COURT FILE NO.: FC-17-629-E000 DATE: November 1, 2018

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Director, Family Responsibility Office for the benefit of Hang Soon Kim Applicant – and – Du Won Kim Respondent

Elizabeth Kay, for the Applicant Respondent Self-Represented Heard: October 26, 2018

The Honourable Madam Justice Deborah L. Chappel

REASONS FOR JUDGMENT

I. Introduction

[ 1 ] This was the hearing of a motion which the Respondent, Mr. Du Won Kim (hereinafter referred to as “the Respondent” or “Mr. Kim”) brought in the context of a default proceeding commenced by the Director, Family Responsibility Office (“the FRO”) on June 2, 2017. The FRO initiated the default proceeding to enforce an order of Snowie J. dated September 3, 2010. The FRO also seeks to enforce support arrears claimed pursuant to two prior temporary orders, dated March 2, 2007 and September 11, 2008 respectively. Mr. Kim seeks an order staying the default proceeding and prohibiting the FRO from pursuing any further enforcement measures against him “until such time as the Director has taken adequate steps as determined by the court to address the failure of Manulife Financial to comply with the Support Deduction Notice served upon them.” Mr. Kim alleges that from 2011 until 2016, Manulife Financial (“Manulife”) misdirected sums totalling approximately $67,871.00 which were payable to him and which it should have sent to the FRO pursuant to a Support Deduction Notice issued by the FRO. In particular, he alleges that Manulife misdirected these funds to the Clerk of the Superior Court of Justice in Brampton, Ontario pursuant to a notice of garnishment which Snowie J. ordered on September 3, 2010 to enforce other liabilities owed by the Respondent to the support recipient (“the court garnishment”).

[ 2 ] The Respondent proposed two possible solutions for resolving the alleged errors by Manulife. First, he submitted that Manulife could be ordered to pay the FRO the equivalent of the misdirected amounts, and the FRO’s Statement of Arrears could then be adjusted downward accordingly. While he did not refer to any specific section of the Family Responsibility and Support Arrears Enforcement Act, 1996, S.O. 1996, c. 31, as amended (the “FRSAEA”) in support of this request, I note that section 26(7) of the Act provides that an income source is liable to pay to the Director any amount that it failed without proper reason to deduct and pay to the Director after receiving notice of a Support Deduction Order. The second option which the Respondent proposed was to retroactively designate the allegedly misdirected funds as having been applied towards his support arrears, and to adjust the FRO’s Statement of Arrears accordingly. This would result in the arrears noted in the FRO’s Statement of Arrears being reduced by the amount of the misdirected funds, and the amounts owing to the support recipient on account of the other liabilities captured by the court garnishment being increased by the same amount.

[ 3 ] For the reasons that follow, I have concluded that the motion should be dismissed, without prejudice to the Respondent’s right to seek relief in his Motion to Change Final Order currently before the Superior Court of Justice in Brampton regarding the amount that Manulife deducted pursuant to the FRO Support Deduction Notices.

II. Background

[ 4 ] By way of background, the Respondent and the support recipient Hang Soon Kim were married in 1985 and had one child, namely Tara Kim, born March 6, 1990 (“Tara’). They separated in 2005, and Tara remained in the care of her mother following the separation. The recipient commenced Family Law proceedings following the separation. On March 2, 2007, Snowie J. ordered the Respondent to pay child support in the amount of $1,510.47 per month. The case proceeded to trial, and Snowie J. made a final order on September 3, 2010. Pursuant to that order, the Respondent was required to pay child support to the recipient in the amount of $719.00 per month commencing September 1, 2010. The order also required the Respondent to pay the recipient $114,041.00 on account of arrears of the Table amount of child support under the Federal Child Support Guidelines (the “Guidelines”) and arrears of spousal support, the sum $35,002.64 on account of arrears for section 7 expenses under the Guidelines, and an award of $791,495.00 for property-related claims and lump sum spousal support. Snowie J. ordered that notices of garnishment were to issue immediately to a number of garnishees, including Manulife, to enforce the liabilities totalling $791,495.00 for the lump sum spousal support and property-related awards.

