 1990, c. F.3, s. 9 (3).

Ten-year period

(4) Subsections (3) and 2 (8) (extension of times) do not permit the postponement of payment beyond the ten-year period mentioned in clause (1) (c). R.S.O. 1990, c. F.3, s. 9 (4).

[22] Section 9 starts out: “in an application under section 7”. Section 7 reads:

Application to court

7. (1) The court may, on the application of a spouse, former spouse or deceased spouse’s personal representative, determine any matter respecting the spouses’ entitlement under section 5. R.S.O. 1990, c. F.3, s. 7 (1).

Personal action; estates

(2) Entitlement under subsections 5 (1), (2) and (3) is personal as between the spouses but,

(a) an application based on subsection 5 (1) or (3) and commenced before a spouse’s death may be continued by or against the deceased spouse’s estate; and

(b) an application based on subsection 5 (2) may be made by or against a deceased spouse’s estate. R.S.O. 1990, c. F.3, s. 7 (2).

Limitation

(3) An application based on subsection 5 (1) or (2) shall not be brought after the earliest of,

(a) two years after the day the marriage is terminated by divorce or judgment of nullity;

(b) six years after the day the spouses separate and there is no reasonable prospect that they will resume cohabitation;

(c) six months after the first spouse’s death. R.S.O. 1990, c. F.3, s. 7 (3).

[23] An application to the court must be made pursuant to section 7 for a determination of an equalization payment that is defined in section 5. Section 9 sets out the powers that a court has when an order is made for an equalization payment pursuant to section 7.

[24] The issue is whether a party must plead what powers the court should exercise once the quantum of equalization has been ordered or agreed to.

[25] The Relevant subsections of Section 34 of the Family Law Act read:

Section 34 specifies the orders the court can be made in an application under section under section 33. These orders include, inter alia, on an interim or final basis, an order:

(b)

requiring that a lump sum be paid or held in trust;

(e)

requiring that some or all of the money payable under the order be paid into court or to another appropriate person or agency for the dependant’s benefit;

(k)

requiring the securing of payment under the order, by a charge on property or otherwise.

[26] It is my view that the powers available to the court under both section 9 and section 34 are in aid of, or ancillary to, substantive orders that may be made in an application under section sections 5 and 7 (equalization) or section 33 (support). Both sections 9 and 34 are enabling sections. They provide the court with certain powers that enable a court that has determined and quantified equalization or support obligations, to effect the payment of the equalization or support that has been ordered. The powers specified in sections 9 and 34, become available “in an application” under section 5 and 7 or section 33.

[27] A party should anticipate that once an order for equalization is made or an order for support is made, a court will have the powers to give effect to that order pursuant to sections 9 or 34 respectively as long as the evidence supports the utilization of one of the powers.

[28] If I am wrong in this analysis of the courts access to these enabling sections, I feel it is necessary to consider whether, in the circumstances of this case, there is sufficient pleadings by Claudia and evidentiary basis for making an order under either sections 9 or 34.

Family Law Pleadings

[29] Much has been written about pleadings in family law or lack thereof. In the decision of the Ontario Court of Appeal released October 31, 2016, in Frick v. Frick, 2016 ONCA 799, Justice Benotto reminds us of the proper framework in which the Family Law Rules must be considered.

[30] Benotto J. affirms that family law operates within a different scheme than any other litigation. In Frick, the Court of Appeal was dealing with the issue of whether or not a party must plead material facts in order to support a claim that the party was seeking. In that case, an application was made for an unequal division of the net family property pursuant to the Family Law Act s. 5(6). The Respondent asserted that there were no material facts pled and as a result, the Applicant’s claim for unequal division should be dismissed. Commencing at paragraph 11 Benotto J. stated:

[11] The Family Law Rules were enacted to reflect the fact that litigation in family law matters is different from civil litigation. The family rules provide for active judicial case management, early, complete and ongoing financial disclosure, and an emphasis on resolution, mediation and ways to save time and expense in proportion to the complexity of the issues. They embody a philosophy peculiar to a lawsuit that involves a family.

[31] In the Frick matter, the motions judge ruled that the Family Law Rules did not adequately provide for directions on pleadings. The motions judge proceeded to resort to the Rules of Civil Procedure in this regard. Justice Benotto did not agree with the motions judge’s resort to the Rules of Civil Procedure. Commencing at paragraph 14 she stated:

[14] The motion judge’s analysis reflects a misunderstanding of the family rules.

[15] This case, like all cases in family law, was started with an “Application” in the prescribed Form 8. In accordance with this form, a party is required to set out the details of the order sought and the important facts supporting the claim.

