Court File and Parties

COURT FILE NO.: 33983/11-01

DATE: 2018-03-09

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LUCAS ATANAZY SKOCZKOWSKI

Applicant

– and –

ERICA YEN WONG

Respondent

COUNSEL:

Judith M. Nicoll, for the Applicant

Laurie H. Pawlitza, for the Respondent

HEARD: December 12, 2017

REASONS FOR JUDGMENT

Kurz J.

[1] Lucas Atanazy Skoczkowski (“Lucas”) moves to change the child and spousal support order of Justice Giselle Miller dated August 24, 2016 (“the Miller J. order). That order, made on consent, incorporated the arbitration award of Alfred A. Mamo, dated June 15, 2015 (“the Mamo award”). Lucas says that he commenced this proceeding because he suffered a “catastrophic … never contemplated” change in circumstances since the time of the Mamo award.

[2] On February 14, 2017 Lucas was fired for cause and without notice or compensation from his position as CEO of the company that he co-founded, Redknee Solutions Inc. (“Redknee”). He claims that he has not been able to find any employment since his termination.

[3] Unless restored by the courts, by virtue of his termination, Lucas has apparently lost all of his rights to severance, vacation pay, bonuses, stock options, retention bonus, extended health benefits, and other tangible benefits of his former position. He also has suffered a significant financial loss because of the drop in value of his Redknee shares and a general diminution of his capital position.

[4] Lucas has sued Redknee for wrongful termination and various other civil wrongs. For its part, Redknee accuses him of for fraud, breach of contract, and other civil wrongs. Redknee’s major investor, Texas investment company, ESW Capital (“ESW”), has also separately sued him in Texas for similar alleged wrongdoing. It will almost certainly be years until the results of that litigation will be known.

[5] Lucas’ former wife, Erica Yen Wong (“Erica”), resists this Motion to Change. She says that it is, at the very least, premature. She says that Mr. Mamo, whose award led to Miller J’s order, contemplated the circumstances that Lucas is now facing. Mr. Mamo (and Miller J.) required Lucas to wait at least two years after his income dips below $465,000 per year before moving to vary the terms of his award. Further Erica argues that Lucas is the author of his misfortune, having been terminated for cause because he acted improperly in his role with Redknee. She adds that his financial losses arise out of reckless financial decisions that should not be visited on her and their children. In any event, she decries his absence of financial disclosure and his apparent lack of efforts to mitigate his job loss. As a result, she seeks to have this motion dismissed and for Lucas to be required to continue to obey the Miller J. support order until at least 2019, if not 2020.

[6] For the reasons that follow, I dismiss this motion to change. Lucas has not met the criteria set out in par. 22 and 23 of the Miller J. order and he has failed to meet his onus to prove that he has experienced a material change in circumstances that was not contemplated at the time of the Miller J. order or the Mamo award. Even if he had, I would impute income of $465,000 per year to him at this time.

Background

[7] Lucas and Erica met as high school students. They pursued a long distance relationship while each was at school and then when they entered the work force. They began to cohabit in October 1998 and married on May 26, 2000. They separated ten and a half years later, on September 8, 2010. Lucas and Erica have two children, Nathan Jeffrey Skoczkowski, born February 3, 2004 and Joshua Phillip Skoczkowski, born December 18, 2009 (“the children”).

[8] The children have resided with Erica since separation. She has always been their primary caregiver. She took two one-year maternity leave terms from work and has not worked outside the home since March, 2008. Erica plans to retrain through an M.B.A. course and then re-enter the work force. But she says that a variety of health issues have prevented her from moving forward with that plan at this time. The issue of Erica’s attempts to become financially self-sufficient is to be the subject of a 2020 review called for by the Miller J. order.

[9] Lucas is an extremely successful businessman. While working at Nortel, he and three fellow employees founded Redknee as an IT company. It was originally a private company that went public in 2007 and became a thriving business. Lucas left Nortel for Redknee in 1999 and worked there until his termination on February 14, 2017. At the time of his termination from Redknee, Lucas was its CEO. Lucas was previously named one of Canada’s top 40 executives under 40 years of age. He was invited to join a peer networking and support group called the Young Presidents of Ontario.

Mano Arbitration and Award

[10] After Lucas commenced this proceeding in 2011, the parties agreed to resolve their contentious and complex financial issues through arbitration. They retained Alf Mamo, a very senior family law expert and arbitrator. Mr. Mamo’s arbitration was held in two stages, first dealing with Erica’s unjust enrichment claim, and then with the remaining property and support issues.

[11] In a very lengthy and learned decision, Mr. Mamo granted the Mamo award, containing the following terms:[^1]

a. Lucas shall pay an equalization payment to Erica of $2,040,274.25, payable in three installments;

b. He shall pay child and spousal support to Erica based on a set formula, as follows:

i. Monthly support is grounded in Lucas’ base income of $465,000 per year. Accordingly he is required to pay:

1. Table child support of $5,603 per month; and

2. Seventy per cent of four identified special and extraordinary (“s.7”) expenses: private school, uninsured health expenses, summer camps and child care/nanny expenses for the children while Erica augments her education or goes to work. Erica is responsible for all other s.7 expenses;

3. Spousal support of $11,507 per month, calculated on the “high” range of spousal support under the Spousal Support Advisory Guidelines (“SSAG”). The high range is a based on a finding that Erica is entitled to compensatory spousal support.

ii. In addition, Lucas will pay to Erica an annual lump comprised of 25 per cent of any amount of income that he earns between $465,000 and $1.5 million, and a further 10 per cent of any income above $1.5 million.

iii. Mr. Mamo set out a formula for determining Lucas’ income, including the provision of certain disclosure.

iv. The terms of child and spousal support set out above will be reviewable if Lucas’ income drops below the annual sum of $465,000 for two years in a row;

v. Those support terms are reviewable effective January 1, 2020. At that time the review will consider whether Erica should continue to receive spousal support from Lucas;

vi. Further those support terms are “…subject to variation in the event of a material change in circumstances that is not covered by the variation of income contemplated by the terms set out above.”[^2]

vii. Lucas is to secure his support obligations with a $5,000,000 life insurance policy; and

viii. Lucas is to maintain the children as beneficiaries in his extended health and dental benefits at his place of employment.

[12] Mr. Mamo offered three important explanations for the structure of the support arrangements that he awarded. First, he stated that they were intended to parallel Lucas’ compensation structure with Redknee.

[13] Second, they mimic the manner in which the family would have operated had there not been a separation: some of its ongoing expenses would have been paid out of capital until there was an infusion of income through bonus or incentive. Mr. Mamo added that “[t]he significant financial resources of the family make such a structure possible and reasonable.”

[14] Finally, Mr. Mamo described this arrangement as “… a peace plan for five years for this family within which calculations with respect to support be made as simple as possible.” The Skoczkowski/Wong family had experienced what Mr. Mamo described as five “turbulent” years since separation. The arbitration before him was long, contentious and obviously extremely expensive.[^3] The arbitrator saw his peace plan as being in the children’s best interests. He also found it to be in line with the support provisions of the Divorce Act, the Child Support Guidelines, and the Spousal Support Advisory Guidelines.