[ 5 ] The FRO received the support order on September 15, 2010, and it adjusted its Statement of Arrears respecting the Respondent accordingly. It issued a Support Deduction Notice to Manulife on December 15, 2010. The Respondent was receiving disability insurance benefits through Manulife’s Living Benefits Claims Department at that time, and the evidence indicates that Manulife paid 50% of those benefit amounts to the FRO pursuant to the Support Deduction Notice. In addition to those disability benefits, the Respondent received funds from Manulife as a result of a distribution relationship which he and his company, New Seoul Insurance Corporation (“New Seoul”), had with Manulife. These funds consisted of commissions relating to the sale of insurance policies which the Respondent had sold to various clients through New Seoul. Manulife paid two types of commissions. First, there were regular monthly payments, which the Respondent states were a small portion of the total annual amount that he was paid. According to the Respondent, the bulk of his annual commission income came in the form of an annual lump sum special bonus, paid in the spring each year for the previous calendar year. The FRO’s initial Support Deduction Notice dated December 15, 2010 was not included in the evidence before me, and therefore it is unclear whether the Notice referred to all sums payable by Manulife to Mr. Kim, or only to the disability benefits. A letter from Mr. William Bennett, Assistant Vice President and Counsel with Manulife, dated September 28, 2011 suggests that Manulife only began remitting 50% of the monthly disability benefits to the FRO at that time.

[ 6 ] The FRO commenced a default proceeding against the Respondent in the Ontario Court of Justice, Brampton in 2011. On March 15, 2011, Dunn J. made a final default order, requiring the Respondent to pay the ongoing child support amount of $719.00 per month plus $2,281.00 per month towards arrears, for a total payment of $3,000.00 per month. The order provided that in default of these terms, the Respondent was to be incarcerated for ten days per default.

[ 7 ] On March 28, 2011, the FRO issued an updated Support Deduction Notice to Manulife, directing that it garnish 50% of all net earnings payable to Mr. Kim, which is the maximum amount that the FRO is permitted to enforce pursuant to section 23 of the FRSAEA. In its correspondence to the Respondent relating to the updated Support Deduction Notice, the FRO referred to the garnishment notices that had been issued by the Clerk of the Court to Manulife, and stressed that the Respondent’s support arrears took priority over his other judgment debts. The FRO indicated that Manulife should forward 50% of Mr. Kim’s net earnings to the FRO, and the other 50% to the Clerk of the Superior Court of Justice pursuant to the garnishment notice issued by that court.

[ 8 ] The Respondent’s complaint regarding alleged misdirection of funds by Manulife relates to the annual bonus payments which Manulife paid out in the years 2011 to 2017. He alleges that Manulife incorrectly directed all of the bonus payment paid in 2011 to the Clerk of the Superior Court in Brampton pursuant to the court garnishment issued by that court, and that it remitted the bulk of the bonus payments from 2012 to 2017 to the Clerk of the Court as well. The Respondent’s position is that Manulife should have directed 50% of each bonus payment received from 2011 to 2017 to the FRO pursuant to the Support Deduction Notices which it had issued. His position is that in total, Manulife misdirected $67,871.00 to the Clerk of the Court as a result of its errors in handling the bonus payments. He states that he has attempted to resolve this issue many times with the FRO and Manulife, but that he has been unable to remedy the problem. He further asserts that he has been subjected to constant enforcement pressure from the FRO, and that the correction respecting the alleged misallocated amounts is necessary in order to protect him from any further aggressive enforcement activity by the FRO.

[ 9 ] The evidence before me indicates that Manulife initially took the position in 2011 that any bonus amounts payable in connection with Mr. Kim’s insurance business were payable to the corporation, New Seoul, and not to Mr. Kim personally. This position is set out in a letter from Mr. William Bennett to the Respondent dated September 28, 2011. Accordingly, Manulife was of the view that the bonus payments were not caught by the FRO Support Deduction Notice and should be paid to the Clerk of the Court pursuant to the notice of the court garnishment which it had received from the court. In any event, Mr. Bennett noted that the New Seoul bonus payment for 2010, which was payable in 2011, had already been paid to the Clerk of the Court prior to receipt of the updated FRO Support Deduction Notice dated March 11, 2011.

