Court File and Parties
COURT FILE NO.: FS-17-415097-00 DATE: 20180130 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Laura Elizabeth Oliver Applicant
– and –
Bernard John Oliver Respondent
Appearing on her own Behalf Appearing on his own Behalf
HEARD: December 4-6, 2017
C. GILMORE, J.
TRIAL JUDGMENT
OVERVIEW
[1] The applicant/wife seeks a divorce, child support and s. 7 expenses. She also seeks a small adjustment to the previously agreed upon equalization payment as well as a set off of third party payments against any retroactive and ongoing spousal support sought by the respondent/husband.
[2] While the wife’s application seeks child support and s. 7 expenses, her position at trial was that the husband will simply never pay. In exchange for past and future child support and s. 7 expenses, the wife proposes to retain the husband’s interest in a jointly-owned cottage property the parties own in New York State. The wife estimates the current value of the cottage at $30,000. She seeks this relief as a special provision under the Divorce Act and assured the court that she is fully capable of providing for the children financially.
[3] With respect to retroactive and ongoing spousal support, the wife’s position is that her obligation to pay such support has been fully satisfied by both monthly payments made to the husband directly and third party payments made on his behalf post-separation.
[4] The husband seeks ongoing and retroactive spousal support. Both parties seek to impute income to the other for the purpose of retroactive and ongoing support calculations. The husband seeks arrears of child and spousal support totaling $194,232 and ongoing spousal support of $1,688 per month based on an imputed income to the wife of $203,953 for 2016 and the husband’s 2016 income of $42,000. The monthly spousal support of $1,688 is net of the husband’s child support obligation of $614 per month. Support is to be adjusted annually based on an exchange of Income Tax Returns and Notices of Assessment.
[5] The husband seeks a declaration that he owes no retroactive s. 7 expenses on the grounds that he was not given proper notice or consulted about the expenses until the receipts were produced shortly before trial.
[6] Equalization issues were previously settled by way of a consent order dated July 28, 2017. There is an issue with respect to the interpretation of the term “post-separation adjustments” in the order, which will be dealt with in this judgment.
[7] Custody and access issues were also settled by way of a consent order dated April 24, 2017. The wife has sole custody of the children. Given the ages of the children, access to the husband is at the discretion of the children and arranged by them directly.
[8] The parties were married on August 18, 1995 and separated on December 31, 2010. They have two children: Cameron (age 17) and Dillen (age 15). Cameron is in Grade 12 and applying to university. Dillen is in Grade 10. Both children have lived full time with the wife since December 2014. Between December 31, 2010 and December 2014, the parties shared time with the children.
[9] Both parties represented themselves at trial. The wife is a full-time family law lawyer with considerable experience. The husband is university-educated and works as a contractor for $25 an hour. He is experienced in home renovation, dry walling, painting and landscaping.
[10] The separation of these parties was a bitter one and they communicate very little. It is clear that each blames the other for the breakdown of the marriage, the extended litigation and the financial consequences of both. It is hoped that the results of this trial will allow the parties to move on with their lives and, in particular, to communicate more productively about the children.
The Parties’ Incomes
Imputation of Income to the Wife
[11] Before a determination of any past or future support obligations can be made, the court must make a finding as to each party’s income between 2010 and 2016. With respect to the wife, the husband submits that her net business income should be grossed up by 25% based on personal expenses she writes off through her business. The wife argues that the husband is underemployed and that an income of $48,000 should be attributed to him in each year since separation.
[12] As mentioned, the wife is a family law lawyer. She has been practicing in the Oakville area since 2000. She is now a sole practitioner.
[13] The husband made several submissions with respect to grossing up the wife’s income. First, he submits that the wife rents office space to another lawyer by the name of “Sam” and that she had not declared the rental income. He submitted that $800 per month in rental income should be attributed to the wife.
[14] The wife disputed this. She admitted that she and Sam have an arrangement but that Sam does not use the office often as he has a very limited law practice. Rather than pay an actual rent, he buys office supplies for the office, which offsets his use of it. There is no formal lease agreement between Sam and the wife.
[15] The husband pointed to the General Ledgers for the wife’s business that show that she pays all of her car expenses and many household expenses such as utilities and groceries through her business. The wife did not dispute this but said that at the end of the year her accountant includes all personal expenses in her income and she pays tax on the income used to pay those expenses.
[16] The husband also disputes the wife’s office expenses claiming she bought the children’s computers through her office. She responded that the children have Mac computers, which are not compatible with her office computers so her accountant would question the expense.
[17] The husband questioned the wife’s deductions for business meals and entertainment when she is a successful sole practitioner who works off referrals and has failed to show that such expenses are required to operate her business.
[18] When questioned by the court, the wife agreed that, although she deducts 100% of her vehicle expenses, she does not use her vehicle strictly for business. She testified that it was more accurate to say that she used her car for business 75% of the time. The husband’s position was that even that amount was excessive and that the wife used her car for business at the most 50% of the time.
[19] The wife is a sole practitioner. I agree that business meal expenses for client entertainment would not be significant. The wife has a busy practice and works for many affluent clients in the Oakville area. There was no evidence that she needed to “wine and dine” prospective clients for business. An add-back of some portion of her meal and entertainment expenses is therefore also in order.
[20] Section 19 of the Federal Child Support Guidelines (the “CSGs”) sets out the circumstances in which a court may impute income to a spouse in appropriate circumstances. The section that applies to this case is s. 19(1) (g), which provides that imputing income may be appropriate where “the spouse unreasonably deducts expenses from income.” It is also worth noting that s. 19(2) states that s. 19(1)(g) is not governed solely by whether or not the deduction is permitted under the Income Tax Act.
[21] While clearly the CSGs are meant to deal with child support payors, the principles are consistently applied to all payors, whether spousal or child support payors. These principles are important in the case at bar, as the amount of the wife’s spousal support obligation will clearly impact her ability to provide financially for the children who are in her full-time care.