[16] Rule 1(7) does not apply to redirect the court to the civil rules, because the family rules adequately cover the contents of an application. The family rules do not require all of the material facts relied on to be set out at the time the case is started because a party will often not know all the facts supporting a claim. That is why the family rules provide stringent financial disclosure obligations. The emphasis on financial disclosure reflects the fact that parties might not know – and are entitled to find out – the details of the other’s circumstances. To require a party to plead “material facts” before financial disclosure would run contrary to the way family litigation is conducted, contrary to the family rules and contrary to basic fairness.

[17] The wife’s pleading claiming an unequal division of net family properties was not defective for failure to plead material facts.

[32] In Moghimi v Dashti, 2016 ONSC 2116, F.L.Myers J released a decision on March 29, 2016 in which pleadings in family law were also a point of contention. In that case, the Respondent had moved on the eve of trial to amend his pleadings in order to claim an unequal division of the net family property. The parties in that case had a settlement conference in January 2016. Since the matter was not going to settle it was converted into a trial management conference. A trial was set to begin on April 4, 2016. At the trial management conference, the Respondent represented that the issues were now narrowed and that the only issue related to property would be her claims with respect to the matrimonial home. Despite that representation, the Respondent brought the motion to amend his answer to include a claim for unequal division.

[33] Justice Myers makes reference to a decision of Justice Quinn in Stefureak v. Chambers, 2005 16633 (ON SC):

At para. 11, Quinn J. held that there is no difference between Rule 11(3) of the Family Law Rules and Rule 26.01 of the Rules of Civil Procedure. “In other words,” he wrote, “Family Law amendments are not special.” The respondent put particular emphasis on para. 16 of Stefureak in which Quinn J. wrote:

Undermining the importance of pleadings

[16] I agree with Mr. Dedinsky in his submission that every time an amendment is allowed there is an attendant risk that the importance of pleadings will be undermined. And there can be little doubt that pleadings in family proceedings are often sad creations. Admittedly, I could become quite attracted to the notion that parties should live or die by their pleadings as initially drafted – this would nicely focus the mind of counsel at an early stage in the case. Rule 11(3) provides little incentive for the careful attention to the preparation of pleadings and so serial pleadings are here to stay.

[34] Justice Myers goes on in Moghimi at para.16:

[16] Relying on the sad state of pleadings and a judge’s expression of despair because they are here to stay is hardly compelling legal reasoning in support of an amendment in this case. Pleadings have important purposes in the just determination of a dispute. They provide notice to the other party of the case that she has to meet. There is no principle more important to the fairness of a dispute resolution process than that each side is entitled to fair notice. Once the parties know what the case is about, they make choices and take actions. They produce relevant documents based on the issues raised and facts pleaded in support of those issues. They may question the other parties and possibly third parties as well on the facts that underlie the issues or which arise from the documents produced. At trial, the pleadings set the scope of the admissibility of evidence. Evidence presented at trial must be relevant to an issue joined in the pleadings.

[35] It must be pointed out that the Moghimi decision was released well before the Court of Appeal decision in Frick and certainly years before Quinn J.’s decision in Stefureak.

[36] I agree with Benotto J.’s statements in Frick:

“The Family Law Rules embody a philosophy that is peculiar to a law suit that involves a family.”

“The Family Law Rules were enacted to reflect the fact that litigation in family law matters is different from civil litigation”.

[37] Often family law is a complex application of the rules of court and of evidence. The foundation from which family law matters are dealt with, however, is the requirement to deal with each cases justly. That is the primary purpose that is set out in the rule 2(2) of the Family Law Rules.

[38] In dealing with cases justly, Rule 2(3) (a) provides that court must ensure that the procedure is fair to all the parties. A very basic element of “fairness” is knowing the case that a party must meet. As Justice Benotto pointed out in Frick, supra, applications are to be in accordance with a specified form. That form sets out that parties are to detail what orders they wish the court to make and the important facts to support their claims.

[39] Each party and each lawyer has a duty to assist the court in promoting the primary purpose of the Family Law Rules.

[40] A very important aspect of dealing with cases justly is that there is a duty to case manage each case. This includes a duty to identify the issues and separate and dispose of those that do not need full investigation and trial. (my emphasis).

[41] As a corollary to that proposition, the parties need to identify the issues that need to be fully investigated at trial.

[42] As a result of case conferencing, issues may change, may become more refined and defined. The continuing responsibility to disclose and update that disclosure may change the definition of the issues. This process may result in issues that may not have existed when the action was originally brought. As a result of the conferencing process, however, if the issues change, they should be defined by either amendment to the pleadings or a clear delineation of what the real disputed issues are. That clear delineation can also be achieved by a direction given by the court at one of the conferences prior to trial or a further order of the court.

[43] The central focus must be whether both parties know or should know what case they must meet.

[44] In this case, the trial management conference (TMC) report of the judge noted in the report to the trial judge that the following represent the outstanding issues for trial:

What contact should the father be allowed to have with the child?

Whether the court should impute income to the father?

What equalization should be ordered?