[15] Mr. Mamo and Miller J. were entitled to implement those support terms under s. 15.1 (5) (a) of the Divorce Act despite the fact that the child support terms were “…different from the amount that would be determined in accordance with the applicable guidelines …” Mr. Mamo’s explanations for his “peace place” represent the kind of reasons required under s. 15.1(5)(b) to deviate from the Child Support Guidelines (“CSG”) table amounts. It should be noted though that Lucas’ income at the time, over $150,000 per year, makes the application of the CSG tables discretionary in any event.[^4]

First Mano Clarification Award

[16] Following the release of his award, both parties wrote to Mr. Mamo under s. 40 (1) of the Arbitration Act for an explanation of a number of the award’s terms. One of the key areas raised was the issue of Lucas’ support obligations should his income fall below $465,000 per year. On the one hand there was the term requiring Lucas to wait for two years for a review and on the other was the term allowing a variation in the event of a material change in circumstances.

[17] On September 30, 2015, Mr. Mamo issued his first clarification award. He explained the apparent confusion regarding a support review after a two-year delay and a variation. He stated that the material change term “…was intended to deal with non-monetary issues such as a change in primary residence of the children, just to cite an example.”

[18] Mr. Mamo explained the two-year delay in the support review in the event that Lucas’ annual income drops below $465,000 in two ways. First it is meant to reflect the state of the law which requires, on a threshold basis, that the material change not be one that is “merely transitory”.[^5] He adds that “[t]his is especially so in circumstances where Lucas has significant net worth.”

[19] Second, Mr. Mamo was seeking to reduce the potential conflict between the parties based on a temporary change in Lucas’ income. He felt that any transitory overpayment could be taken into consideration at the appropriate time after the appropriate delay.

[20] Mr. Mamo added that he had specifically considered the possibility that Lucas could lose his job, but felt that the delay was nonetheless appropriate. As Mr. Mamo explained it:

I did take into consideration the possibility of Lucas losing his job. Looking at that circumstance realistically, Lucas is likely to receive severance pay, and in any event, if no longer associated with Redknee, then he would be in a position to access his significant means by way of liquidation of Redknee shares, which would not be subject to many restrictions discussed at the Arbitration .[^6]

Second Mano Clarification Award

[21] On October 26, 2015, and in response to further written questions from counsel, Mr. Mamo issued a second clarification award. Among other things, he set out the common sense nature of the assumptions that did and did not go into the making of his support award, stating:

The [support] Award is based on current facts as presented during the arbitration hearing. Potential future scenarios with respect to the financial health of Redknee, be it going bankrupt or being bought out by a wealthy conglomerate or anything in between, was not in my contemplation when formulating the terms of the Award.

Miller J. Order

[22] On August 24, 2016, Miller J. granted Erica’s consent 14B Motion to incorporate the terms of Mr. Mamo’s equalization and support awards into a court order. Both counsel agreed during the argument of this motion to change that I should treat Mr. Mamo’s reasons for his awards as the reasons for the Miller J. order. Counsel negotiated the wording of the Miller J. order, exchanging drafts until there was agreement on the terms.

Differences in wording between the Mamo Award and the Miller J. Order

[23] While no changes between the Mamo awards and the Miller J. order were brought to my attention during the argument of the motion, I later noted that the Miller J. order and the Mamo award do not contain identical terms. In particular:

• Mr. Mamo treats the issues of review and variation separately. He states in his summary of the award that the support terms will be “… reviewable if Lucas’ income drops below the sum of $465,000 for two years in a row.” He adds that:

The child and spousal support provisions will be subject to variation in the event of material change in circumstances that is not covered by the variation of income contemplated by the terms set out above.

• On the other hand, paragraph 22 of the Miller J. order speaks about a review, not a variation. This may occur if Lucas’ income drops below $465,000.00 for two consecutive years or in the event of “a non-monetary change in circumstances”. In other words, the only variation called for in the Miller J. order requires a “non-material change in circumstances.” That term was not contained in the award itself, but rather reflects Mr. Mamo’s explanation in his first clarification award.

• Paragraph 23 of the Miller J. order contains a term more restrictive regarding variation that the term found in the Mamo award. It reads as follows:

Save for the circumstances at paragraph 22 above, the support shall be fixed and non-variable until January 1, 2020 and there shall be no retroactive adjustment prior to that time except as set out in this Order.

• This term may have been implied in Mr. Mamo’s award (as Mr. Mamo explained in his two explanatory awards), but it is not explicitly stated there.

[24] The differences between the Mamo award and the Miller J. order are potentially important because it is the Miller J. order and not the Mamo award that I am called upon to vary.

[25] On January 3, 2018, I issued a temporary endorsement in this proceeding, a copy of which is attached as Schedule A to this endorsement. In that endorsement I asked five questions about the reasons for and significance of any changes between the order and the award. Following the release of that endorsement, I conducted a conference call with counsel and later received their supplementary written submissions. I have carefully considered those submissions and will have more to say about the issues to which they respond later in these reasons.

Lucas’ Financial Changes in Circumstances Since Mamo Awards

[26] In the approximately year and a half following the release of the Mamo award, Luca’s financial circumstances have changed for the worse. He was terminated without compensation from Redknee. Further the value of his Redknee shares decreased significantly: by almost 2/3 between 2014 (the year that the Mamo arbitration began) and the end of 2017.

Lucas’ Termination from Redknee

[27] At the time of both the Mamo award and the Miller J. order, Lucas was the CEO of Redknee. In the seven years prior to this motion being brought, Lucas’ income for support purposes was:

2010: $ 416,108[^7]

2011: $ 544,361

2012: $ 479, 657

2013: $4,034,891[^8]

2014: $1,438,211

2015: $ 729,498

2016 $1,083,871

[28] In his most recent financial statement, sworn November 20, 2017, Lucas claims no present income. However for 2017, Lucas actually earned two months of salary from Redknee, for a total of $116,000[^9]. He also received Employment Insurance benefits of $543 per week for about ten months, and the capital gains realized from the liquidation of over $5 million in Redknee shares to pay off margin loans and to meet his obligations under the Mamo award.

[29] Lucas has paid $171,000 in support for child and spousal 2017 in accord with the order of Gray J. of September 12, 2017. That order required the payment of all support arrears within 10 days and no stay of the Miller J. award until this motion was heard.

[30] Lucas was terminated from his position as CEO at Redknee on February 14, 2017. The exact reasons for the termination are subject to what will likely be highly contentious litigation. Redknee claimed that he was fired for cause for fraud, insider trading and neglect of duties. Those allegations arise from the manner of his trading in Redknee shares. At this stage, those allegations are not proven.

[31] The allegations in support of Lucas’ termination arose in part out of his decision to set up a margin trading account for the purchase of additional Redknee shares. At the time, he was already Redknee’s largest shareholder. He bought about $4 million in further Redknee shares on a margin account; that is he borrowed money to buy the shares, using them as security for the purchase. Lucas says that he purchased the extra shares in order to demonstrate his confidence, as CEO, in Redknee. He swore that he

…did this to ensure that the company would stay strong and so that I would continue to have a viable company to work for and earn income form to support my family. I was not obliged to do it by the Board of Directors, but I felt it was appropriate to do at the time.

[32] However if he knew that ESW or any other outside investor was planning to purchase a controlling interest in Redknee at the time that he purchased his shares, the purchases may be vulnerable to a claim of insider trading. Further he would have known that loans on margin accounts are vulnerable to being called, particularly should the value of the shares decrease.