[22] In Bak v. Dobell, 2007 ONCA 304, 86 O.R. (3d) 196, the court made it clear that s. 19 provides the court with discretion to impute income to a support payor. Further, the list of circumstances in s. 19(1) is not exhaustive. The Court of Appeal for Ontario in Riel v. Holland (2003), 2003 CanLII 3433 (ON CA), 67 O.R. (3d) 417 (C.A.), at para. 36 specifically addressed self-employment income and stated “Where significant amounts of untaxed business income are used for payment of personal expenses, “grossing up” business income to place a spouse’s real income on a par with what it would be in a salary context is another example [of circumstances in which income may be imputed.”]
[23] In Wilson v. Wilson, 2011 ONCJ 103, the court referred to s. 19(2) commenting that “Common expenses that may legitimately be deduced for income tax purposes, but personally benefit the payor…include expenses for car, home office, travel and entertainment.”
[24] The most common “add backs” to self-employment income are car expenses (30% in Martin v. Benson, 2016 ONSC 7535, 50% in Brans v. Brans, 2000 CanLII 22471 (ON SC)), 60% in Sos-Porritt v. Porritt, 2015 ONCJ 477). Meals and entertainment are also commonly added back because the payor has failed to prove that the expense was necessary to conduct business (100% added back in Benson and Porritt, 50% in Brans and Osmar v. Osmar, 2000 CanLII 20380 (ON SC)).
[25] Capital Cost Allowance (“CCA”) is also frequently added back to income as it is a tax deduction for depreciable property such as furniture and equipment. Since salaried employees are not entitled to such deductions, adding back CCA is consistent with the principles in Riel v. Holland with respect to an attempt to put salaried and self-employed payors on par with one another.
[26] The husband alleged that the wife does “work for service” in her practice and mentioned the name of two individuals that he was aware of when he assisted the wife with office administration at one point during the marriage. The wife responded that this was actually the husband’s idea as he was in charge of collecting her office receivables at the time. The wife told the court she no longer does this as one of the individuals reneged on the deal, which was, of course, unenforceable, and the other individual never finished the job.
[27] The husband submits that the wife’s lifestyle has not changed. She still drives a nice car, belongs to the Oakville Club (an exclusive yacht and racquet club), belongs to a private ski club in New York State and recently bought a new townhouse worth over $1 million.
[28] The wife disputes these allegations. She testified that she drives an older car, and that the ski club membership was taken out so the children could avail themselves of the superior snowboard coaching at that club. The children have decided not to snowboard competitively this year due to school obligations and, as such, the wife will be resigning her family membership. She told the court that the husband was well aware of the children’s snowboarding skill and that throughout the marriage he supported their participation in that sport at a high level. As for the Oakville Club, Cameron plays badminton with the senior men and is a good player. The wife intends to keep this membership for as long as she can for the benefit of the children.
[29] With respect to the townhouse, the wife disputed that it was worth $1 million and challenged the husband as to where he received that information. The husband conceded that it was hearsay.
[30] I found the wife to be a credible witness. When challenged by the husband she readily conceded that she had, in the past, engaged in work-for-service arrangements and that she paid personal expenses through her business. However, she gave reasonable and acceptable explanations for these issues.
[31] It was clear that the wife was frustrated with the husband for many reasons including what she believed to be the husband’s abandonment of his parental responsibilities, failure to be reasonable during negotiations, refusal to take responsibility for the financial difficulties during the marriage, and refusal to accept responsibility for his part in the breakdown of the marriage. Notwithstanding that frustration, she was well-prepared and measured in the delivery of her own evidence and when cross-examining the husband.
[32] I decline to impute any additional income to the wife for the alleged tenant. I accept the wife’s evidence that he works only a few hours a week in her office and pays his way through the contribution of office supplies.
[33] The husband seeks to impute income to the wife in 2016 of $203,953. He seeks to impute an additional 25% of income to the wife in each year between 2010 and 2016. When asked by the court how he arrived at 25% he testified that his former lawyer told him to use that number. Other than the $800 per month for rent, he was unable to give the court any numeric specifics of what made up the 25% he was seeking to impute.
[34] Generally, his evidence was that the wife’s lifestyle had not changed and that she had the ability to write off personal expenses. He clearly felt this was unfair given that he did not have the same opportunity.
[35] I decline to impute an additional 25% of gross income to the wife. This is a significant amount in each year. In this court’s view, the fairest approach is to target certain expenses, such as car, meal and entertainment expenses in addition to CCA, which are deductions not entirely needed for the wife to operate her business. Using the principles in the abovementioned cases it is reasonable to add back 50% of the wife’s car, meal and entertainment expenses and all of her claimed CCA allowance. In my view, the best approach is to make those adjustments each year based on the actual numbers. Inputting these additional amounts into the SSAG formula as non-taxable income with an automatic gross-up would reflect the benefit to the wife of using these expenses for her personal benefit. Using the formula described, the wife’s imputed income between 2011 and 2016 would be as follows.
[36] In 2011, the line 150 income was $57,323. Added back to this income would be 50% of the vehicle expense ($4,785), 50% of the meals and entertainment ($1,329.50) and CCA of $607. This would add $6,721.50 to the wife’s income for a total in 2011 of $64,044.50.
[37] In 2012, the line 150 income was $68,994. Added back to this income would be 50% of the motor vehicles expense ($6,142.50), 50% of meals and entertainment ($1,928) and CCA of $932. This would add $9,002.50 to the wife’s income for a total in 2012 of $77,996.50.
[38] In 2013, the line 150 income was $110,933. Added back to this income would be 50% of the motor vehicle expense ($3,768.50), 50% of meals and entertainment ($1,307) and CCA of $3,325. This would add $8,400.50 to the wife’s income for a total in 2013 of $119,333.50.
[39] In 2014, the line 150 income was $108,960. Added back to this income would be 50% of the motor vehicle expense ($4,647), 50% of meals and entertainment ($1,669) and CCA of $5,090. This would add $11,406 to the wife’s income for a total in 2014 of $120,366.