[45] The Respondent amended his pleadings to include a claim for spousal support. That redefined the outstanding issues.

[46] After the TMC and before this trial started, on March 17, 2017, Justice Thompson granted a consent order that reads:

[1] The equalization payment owing by the Applicant to the Respondent is $70,000

[2] This court further orders that the mechanics of payment shall be determined by the trial judge.

[47] In Bortnikov v. Rakitova, 2015 ONSC 550, Kiteley J. considered the impact of trial management at trial. I agree with her statement at para. 16:

[16] Pursuant to rule 17(6)(c) and (d), it is essential that both parties understand what the issues will be at trial and equally as important, what issues will not be considered by the trial judge.

[48] At the outset of trial, the parties indicated that they had come to an agreement on the amount of equalization. However, the mechanics of that payment was to be left to the trial judge. Mr. Staats submitted that he would be arguing that there was never a pleading with respect to what, if any, powers of the court that are set out in the Family Law Act section 9 would be relied upon by the Applicant. He submits that it would, therefore, be improper for her to seek an order for either delaying the payment of the equalization or ordering that the equalization be held as security for support payments.

[49] Mr. Staats referred to the decision of Justice Gordon in Hunter v. Hunter, (2006) 22139. In that case, the Respondent was ordered to pay an equalization payment. He submitted that the only funds available to satisfy the equalization were his client’s investment funds and pension fund and he could only withdraw those funds over a period of time. At trial he sought an order to defer the payment pursuant to section 9(1)(c) of the Family Law Act. Justice Gordon stated that para. 64:

[64] Mr. Hunter also sought an order at trial deferring payment pursuant to Section 9(1)(c) of the Family Law Act. He neglected to claim this relief in his pleadings.

[68] It is not appropriate to raise the issue at trial when such relief was not claimed in the pleading: see Reu v. Reu (1985), 1995 17877 (ON SC), 14 R.F.L. (4th) 401 (UFC). The other party is entitled to adequate notice of the actual claim. Mr. Hunter should have sought leave to amend his Answer by motion well before the trial.

[50] It should be noted that Gordon J.’s decision was in 2005. That was 11 years before the Frick decision. Justice Gordon relied on a decision of the Unified Family Court in 1985. The rules of the Unified Family Court in 1985 were quite different than the present day Family Law Rules. Mr. Culp did not ask to amend his pleadings. He submitted that it was clear that the issue of any use of the powers in section 9 were before the court given the wording of the order of Justice Thompson dated March 17, 2017.

[51] I am of the view that the powers of the court that are set out in either section 34 or section 9 do not have to plead. In an order for the powers in section 9 to become operative, the grounds to support a claim pursuant to section 5 and 7 of the Family Law Act must be pled in order for section 9 to become operative.

[52] Once an order for support or equalization has been made, there must be sufficient evidence on a case specific basis for the court to issue the appropriate order under either sections 34 or 9.

[53] In this case, I agree with Mr. Culp. There could be no other reason for the parties to consent to an order that “the mechanics of payment of the equalization payment be left to the trial judge”. Section 9 provides for the powers of the court to make other orders relating to the payment of the equalization. At no time did Mr. Staats seek clarification of what facts would be relied on to support a claim related to “the mechanics” of payment. The Respondent simply agreed that that issue would be left to the trial judge.

[54] In my view the parties complied with their duty to promote the primary purpose of the rules. They continued to negotiate settlement of at least some of the issues. They settled the quantum of equalization. They then further defined for the court what the outstanding issue would be for the trial judge. One of the issues outstanding, in addition to those flagged in the trial management conference report was “the mechanics of payment of the equalization payment”.

[55] The trial proceeded with evidence being put forward by the Applicant with respect to arrears of child support and non-compliance with multiple court orders. The issue of arrears of support was thoroughly canvased in the evidence. There would be no prejudice to the Respondent for the court to consider any of the powers outlined in either section 9 of the Family Law Act.

[56] The Ontario Court of Appeal considered the issue of a lack of pleading in the case of Mickle v. Mickle, 2008 ONCA 36,. In that case the Applicant did not specifically plead that she was seeking an order for increased child support due to the increased income of the Respondent. The Court of Appeal stated at para 8:

[8] Accordingly, while it is always preferable that issues be clearly delineated in formal pleadings, we see no prejudice to the appellant from the judge’s consideration of the issues of increased child support. There was no basis upon which to adjourn the trial, particularly because an adjournment was not sought, and there was no further evidence that the appellant could have called at a subsequent trial that was not available at this trial or that would have changed the result.

[57] I find that the Respondent knew that the issue of the mechanics of payment of the equalization would be dealt with at trial. I also find that there was no prejudice to the Respondent as all of the relevant evidence to consider some of the powers set out in s 9 was placed before the court.

