Court File and Parties

COURT FILE NO.: FS-17-17997 DATE: 20180927 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Louis Chibante Applicant – and – Lynne Chibante Respondent

Counsel: Samuel A. Mossman, for the Applicant Warren S. Fullerton and Daniel Ableser, for the Respondent

HEARD: August 14, 2018

RULING ON MOTION

HEBNER J.:

[1] This motion was brought by the respondent for a determination of the appropriate quantum of temporary spousal support payable by the applicant. The current support order is that of King J. dated February 9, 2018, in the sum of $11,118 per month, made on consent. The respondent requests support in the sum of $25,000 per month, retroactive to December 1, 2017. The applicant takes the position that the current order ought to remain in place.

Background Facts

[2] The applicant (“Louis”) and the respondent (“Lynne”) were married on August 18, 1990. They separated March 1, 2017. They were married for almost 27 years. They raised two children. Dominique is currently 22 years of age and Felicia is currently 25 years of age. Both children are currently independent.

[3] Louis and Lynne are equal shareholders, both directly and through a family trust, in Golden Acre Farms Inc. (“Golden Acre”), a greenhouse operating company in Leamington, Ontario. They are also equal shareholders of a holding company that owns units in a limited partnership for a startup greenhouse operation in Ohio.

[4] There is a separate action between the parties dealing with the ownership of Golden Acre. Both parties seek to purchase the other’s interest and/or a winding up. That action remains outstanding.

[5] Louis runs the parties’ business. Lynne was, throughout the marriage, a stay-at-home mother and homemaker. Lynne has no independent income. She is completely dependent on Louis for her financial needs. Louis is not asserting that Lynne ought to look for employment or that income ought to be imputed to her for support purposes. Louis acknowledges that Lynne is entitled to support.

[6] The issue before the court is a determination of Louis’ income for spousal support purposes and, having determined Louis’ income, the appropriate amount of support, both issues to be determined on a temporary basis.

Lifestyle

[7] Louis and Lynne lived a lavish lifestyle during the course of their marriage. According to Lynne’s affidavit evidence, the parties lived in a home valued at over $1 million. There were regular vacations to warmer climates; expensive automobiles; regular outings to restaurants and other venues. Lynne had the unlimited use of a company credit card. The parties jointly own a condo in Windsor where one of their children reside. The condo was redecorated and renovated at a cost exceeding $122,000.

[8] The lifestyle of the parties was financed through their business. A former bookkeeper and controller at Golden Acre, Tony Ingratta, provided affidavit evidence confirming the financing of the parties’ lifestyle through their corporation. He said:

It was very common for Luis to give me credit card statements and direct that expenses that were clearly personal in nature, be entered into the accounting records as business expenses.

[9] Mr. Ingratta set out the types of personal expenses that were paid for by the company. They included travel and meals. They also included items such as the purchase of electronic equipment for the matrimonial home and condo ($50,301.02).

[10] The parties had the means to live well, and they did live well. The bulk of their expenses to do so were paid for by their corporations.

Louis’ Income

[11] Both parties retained certified business valuators to value Louis’ income for the purpose of determining spousal support.

[12] In 2014, Louis’ line 150 income was $129,000. In 2015, Louis’ line 150 income was $426,895. In 2016, Louis’ line 150 income was $476,657. In 2017, Louis’ line 150 income was $213,317.64. However, Louis’ line 150 income is not the end of the matter. In determining income for support purposes, the court may consider income available to a party who is a shareholder, director or officer of a corporation. Section 18 of the Federal Child Support Guidelines, SOR/97-175 (“Guidelines”) reads, in pertinent part:

18(1) Where a parent or spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the parent’s or spouse’s annual income as determined under section 16 does not fairly reflect all the money available to the parent or spouse for the payment of child support, the court may consider the situations described in section 17 and determine the parent’s or spouse’s annual income to include,

(a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation years.

[13] The power to impute income to a parent or spouse is contained in s. 19 of the Guidelines. Section 19 reads, in pertinent part, as follows:

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, the following;

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

(2) for the purpose of clause (1) (g), the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act (Canada).