[ 10 ] Exhibit “G” to the Respondent’s affidavit sworn October 10, 2018 in support of this motion consists of Compensation Statements issued by Manulife relating to payments made from 2011 to 2017. The heading on these statements is the name of Mr. Kim’s corporation, “New Seoul Insurance Corporation,” suggesting that the statements relate to the corporation’s account with Manulife. The statements refer to a payment called “New Seoul Bonus” as well as much smaller amounts, referred to as “transfers” to Mr. Kim. The Respondent alleges that the total of these amounts on each statement represents the bonus payments that are in question on this motion, and that Manulife should have sent 50% of these total amounts to the FRO from 2011 to 2017. The statements show amounts which Manulife sent to the Clerk of the Court and to the FRO. Upon carefully reviewing these amounts, it is very unclear to me how Manulife calculated and allocated the deductions pursuant to the court garnishment and the Support Deduction Notice for the months in question. For example, as I have noted, Manulife had taken the position that the annual bonus amounts were payable to New Seoul and thus were not subject to the FRO Support Deduction Notice. If the total amounts reflected in these statements represented the annual bonus payments, as Mr. Kim alleges, then Manulife would not have paid any of the monies to the FRO based on its position. However, the statements from 2012 to 2017 all show that Manulife sent funds to the FRO. Alternatively, if the amounts designated as “New Seoul bonus” were considered by Manulife as being payable to the corporation, and the “transfers” to Mr. Kim noted on these statements represented the regular monthly commission amounts payable to Mr. Kim, one would expect that the amount sent to the FRO would be 50% of those transfer amounts. However, the amounts noted as having been remitted to the FRO are not 50% of these transfer amounts. Quite simply, I am unable to determine from the Compensation Statements how Manulife calculated the amounts which it sent to the FRO.

[ 11 ] At some point in early 2017, Manulife appears to have changed its position and concluded that the FRO Support Deduction Notice actually extended to the annual bonus amount payable in that year. As indicated above, it had previously held that these payments were due to New Seoul and therefore not subject to the FRO garnishment. However, in a letter from Mr. Blair Anderson, Assistant Vice President and Senior Counsel to Manulife dated April 24, 2017, Mr. Anderson indicated that only $1,500.00 of the annual bonus amount would be remitted to the FRO pursuant to the Support Deduction Notice. His reasoning was that the Support Deduction Order only permitted Manulife to remit up to 50% of the $3,000.00 which the Respondent was required to pay pursuant to the March 15, 2011 default order. Clearly, this represented a misunderstanding of the FRO’s Support Deduction Notice, which actually directed Manulife to garnish 50% of all net earnings that were payable to Mr. Kim. Manulife subsequently sent another letter to Mr. Kim dated May 1, 2017 indicating that it had made an error in the manner in which it had been calculating the annual special bonus payment. Mr. Anderson confirmed that in future, Manulife would be allocating 50% of the total annual bonus payments to the FRO and 50% to the Clerk of the Court. However, in this letter, it appears that Manulife was still operating under the understanding that garnishment of the Respondent’s regular monthly commission payments by the FRO was subject to a monthly maximum of $1,500.00, ie. half of the $3,000.00 amount stipulated in the default order.

[ 12 ] The issue of how much Manulife should have remitted to the FRO from 2011 to 2017 is important to both the Respondent and the support recipient Ms. Kim. The reason for this is that the FRO has many effective enforcement powers pursuant to the FRSAEA with respect to arrears of child and spousal support, including the right to commence default proceedings and to pursue the numerous remedies associated with that process. If funds which were directed to the Clerk of the Court are now designated as having been paid on account of the Respondent’s support obligations, this would translate into a decrease in his support arrears and a corresponding increase in his other liabilities to Ms. Kim. This would result in Ms. Kim losing the assistance of the FRO in enforcing any funds that may be re-designated in this manner.