[40] In 2015, the line 150 income was $142,745. Added back to this income would be 50% of the motor vehicle expense ($3,143.50) and 50% of meals and entertainment ($1,625). There was no CCA deduction in 2015. This would add $4,768.50 to the wife’s income for a total 2015 income of$147,513.50.
[41] In 2016, the line 150 income was $163,162. Added back to this income would be 50% of the motor vehicle expense ($7,387.50) and 50% of meals and entertainment ($1,226). There was no CCA deduction in 2016. This would add $8,613.50 to the wife’s income for a total income in 2016 of $171,775.50.
[42] The wife’s testimony regarding her business expenses made sense. However, it is clear there is some component of personal benefit to the deductions she takes. Using the 2010 tax year as an example, if her line 150 income of $137,341 is grossed up by 25% as suggested by the husband, that would increase her income by $34,335.25 in that year. As illustrated in the calculations above, a fairer approach is to simply reduce the obvious personal expenses and remove the claim for CCA in each year. In 2010, for example, if one reduces the vehicle expense by 50%, the meals and entertainment by 50% and removes the claim for Capital Cost Allowance altogether, the amount to be added back would be $9569.
Imputation of Income to the Husband
[43] The wife seeks to impute income to the husband of $48,000 per year in each year between 2010 and 2016. She calculates this amount as $25 per hour for 48 weeks a year.
[44] The wife’s position is that the husband is well-educated and highly-skilled but has done nothing to advance his education or training since separation. She submits he could be earning as much as $100,000 per year so imputing income of $48,000 per year is more than reasonable. The wife has received no child support from the husband and suggests that at an imputed income of $48,000 per year, he owes her $27,000 in retroactive support payments.
[45] The husband is one course short of a three-year university degree in gerontology. He has made no efforts to complete his degree. Although he has skill as a renovator, painter and landscaper, he conceded during cross-examination that he has taken no course since separation to upgrade his trade skills.
[46] The husband’s evidence is that he has had to sell everything he owned and now lives in a trailer that he has modified as a year-round living space. He is not able to properly entertain the children in this space and has to spend time avoiding by-law enforcement officers because of overnight parking prohibitions.
[47] The husband gave evidence about his employment history including work done on the couple’s various matrimonial homes. At the time they purchased their first home in Dundas, Ontario in 1997 he was working as a landscaper making $45,000 per year. He spent many hours renovating the Dundas home, which he estimated to be about $30,000 in labour. After the Dundas home was sold they bought a house in Hamilton. The husband estimates he put about $20,000 of labour into that home.
[48] In 2004 they purchased the home on Trafalgar Road in Oakville. This was the home they were residing in on the date of separation. The husband’s evidence was that the home needed a massive rebuild and his labour on that home was worth $300,000. He had to quit his job as a high-end landscaper so he could focus all of his efforts on the home and the children. The wife was upset that the husband quit his job without consulting her.
[49] The husband testified that the parties used their line of credit to purchase a cottage in Ellicottville, New York. They stayed there on weekends while the children pursued their snowboard racing. The husband’s evidence was that he did $30,000 worth of labour on the cottage.
[50] The husband estimates that the cost of the labour he put into all of their homes and the cottage was $600,000.
[51] At the wife’s urging, the husband took an intensive mediation course at McMaster University during the marriage. The plan was to have the wife refer mediation clients from her law practice to the husband. The husband graduated but has not completed the required practical portions of the course including a 20-hour practicum and two exams. The husband complained that this is now impossible for him because the wife is a well-known family law lawyer in the Oakville area, and he will not get referrals from the local family law lawyer network. He also stated that he cannot afford to complete the requirements. The wife’s position is that the husband has simply not bothered to complete these requirements, and if he did, it would be a good source of income for him.
[52] The husband has had various jobs since separation including six months at Olympus doing insurance-related renovations and six months at Ontario Renovations. He currently works at Miscione Homes where he earns $25 per hour for an eight-hour day. He is a general renovator and installs floors, does painting, framing, light plumbing and assists other trades. He started that job in March 2017 and earns a straight hourly wage with no pay for overtime or benefits.
[53] During cross-examination of the husband, the wife reviewed his income tax returns. In 2011 he had T4 income of $6440. The husband’s evidence was that he was doing odd jobs that year, possibly for Van Dyck Homes. In 2012 he had no employment income. He claimed a total of $32,400 in support payments. He claimed the same amount of support payments in 2013. There was significant evidence about the support claimed in 2012 and 2013. The husband’s evidence was that he received spousal support payments from the wife of $14,400 in each of 2012 and 2013. He did not receive child support from her. He could not explain why he claimed $32,400 in support on both his 2012 and 2013 income tax returns. He testified that this was a significant mistake but conceded he was the one who gave this information to H&R Block, which prepared his returns.
[54] In 2013 the husband also claimed employment income of $11,251. He testified that he worked for Orlando Management for three months that year. In 2014 the husband claimed self-employment income of $10,276. In 2015 he claimed $9643 as T4 income working for a renovation company. In 2016 he claimed self-employment income of $6329.
[55] The husband was cross-examined extensively about his income. He conceded that although he had no registered business in his name, he earned self-employment income as an independent contractor in 2014 and 2015 and that he was writing off expenses against his income. He agreed that he did not take credit cards but was paid either in cash or by cheque. He disagreed with the proposition that this meant he was not declaring all of his revenue for tax purposes.
[56] The husband was cross-examined on his 2011 bank statements. Although he declared income of $6440 that year, a further $23,000 was deposited into his account that was not support. The husband explained that the company he was working for at that time deposited money with him for materials. He could not explain why the deposits went on for 11 months when he only worked for that company for two months or why there was no indication of money coming out for materials (i.e. payments to places such as Lowe’s or Home Depot).