[14] Given the complications in determining a business owner’s income for the purpose of support, expert evidence is often relied upon. This case is no exception. Louis retained Wayne Rudson of Rudson Valuation Group Inc. Lynne retained Federica Nazzani of Capital Assist Valuation Inc.

[15] Mr. Rudson prepared his first report dated October 24, 2017. Mr. Rudson determined that Louis’ income, for the purposes of support, was $175,000 in 2014, $210,000 in 2015 and $275,000 in 2016. The report was a limited one. On page 4 of his report, Mr. Rudson said:

In arriving at our findings, we have reviewed and relied upon, inter alia, financial statements and other information as outlined on Exhibit 1 attached hereto. In the course of our review, while relying on the information outlined in Exhibit 1, we have neither conducted an audit nor have we sought external verification of the information provided to us.

[16] Ms. Nazzani provided her report, on behalf of Lynne, dated April 26, 2018. Ms. Nazzani determined Louis’ annual income for support purposes for 2014 to 2017 as follows:

• 2014 – $828,463
• 2015 – $621,533
• 2016 – $821,955
• 2017 – $814,836.

[17] Mr. Rudson provided a further report dated August 2, 2018. The report is unsigned. In his affidavit, Mr. Rudson acknowledged: “The report is presently in draft form as I have yet to have been able to complete my audit of the information provided to me by the controller for Golden Acre Farms, Ms. Brenda Moody, upon whose data I have relied in the preparation of this report.” In this report, Mr. Rudson concludes that Louis’ income for support purposes is as follows:

• 2014 – $410,000
• 2015 – $435,000
• 2016 – $555,000
• 2017 – $355,000

[18] It seems to me that, to determine Louis’ income for support purposes, the consideration is between Mr. Rudson’s August 2, 2018 preliminary report and Ms. Nazzani’s April 26, 2018 report. The difference between the two reports can be summarized thusly:

1. The two valuators have both adjusted Louis’ line 150 income upwards to account for an attribution of personal expenses paid by the company for his benefit. The difference in the adjustments are: a) For 2014, Ms. Nazzani has added $282,384 plus a tax gross up of $277,125 for a total of $559,509. Mr. Rudson has added $111,653 plus a gross up of $111,653 for a total of $223,306. b) For 2015, Ms. Nazzani has added $183,677 plus a tax gross up of $180,256 for a total of $363,933. Mr. Rudson has added $106,271 plus a gross up of the same amount for a total of $212,542. c) For 2016, Ms. Nazzani has added $186,000 plus a tax gross up of $214,258 for a total of $400,258. Mr. Rudson has added $119,793 plus a gross up of $140,627 for a total of $260,420. d) For 2017, Ms. Nazzani has added $259,446 plus a tax gross up of $298,863 for a total of $558,309. Mr. Rudson has added $64,993 plus a gross up of $76,297 for a total of $141,290.
2. Ms. Nazzani has added back the remuneration paid to Lynne and both of the children in each of the years. Mr. Rudson has added back only the income paid to Lynne.

[19] The determination of Louis’ income for support purposes requires a reconciliation of these two differences between the experts’ reports.

[20] Insofar as the children’s wages are concerned, Mr. Ingratta in his affidavit said the following:

[T]he parties’ children, Dominique and Felicia, were paid wages far in excess of fair market value for their services to GAF (Golden Acre Farms). It is true that they worked for GAF, but the work was only in the summer months when they were out of school. For example, in 2014, Felicia was paid $32,259 while Dominique was paid $26,000, all for 4 months’ work. These salaries when annualized equate to $97,557 and $78,000 respectively. Their co-workers, doing similar work, were paid about minimum wage.

[21] Mr. Ingratta was the bookkeeper and controller at Golden Acre for over 15 years. He left his position in September 2017. It seems to me that his evidence can be relied upon in that regard. I am therefore of the view that Ms. Nazzani’s calculations in respect of the adjustment for non-arm’s length wages is most likely the more accurate on an interim basis.