[33] In fact, Richardson GMP, which held Lucas’ margin account, called its loan at a time that the Redknee shares had declined in value. That call forced the sale of Lucas’ shares at the reduced price. Lucas also had to sell some of his Redknee shares in order to make an equalization payment installment on the schedule set out by Mr. Mamo and the Miller J. order (although he was nine months late in doing so). But it appears that the margin call and sale of shares came about at a time that Lucas’ shares were supposed to be in “blackout”. This means that that he was disentitled to sell the shares because of his contractual obligation with Redknee and regulatory concerns about potential insider trading.

[34] In its originating Texas pleadings in its litigation against Lucas, ESW claims that his behaviour regarding Redknee shares was improper. It adds that it was unknown to both Redknee and ESW at the time that it occurred. That conduct allegedly caused them to lose confidence in Lucas. ESW pleads that Lucas’ margin trading of Redknee shares was a form of gambling. It continues with the claim that when the margin call for payment was made by Richardson GMP, his forced sale of shares constituted a “fire sale” of Redknee shares. This “fire sale” allegedly harmed Redknee’s reputation and the value of ESW’s investment. ESW also claims that Lucas should have made appropriate arrangements to meet his equalization obligations to Erica without trading Redknee shares during a blackout period.

[35] In his statement of claim against Redknee, Lucas states that he was asked to agree to become the Redknee co-CEO (arguably a demotion), failing which he would be terminated. He refused the proposal, claiming that it constituted constructive dismissal. As a result he was terminated. He makes no reference to a loss of salary had he accepted the offer.

Lucas’ Evidence of his Present Circumstances

[36] Lucas describes the change in his financial circumstances as “catastrophic”. In his Motion to Change, brought only two weeks following his firing, he asked to immediately terminate all of his support obligations to Erica, including those related to child support. He swore a number of financial statements in this motion in which he claimed no income. However in his affidavit sworn November 20, 2017, eight and a half months after he brought this motion, he agrees that some income should be imputed to him for child support purposes only. He concedes that the imputed income should be $100,000 per year. He does not state the basis for that imputation. In a later written submission, Lucas suggests that the court consider suspending the Miller J. award for 18 months and substitute in its place a temporary order based on an imputed $100,000 per year income figure. In that event, Lucas says that Erica would not be required to repay the support paid to her since Lucas’ firing until the matter is finally determined.

[37] Lucas states that he paid support after his termination by borrowing money from his second wife, Nancy Lin, who works. However, despite Erica’s requests, he has not informed her or the court of his second wife’s income or assets in order to confirm his allegation. I will have more to say with regard to his financial relationship with his second wife and the level of his disclosure below.

[38] Lucas has not worked since his termination from Redknee. He claims that he cannot find work because of his previous employment as a CEO and his litigation with Redknee, ESW and Erica. From the evidence, it is not clear how this proceeding affects his ability to obtain employment or exactly why he cannot find any employment.

Law

[39] The jurisdiction for a spouse or ex-spouse to bring a Motion to Change a support order is found in s. 17 (1) and (3) of the Divorce Act, which reads as follows:

Order for variation, rescission or suspension

17 (1) A court of competent jurisdiction may make an order varying, rescinding or suspending, prospectively or retroactively,

(a) a support order or any provision thereof on application by either or both former spouses; or

(b) a custody order or any provision thereof on application by either or both former spouses or by any other person.

Terms and conditions

(3) The court may include in a variation order any provision that under this Act could have been included in the order in respect of which the variation order is sought.

[40] The factors that a court must consider in a support variation application are set out in Divorce Act s. 17 (4) onward. Those factors are different for child and spousal support. The applicable provisions read as follows:

Factors for child support order

(4) Before the court makes a variation order in respect of a child support order, the court shall satisfy itself that a change of circumstances as provided for in the applicable guidelines has occurred since the making of the child support order or the last variation order made in respect of that order.

Factors for spousal support order

(4.1) Before the court makes a variation order in respect of a spousal support order, the court shall satisfy itself that a change in the condition, means, needs or other circumstances of either former spouse has occurred since the making of the spousal support order or the last variation order made in respect of that order, and, in making the variation order, the court shall take that change into consideration.

(i) Guidelines apply

(6.1) A court making a variation order in respect of a child support order shall do so in accordance with the applicable guidelines.

(ii) Objectives of variation order varying spousal support order

(7) A variation order varying a spousal support order should

(a) recognize any economic advantages or disadvantages to the former spouses arising from the marriage or its breakdown;

(b) apportion between the former spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;

(c) relieve any economic hardship of the former spouses arising from the breakdown of the marriage; and

(d) in so far as practicable, promote the economic self-sufficiency of each former spouse within a reasonable period of time.

[41] Under s. 14 of the CSG, the test for a variation of a child support order is set out as follows:

Circumstances for variation

14. For the purposes of subsection 37 (2.2) of the Act and subsection 17 (4) of the Divorce Act (Canada), any one of the following constitutes a change of circumstances that gives rise to the making of a variation order:

15. In the case where the amount of child support includes a determination made in accordance with the table, any change in circumstances that would result in a different order for the support of a child or any provision thereof.

16. In the case where the amount of child support does not include a determination made in accordance with a table, any change in the condition, means, needs or other circumstances of either parent or spouse or of any child who is entitled to support.

17. In the case of an order made under the Divorce Act (Canada) before May 1, 1997, the coming into force of section 15.1 of that Act, enacted by section 2 of chapter 1 of the Statutes of Canada, (1997).

18. In the case of an order made under the [Family Law] Act, the coming into force of subsection 33 (11) of the Act.

[42] In the seminal case of Willick v. Willick,[^10] the Supreme Court of Canada spoke of the steps to be taken to determine whether a support order should be changed. The first step is to determine whether there has been a material change in circumstances and then to consider what change ought to be made in light of that change.

[43] In order to consider whether there has been a material change in circumstances, the court must consider the issue of foreseeability. As Justice John Sopinka wrote for the majority at para. 21, a material change in circumstances:

… means a change, such that, if known at the time, would likely have resulted in different terms. The corollary to this is that if the matter which is relied on as constituting a change was known at the relevant time it cannot be relied on as the basis for variation.

[44] Further, as Mr. Mamo pointed out in his award, the change cannot be merely transitory.[^11] An inability for short periods of time to make support payments is not sufficient. The change must be "significant and long lasting; whether it was real and not one of choice."[^12]

[45] In considering the previous order, it is presumed that the previous order was correct and that it met the objectives for a spousal support order set out in s. 15.2(6) of the Divorce Act. [^13]

[46] The previous court order, whether or not made on consent, may set out what is or is not foreseeable, and thus answer the “Willick question”. As Abella and Rothstein JJ. wrote for the majority of the Supreme Court of Canada stated in L.M.P. v. L.S.:[^14]

39 Parties may either contemplate that a specific type of change will or will not give rise to variation. When a given change is specified in the agreement incorporated into the order as giving rise to, or not giving rise to, variation (either expressly or by necessary implication), the answer to the Willick question may well be found in the terms of the order itself. That is, the parties, through their agreement, which has already received prior judicial approval, have provided the answer to the Willick inquiry required to determine if a material change has occurred under s. 17(4.1). Even significant changes may not be material for the purposes of s. 17(4.1) if they were actually contemplated by the parties by the terms of the order at the time of the order. The degree of specificity with which the terms of the order provide for a particular change is evidence of whether the parties or court contemplated the situation raised on an application for variation, and whether the order was intended to capture the particular changed circumstances. Courts should give effect to these intentions, bearing in mind that the agreement was incorporated into a court order, and that the terms can therefore be presumed, as of that time, to have been in compliance with the objectives of the Divorce Act when the order was made.