[57] In 2012 the husband was questioned about unaccounted deposits to his personal account of $37,554. He explained that these amounts were to buy materials for the company he was working for at the time. While there were some payments made to Lowe’s and Home Depot, it was also clear that much of that money was used to pay personal expenses. The husband declared no income for tax purposes in 2012.
[58] In 2013 the husband made deposits of over $30,000 for which he could not account. The wife suggested that since the husband’s declared income for tax purposes in 2013 was $11,251, he must have been earning cash income. He denied this suggestion.
[59] In 2014 the husband made total deposits (to the parties’ joint and his sole account) of approximately $29,000 while his income for tax purposes was approximately $10,000.
[60] In 2015 there was very little activity in the husband’s accounts. He declared gross business income of $18,630, yet nowhere near this amount went into his accounts. Further, he claimed $21,000 in rent, which exceeded both his deposits and his declared income.
[61] Overall I found the husband’s credibility to be lacking. He was evasive and, at times, sarcastic with the wife during cross-examination. Certain aspects of his income history simply did not make sense. Either he was depositing money into his accounts that he did not declare as income or he was earning income that he did not deposit into his accounts and did not declare as income. The oddity of the excess support claimed for tax purposes in 2012 and 2013 is also concerning given that the tax preparer was acting on information given to it by the husband.
[62] The husband complained bitterly about the wife delaying this proceeding yet the evidence demonstrated something quite different. For example, it was the husband who initially refused to allow the lawyer acting on the sale of the matrimonial home to release money to pay the wife’s CRA debt. The house sale closed on December 1, 2014 but the first payment to CRA was not made until May 7, 2015. The husband had various excuses but I find that his delay cost the wife unnecessary interest and penalties.
[63] The husband refused to consent to the house sale proceeds being placed in an interest-bearing account. He claimed he was not aware that the trust funds did not earn interest. This seems disingenuous for two reasons. First, the husband worked in the wife’s law office from time to time working on accounts and receivables during the marriage and was aware of the financial workings of a law office. Second, why would there be a request to put the sale funds into a GIC if they were already earning interest?
[64] I also find that the husband unnecessarily delayed matters by refusing to sign a Confidentiality Agreement regarding production of the wife’s financial information from her practice. The husband blamed these delays on his various lawyers or the wife but I find that the husband was uncooperative and resistant to reasonable requests.
[65] The husband seemed shocked that there was so little money left after the sale of the matrimonial home. He seemed unable to fathom that the wife’s income tax debt consumed most of the proceeds and that much of that debt was accumulated during the marriage. He testified that the wife kept financial information from him by diverting it to the office. However, I accept the wife’s evidence that she was the primary income earner and was the spouse who paid the bills. Managing the household finances did not mean she was hiding that information from the husband. It was clear that the parties were living beyond their means and financing that lifestyle by not paying their taxes. The husband agreed that the wife kept him informed about her tax debt but when it came time to deal with it by paying it out, the husband was resentful and blamed the wife.
[66] In summary, I find that the husband’s evidence about his income must be viewed with some skepticism. His evidence on his personal financial issues simply did not make sense. Given his education and his skills I agree with the wife that imputing an income to the husband of $48,000 per year is quite reasonable.
[67] Pursuant to s. 19(1) (a), income may be imputed to a payor where a spouse is intentionally under-employed or unemployed. There is no bad faith requirement under this section or any necessity to find an intention to avoid the payment of child support. As well, a court must be careful not to select a random amount of imputed income. The income must be grounded in evidence.
[68] In this case, the husband has worked in the same type of employment during the marriage and post-separation. He continues to paint, drywall and do general renovation work. In this court’s view his current employment at $25 per hour is reflective of his past and current earning power. It is not really possible to determine the actual amount the husband was earning until he obtained his current job in March 2017. This is because it is unclear what income he was reporting and not reporting. Suffice it to say that he was in the same business, and given this court’s findings with respect to his credibility, it is not unreasonable to impute income to him at the rate of $25 per hour in the years post-separation. This amount is reflective of the husband’s age, experience, education, and skills and also reflects a reasonable number of working hours per week and per year (48 weeks at eight hours per day).
Spousal Support
[69] The husband claims compensatory and non-compensatory spousal support retroactive to the date of separation and ongoing.
[70] The wife disputes that any claim of a compensatory nature exists. She submits that the husband quit his job to finish the renovation on the matrimonial home on Trafalgar Road and that he was not the children’s primary caregiver. If he had been their primary caregiver, why have the children been living with the wife since January 2014?
[71] The wife submitted that, based on her calculations, and even using the husband’s suggested numbers for their incomes, the lump sum spousal support payment for their marriage would be $113,214. Her position is that she has more than paid this amount either by direct payments of support or by way of third party payments that benefitted the husband. Her calculation is that she has in fact overpaid support by some $200,000 given the third party payments, the child support owing to her and the s.7 expenses for which she has been solely responsible since separation.
[72] There is no doubt that the husband has struggled to find his way since separation. He has progressed through a series of short-term jobs and projects and seems to have finally landed on his feet with his current job, which he has held since March 2017. He is living in substandard accommodation and has depleted the few assets he has. He claims that he has a wrist injury that may affect his ability to work long term. However, there was no reliable medical evidence to support this.
[73] The parties benefitted from the husband’s skill as a landscaper and renovator during the marriage. The wife was always the higher income earner and there was an understanding between the couple that the husband would use his skills to increase the value of the various homes they owned and sold. This meant that he was, at times, more available for the children.
[74] However, I do not accept that the husband was the children’s primary caregiver during the marriage as he contends. It was clear from the wife’s income tax returns that the children attended daycare. I also accept the wife’s evidence that she was very active in the children’s lives and took on her fair share of domestic duties. While the husband may have been more available for the children during the winter months when he was not renovating or landscaping, that does not mean he was their primary caregiver.
[75] Post-separation the parties shared the parenting of the children until December 2014 when the children began living with the wife full time. While there is no dispute that the children have a good relationship with their father, they do not see him frequently.