[22] Insofar as the personal expenses are concerned, Mr. Rudson’s opinion must be considered with some skepticism. In his first report dated October 24, 2017, he calculated Louis’ income without including any amount for personal expenses. He said in that report:

We understand that there were no personal expenses of Mr. Chibante paid on his behalf by any of the business interests and, accordingly, no adjustment is required in this regard.

[23] After Ms. Nazzani released her report, Mr. Rudson provided his second report acknowledging that there ought to be some adjustment for personal expenses. However, he does not concede many of the adjustments that were made by Ms. Nazzani, including the sum of $50,301.02 paid to APW Custom Home Theatres in 2014. As noted above, Mr. Ingratta identified this specific amount as a personal expense for the purchase of electronic equipment for the matrimonial home and the Windsor condo. Mr. Ingratta was the bookkeeper and controller at the time the expense was incurred. Mr. Rudson relies on the advice of Ms. Moody, the current controller, who identifies the expense as “boardroom systems”. Another expense Mr. Rudson does not concede is the sum of $1,695 paid to Anjema Eye Institute in 2017 for “vision care for Louis not covered by benefits”. This is clearly a personal expense that ought to have been included.

[24] By the same token, Ms. Nazzani has made adjustments for amounts that are clearly business expenses. As an example, she included the sum of $2,271.17 paid to O’Sarracino Trattoria in 2017 for the 2016 staff Christmas party.

[25] In order to properly calculate Louis’ income for support purposes, it will be necessary to review every expense that is not agreed upon between Mr. Rudson and Ms. Nazzani to determine whether it ought to be deemed personal, and thus included in Louis’ income for support purposes, or business, and thus not included in Louis’ income for support purposes. There is insufficient evidence before the court at this time to undertake this task. Louis’ income for support purposes will have to be determined at a trial, on a more fulsome record.

[26] Motions for temporary spousal support orders are summary in nature. A helpful list of factors to consider in determining an order for temporary spousal support are set out in Robles v. Kuhn, 2009 BCSC 1163, and repeated by Lemon J. of this court in Driscoll v. Driscoll. They are as follows:

1. On applications for interim support the applicant's needs and the respondent's ability to pay assume greater significance;
2. An interim support order should be sufficient to allow the applicant to continue living at the same standard of living enjoyed prior to separation if the payor's ability to pay warrants it;
3. On interim support applications the court does not embark on an in-depth analysis of the parties' circumstances which is better left to trial. The court achieves rough justice at best;
4. The court should not unduly emphasize any one of the statutory considerations above others;
5. On interim applications the need to achieve economic self-sufficiency is often of less significance;
6. Interim support should be ordered within the range suggested by the Spousal Support Advisory Guidelines unless exceptional circumstances indicate otherwise;
7. Interim support should only be ordered where it can be said a prima facie case for entitlement has been made out;
8. Where there is a need to resolve contested issues of fact, especially those connected with a threshold issue, such as entitlement, it becomes less advisable to order interim support.

[27] To recap, here there is no issue as to entitlement. The issue is one of quantum. In order to determine the appropriate quantum of spousal support, it is necessary to determine the income available to Louis for the purposes of support. This is not a case where the spouse is unemployed or underemployed and the question of whether to impute income to a spouse on an interim basis arises. Rather, the question is one of what the parties have taken from their business as income over the years. As history is the best indicator of the future, the quantum of spousal support ought to be determined on the basis of monies taken by the parties from their business over the last three years.

[28] In order to do rough justice between the parties, I intend to use the midpoint between the experts’ calculations of personal expenses paid by the business, including the gross up for tax purposes. I use Ms. Nazzani’s calculations as a base. I therefore calculate the income over the last three years as follows:

1. In 2015, the midpoint of personal expenses paid by the business was $288,237. Using Ms. Nazzani’s calculations, I replace her inclusion of personal and discretionary expenses with this figure, leaving me with an income of $545,837.
2. In 2016, the midpoint of personal expenses paid by the business was $330,339. Following the same procedure as 2015, I calculate the income to be $752,036.
3. In 2017, the midpoint of personal expenses paid by the business was $349,800. Following the same procedure as 2015 and 2016, I calculate the income to be $606,327.