42 Ultimately, courts are tasked with determining if a material change of circumstances has occurred so as to justify a variation of a s. 15.2 order under s. 17. The analysis is always grounded in the actual circumstances of the parties and the terms of the s. 15.2 order; what meaning a court will give any general statement of finality found in an order will be a question to be resolved on that basis. As we have explained, in some situations, the agreement incorporated into the order may help shape what is meant by a "material change of circumstances". Where a s. 15.2 order deals with a specific change, it assists courts by answering the Willick inquiry through its terms. Conversely, when the order is general, or simply purports to be final, these less specific terms provide less assistance to courts in answering the Willick inquiry. Sometimes, in such cases, the circumstances of the parties may be such that courts will give little weight to a general statement of finality and conclude that a material change exists. However, at other times, in such cases, the circumstances of the parties may also be such that the courts will give effect to a general statement of finality and conclude that a material change does not exist.

[47] At page 76 of their Spousal Support Advisory Guidelines: The Revised User's Guide (the “RUG”), Professors Carol Rogerson and Rollie Thompson, that authors of the SSAG, write:

L.M.P. is now the leading case on the threshold test for variation. The test is not whether the change was or was not "foreseeable" by the parties at the time of the previous order. The language of "foreseeability" is mistakenly transposed by lawyers and judges from the case law dealing with spousal support agreements -- first Pelech and now Miglin. Some prefer to restate the "material change" test as a change that was not "foreseen" in the initial order, but even this often leads to confusion. The better approach is to focus on what was "contemplated" or "taken into account" in the initial order.

[48] In Walts v. Walts,[^15] MacKinnon J. of this court cites the RUG quote set out above with approval, stating:

12 This approach is, in my view, to be preferred to one which asks whether the support payor's retirement was foreseeable or foreseen at the time the original order was made. Most Canadian employees do retire; retirement is not an unexpected event. It is more useful to inquire whether the event that has since occurred, for example, income reduction due to retirement, was taken into account in the order that was made. This inquiry lends itself more naturally to an analysis of issues that arise from the timing of and reasons given in support of retirement in relation to whether the income reduction does or does not constitute a material change in circumstances. [Emphasis added]

Determining Quantum of Support and Imputing Income

[49] Once a material change in circumstances is made out, the court must consider what new order is appropriate. Professors Rogerson and Willis state at p. 74 of the RUG that

…on a variation, the court must limit itself in its order to whatever variation is justified by the material change in circumstances. As the S.C.C. made clear in L.M.P., above, at para 47, a variation is neither an appeal nor a hearing de novo. Judges making variation orders under s. 17 are required to limit themselves to making the appropriate variation and should not weigh all the factors to make a fresh order unrelated to the existing one.

[50] That being said, it must be noted that Sopinka J., writing for the majority in Willick found that once a material change in circumstances has been found, the court must consider the impact of the change on the parties and children to realistically determine the quantum of a new order. That consideration must be based on the full matrix of facts regarding the parties’ and children’s present circumstances, including any changes.[^16]

[51] In doing so, it is open to a court to impute income to a support payor, as Erica asks this court to do if it entertains this Motion to Change. The CSG sets out a non-exclusive list of criteria that would allow a court to impute income to a support payor, as follows:

Imputing income

19. (1) The court may impute such amount of income to a parent or 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.

[52] The leading case regarding the imputation of income to a support payor is the decision of the Ontario Court of Appeal in Drygala v. Pauli.[^17] At para. 32 of that decision, the court described the imputation of income as:

... 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 legal obligation, a parent must earn what he or she is capable of earning.

[53] As Chappel J. of the Superior Court Family Division explained in Szitas v. Szitas,[^18] citing Drygala v. Pauli:

The Ontario Court of Appeal has held that in determining whether to impute income on the basis that a party is intentionally underemployed or unemployed pursuant to section 19(1)(a) of the Guidelines, it is not necessary to establish bad faith or an attempt to thwart child support obligations. A parent is intentionally underemployed within the meaning of this section if they earn less than they are capable of earning having regard for all of the circumstances. In determining whether to impute income on this basis, the court must consider what is reasonable in the circumstances.

[54] In reviewing the case law, Chappel J. cites seven principles that apply to the imputation of income to a support payor:

1. There is a duty on the part of the payor to actively seek out reasonable employment opportunities that will maximize their income potential so as to meet the needs of their children.

2. Underemployment must be measured against what is reasonable to expect of the payor having regard for their background, education, training and experience.

3. The court will not excuse a party from their child support obligations or reduce these obligations where the party has persisted in un-remunerative employment, or where they have pursued unrealistic or unproductive career aspirations. A self-induced reduction of income is not a basis upon which to avoid or reduce child support payments.

4. If a party chooses to pursue self employment, the court will examine whether this choice was a reasonable one in all of the circumstances, and may impute an income if it determines that the decision was not appropriate having regard for the parent's child support obligations.

5. When a parent experiences a change in their income, they may be given a "grace period" to adjust to the change and seek out employment in their field at a comparable remuneration before income will be imputed to them. However, if they have been unable to secure comparable employment within a reasonable time frame, they will be required to accept other less remunerative opportunities or options outside of the area of their expertise in order to satisfy their obligation to contribute to the support of their children.

6. Where a party fails to provide full financial disclosure relating to their income, the court is entitled to draw an adverse inference and to impute income to them.

7. The amount of income that the court imputes to a parent is a matter of discretion. The only limitation on the discretion of the court in this regard is that there must be some basis in the evidence for the amount that the court has chosen to impute.[^19]

[55] Amplifying on Chappel J.'s seven points, while I have broad discretion to impute income to a payor, that discretion is not untrammeled. As the Ontario Court of Appeal stated in Drygala v. Pauli:

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.[^20]

[56] In Drygala v. Pauli the Ontario Court of Appeal set out the following three questions which should be answered by a court in considering a request to impute income under s. 19 (1) (a) of the CSG:

1. Is the party intentionally under-employed or unemployed?

2. If so, is the intentional under-employment or unemployment required by virtue of his reasonable educational needs?

3. If not, what income is appropriately imputed?

[57] The Ontario Court of Appeal made clear in Drygala v. Pauli that the test for imputing income is the same for child and spousal support.

[58] The test set out in Drygala v Pauli was recently refined by the Ontario Court of Appeal in Lavie v Lavie.[^21] There, Rouleau J.A., speaking for the court, set out a very clear black line test for intentional underemployment. It is one in which the subjective reasons for the underemployment (and by extension, unemployment) are not relevant. He wrote:

26 There is no requirement of bad faith or intention to evade support obligations inherent in intentional underemployment: Drygala v. Pauli, at paras. 24-37. the reasons for underemployment are irrelevant. If a parent is earning less than she or he could be, he or she is intentionally underemployed.