[76] I do not accept that the husband has a claim for compensatory support. He was being paid $25 an hour as a landscaper at points during the marriage and is being paid $25 an hour in his current job. The wife did not approve of the husband quitting his job to work on their home improvement projects. She wanted him to work and indeed their lifestyle was such that they needed his income. I find that it was his choice alone to quit various jobs during the marriage.
[77] In Bracklow v. Bracklow, [1999] S.C.R. 420, the Supreme Court of Canada specified that compensatory support usually encompasses the lack of ability to support oneself due to foregoing career opportunities during the marriage. The case at bar is not one in which the husband gave up opportunities for advancement so that the wife could retrain or advance her career. The wife was already a fully-trained lawyer with a busy practice. As well, the wife did not request that the husband give anything up for her. Indeed, any decision to quit his jobs so he could work on home improvements were the husband’s alone and were decisions the wife did not condone.
[78] The husband also claims support on a non-compensatory basis. I agree that he has such a claim. Based on the Bracklow principles, the husband has suffered some economic hardship, albeit some of it self-induced. I agree with the husband that he has suffered some disadvantage from the break-up of the marriage due to a lack of intra-spousal entitlement. While the husband will likely never be able to earn as much as the wife, he has skills that he has not realistically attempted to ameliorate or enhance. He appears content to live a somewhat vagrant lifestyle, blaming the wife for all he has suffered rather than taking a close look at his own lack of motivation.
[79] It is worth reiterating the credibility problems with the husband’s evidence. There is a concern that the husband’s lifestyle may not actually be as dire as he portrays since it was not really possible to pinpoint the husband’s real earnings in the first five years following separation.
[80] For all of the above reasons, I find that the husband is entitled to non-compensatory support but not at the highest level. Given the length of the marriage, the roles the parties took on during the marriage and the husband’s ability to become self-sufficient, a duration of 10 years for the payment of spousal support is reasonable. I reach this conclusion considering the three relevant considerations under the Divorce Act, which are provided in s. 15.2(4), as well as the duration of support recommended by the SSAGs (7.5 to 15 years, see Schedule “A” to this judgment).
Calculation of Retroactive and Ongoing Child and Spousal Support
[81] Schedule “A” to this judgment is a DivorceMate calculation of support for the period of 2011 to 2016. These calculations to do not contain any adjustments for support already paid. The calculations reflect the CSG tables in force at the relevant time.
[82] In 2011, using the imputed income of $64,044.50 to the wife and $48,000 to the husband, there would be only nominal spousal support payable at the highest range. Based on the shared parenting arrangement during that year, and using the CSG table in effect during that year, the wife would owe the husband child support of $274 per month for 12 months or $3,288.
[83] In 2012 using the imputed income of $77,996.50 to the wife and $48,000 to the husband, there would be both child and spousal support owing to the husband. As the parties shared the care of the children at this time, it is reasonable for spousal support to be calculated in the mid-range. Given that this is a retroactive calculation it is easier to calculate arrears of spousal support on a net basis. The net cost of paying support in the mid-range by the wife would be $50 per month and would result in retroactive spousal support of $600. Based on the shared parenting arrangement during that year, and using the CSG table in effect during that year, the wife would owe the husband child support of $482 per month or $5,784 for 2012.
[84] In 2013 using the imputed income of $119,333 to the wife and $48,000 to the husband, there would be both child and spousal support owing to the husband. Shared parenting continued in 2013 and the mid-range of the SSAG formula would give the husband 49% of the parties’ net disposable income. Therefore, child support would be owed to the husband in the amount of $1,016 per month for twelve months or $12,192 for 2013. The net after tax cost of paying support to the husband in the mid-range by the wife is $675 per month. Therefore, net spousal support owed for 2013 would be $8,100.
[85] In 2014, the parenting arrangement changed. The children began to live full time with the wife as of November 30, 2014. Therefore, there will be two retroactive calculations for 2014. One from January to November and the second calculation for December only, showing the children residing with the wife full time. Once again, the SSAG range for spousal support should be at the mid-range end given that the parties shared the care of the children for most of that year. However, once the children began to live with the wife, spousal support should revert to the low range given the wife’s responsibilities for the care and expenses related to the children.
[86] Using the 2014 imputed income to the wife of $120,366 and $48,000 to the husband, the wife would owe child support to the husband of $1,055 per month for the period of January to November 2014 for a total of $11,605. The after tax cost of paying spousal support in the mid-range during this period would be $728 per month for a total of $8,008.
[87] In December 2014, the children began residing full time with the wife. The husband would owe the wife child support of $715 for December 2014. The after tax cost of paying spousal support at the low range for this month would be $593 owed by the wife for that month.
[88] In 2015 based on the wife’s imputed income of $147,513.34 and the husband’s imputed income of $48,000, the husband would owe child support of $715 per month for 12 months or $8,580. The after tax cost to the wife of paying spousal support in the low range would be $738 per month or $8,856.
[89] In 2016 based on the wife’s imputed income of $171,775.50 and the husband’s imputed income of $48,000, the husband would owe child support of $715 per month for 12 months or $8,580. The after tax cost to the wife of paying spousal support in the low range would be $880 per month or $10,560.
[90] Based on all of the above, the wife would owe the husband net spousal support of $36,717 and child support of $32,869 for the period of January 2011 to December 31, 2016. Once the husband became obligated to pay child support in December 2014, his total retroactive obligation from December 1, 2014 to December 31, 2016 was $17,875. This can immediately be set off from the wife’s retroactive child support obligation leaving net child support owing to the husband of $14,994 for the relevant period
Adjustments to Retroactive Support Owed
[91] The total net child and spousal support owed by the wife for the period of January 1, 2011 to December 1, 2016 (“the relevant period”) is $51,711. During this period the wife paid certain expenses on behalf of the husband. An Agreed Statement of Facts was prepared by the wife based on a Request to Admit served on the husband. Based on his Response to the Request to Admit, the wife has paid on his behalf (during the relevant period) the following expenses: $496.40 for his CAA membership, $22,727.60 for auto insurance for the husband’s three vehicles plus his share of the house insurance, and $11,176.77 for the husband’s Oakville Club dues and food and beverage expenses. These credits total $34,400.77 leaving a balance owing to the husband of $17,310.23.