Method of paying the Equalization Payment Considering Child Support Obligations

The imputation of Income to Peter

[58] The issue of the proper order to be made with respect to the mechanics of payment of equalization must be looked at within the context of all of the evidence and findings that I must make in this matter. Whether or not income is imputed to the Respondent will impact the nature of the orders that I might make relative to the claim by the Respondent for spousal support. The impact on child support arrears, ongoing child support and they type of order pursuant to section 9 will also be significant.

[59] Should income be imputed to the Respondent, Peter, and if so for what periods of time?

[60] Section 19 of the Child Support Guidelines allows the court to impute such income to a spouse as it considers appropriate in the circumstances, which circumstances include:

(a) the parent or spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of any child or by the reasonable educational or health needs of the parent or spouse;

(b) the parent or spouse is exempt from paying federal or provincial income tax;

(c) the parent or 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 parent's or spouse's property is not reasonably utilized to generate income;

(f) the parent or spouse has failed to provide income information when under a legal obligation to do so;

(g) the parent or spouse unreasonably deducts expenses from income;

(h) the parent or 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 parent or spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

[61] The list of categories set out in section 19 is not exhaustive. The court has the discretion to impute income in circumstances that are not only analogous but also those in which imputation would be consistent with legislative intent. Bak v. Dobell (2007) 2007 ONCA 304, 86 O.R. (3d) 196 (C.A.)

[62] Bak confirms that “income” for support purposes is presumptively the payor’s income as it appears on line 150 of his or her income tax return, at para. 30. Consequently, under the Ontario Guidelines, income is presumptively restricted to that which is subject to taxation. However, whether income should be imputed to a payor spouse does not depend solely on the determination of that spouse’s presumptive income. The courts retain discretion to impute income to a payor spouse in excess of that spouse’s presumptive income where the imputed income is supported by the evidence and is consistent with the objective of establishing “fair support based on the means of the parents in an objective manner that reduces conflict, ensures consistency and encourages resolution”: Bak, at para. 36; Drygala v. Pauli (2002), 2002 41868 (ON CA), 61 O.R. (3d) 711, 29 R.F.L. (5th) 293 (C.A.), at para. 44.

[63] In the case of Decker v. Fedorsen, 2011 ONCJ 850 Justice Sherr made the following comments, commencing at para. 18:

18. Imputing income is one method by which the court gives effect to the joint and ongoing obligation of parents to support their children. In order to meet this obligation, the parties must earn what they are capable of earning. If they fail to do so, they will be found to be intentionally under-employed. Clause 19(1)(a) of the guidelines is perceived as being a test of reasonableness: Drygala v. Pauli, 2002 41868 (ON CA), 2002 41868, 61 O.R. (3d) 711, 164 O.A.C. 241, 219 D.L.R. (4th) 319, 29 R.F.L. (5th) 293, [2002] O.J. No. 3731, 2002 Cars­well­Ont 3228 (Ont. C.A.).

19. The test for imputing income for child support purposes applies equally for spousal support purposes: Rilli v. Rilli, 2006 34451 (ON SC), 2006 34451, 151 A.C.W.S. (3d) 1130, [2006] O.J. No. 4142, 2006 Cars­well­Ont 6335 (Ont. Fam. Ct.); Perino v. Perino, 2007 46919 (ON SC), 2007 46919, 46 R.F.L. (6th) 448, [2007] O.J. No. 4298, 2007 Cars­well­Ont 7171 (Ont. S.C.).

20. Section 19 of the Guidelines is not an invitation to the court to arbitrarily select an amount as imputed income. There must be a rational basis underlying the selection of any such figure. The amount selected as an exercise of the court's discretion must be grounded in the evidence: Drygala v. Pauli, supra, para 44.

21. A self-employed person has the onus of clearly demonstrating the basis of his net income. This includes demonstrating that the deductions from gross income should be taken into account in the calculation of income for support purposes: Whelan v. O’Connor, 2006 13554 (ON SC), 2006 13554, 28 R.F.L. (6th) 433, [2006] O.J. No. 1660, [2006] O.T.C. 409, 2006 Cars­well­Ont 2581 (Ont. S.C.). This principle also applies where the person's employment income is derived from a corporation that he fully controls: MacKenzie v. Flynn, 2010 ONCJ 184, [2010] O.J. No. 2145, 2010 Cars­well­Ont 3450 (Ont. C.J.).

[64] In Rodrigues v. de Sousa, 2008 ONCJ 807, Justice Sherr was faced with the issue of whether or not he should impute income to someone who chose self-employment in a losing business when he had the capacity by way of education and occupation skills. He stated, commencing at para. 17:

[17] It makes no sense to me that someone with the father’s skills and experience would, for six years, choose to continue a self-employed venture that provides him with an income that would make him eligible for social assistance. The one job application he referred to was only made in April of 2008. His failure to seek employment in these circumstances is unreasonable. The first part of the test in Drygala v. Pauli is met. I find that the father is intentionally under-employed.