Interim Variation

[59] While it should not be a matter of course, the court has the jurisdiction to stay the enforcement of a support order and substitute instead an interim order, as requested by Lucas. The applicable law is set out in fulsome detail by Gauthier J. in Innocente v. Innocente.[^22] Gaulthier J. finds that the court may make such an order in appropriate circumstances. His analysis of the issue is worth repeating and I do so below:

40 Del Frate J. in Fredette v. Fredette, [2005] O.J. No 4938, stated the following, at paragraphs 3, 4, and 5:

3. There are two lines of decisions regarding jurisdiction. One, no variation ought to occur since the legislation did not expressly provide for such. See Deveto v. Deveto, 1994 CanLII 3841 (ON CJ), [1994] O.J. No. 2310; Boyer v. Bradley, 1995 CanLII 3846 (ON SC), [1995] O.J. No. 1670; Tomkins v. Tomkins, 1996 CanLII 4794 (ON CJ), [1996] O.J. No. 3549.

4. The other line of reasoning permits a variation if hardship is demonstrated. See: French v. Woods, 1992 CanLII 7797 (ON SC), [1992] O.J. No. 2017; Crawford v. Dixon, 2001 CanLII 28121 (ON SC), [2001] O.J. No. 466. The Crawford decision reviews in detail, other decisions against and in favour of permitting a variation.

5. I prefer the reasoning adopted by Granger J. in the Crawford decision where he writes at page 6, paragraph 14:

On balance, although the court should not make it a practice to vary final orders on an interim basis, if the moving party makes out a clear case for relief and proves that the need for the variation is urgent, there seems to be little reason to deny the power to vary. Such a denial might encourage the other side to delay.

41 The legislation does not expressly grant the power to make an interim or temporary variation of a Final Order. While subsection 15.1(2) of the Divorce Act permits the court to "make an interim order requiring a spouse to pay for the support of any or all children of the marriage, pending the determination of the application under subsection (1)", section 17 dealing with the variation of orders makes no reference to the court's authority to make any interim or temporary order.

42 It is reasonable to assume that having expressly granted the authority for interim or temporary relief for some orders, the exclusion of such authority on variation is clear and deliberate.

43 Such comment was made in Tomkins v. Tomkins 1996 CanLII 4794 (ON CJ), [1996] O.J. No. 3549, where Agro Prov. J. made a significant observation, at paragraph 16 of her decision:

16 In those instances where the Legislature has authorized interim relief, that authority was granted to avoid undue hardship or to prevent some mischief with the family dynamic that would otherwise frustrate the legislative intent as expressed in the preamble. For example, under section 12, orders for preservation of property may be made on an interim or final basis; as may be orders under section 24 respecting the matrimonial home and its contents; under section 34 for support; under section 40 to restrain the depletion of property; and under section 46 to restrain harassment.

44 Although Agro J. was dealing with the variation provision of the Family Law Act, there appears to be little or no difference between the variation provisions of the Family Law Act, and those contained in the Divorce Act.

45 In those cases where a temporary or interim variation of a final order has been granted, the courts have found what are in my view, exceptional circumstances:

(a) To prevent undue hardship. Dancsecs v. Dancsecs (1994), 1994 CanLII 7434 (ON SC), 5 R.F.L. (4th) 64 (Ont. Gen. Div.);

(b) Where the failure to make the interim order would be incongruous or absurd. Rogers v. Rogers (1990), 1990 CanLII 12231 (ON SC), 27 R.F.L. (3d) 214 (Ont. H.C.) and French v. Woods (1992), 1992 CanLII 7797 (ON SC), 42 R.F.L. (3d) 345 (Ont. Gen. Div.); and

(c) Where there is a pressing and immediate urgency. See McTaggart v. Hilton, [1994] O.J. No. 1069.

46 The most recent decision to which I was referred on this issue is that of V. Mitrow J. in Clark v. Vanderhoeven 2011 ONSC 2286, [2011] O.J. No. 1759.

47 Like Del Frate J., Mitrow J. prefers the principle that the court does have jurisdiction to make interim variation of a final order. With respect to the test to be applied, he referred to Hayes v. Hayes, 2010 Carswell Ont. 4796 (On. S.C.J.). In that case, Spies J. had this to say, at paragraph 38:

...An interim variation of the underlying support order is the most drastic intervention a court could make pending a final hearing of a motion to change. The cases are not clear on what is required to show that continuation of the order would be "incongruous and absurd." The plain meaning of these terms would suggest the order is inappropriate, unreasonable or ridiculous.

48 I conclude, as did Del Frate J. and Mitrow J. among others, that there is jurisdiction to make an interim variation of a final order, where the circumstances warrant it.

Has Lucas Proven that there has been a Material Change in Circumstances Since the Miller J. Order?

[60] Even accepting that the reasoning of the Mamo award (as explained in his two explanatory awards) should be accepted as the reasons for the Miller J. order, it is that order that must be the starting point in this proceeding. After all it is the order rather than the reasons (or even the arbitration award without the order) that is enforceable and subject to this variation proceeding. The terms of that order were agreed upon by experienced counsel after careful review. That does not make it a consent order, but it does mean that the parties agreed that the Miller J. order reflects the intent of the Mamo award.

[61] I note that Lucas’ counsel stated in her supplementary written submissions in response to my January 3, 2018 endorsement that if I wish to enforce par. 23 of the Miller J. order, Lucas

… should be permitted to seek an order under Rule 25(19) of the Family Law Rules to change the order to reflect that the order can be varied in accord with paragraph 532 of the [Mamo] award.

[62] That paragraph allows for a variation of the Mamo award’s child and spousal support terms “…in the event of a material change in circumstances that is not covered by the variation of income contemplated by the terms set out above.”

[63] But there is no motion before me under r. 25(19) to change the Miller J. order because it contains a mistake. That makes this proceeding different than say the circumstances in Clatney v. Quinn Thiele Mineault Grodzki LLP ,[^23] where such a motion was brought in the face of an attempt to enforce a final order.

[64] Equally important, as set out above, Mr. Mamo explained in his first explanatory award that the term Lucas referred to “…was intended to deal with non-monetary issues such as a change in primary residence of the children, just to cite an example” [emphasis added]. To the extent that Lucas wishes me to rely on the Mamo awards, they do not assist him in his quest to ignore the wording of the Miller J. order.

[65] Paragraph 23 of that Miller J. order prohibits a Motion to Change unless Lucas’ income drops below $465,000 for two consecutive years or there is a non-monetary material change in circumstances. As Lucas’ alleged “catastrophic” changes are entirely financial, they cannot be seen as “non-monetary”. Further he has not yet seen his income drop below $465,000 for two consecutive years.

[66] All of that being said, even the exclusionary terms of paragraph 23 of the Miller J. order may conceivably be varied in appropriate circumstances where there is a material change in circumstances. What is key here is whether the Miller J. order, as explained by the three Mamo awards, answers the “Willick question”. In other words, does the order and the reasons behind it contemplate circumstances such as those currently experienced by Lucas?

[67] Lucas’ argument is that they do not. While Mr. Mamo specifically anticipated the possibility of Lucas losing his job, and built that potential into his award, he did not anticipate the “catastrophic” manner in which he did so. He did not anticipate that Lucas would have no recourse to severance payments, stock options or that he would face a diminished Redknee stock price.