[92] During the relevant period, the wife also paid the husband’s 50% share of the joint line of credit ($7,200 per year) for 3 years and 11 months for a total of $28,200. While this was not part of the Agreed Statement of Facts, it was not disputed. I accept the wife’s evidence that she also paid the husband’s cell phone bill from 2011 to 2014 totaling $9,590.97. Extensive receipts were provided at trial.
[93] The wife should also be given credit for the actual amounts of child support she paid, which totaled $30,043.69 (see Exhibit 8). If the additional third party payments and child support payments are totaled ($28,200 + $9,590.97 + $30,043.69) and the balance owing to the husband ($17,310.23) is subtracted, the wife has overpaid the husband by $50,524.43. This amount does not include any of the large amount of s. 7 expenses claimed by the wife. The husband’s position at trial is that he was not informed of these expenses in advance but was only given a large number of receipts shortly before trial. He describes the expenses as “too rich” for him and based on his income, he submits he should not have to pay for any arrears of s. 7 expenses. He also objects to the orthodontic expense for Cameron claiming that the work was cosmetic and unnecessary. Section 7 expenses will be dealt with in more detail below.
Section 7 Expenses
[94] During the marriage, the parties encouraged their children to become involved in snowboarding at a high level. The husband was the one who originally encouraged the children to pursue that sport. The parties purchased a cottage in New York State so that the children could snowboard at Holiday Valley Ski Club in Ellicottville every weekend. The children received specialized coaching and competed at the provincial and national level in the both the U.S. and Canada. Post-separation, the wife drove the children to the Ellicottville property every weekend so that the children could receive training. She also accompanied them to national competitions. By 2016 the children were receiving individualized coaching and the wife had joined a private ski club (Holimont) to provide the children with access to better coaching and conditions.
[95] The children were also involved in badminton and squash at the Oakville Club. The husband fully supported all of these activities during the marriage and remained a member of the Oakville Club with the wife paying all of his expenses there until mid-2014.
[96] The husband was well aware of the children’s involvement in all of these activities as he was fully supportive of them during the marriage. Post-separation, he knew the children were still members at the Oakville Club because he saw them there. He was also aware that the children went away every weekend with the wife for snowboard training and competitions and that the children required expensive equipment for snowboarding including specialized snowboards and boots. It is disingenuous for the husband to now say that he refuses to contribute to these expenses because he was not aware that they were being incurred.
[97] In determining whether such expenses are reasonable and necessary pursuant to s. 7 of the CSGs, the court may consider the amount of the expense in relation to a parent’s income, the nature of activity, any special talents of the children, the overall cost of the program and any other similar factors.
[98] With respect to the children’s snowboarding, I find that the expenses are necessary given the history of the activities in which the children were involved during the marriage and their talent as nationally-ranked competitive snowboarders. Clearly, both children excelled at snowboarding but this came at a cost. Competing nationally meant becoming members of the U.S. National Snowboard Association and its Canadian equivalent. Each competition had an entry fee of between $30 and $55 per child per day and required driving (or airfare), lodging and food. They required membership at a ski club, individual coaching and specialized equipment and clothing for the different snowboard disciplines of slalom, GS and freestyle racing as well as border cross and slope style.
[99] The reasonableness of the snowboard expense is another issue. The expenses are admittedly very high and there is some truth to the husband’s contention that they are simply “too rich” for him. Even with an imputed income of $48,000 it is difficult to justify requiring the husband to contribute, for example, to the $10,644 in snowboarding expenses in 2015. Section 7 is permissive and allows the court considerable discretion to determine which expenses fall within the enumerated s. 7 categories as well as what payment should be made towards those expenses by a party, as this court has long recognized (see Giles v. Villeneuve, 1999 CanLII 1997 (ON CA)). I find that the husband should be required to contribute a set percentage for the children’s expenses for snowboarding that is lower than his proportionate share given the nature and amounts involved. In fairness to the husband and recognizing that there is no particular science in determining this percentage, I have used a set 20% contribution to snowboarding. The calculations in Schedule A have the husband’s special expense apportionment as high as 47% (2012). The husband’s retroactive contribution at 20% between 2011 and 2017 shall be added to the wife’s support credit.
[100] With respect to the Oakville Club expenses, I find that those were not necessary. The racquet sports in which the children indulged were more for leisure and fitness than competition. While it is true that Cameron was on an elite-level badminton team, there was no evidence that he was competing at the high level he was in snowboarding. While the husband was a member of the Oakville Club both before and after separation, he was only able to be a member while the wife paid for his dues and fees. The husband should not be asked to contribute to this expense in the circumstances given his personal financial circumstances and given his other contributions to s. 7 expenses.
[101] Exhibit 9 at trial was the wife’s calculation of children’s expenses for camp, Oakville Club, snowboarding, orthodontics and prescriptions. Extensive receipts were provided for all expenses. The husband did not really object to any of the amounts submitted by the wife. His position was simply that he could not afford any contribution to them given his income.
[102] I accept the documents submitted by the wife with respect to the cost of snowboarding for both children. The total amounts for these expenses were $48,732 between 2011 and 2017. The husband shall be required to contribute 20% or $9,600 to these expenses and this amount shall be added to the wife’s support credit.
[103] The wife also seeks reimbursement for summer camp, driving lessons for Cameron, prescriptions for both children and braces for Cameron. The husband’s objection to making a contribution to these expenses is twofold: first, he does not have the ability to pay for these expenses given his income, and second, the orthodontic expense for Cameron was not necessary as the treatment was cosmetic only. The wife does not agree and provided evidence that Cameron needed the braces because he had a cross bite that resulted in misalignment of his teeth. The wife described the procedure as very painful for Cameron and she would not have pursued the treatment had it not been necessary. The husband provided no contrary medical evidence (either written or oral) that the procedure was not necessary.