[19] The third part of the test in Drygala v. Pauli is a little more difficult to assess at this stage. What income should be imputed to the father? Although a more accurate determination will be made at trial after all of the evidence is heard and tested, this should not preclude the court from assessing income on a temporary basis if the first two parts of the test in Drygala v. Pauli are met. To do otherwise would be unfair to the child and would send the wrong message to payors. The message that I want to clearly send to this father is that he has a child to support and the court expects him to take reasonable steps to earn what he is capable of earning to meet his obligation as a father. This father’s position in his submissions, “that it is the mother’s turn to support the child and do her share, because I mainly supported the child while I was working” is not acceptable. The child deserves much better from him.

Application of the law to the evidence in this case

Peters Underemployment

[65] I find that Peter is underemployed and he has been underemployed since at least the date of separation in February 2013.

[66] Peter has been working in the construction/home renovations business for approximately 29 years. He takes pride in the work that he does. He stated, in his evidence, that when he learned that workers that he assigned to complete a job did not do a satisfactory job, he re did the work at no cost to the client.

[67] When the parties lived in the Hamilton area from 2000 until sometime in 2007, 99 percent of his work came from a company called Woodcraft Canada Ltd. Although he was a sole proprietor he received his contracts for home renovations from Woodcraft.

[68] In 2007, the parties moved to the City of Brantford. Peter’s work with Woodcraft started to diminish and he embarked upon securing his own contracts for home renovation jobs. He asserted that it was difficult to establish his own business. Among other things, he claimed that Brantford was a difficult market with lots of competition for clients whose main priority was to pay the least they could and not the quality of the work. I do not accept Peter’s assertions that the move to Brantford caused him to start all over again in a market that was much more limited than the Hamilton market.

[69] I find that the decision to move to Brantford was a joint decision with his wife. They picked out the house they were going to purchase together. They put that home in joint names and Peter chose to do the renovations on this home. Peter’s claim that he lost all of his contacts that he formerly had in the Hamilton and surrounding area is also not accepted by me. Brantford is only a 25 minute drive from Hamilton. There is absolutely no reason that he could not have continued to market himself in the area that he was used to working in, in addition to the new area of Brantford and surrounding area. In fact Peter did have some contracts in the area surrounding Hamilton that included Dundas, Burlington and Stoney Creek.

[70] He stated that from 2007 to 2012 his income from his business averaged in a range that was between $30,000 to $40,000 annually. Peter testified that 2012 was an extraordinary year. That was a year that he made a taxable income of $68,000. According to Peter, he never made that amount of money prior to that year and certainly not after 2012.

[71] The parties separated on February 16, 2013. On December 20, 2013, a temporary child support order was made by Justice Lococo that required Peter to pay child support for their child Meagan in the amount of $624.54 per month based on line 150 income in his 2012 tax return of $68,411 annually. He was also required to pay the sum of $218 per month for section 7 expenses based on his income and Claudia’s income in the amount of $82,850 annually.

[72] That order has remained in force until this trial. However, Peter did not pay the support as ordered. By December 2015, the support arrears amounted to $12,000.

[73] Shortly after the parties separated, instead of Peter making efforts to grow his business and maximize his earnings, he went on a trip to Western Canada. He spent approximately 3 weeks skiing with his nephew. When he returned from his ski trip he continued to act in a manner that reduced his earnings and earning capacity. He went on a further trip. This time he drove out East and down the eastern provinces. When he returned, he took multiple trips to see his friend in Montreal. He claimed that he briefly moved there in an order to make an effort to start his business in Quebec. I do not accept that he took those trips for that purpose. He did not have the proper certifications in order to work in that province and he was either reckless in his planning or simply reckless in regard for his duty to pay child support.

[74] It was not until the start of this trial that he disclosed that he had secured employment in Barrie.

[75] Peter purchased Claudia’s interest in the matrimonial home on 2014. In order to do that he obtained a mortgage in the total amount of $240,000. This amount was used to pay off the existing mortgage on that home and to pay out Claudia’s one half interest.

[76] When Peter sold this home in December 21, 2015. He received the sum of $202,516.14.

Peter’s Lack of Complete and Accurate Disclosure

[77] Peter’s line 150 incomes from 2010 to 2015 are set out above in paragraph 10. He claims that except for his 2012 income, his income from his business had been relatively low. Since the order for support of Justice Lococo his income from his business can only be characterized as dismal.