[29] I use the average of the above three numbers based on s. 17(1) of the Guidelines in order to come to an income of $634,733. As Louis has complete control of the company, that income will be determined to be his and he will be required to pay spousal support to Lynne.

[30] Attached is a copy of my guidelines calculation. The range of spousal support payable according to the Spousal Support Advisory Guidelines (“SSAG”) is $19,835 per month on the low end, $23,141 at the midpoint and $26,224 at the high end.

[31] Louis asserts that there has been no material change in circumstances since the making of the order of King J. dated February 9, 2018. Louis therefore asserts that there ought to be no change in the current amount of spousal support payable. I reject that argument for two reasons:

1. The order of King J. was made on consent, on an interim, without prejudice basis. The parties needed to put an interim arrangement in place so that spousal support will flow, but it was clearly made on the basis that the issue would be addressed when further information became available.
2. The report of Ms. Nazzani dated April 26, 2018 was released after King J.’s order. Similarly, the updated report of Mr. Rudson dated August 2, 2018 was released after the order of King J. The first opportunity the parties had to address the issue of interim spousal support taking into account the opinions of the two experts was on this motion before me scheduled by way of special appointment.

[32] Louis’ income exceeds $350,000 per annum. The SSAG provide that after the payor’s gross income reaches a ceiling of $350,000, the formulas can no longer be automatically applied. At section 11.3 of the SSAGs, it is stated: “What is clear is that the larger stakes at these income levels (above $350,000) and the complexities of the individual cases mean that the advisory guidelines will have less significance to the outcomes above the ceiling, whether negotiated or litigated”: see also Halliwell v. Halliwell, 2017 ONCA 349, 138 O.R. (3d) 671.

[33] In this case, I see no reason to depart from the application of the SSAG. Louis and Lynne were married for over 26 years. They raised two children. They built a business together. They are joint owners of that business. They should both share in the income of that business until its ownership is determined in the civil action. They both ought to benefit from that business, both in the form of income taken from it and in the form of its capital. At the same time, care must be taken not to make the award too high such that business operations are hindered.

[34] In my view, the appropriate amount of interim spousal support payable is $20,000 per month, based on my calculations as set out above and all of the circumstances. This amount is within the range of the SSAG calculations summarized above. I have reviewed Lynne’s financial statement and this amount should allow her to enjoy a lifestyle comparable to Louis’ and to the lifestyle they both enjoyed during marriage. At the same time, given the amounts the parties have been able to take from the business in the past four years, the amount ought to be maintainable. In my view, it strikes the appropriate balance on an interim basis.

[35] As for the commencement date, Lynne takes the position that the support ought to be retroactive to December 1, 2017. Lynne had access to the corporate bank account following separation until approximately October 2017. Louis points out that Lynne withdrew $223,535.30 from the corporate bank account prior to October 3, 2017. It appears as though, since then, she has been limited to the spousal support orders that have been made, with the first being my order of November 17, 2017, made on consent for spousal support to commence December 1, 2017. Now that we have additional information, I see no reason not to adjust the amount retroactive to that date.

[36] The order I make for interim spousal support is meant to be rough justice in an attempt to ensure that Lynne and Louis receive close to equal benefit from their joint business pending the resolution of this matter and the related civil action. It is by no means meant to be a final determination of the appropriate quantum of spousal support. I expect that the order I make will be adjusted by the trial judge on a fulsome record.

Disposition

[37] For the foregoing reasons, I order that the applicant, Louis Chibante, shall pay to the respondent, Lynne Chibante, temporary spousal support in the sum of $20,000 per month, retroactive to December 1, 2017.

[38] In the event counsel are unable to agree on costs, written submissions, to include a costs outline and any relevant offers to settle, may be provided according to the following timeline:

1. The respondent may provide submissions within 20 days;
2. The applicant may provide submissions within 20 days thereafter;
3. The respondent may provide reply submissions within 10 days thereafter.

Original signed by Justice Pamela L. Hebner Pamela L. Hebner Justice

Released: September 27, 2018