[104] I accept the wife’s evidence and find that the braces, driving lessons and medical prescriptions were reasonable and necessary. The husband should contribute his proper proportional share to those expenses based on the 2016 DivorceMate calculation or 30%. The total for the driving lessons, braces and prescriptions was $8,395. The husband’s contribution would therefore be $2,518.50. This amount shall be added to the wife’s support credit.
[105] While the children no doubt benefitted from summer camps, the cost is high and does not, in my view, fit squarely within the reasonable and necessary criteria for a s. 7 expense. The husband should be required to contribute the same set 20% as for the snowboarding. The total for all camps for the children between 2011 and 2017 was $13,965. The husband shall be required to contribute $2,793 which shall be added to the wife’s support credit.
[106] Therefore the wife shall receive an additional support credit of $14,911.50, which shall be added to the previous support credit of $50,524.43 for a total of $65,435.93.
Equalization Adjustment
[107] The wife brought a motion at the beginning of trial seeking an adjustment to the equalization payment of $152,429.55. This amount was to be paid to the wife pursuant to a consent order dated July 28, 2017. The wife seeks a further $3,993.40.
[108] According to the wife’s affidavit sworn November 16, 2017 and her evidence at trial, the equalization issue and the issue of post-separation expenses was settled based on an estimate of the property taxes the wife had paid on the New York cottage. A round number estimate of $25,000 was used for settlement purposes and the wife was to provide the husband’s lawyer the actual tax bills. The husband’s lawyer confirmed receipt of the tax bills on August 16, 2017 totaling $23,435.49. However, that amount was in U.S. funds, which the wife’s lawyer indicated would result in a payment of $28,993.40 in Canadian funds.
[109] The wife sent a revised draft order to the husband’s lawyer for approval as to form and content. No response was ever received.
[110] The husband objects to any change to the final order. His position at trial was that $25,000 was the proper number to be used and no further adjustment was required. Initially his position was that the equalization amount included all post-separation amounts for s. 7 expenses but in cross-examination he agreed that support issues were to be dealt with at trial.
[111] It is clear from the wife’s motion material and her evidence at trial that the husband and his lawyer were ignoring the required equalization adjustment. The request is proper based on the agreement being reached with the tax number to be confirmed. Indeed, the final number was a conditional one based on further information being provided. The wife should receive the additional $3,993.40 by way of equalization payment.
[112] There is $30,900 left in trust from the sale of the matrimonial home. Of the $155,422.95 owed to the wife, $120,000 was paid out to CRA for her income tax debt. She is owed a further $35,422.95.
[113] Of the funds held in trust, $8,835.71 belongs to the wife and $22,000 to the husband. Clearly there are insufficient funds to pay the wife the balance of the equalization payment owed to her.
Is Lump Sum Spousal Support Appropriate?
[114] The wife requests to pay a lump sum settlement of retroactive and ongoing spousal support. Lump sum payments are less frequently ordered than ongoing support for several obvious reasons. First, it is often the case that the capital simply is not available to the payor spouse. Second, if the recipient spouse has received an equalization payment, it is presumed that their need for capital has been satisfied, and their real need is for ongoing income. Third, some cases simply do not favour a lump sum payment over periodic payments. Finally, a lump sum payment precludes the possibility of a variation and does not account for the exigencies of life which lay ahead for the recipient spouse.
[115] However, in this case I am satisfied that a lump sum payment is the most obvious and fair way to deal with the husband’s claim. In doing so, I rely on the principles in Davis v. Crawford, 2011 ONCA 294, 106 O.R. (3d) 221. In that case, the Court of Appeal for Ontario dealt with an appeal of a lump sum award in a long-term common law relationship without children. The court upheld the lump sum award and set out the following principles with respect to lump sum spousal support awards at paras. 60, 63, 66-67:
a. Lump sum awards should not be made in the guise of support for the purpose of redistributing assets
b. A lump sum award should not be ordered if it would undermine the payor’s future self-sufficiency
c. The advantages of making such an award must be weighed against the disadvantages
d. Situations in which a lump sum award may be appropriate are ones in which terminating contact between the spouses is desirable, ensuring support will be paid where there is a real risk of non-payment, situations in which the payor has the means to pay lump sum support but not periodic payments, and circumstances in which a lump sum has the effect of immediately satisfying an award of retroactive support.
[116] It is important to note that the Davis case significantly widened the court’s discretion to make orders for lump sum spousal support. Prior to that case, such awards had generally been restricted to cases that involved limited or unusual circumstances.
[117] I find that the facts of this case fit well within the prescribed principles set out in Davis for the following reasons:
a. There is a significant amount of retroactive support owed to the wife as well as an equalization payment that the husband could likely never satisfy.
b. The husband has never paid any child support or s. 7 expenses since the date of separation.
c. There are issues related to the husband’s credibility and his actual earnings as a contractor.
d. The wife cares both children full time. Any significant payment of periodic spousal support will affect her ability to provide financially for the children especially once they pursue post-secondary education.
e. At the parties’ imputed income levels in 2016, there is very little net difference between the spousal and child spousal support owed.
f. Given the animosity between the parties, a lump sum award would afford a clean break, minimize the contact between the parties, and allow them to plan their financial futures.
g. The lump sum award takes into account the benefits the husband received post-separation including the payment of third party expenses on his behalf, and the fact that he did not have to contribute to the children’s support or s.7 expenses.
[118] Having already found that the wife’s spousal support obligation would be of a 10-year duration at the low end of the SSAGs, a determination of a lump sum amount must be made. It goes without saying that the wife’s income has fluctuated significantly since separation. Using the SSAG midpoint lump sum value in the low range for a 10 year support duration and averaging that amount over the 2014, 2015 and 2016 imputed income of the wife results in a lump sum amount of $97,463.