[68] Erica’s response is that the order is explicit and that its clear terms should not be ignored. Mr. Mamo clearly answered the “Willick question”. He was very clear about what types of variations were allowed before 2020. He even contemplated the possibility of Lucas losing his job. Further, Mr. Mamo never referred to the term “catastrophic”, which is found sprinkled throughout Lucas’ materials.

[69] In considering the arguments, I agree with Erica. Although Mr. Mamo did not directly advert to the circumstances that followed Lucas’ employment termination, that is not the end of the consideration. As Mr. Mamo fairly pointed out, he did not and was not able to consider every possible permutation for Lucas’ future economic prospects.

[70] What Mr. Mamo did contemplate and take into account in his award was that if Lucas lost his job, he would attempt to muster the financial resources to continue to support his first family in the manner in which they had been supported, whether by income or assets. He even considered the possibility that Lucas would not obtain severance payments and spoke of him relying on his other resources “in any event”. Lucas has failed to prove that he is unable to do so. In the alternative, if I am incorrect and Lucas’ loss of employment constitutes a material change in circumstances, I would impute his former base salary, $450,000 per year to him, at least at this time.

[71] I make the findings set out above for the following reasons:

a. The timing of this motion to change is suspicious;

b. Whatever financial decisions Lucas made, he had an duty to make them in a manner that best ensures that he could continue to meet his support obligations;

c. Lucas has failed to demonstrate that he has made any reasonable attempts to find alternate employment.

d. The evidence of Lucas’ lifestyle choices, combined with his lack of disclosure, fail to demonstrate a material change in circumstances in his ability to meet his support obligations.

e. Lucas has sufficient assets to meet his support obligations.

Details of those reasons are set out below.

The Timing of this Motion to Change

[72] Put bluntly, the timing of this motion to change is most suspicious. It was brought just two weeks after Lucas was terminated. At that time he had no idea whether he would be able to find other employment or start another business or find another way to meet his support obligations. Yet, despite the fact that his change was at the time transitory, and notwithstanding par. 23 of the Miller J. order, he came to court seeking to terminate all of his support obligations to his first family. He sought to do so immediately, two weeks after his termination. That was just the step that Mr. Mamo attempted to avoid in his award.

[73] While the details are still subject to litigation, what is clear at this stage is that there was some connection between Lucas’ dealings with his shares and his employment termination. He was forced to sell Redknee shares to meet his obligations his margin lender, Richardson G.M.P. The Miller J. order was obtained because of Erica’s desire to enforce the Mamo award when it was in default. When the payment came, it was about nine months late. In his materials Lucas blames Erica for her enforcement efforts.

[74] We now know that shortly after he was forced to sell Redknee shares during a blackout period to meet his obligations to Erica, Lucas ran into trouble with his employer. That trouble related in part to those sales. Along with his margin call, the sale to honour Lucas’ equalization obligations was an ostensible reason for his termination. Then two weeks later, he sought to end all of his support obligations to Erica and his first two children. In his materials, he complained about the money that he had paid her and that, in his view, she was financially worth more than him. That is why it is reasonable to question the timing of this motion to change. It is open to the court to question whether he moved so quickly to terminate all support because he blamed her for his predicament.

Lucas’ Duty to make Financial Decisions that Best Ensure that he could meet his Support Obligations to Erica

[75] In Maharaj v Wilfred-Jacob,[^24] Trimble J. of this court pointed out that when a payor’s reduced income arises because of events over which he had some control, he cannot reduce his support obligations. Trimble J. wrote:

169 Even if the payor has a reduced ability to pay support (normally a condition that may qualify as a change in circumstances under section 17(4) of the Divorce Act or section 37 of the Family Law Act) a payor cannot reduce support where the reduced income arises from the events over which the payor had some control. This rule is most pointedly made in cases involving a criminal conviction (see, for example Luckey v. Luckey, 1996 CanLII 11217 (ON SC), [1996] O.J. No 1960 (Gen. Div), Myatt v. Myatt, 1993 CanLII 1144 (BC SC), [1993] B.C.J. No. 215 (S.C.), Marucci v. Marucci, [2001] O.J. No. 4888 (S.C.). The rule also applies where the payor is fired for cause.

[76] Trimble J. then looked to some rules that apply when the court considers the imputation of income in such circumstances. He wrote about a parent’s obligations to prioritize their support obligations as follows:

170 In imputing income, the following rules apply:

a) A parent's obligation to support his or her children takes precedence over the parent's own interests and choices. Every parent has the obligation to earn what s/he is capable of earning.

b) A parent cannot knowingly avoid or diminish, and may not ignore, his or her obligation to support his or her children. There is intentional unemployment or underemployment when a party chooses not to work when capable of earning an income or not to work to his/ her full capability

c) A parent must act responsibly when making decisions that may affect his/her ability to pay child support. The CSG does not apply to situations in which the payor, through no fault of his own, cannot work (lay off, termination, or employer reduced hours). The CSG, however, provides flexibility between the obligation to support children, and the need to have "meaningful work".

d) The determination to impute income is discretionary, as the court considers appropriate in the circumstances. The spouse seeking to reduce support must show that the educational or work decisions or pursuits are reasonable in light of the support obligation.

e) A parent will not be excused from his or her child support obligations in furtherance of unrealistic or unproductive career aspirations or interests, nor will it be acceptable for a parent to choose to work for future rewards to the detriment of the present needs of his or her children, unless the parent establishes the reasonableness of his or her course of action.

[77] Here Lucas was fired for cause. His problems appear to have arisen from the apparent or real breach of his duties of CEO of Redknee to avoid insider trading, including restrictions on trading in his shares. At this stage this court cannot comment about the legal propriety of his purchase of Redknee shares on margin, ostensibly to show his confidence in the company. That will be the object of other litigation. But it can note that he gambled on those shares at a time that he knew of support obligations to his first family, and lost. As he admitted, he was under no obligation or compulsion to buy those shares.

[78] Recall that Mr. Mamo clearly set out his rationale for the limited non-variability of his support award. He contemplated that Lucas would act in the event of a loss of employment to ensure that he could continue to support that first family. That is, he would have mustered his financial resources in order to ensure that he continued to support them. As set out within these reasons, there is no evidence that this occurred here.

[79] Saying that, the court can comment on Lucas’ argument that Erica caused some of his problems with Redknee by forcing him to sell some shares during the blackout period. The court cannot fault Erica for attempting to enforce a perfectly valid arbitration award and subsequent court order. Lucas is obviously a very intelligent and sophisticated businessman. He was aware of his financial obligations to Erica well before he decided to buy all of those added Redknee shares on margin. He chose to prioritize the apparent advantages of his attempt to maximize his capital position with Redknee over his legal obligations to his former wife and children.

[80] In other words, Lucas was aware of the obligations imposed on him by the Mamo award. He had the resources to plan to meet his financial obligations on time. He engaged in gambles that jeapordized his ability to meet his obligations. He cannot blame Erica for insisting that he honour his obligations and protecting her legal interests. In light of the history of this case, he should have assumed that she would do so and planned accordingly.