[78] He has made representations with respect to his income in his answer, his amended answer and multiple financial statements that he has filed in these proceedings. I will summarize them with respect to significant representations that he has made from time to time as follows:

a. In his answer dated April 22, 2013 he stated that his income was between $35,000 and $70,000 per annum after expenses but before taxes;

b. In his amended answer dated May 14, 2015, he struck out his representation as set out above and represented that his income for 2013 and 2014 was in the range of $23,000 - $25,000 net of expenses but before taxes;

[79] In his financial statement dated April 22, 2013 (Fin Stat 1) he represented that his:

a. income - $42,000

b. living expenses - $67,260

c. TD Visa (the only credit card debt disclosed) - $12,800

[80] In his financial statement dated November 25, 2014 (Fin Stat 2) he represented that his:

a. income - $32,965

b. living expenses - $112,720

c. TD Visa - $12,970

[81] In his financial statement dated September 2, 2015 her represented that his:

a. income - $17,199 (plus RRSP withdrawal of $1,666.67)

b. living expenses - $83,834

c. TD Visa - $36,281.49

d. Scotia Amex - $19,759

e. Scotia Visa - $4,433

[82] Fin Stat 3 was the first time he disclosed his two Scotia credit cards.

[83] Fin Stat 3 was the first time he showed that he had RRSPs totalling $36,735.

[84] In his financial statement dated April 1, 2016 her represented that his:

a. income - $0.00

b. living expenses - $53,346

c. no credit card debt - $0.00

d. no RRSPs - $0.00

[85] In his financial statement dated January20, 2017 he represented that his:

a. income - $19,817 (plus RRSP withdrawal of $12,500)

b. living expenses - $42,218

c. RRSPs - $33,139

d. For the first time he declared that he owed 2 Jeep vehicles worth $6,300 and tools of $6,000

[86] Simply put, Peter’s representations with respect to his financial circumstances is inconsistent and not believable. Early, accurate and complete disclosure of a parties financial circumstances if a requirement that rests at the foundation of family law. When a party makes so many disparate representations of what their financial circumstances are their credibility moves down the scale toward zero. I find that Peter has no credibility with respect to his finances.

[87] From the date of Justice Lococo’s child support order and onward, Peter went from a finding that his income was approximately $68,411 down to no income at all. He did not pay the child support as ordered. The arrears mounted until $12,500 by December 2015. For those two years he paid a total of $2000 in support.

[88] Peter testified that, in 2013 a friend of his, Todd Reynolds “spotted him a Jeep”. He claimed that his friend wanted to put a smile on his face. He also claimed that his friend told him to pay him when he could. According to Peter, when he sold his house in 2015, he paid his friend $13,000. There was no proof of this payment. He did not disclose that he owned a jeep nor did he disclose that he owed any money for a jeep in his financial statements at the time.

[89] He claimed that he lived on his credit cards. It is true that he ran up credit card debt to a grand total that exceeded $60,000 by December 2015. He claimed that the excessive amounts he ran up on those cards were to pay for his living expenses. A closer examination of those credit card statements however, reveal that a substantial portion of the expenses incurred on all of the cards were for business related expenses.

[90] There are so many events in the evidence that allow for the imputation of income that I have only included a few.

[91] His financial disclosure is lacking and inconsistent.

[92] He claimed that he paid his sister money she loaned him in the amount of $25,000. He did not provide any written proof of this alleged date. He did to not give any specifics of when this was supposed to have incurred. There was no evidence at all of the term or interest that may have attached to this alleged debt. In addition, although his bank statements do show that he paid off his credit cards, they do not show any $25,000 payment to his sister as he alleges. Peter’s sister did not testify. I reject his testimony in regard to this debt and the payment he claims to have made.

[93] With that backdrop of Peter’s complete lack of credibility with respect to his finances and his earnings, I must consider the evidence of Claudia with respect to her assertion that Peter frequently worked for cash and did not record those payments. According to Claudia, Peter would come home often with large sums of cash. In addition, she claimed that Peter would do work and receive trade-offs from clients. She stated that he got dental veneers by doing renovations for their dentist. He received other gifts from other clients in lieu of payment. She states that none of this was declared by Peter

[94] According to Claudia, when he brought home cash, they would both count the cash and put it in envelopes, and then put it in a compartment in an armoire in their bedroom. Peter denies that he ever worked for cash with the exception of two occasions when he did work for Claudia’s parents and uncle. Claudia presented documents in the handwriting of Peter that clearly demonstrated that he did work for her parents and her uncle. Peter admitted that he was paid approximately $20,000 in cash and in kind. However, he stated that he only did this because they were family. That was the only cash he admitted to receiving.

[95] I accept Claudia’s evidence that Peter often took cash for his work and did not declare the cash. The difficulty with any case that involves allegations of cash payments is the lack of evidence to establish what amount of cash can be assigned. In some cases the difference between the claimed living expenses and the claimed income can account for some assignment of cash. However, there is no evidence that when the parties lived together, expenses exceeded claimed income. After separation, the financial situation of Peter, as alluded to above, is lost in the fog that is created by his representations. On the evidence before me I cannot make a finding of the quantum of cash that Peter has historically taken from his business clients.

What income should be imputed?