[ 13 ] As I have noted, the FRO commenced the current default proceeding on June 2, 2017. As of that date, the arrears noted on the FRO’s Statement of Arrears totalled $92,540.33. The default proceeding was adjourned several times in this court to allow the Respondent to commence a Motion to Change the September 3, 2010 order. There were further delays when it was determined that the Respondent required leave to bring a Motion to Change as a result of previous orders of other courts. The Respondent brought a motion for leave, which was granted, and then filed a Motion to Change Final Order. The Motion to Change was then transferred to the Superior Court of Justice in Brampton, where the support order dated September 3, 2010 was made.

III. Analysis

[ 14 ] Based on the information outlined above, it certainly appears that Manulife experienced difficulty determining how funds payable to Mr. Kim and New Seoul should be properly allocated as between the FRO Support Deduction Notices and the court garnishment issued by the Clerk of the Court in Brampton. Given these difficulties, it is unclear whether it directed the proper amount of funds to the FRO from 2011 to 2017. I can appreciate the Respondent’s frustration in attempting to resolve this issue. Unfortunately, for the reasons outlined below, I conclude that the issue cannot be addressed and resolved in the manner requested by the Respondent in this motion, or in this court in the context of a default proceeding brought by the FRO under the FRSAEA. I am therefore dismissing the motion, without prejudice to the Respondent’s right to pursue relief in his Motion to Change Final Order currently before the court in Brampton regarding the amount that Manulife deducted under the Support Deduction Orders during the period from 2010 onward.

[ 15 ] I deal first with the Respondent’s broad request for a stay of the default proceedings in this court and an order prohibiting the FRO from pursuing any other enforcement measures. Section 5 of the FRSAEA stipulates that it is the duty of the Director to enforce support orders where the support order and the related Support Deduction Order, if any, are filed in the Director’s office, and to pay the amounts collected to the person to whom they are owed. The court has the jurisdiction to stay the enforcement of a support order. However, section 20(6) of the FRSAEA specifically provides that the operation or enforcement of a Support Deduction Order is not affected by an order staying the enforcement of the related support order, unless the order is also stayed. There was no motion before me requesting a stay of the September 3, 2010 order, and there was no evidence indicating that the Respondent has requested this relief in the context of his Motion to Change Final Order. A motion to stay the support order should properly be brought in the context of the Motion to Change the support order which is now proceeding in the Superior Court of Justice in Brampton. Furthermore, such a motion should be made on notice to the support recipient. For all of these reasons, I decline to order a stay of this default proceeding or to make an order prohibiting the FRO from pursuing other enforcement measures.

[ 16 ] The Respondent’s main goal in this motion was to rectify the concerns that Manulife may have sent significant amounts of money payable to him to the Clerk of the Court rather than the FRO. Counsel for the FRO, Ms. Kay, submitted that the concerns which the Respondent has raised about Manulife’s remittance of funds as between the FRO and the Clerk of the Court go to the issue of entitlement to support, and relied on section 8.4(9) of the FRSAEA for the proposition that the Director is not a proper party in proceedings involving entitlement. My understanding is that the FRO advanced this argument as part of its general position that these issues should be properly determined by the court within the context of the Respondent’s Motion to Change Final Order in the Brampton Court, rather than in the default hearing before this court. I do not agree with the argument that the issues in this case go to entitlement to support, but I concur with the FRO that the concerns respecting Manulife’s allocation of funds payable to the Respondent should be properly determined by the court in Brampton in the context of the Motion to Change proceedings. Dealing first with the argument relating to entitlement, Section 8.4(9) of the Act provides that the Director is not a party to either a proceeding to determine a person’s entitlement to support under a support order or a motion to decide whether a support obligation has terminated. The issues relating to Manulife’s remittance of funds payable to the Respondent do not in my view relate to the recipient’s or child’s entitlement to support or whether the Respondent’s support obligation has terminated. Rather, they relate to whether Manulife has complied correctly with the Support Deduction Notices which the FRO sent them, and whether the FRO’s Statement of Arrears should be corrected if there were any errors.