[119] The wife is already owed a credit of $65,435.93 for retroactive child support, third party payments and direct payments of support. Added to this would be the unsatisfied portion of her equalization payment or $35,422.95 for a total of $100,858.88. It is this court’s view that the support and equalization credits more than satisfy a lump sum payment of spousal support from the wife to the husband. The amounts used account for:
a. The fluctuations in the wife’s income;
b. Grossed up imputation of income to the wife;
c. Imputation of a reasonable amount to the husband for the reasons previously articulated;
d. Support previously paid by the wife;
e. The outstanding equalization payment owed to wife;
f. A contribution towards s.7 expenses by the husband which is both reasonable and reflective of the special nature of some of the expenses.
g. The calculations are done on a net basis in order to obtain an accurate reflection of past credits and obligations.
[120] The lump sum spousal support payment would satisfy the wife’s spousal support obligation but does not deal with any ongoing child support or s. 7 expenses. The wife’s proposal to transfer the husband’s interest in the cottage in New York State to her seems to be a reasonable way of dealing with this. The property is worth between $28,000 to $32,000 and is currently for sale. The net benefit to the wife of the husband’s share is unlikely to be more than $15,000, which is nowhere near the cost of raising the two children until they are no longer dependents. This is also a benefit to the husband who may advance his career and plan his financial future without the concern of having to pay for the children’s support or s. 7 expenses.
[121] The wife has assured the court, and I accept, that now that she has cleared her debt with CRA and is on a better track financially, she is able and prepared to take on the full financial responsibility of both children.
[122] This solution also allows each party to receive some cash from the funds remaining in trust.
Conclusion and Final Order
[123] These parties lived beyond their means during the marriage. The husband claimed he was unaware of the extent of the wife’s tax debt or her mounting bills. He was shocked and resentful about the fact that the wife’s tax debt meant that virtually all of the matrimonial home sale proceeds were owed to her. His resentment about these circumstances permeated his testimony.
[124] The wife claimed the husband was extravagant, under-employed and was well aware of their dire financial situation. She called him a “prepper” who believed in conspiracy and apocalyptic theories and who stored large amounts of food and water in the basement in order to be ready for the inevitable. She described their last two years of marriage as unbearable because the husband spent hours on his computer researching his theories and neglected the wife, the children and the home as a result.
[125] However, both parties appear to have righted themselves and seem on track to regaining control of their lives both emotionally and financially. The children are, by all accounts, well-adjusted, happy and doing well in school.
[126] These parties need finality and a path to move forward.
[127] The wife does not seek ongoing child support. Rather, based on her position that her obligation to pay spousal support has been satisfied by her previous payments, she seeks a “special provision” for the payment of support pursuant to s. 15.1(5) of the Divorce Act. Special provisions for child support are ones that are out of the ordinary or unusual and do not conform to the CSGs. The provision must objectively benefit the children (see Quinn v. Keiper (2007), 2007 CanLII 39759 (ON SC), 87 O.R. (3d) 179 (S.C.)).
[128] The wife clearly has the means to provide for the children even without the benefit of child support from the husband. The wife has considered the consequences of attempting to collect support from the husband and the difficulties with exchanging income information each year. I accept that the wife’s concerns are valid. Prior to the husband obtaining his current job, it is unclear what his income was. For the reasons indicated above, this is a case in which the circumstances support the ordering of a lump sum award of non-compensatory support to the husband and a special provision for child support.
[129] Given all of the above, I make the following final orders:
a. The parties are hereby divorced.
b. The applicant shall pay lump sum spousal support to the respondent in the amount of $97,463. This amount represents the midpoint lump sum award at the low end of the SSAGs based on an average of the income imputed to the applicant for 2014, 2015 and 2016 as per Schedule “A” to this judgment. This payment represents the applicant’s past and future obligation to support the respondent in all aspects.
c. The applicant shall not be required to make any actual payment of lump sum support to the respondent, such payment having been completely subsumed by the credits owed to the applicant for retroactive support, third party payments and the balance of the equalization payment owing to her by the respondent totaling $100,858.88 The respondent shall pay the wife the difference between the credits ($100,858.88) and the lump sum of support ($97,463) being $3,395.88 from his share of remaining house sale proceeds.
d. As a result of the calculation of support credits owing to the applicant, and the provisions in sub paragraph e) following, the respondent does not owe any retroactive or ongoing child support or s.7 expenses for the children.
e. Effective immediately, the applicant shall be fully responsible for all of the children’s expenses and support by way of a special provision under s. 15.1(5) of the Divorce Act.
f. The respondent shall forthwith transfer his interest in the property municipally known as 8112 Dake Hill Road, Cattaraugus, NY, 14719 to the applicant. In the event that the Dake Hill Road property has sold by the date of this judgment, the applicant shall receive all of the net sale proceeds.
g. The remaining house sale proceeds in trust shall be paid out as follows:
i. To the husband;$22,000- $3,395.88 being $18,604.12
ii. The balance to the wife.
iii. Any administrative or other fees owing to the lawyer in possession of the funds in trust shall be paid out before any distribution is made to the parties and apportioned equally between them.
h. The applicant shall provide a draft final order to my attention. The respondent’s approval of the draft order is not required.
Costs
[130] The parties were self-represented and as such it is unclear if they will be seeking costs. In the event that they seek costs for their own out of pocket expenses or prior legal fees they may provide written costs submissions of no more than three pages in length (double spaced) exclusive of any Bill of Costs or Offers to Settle.
[131] The wife shall provide her costs submissions within seven days of the date of this judgment, the husband seven days after that, and any reply by the wife seven days after the husband’s response. If no costs submissions are received within 35 days of the date of this judgment, costs shall be considered to be settled.
[132] Costs submissions shall be emailed directly to my assistant at Natasha.Mirabelli@ontario.ca.
C. Gilmore, J.
Released: January 30, 2018