[96] I find that income should be imputed to Peter. Peter admitted that even when his net income was at its highest in 2012, the $68,411 was after he wrote off certain business expenses. He stated that he was able to obtain a mortgage in the approximate amount of $240,000 in or about 2013 because the banks recognize that his net taxable income is not a reflection of his true earning capacity due to the fact that he can deduct certain expenses that are not necessarily true expenses. He agreed that the capital cost allowance, the utilities and certain discretionary expenses such as transportation and cell phone could be lowered to reflect a more accurate picture of what his earnings are. I agree with those representations made by Peter. He disclosed in his 2012 tax return that his gross income for 2012 was $187,823.47. If you add back the amount claimed for such items in 2012, the add back is as follows:

CCA deduction - $6,825.83

Utilities - $1,886.63

Motor Vehicle - $10,383.90

[97] If you allow a conservative amount, 50% of the utilities and motor vehicle, as legitimate business expenses that would result in a total add back to income of $12,961.09. The result would be income for support purposes of ($68,411.90 + $12,961.09) $81,372.99.

[98] Peter claimed to have earned a gross income in 2013 of $129,952.86. That gross income reflected a reduction of $57,489.00. That reduction can be accounted for by Peter taking extensive vacations to Western and Eastern Canada. In addition, his incarcerations and subsequent trips to Montreal to visit a friend.

[99] I find that upon a review of the tax returns from 2012 forward, Peter cannot justify the reductions in his incomes. I reject his assertion his reduction in income was a result of his inability to be successful at his business. His reduction is self-inflicted and unjustified.

[100] Peter now claims to have found employment in Barrie. He states that he is earning $25 per hour and that he is able to work 40 hours per week. In addition, he has been advised that he would be offered overtime by working weekends from time to time. If he worked 45 hours per week, that would yield him an income of $58,050 per annum.

[101] There is no reason that Peter could not, at least, retain the level of his earnings that were achieved by him in 2012. Claudia is only seeking that I impute income to him at the level of $68,411.00. That being the amount he was earning at the time of the interim support order of Justice Lococo. I agree with that submission. In my view, the $68,411.00 imputation of income for each year from 2013 forward is conservative and it is a fair representation of his income for support purposes from the date of the interim support order to and including the present. Income will be imputed to Peter in the amount of $64,411 in order to calculate the arrears and ongoing support.

Peter’s Spousal Support Claim

[102] The first thing that must be looked at is whether or not Peter is entitled to support. He does not claim that his claim for support is compensatory. He claims that he is entitled to support as a result of the large discrepancy in the income of Claudia and his income.

[103] I reject Peter’s claim for support. The mere existence of a disparity in income following separation does not entitle someone to support. In the circumstances of this case, I am of the view that the income disparity claimed does not exist given my imputation of income to Peter. I have found that he has been underemployed since 2013. The disparity in the incomes between Peter and Claudia is mostly due to the underreporting of his income and his lack of effort in maximizing what his income should be.

Child Support Arrears and Ongoing Child Support

[104] Given my finding of imputed income of $68,411.00 annually to the Respondent, the Respondent shall pay guideline support to the Applicant in the amount of $624.54 per month commencing May 1, 2017.

[105] The Respondent shall pay to the Applicant for arrears of guidelines support and extraordinary expenses from December 20, 2013 to April 1, 2017 in the amount of $9,877.68.

[106] The Respondent shall pay the amount of $1,246.71 to the Applicant for his portion of the AAA Appraisal.

[107] The Respondent shall pay to the Applicant the sum of $500 for his unpaid costs per the outstanding order of costs.

[108] The Respondent shall pay to the Applicant the sum of $2,839.00 for his portion of the extraordinary expenses for the period of time from August 1, 2013 to and including November 30, 2013.

[109] The Respondent shall pay 43 per cent of the orthodontic expense for the child. The total expense billed to date being $4,300. The Respondent’s portion shall be $1,849.00.

[110] The total amount owing by the Respondent to the Applicant for child support arrears and extraordinary expenses as set out above amounts to $16,312.39.

Security for child support

[111] As I set out earlier in these reasons, I am of the view that I can utilize the powers that are set out in sections 34 and 9 of the Family Law Act if the evidence justifies any one of the orders a court may resort to.

[112] In the circumstances of this case, I find that there can be no confidence that Peter will pay the child support that is ordered on an ongoing basis. In addition I do not feel that he can be trusted to pay the amounts that are owing for arrears of support, including extraordinary amounts that are set out above.