[ 17 ] The evidence raises some questions as to whether Manulife may have made errors in the allocation of funds payable to the Respondent as between the FRO and the Clerk of the Court. However, I am unable to resolve this issue in the context of this proceeding for a number of reasons. First, I conclude that this is the wrong court in which to address problems or issues regarding compliance with the Support Deduction Notices. The Respondent did not specify the statutory provisions of the FRSAEA which he was relying on in bringing this motion to resolve the difficulties regarding Manulife’s compliance with the Support Deduction Notices. However, in reviewing the Act, I conclude that this type of motion falls within the scope of section 27(1)(c) of the Act, which provides that a payor, on motion in the court that made or is deemed to have made the Support Deduction Order, may seek relief regarding the amount that is being deducted by an income source under a Support Deduction Order for arrears under a support order. While this section is typically relied on by payors to seek a reduction of the amount being deducted by the income source, it is also in my view broad enough to capture the situation in this case, where the payor argues that an insufficient amount has been deducted. This section and other provisions of the Act clearly indicate that questions relating to an income source’s handling of a Support Deduction Notice are to be dealt with by the court that made the Support Deduction Order. The support order dated September 3, 2010 and the related Support Deduction Order were made by the Superior Court of Justice in Brampton, and therefore I conclude that the Respondent is required to pursue relief relating to Manulife’s compliance with the Support Deduction Notices in that court. Furthermore, I conclude that these issues should be considered in the context of the Motion to Change Final Order proceeding in that court. In that case, the court will be called upon to consider whether the Respondent’s support obligation should be terminated, the appropriate date for any termination, and whether his support obligation should be retroactively reduced. The determination of all of these issues may have an impact the amount of support arrears owed by the Respondent to the recipient. The fixing of support arrears owed by the Respondent should in my view be carried out in a global fashion, including the determination of any adjustments that may be required as a result of errors in the amounts which Manulife should have remitted to the FRO.

[ 18 ] Finally, I conclude that there were serious notice problems with respect to the Respondent’s motion. As I indicated above, the Respondent’s first proposal for resolving the alleged misdirection of funds by Manulife was to require Manulife to pay the amounts that it should have remitted to the FRO, even though the funds in question may have already been paid to the recipient through the court garnishment. This type of serious order against Manulife could not be made without notice to the company. If his intention is to pursue this request in the Brampton proceedings, Manulife would have to be given notice. I conclude that the recipient should also be given notice and an opportunity to respond fully to the Respondent’s claims that Manulife significantly under-remitted funds to the FRO from 2011 to 2017. As I have indicated, Ms. Kim has a very compelling interest in this issue, given the benefits of having the FRO’s assistance in enforcing the Respondent’s support obligations. I have no evidence apart from the Manulife Compensation Statements that were filed confirming that the recipient actually received the bonus payments which the Respondent alleges were wrongly sent to the Clerk of the court. Furthermore, based on the evidence before me, I am unable to determine whether Manulife in fact underpaid the FRO, and if so, the extent of any such underpayment. I certainly have concerns as to whether the figure of $67,871.00 put forward by the Respondent is a reliable calculation of the funds which Manulife may have misallocated to the Clerk of the Court. These concerns are based on the following:

1. With respect to the FRO’s original Support Deduction Notice dated December 15, 2010, it is unclear whether the FRO directed that Manulife garnish only the Respondent’s disability payments or all funds payable to him. The letter from Manulife to Mr. Kim dated September 28, 2011 suggests that the Support Deduction Notice was only directed to Manulife’s Living Claims Department, and that Manulife was only requested to deduct and remit to the FRO 50% of the disability payments payable to the Respondent. In order to fully address whether Manulife under-remitted to the FRO, and if so the extent of the error, it is necessary to consider the scope of the original Support Deduction Notice, whether Manulife deducted monies from all funds payable to Mr. Kim or only from the disability payments, and how much Manulife deducted from all income sources from Manulife.