Lucas’ Attempts to Find Alternate Employment

[81] Lucas claims to have been unemployed since February 14, 2017. He claims to be unable to find a job. In his August 17, 2017 affidavit, Lucas makes various assertions regarding his employment exertions, but offers little solid evidence. He speaks of numerous “real time engagements” (meetings in numerous cities in North America and Europe, telephone calls, video conferences) and Linked In messages. He speaks of volunteer work and attempts to identify and maximize opportunities. They include cogitating the notion of investing in his own company, an endeavor that would require him to purchase or invest in that company.

[82] However he offers no independent evidence to confirm his assertions of his alleged attempts to find work and his purported unemployability.

[83] Lucas’ only independent “evidence” is an attachment to his August 17, 2017 affidavit. That attachment contains a one paragraph unsworn email from a “head hunter”, Jeff Hauswirth, to his lawyer. In the email, Mr. Hauswirth claims that it will take Lucas two to three years to find an employment opportunity equivalent to his Redknee position. That unsworn email is not evidence. It also does not say that Lucas has to remain unemployed for that two to three years before he regains his former employment stature.

[84] Further, there is no evidence that Lucas hired Mr. Hauswirth to help him find employment. Instead they appear to have a prior relationship. If Lucas felt that he required Mr. Hauswirth’s evidence, he could have asked Mr. Hauswirth to swear an affidavit. But for unexplained reasons he chose not to do so.

[85] As Ms. Pawlitza’s factum accurately states, the problem with Lucas’ evidence is its vagueness and lack of corroboration. Ms. Pawlitza accurately describes the paucity of real evidence in support of Lucas’ allegations when she writes:

What is glaring by its absence is any information that is independent of Lucas’ sweeping statements. He has not provided one calendar print out, contact list, plane ticket, or passport page. He has not provided a current c.v. He has not provided any employment applications or the name of a head hunter with whom he is working. He has given no indication whatsoever what the purpose is of his corporations and what he intends to do if he is ‘identifying an opportunity he can develop’ or ‘lead through scaling and transformation’.

[86] Further, if Lucas were concerned with confidentiality before revealing the information or evidence whose absence Ms. Pawlitza highlights, he could have sought a sealing order for it. His failure to provide any of that information to take that step is telling.

[87] I also have to note that Lucas’ unemployment is not just the result of an unanticipated response by Redknee and ESW to his stock transactions. There was an element of his own deliberate choices. I am not only speaking of his margin trading or failure to plan for the payment of his equalization installment.

[88] Lucas was offered the opportunity to be a co-CEO of Redknee, at an apparently unreduced salary, but refused it. He was told that if he refused the offer he would be terminated. That is what happened. I recognize that for the purposes of wrongful termination litigation, he was not obliged to accept a demotion (if that is what it is). But he had a different set of obligations in the support context; particularly in light of s. 19 of the Child Support Guidelines. He made a choice at that point that left him unemployed. Recalling the words of Trimble J. in Maharaj v. Wilfred-Jacob, above, he had some control over his income when he refused the offer.

[89] Further, as Rouleau J.A. stated in Lavie v. Lavie, above, “… the reasons for underemployment are irrelevant. If a parent is earning less than she or he could be, he or she is intentionally underemployed.”

Lucas’ Lifestyle Choices and Absence of Disclosure

[90] Telling as well are the gaps and problems with the information that Lucas has disclosed to Erica so far. He has sworn four financial statements since his termination, each claiming no income. He does not even cite the money earned from Redknee in 2017 before termination or his capital gains. Yet he also claims to have a $1.3 million debt for capital gains taxes.

[91] Considering that only 50% of capital gains are taxed, Lucas would have to have earned about $5 million in capital gains to owe $1.3 million in capital gains taxes. That income does not appear in his financial statements nor is the money directly traced in his materials. He does say that he met his margin call and also that he met the final equalization installment.

[92] I note that Gray J. expressed his own concern about the lack of disclosure regarding the disposition of Lucas’ Redknee shares. He stated the following in his September 13, 2017 reasons regarding a disclosure motion:

Applicant has been less than forthcoming with respect to his shares of Redknee, how he disposed of them, what he has done with the proceeds and how he has set up and financed his new companies. As I advised Applicant’s counsel during argument, it was less than helpful to disclose for the first time, in Applicant’s Financial Statement dated August 17, 2017, that his business interests now consist of shares in 4 new companies, with no mention of Redknee, and with no explanation. Such an approach is guaranteed to produce nothing but mistrust, as indeed it did.

[93] Having said the above, I note as well that Gray J. limited the actual further disclosure that Lucas was required to make to details regarding his present unemployment. Gray J. ordered disclosure regarding the present status of Lucas’ litigation with Redknee and ESW, as well as his attempts to find employment and business investments. In response, Lucas produced only a terse single paged disclosure letter. It illuminated little.

[94] Furthermore, certain transactions that Lucas engaged in with his second wife, Nancy Lin, belie Lucas’ claims of a catastrophic change. Lucas gifted half of his interest in his home to Ms. Lin at a time that Erica was seeking to enforce payment of the second of three equalization payment installments (and he still owed the final payment). Lucas claims to owe Ms. Lin $326,605 despite the gift and despite the fact that he claims in his financial statements to still be paying all of the household expenses he shares with Ms. Lin.

[95] Further, Lucas and/or Ms. Lin purchased a $200,000 Tesla vehicle in 2017. Erica first raised the “new” purchase in her December 8, 2017 affidavit. Lucas does not claim that it was purchased before February 14, 2017.

[96] Lucas explains that he gave the half interest in his house to Ms. Lin in November, 2016 because he was unable to offer her any other financial security in the event of his death. He was obliged to cover Erica with $5 million in life insurance. Yet he had just had a child with Ms. Lin and wanted her to feel secure. Lucas states that he still had his job at the time and had been unable to make the payment installment only because he was in a blackout period.

[97] While those explanations may reflect Lucas’ motivations at the time, he made the home transfer at a time that he knew that he owed money to Erica and that he was not going to pay it on time. The transfer also occurred at a time that he was gambling with a margin account to buy Redknee shares. He knew that he could have his margin called, jeopardizing his ability to meet his support obligations. Again he demonstrates that he did not prioritize his support obligations to Erica and his first two children.

[98] In addition, Lucas’s assumption of all home expenses and his family’s purchase of a $200,000 vehicle contradict his claims of a “catastrophic” financial change. It may be that Lucas was paying their expenses while Ms. Lin was on maternity leave. But his financial statements show that he continued those payment after her return to work. Further, if Ms. Lin was able to lend him over $300,000 in order to meet his legal obligations to Erica, why was Lucas paying all of her home expenses after suffering the catastrophic loss of a job and value of his assets?

[99] Taking the issue a step further, if Lucas was unable to pay support (as he claimed in his Motion to Change), why was he or his wife buying an ultra-luxury vehicle? If she could afford the car herself, why has he been paying all of the household expenses at a time that he claims a diminished or non-existent ability to pay support? He appears to have been preferring the interests of his second family at a time that he was seeking to walk away from his obligations to his first.

[100] It may be that Ms. Lin could afford the luxury car all by herself. But that was for Lucas to prove. He fought very hard and successfully to keep disclosure of her finances out of this litigation. He successfully argued that they are irrelevant to his claims of material change regarding his loss of employment. It may be that he was not required to disclose that information, but that does not mean that the questions raised by its absence must be ignored.