[113] In Smart v. Smart 1997 CarswellOnt 3741, [1997] O.J. No. 3741, [1997] O.J. No. 6403, 74 A.C.W.S. (3d) 244, Justice H. Vogelsang dealt with a similar situation that is presented in this case. In Smart, the wife owed an equalization payment. The evidence in that case revealed that Justice Vogelsang could not trust that the husband would make the child support payments he had ordered. Commencing at paragraph 28:

28 The property equalization provisions of the statute set out the statutory scheme for recovery of a spouse's share of the value of marital assets. The sections of the Act dealing with child support create the continuing obligation to a dependant and define its scope. Although the statutory schemes have different purposes, I think it would be most unfair to require the wife (who has no ready cash) to make immediate payment of the equalization sum of $18,528.06, faced as she is with a refusal by the husband to pay support and grave difficulties in enforcement.

29 I am aware of the cases which strongly caution against a redistribution of family property assets in the guise of support. See Mannarino v. Mannarino (1992), 1992 14022 (ON CA), 43 R.F.L. (3d) 309 (Ont. C.A.); Zabiegalowski v. Zabiegalowski (1992), 1992 13978 (ON SC), 40 R.F.L. (3d) 321 (Ont. U.F.C.); Annotation of Prof. J.G. McLeod to Newstone v. Newstone (1994), 1994 3213 (BC CA), 2 R.F.L. (4th) 129 (B.C. C.A.). I agree that generally the two statutory schemes should stand apart. The circumstances here are more similar, however, to Jazenko v. Jazenko (1985), 1985 4972 (ON SC), 46 R.F.L. (2d) 351 (Ont. Dist. Ct.) where LeSage A.C.J.D.C. found the husband's drinking and driving posed too great a risk to his continued employment and would eventually prejudice the children's support, ordering a lump sum. In this case, as well, something must be done to ensure satisfaction of the support obligation and the only available asset is the equalization payment owed to the husband by the wife.

30 Although I am not satisfied that an order for lump sum child support is justified here, it is appropriate to charge the equalization payment under clause 34(1)(k), the $18,528.06 itself providing the security for the child support payments. The payment itself, as property, will be held by the wife in trust for her son and she will be able to reduce the payment every month by any amount for child support unpaid as payments fall due.

31 Pursuant to clause 9(1)(c), payment of the balance of the equalization payment is delayed until the son turns 20 years of age on November 16, 2005 or ceases to be a dependant within the meaning of the Act, whichever first occurs.

[114] Peter simply ignored a court order for interim child support. All of the child care and financial responsibility for the child was thrust onto Claudia from the date of separation forward. Peter made the court process more difficult and costly by providing financial information that was inaccurate and inconsistent.

[115] Peter’s conduct since separation allows me to conclude that he cannot be trusted to comply with court orders and provide the support he should be providing to his child.

[116] Therefore I make the following order:

a) The equalization payment owing by the Applicant to the Respondent in the amount of $70,000 shall be charged as security for child support payments pursuant to section 34(1)(k) of the Family Law Act.

b) The amount of $70,000 shall be immediately reduced by $16,312.39. That reduction amount reflecting the amount of money owed by the Respondent for arrears and non-payment of amounts previous ordered or agreed to as set out above. The remaining $53,687.61 shall be held in trust by the wife Applicant for her and the child. The Applicant may reduce that amount held in trust every month by any amount for child support that is unpaid as payments fall due.

c) The Respondent shall name the child Meagan Poulin, born December 19, 2003 as irrevocable beneficiary of his life insurance policy with Canada Life in the minimum amount of $100,000 for so long as Meagan qualifies as a dependent child.

d) The Respondent’s name shall be removed from the joint subscriber TD CT RESP account # 224-63-6390911 and the sole subscriber of the TD CT RESP shall be the Applicant, Claudia Poulin.

Appropriate Order

Contact with the Child Meagan

[117] Claudia agreed in her evidence that the child Meagan should be able to contact her father in order to preserve any future relationship and so that both the child and the father can be informed of important events in the other’s life.

[118] I further order that the Applicant shall promote and facilitate the child Meagan to send cards to the father at holidays such as Christmas and Easter and other significant days such as father’s day. Such card to be sent to the address provided by the Respondent at 60 Haida Dr., Aurora, Ontario, L4G 2 W8

[119] It is further ordered that the Respondent may send cards to Meagan on the above noted dates. Such cards to be sent to:

Miss Meagan Poulin

Care Of: Mr Todd Bannister

436 Concession 2

RR1 Scotland, N0E 1R0

[120] It is further ordered that Meagan may initiate either text or email communication with her father at her choosing.

[121] It is further ordered that Peter may receive the child, Meagan’s report cards directly from the school.

[122] If counsel cannot agree on costs, counsel may make submissions in writing within 30 days of the release of this ruling with response within 15 days thereafter and reply, if any, within a further 10 day period.

Harper, J.

Released: May 31, 2017

Copy and Paste Citation/Style of Cause DELETE EXTRA LINE SPACE IF APPLICABLE

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Copy and Paste from Table Style of Cause DELETE EXTRA LINE SPACE IF APPLICABLE

REASONS FOR JUDGMENT

Judge

Released: [Click and Type Date]