2. It is necessary to obtain further information about the annual bonus payments from Manulife which the Respondent argues were subject to the FRO Support Deduction Notices. As I have indicated, Manulife was initially of the view that these bonus amounts were payable to New Seoul rather than the Respondent, with the result that the payments were not captured by the FRO garnishment. It later changed its position on this issue, for reasons that are not evident on the evidence before me. More information is required regarding the details of the distribution relationship between Manulife, the Respondent and New Seoul in order to determine whether the bonus amounts were actually captured by FRO’s Support Deduction Notices. There may also be legal issues around whether amounts paid to New Seoul should be attributed to the Respondent for support purposes.

3. Even if the bonus amounts were payable to the Respondent and thus subject to the Support Deduction Notice, further information would be required to determine the extent if any to which Manulife may have misallocated the payments to the Clerk of the Court. Based on the evidence before me, the issues which require further clarification include the following: a) First, the Respondent alleges that Manulife misdirected the entire amount of his bonus payable in 2011 to the Clerk of the Court. Manulife did not believe that this bonus was captured by the FRO’s first Support Deduction Notice dated December 15, 2010, but even if it was subject to the Support Deduction Notice, Manulife states that it sent the funds in question to the Clerk of the Court before receiving FRO’s updated Support Deduction Notice on March 11, 2011. In order to determine whether there was any misallocation of this bonus payment to the Clerk of the Court, the court would require a copy of the original Support Deduction Notice, evidence as to whether that original Support Deduction Notice would have extended to the bonus payments, when exactly Manulife received the updated Support Deduction Notice and proof of when Manulife sent the bonus to the Clerk of the Court in 2011. b) As I have already indicated, the Compensation Statements which the Respondent adduced as evidence relating to the years 2011 to 2017 raise numerous questions regarding the exact amounts of the special bonuses in those years and how Manulife calculated the amounts which it remitted to FRO pursuant to the Support Deduction Notice. c) It is unclear based on the evidence before me whether Manulife made correct deductions with respect to the regular monthly commissions which were payable by Manulife to the Respondent. As I have indicated, Manulife appeared to be under the misunderstanding that it could only deduct a maximum of $1,500.00 per month in relation to these commissions, which was 50% of the Respondent’s payment obligation under the default order dated March 15, 2011, rather than 50% of the Respondent’s net earnings. If Manulife did not direct sufficient of these commission payments to the FRO, then this shortfall would also have to be brought into the fold of the analysis in this case.

[ 19 ] Given the recipient’s strong interest in whether funds garnished by Manulife were misallocated as between the FRO and the Clerk of the Court, and Manulife’s interest in regard to the Respondent’s suggestion that it be held liable for any allegedly misdirected amounts, they should both have the opportunity to consider the issues outlined above and any other relevant matters, to obtain any necessary disclosure, and to be heard before any decision on the issue is rendered.

IV. Terms of Order to Issue

[ 20 ] Based on the foregoing, an order shall issue as follows:

1. The Respondent’s motion dated October 10, 2018 is dismissed.

2. The dismissal of this motion is without prejudice to the Respondent’s right to seek relief in his Motion to Change Final Order before the Superior Court of Justice in Brampton regarding the amount that Manulife Financial has or is currently deducting pursuant to any Support Deduction Notices issued by the Family Responsibility Office since December 2010.

3. The Family Responsibility Office shall serve a copy of these Reasons for Judgment on the support recipient Hang Soon Kim by sending them to her by regular mail to her last known address noted in the Family Responsibility Office’s records, and shall file an affidavit of service in the Continuing Record for the default proceeding.

4. The Family Responsibility Office shall also serve a copy of these Reasons for Judgement on the Legal Department of Manulife Financial located in Waterloo Ontario and shall file an affidavit of service in the Continuing Record for the default proceeding.

5. If either party requests costs in connection with the motion, they shall contact the Trial Coordinator in writing by no later than November 9, 2018 to schedule a costs hearing. Bills of Costs and Books of Authorities will be required for any costs hearing. If neither party submits a request for a costs hearing by November 9, 2018, there shall be no costs payable by either party.

The Honourable Madam Justice Deborah L. Chappel

Released: November 1, 2018