[101] Lucas cannot have it both ways. He cannot claim that only loans from Ms. Lin enabled him to meet his support obligations, and then place the issue of her ability to finance those contributions in a financial black box. There is a certain “pay no attention to the man behind the curtain”[^25] aspect to that argument.

[102] In the absence of evidence to the contrary, and knowing of Lucas’ role as a high income primary earner in his first marriage, it is open to the court to assume three things. First the court assumes that Lucas felt that he could afford to pay all household expenses despite whatever income Ms. Lin earns. Second Lucas and Ms. Lin felt that their family could afford a $200,000 vehicle when he was in the midst of an allegedly “catastrophic” financial downturn. Third, Lucas preferred the interests of his second family to those of his first.

[103] Further, if Ms. Lin had the significant income to be able to lend Lucas over $300,000 and buy a $200,000 car, and if Lucas has no income, why was Ms. Lin not paying all or most of the household expenses?

Lucas has Sufficient Assets to meet his Support Obligations

[104] While my four previous reasons should be sufficient to dispose of the issue, I have considered Lucas’ assets in order to consider his ability to meet support obligations. He has filed a number of financial statements, which for reasons set out above, are not entirely reliable. His most recent financial statement is dated November 20, 2017. It discloses that he claims $4,870,974.48 in assets and $3,363,752.74 in debts for a net figure of $1,516,221.74.

[105] But that net figure is deceiving for a variety of reasons including the following:

a. He claims a half interest in the home that he once fully owned. As set out above, he gifted half of the home of to Ms. Lin. He claims that the home is worth $1,451,000. The $1,451,000 figure is based on an MPAC assessment. Such assessments are often on the low side. Be that as it may though, he claims all of the $905,140.23 secured line of credit registered against the home for himself. He then goes on to claim notional real estate fees for a home he is not selling (50% of a 5% commission), of close to $41,000 as a deduction. Generally that approach is not accepted for valuation purposes under the Family Law Act.[^26] So he claims half of the value and all of the debt secured against the home and half of the real estate commission that may be charged sometime in the future when and if he decides to sell the home. His approach makes the house that was likely worth in the neighbourhood of $1.47 million when he gave half of it to his wife, and worth at least that much now, worth less than zero to him. In fact it is worth, according to him, -$220,640.23. That claim is hard to credit.

b. He claims contingent income taxes of $817,858.99, for businesses that he is not proposing to sell.

c. He claims to owe CRA $1,315,240.32 for the liquidation of his Redknee shares, but concedes that this figure will be reduced because of the $138,084 that he paid for spousal support, which is deductible in his hands and taxable in those of Erica, in 2017.

d. He claims another $134,104.64 in contingent income taxes even though he claimed to have earned nothing in 2017. Of course that statement is not correct. Lucas has offered evidence that, other than capital gains, he earned about as $139,500 in 2017 in Redknee salary and employment insurance. He would have to earn more than double that figure to owe a further $134,104.64 in taxes. He has not disclosed the income that would require him to pay that much in taxes in addition to his capital gains obligations. Further that ignores the notion that Redknee would have made source deductions when it paid him his salary.

e. He claims a debt of $150,000 to an employment lawyer – which is really an estimate of legal fees that will be paid over an unknown period of time in the future.

Conclusion

[106] For the reasons set out above, I find that Lucas’ motion is premature. His income, even from employment, has not fallen below $465,000 for two consecutive calendar years and he has not suffered a non-material change in circumstances. Further he has not proven that he has suffered a material change in circumstances that takes him outside the ambit of paragraphs 22 and 23 of the Miller J. order. Even if I found that he did, I would impute his former $465,000 per year base salary to him at this time (although it is not necessary for me to do so at this time). For those reasons, this motion is dismissed.

[107] Because I am dismissing this motion I will not make an order for further disclosure. That may requirement arise if Lucas brings a further motion to change in the future. However I note that a very narrow interpretation of his disclosure obligations would not assist the parties or the court in that event.

[108] If the parties are unable to resolve the issue of costs, they may make written submissions of up to three pages, double spaced, in addition to any offers to settle and or bills of costs. Erica shall file within 14 days of the release of these reasons and Lucas may do so 14 days later. There will be no reply.

Kurz J.

Released: March 9, 2018

Attachment: Endorsement of January 3, 2018

COURT FILE NO.: 33983/11-01

DATE: 2018-03-09

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LUCAS ATANAZY SKOCZKOWSKI

Applicant

– and –

ERICA YEN WONG

Respondent

REASONS FOR JUDGMENT

Kurz J.

Released: March 9, 2018

[^1]: The terms set out below are derived from the Summary of Award prepared by Mr. Mamo, which is an overview of the substantive portions of the Mamo award. [^2]: As set out below, the meaning of the term was explained in Mr. Mamo’s first clarification award to refer to a non-monetary change in circumstances. [^3]: The arbitration lasted 33 days in total for its two stages [^4]: See CSG s. 4 [^5]: See L.M.P. v. L.S., 2011 SCC 64, [2011] S.C.J. No. 64 at para. 35 [^6]: As the CEO of Redknee, a publicly traded company, Lucas was subject to various blackout terms in which he could not deal with his shares because of legislative rules regarding insider trading and internal Redknee trading policies. [^7]: Figures for 2010-14 from Mamo award. [^8]: Lucas’ line 150 income for 2013 was $1,609,602 but for reasons set out in the Mamo award, Mr. Mamo calculated his support obligations on a figure of $4,034,891. [^9]: Lucas’ annual base salary was increased from $465,000 to $697,000 in or around the beginning of 2017. [^10]: 1994 CanLII 28 (SCC), [1994] 3 S.C.R. 670 [^11]: See L.M.P. v. L.S. at para. 35 [^12]: See Corcios v. Burgos, 2011 ONSC 3326, [2011] O.J. No. 2422 (SCJ) at para., 33, citing Brown v. Brown, 2010 NBCA 5, [2010] N.B.J. No. 18, 2010 CarswellNB 30 (N.B.C.A.); Haisman v. Haisman, 1994 ABCA 249, [1994] A.J. No. 553, 1994 CarswellAlta 179 (C.A.); leave to appeal to the S.C.C. refused, [1995] S.C.C.A. No. 86, [1995] 3 S.C.R. vi (S.C.C.)). [^13]: L.M.P. v. L.S. at para. 39 [^14]: see citation above [^15]: [2016] O.J. No. 4093 (SCJ) [^16]: Willick at para. 102-104 [^17]: (2002), 2002 CanLII 41868 (ON CA), 61 O.R. (3d) 711 (OCA) [^18]: 2012 ONSC 1548 at para. 56 [^19]: ibid at para. 57 -- note citations omitted [^20]: at para. 44 [^21]: [2018] O.J. No. 90 (OCA) [^22]: [2014] O.J. No. 5842 (SCJ) [^23]: 2016 ONCA 377, [2016] O.J. No. 2610 (OCA) [^24]: 2016 ONSC 7925, [2016] O.J. No 6520 (SCJ) [^25]: Quote from the film, The Wizard of Oz. [^26]: See Sengmueller v. Sengmueller, 1994 CanLII 8711 (ON CA), 17 O.R. (3d) 208, (OCA) at para. 18 and Rick v Brandsema, 2009 SCC 10 at para. 55 and 66.