INTRODUCTION

[1] Mr. and Ms. Passfield, the Applicant and the Respondent in this matter, were partners in more ways than one. They were married partners, having been married in 1985, and having lived together since 1983. They were also business partners for much of their marriage. They were initially shareholders together in Camden Carpets, a franchise which operated a floor covering business which opened in 1988 and closed down after a fire in 1996. They went bankrupt together after that business closed and they opened another business, Total Floor Covering, which was initially run from their rental home in Stouffville. The parties eventually purchased a home together in 2004, which was a mixed commercial and residential property in Mount Albert and they operated the business from that location until separation. After separation, the Respondent continued to run the business as a sole proprietorship and he continued to live in the matrimonial home.

[2] The parties had two children; Grant, who was born on October 30, 1986 and Dale, who was born on December 30, 1987. These children were independent by the time the parties separated.

[3] The parties initially separated in July of 2009. Ms. Passfield moved out of the home and Mr. Passfield continued to operate Total Floor Covering out of the home except that he says that he de-registered the partnership, and began to operate it as a sole proprietorship. After separation, it is common ground that the Applicant had nothing further to do with the business.

[4] In 2010, the parties entered into a separation agreement which was drafted by Ms. Passfield. That agreement was, effectively, an interim agreement, wherein the parties agreed that Mr. Passfield could remain in the matrimonial home and, in return, pay the expenses of the home. The agreement specifically contemplated the sale of the home: paragraphs 8 and 13 of the agreement provided as follows:[^1]

The Husband will reside in, and have temporary possession of the marital home, which is located at 25 Albert Street, Mount Albert, Ontario.

The expenses relating to the marital home, including but not limited to mortgage payments, utility bills, property taxes and repair costs, will be paid by the Husband.

HUSBAND WILL STAY ON IN THE HOUSE UNTIL MTG. COMES DUE IN OCT 2013. HE WILL KEEP THE MTG UPTODATE (sic.), THE HOUSE INSURANCE AND THE UTILITIES. ANY EMERGENCY MAINTENANCE TO THE HOME WILL BE THE RESPONSIBILITY OF THE HUSBAND. IN OCT 2012 – THE HOUSE & PROPERTY WILL BE APPRAISED. BOTH HUSBAND & WIFE WILL SPLIT THE COST OF APPRAISAL FEE THEN THERE WILL BE THE OPTION OF ONE OF TWO CHOICES.

HUSBAND HAS OPTION OF BUYING THE WIFE OUT IN REGARDS TO EQUAL SHARE OF THE PROFITS AND THEN REFINANCING MORTGAGE ON HIS OWN.

OR

PUT THE HOUSE UP FOR SALE, GIVES 1 YR – SO IT WILL BE SOLD BEFORE THE MORTGAGE IS DUE IN OCTOBER OF 2013 AND BOTH HUSBAND/WIFE WILL SPLIT THE PROFIT AFTER MORTGAGE IS DISCHARGED.

[5] The agreement left spousal support to be addressed at a future date, stating at para. 7:

Neither party claims entitlement to spousal maintenance at this time, although neither party is expressly waiving his or her right to spousal maintenance in the future.

[6] Ms. Passfield testified that the parties reconciled briefly in August, 2013. She says that she eventually realized that Mr. Passfield suggested this only to delay the sale of the matrimonial home beyond October, 2013 as provided for in the agreement, and to get her signature on a mortgage renewal. She did sign the mortgage renewal but lost faith in her husband after that. She says that the final date of separation was April 1, 2014.

[7] Mr. Passfield denies that the parties reconciled. He says that there were some family events at the home that year and that he stored some of the Applicant’s furniture and that was it. He denies that the Applicant moved back into the home.

[8] In the end, the home was not listed for sale as contemplated in the agreement, and Mr. Passfield refused to list it when the Applicant’s lawyer wrote to him and, eventually, his lawyer. He says that he refused to list it because it was not fit for sale. These proceedings were begun by Ms. Passfield in June, 2016, and she says that she did so to get the home listed. Notwithstanding this, it took until January, 2017 to get Mr. Passfield’s signature on a listing agreement, and another 18 months to obtain an offer acceptable to both parties. The home is now sold; the transaction was closing as the parties conducted this trial in November, 2018.

[9] Although both parties claimed equalization, the only relief addressed at trial was Ms. Passfield’s claim for spousal support. She asks only for lump sum spousal support in the amount of Mr. Passfield’s remaining equity in the home. She says that she does not want periodic support because Mr. Passfield will not pay it. She bases this upon Mr. Passfield’s litigation conduct, including his failure to obey court orders, to make payments as required by court orders, his attempts to frustrate the sale of the home and because of Mr. Passfield’s self-employed status which renders periodic support uncollectable.

[10] The amount of the net proceeds available to the parties from the sale of the home was estimated to be about $206,000 after payment of real estate commission and legal fees. From his one half share of the equity, Mr. Passfield already owed unpaid occupation rent ordered by McPherson J. in the amount of $2,400 as well as costs of $5.000. This would quantify Ms. Passfield’s lump sum support claim as being between $95,000 and $96,000.

Result

[11] For the reasons set out below, there shall be an order that the Applicant receive Mr. Passfield’s share of the net proceeds of the home by way of lump sum spousal support and in satisfaction of Mr. Passfield’s obligation to pay spousal support. There shall be an order that the real estate lawyer distribute the entire net proceeds of the home to Ms. Passfield.

A Note on Evidence

[12] The only witnesses at this trial were the Applicant and the Respondent.

[13] The Applicant was well prepared in the presentation of her evidence. She had done her homework and had reviewed what disclosure that the Respondent had provided and gave her input on it. She gave her evidence in a forthright and clear fashion, with very few logical inconsistencies. In her cross examination, she admitted where she may have made mistakes and was not argumentative. I found her evidence to be both credible and, as a result, reliable.

[14] The evidence of Mr. Passfield, unfortunately, was not as believable. There are a number of reasons for this. Firstly, his evidence was inconsistent on many fronts. He was unable to explain why he obstructed the real estate showings of the home, partly by using an admittedly vicious guard dog on the property which prevented showings. He accused Ms. Passfield of speaking out of turn on the listing without any expertise in real estate, yet stated that he knew better than the realtor about the removal of the sign on the property; he testified that he did this because purchasers mostly find property on the internet. He could not explain adequately why he would not sign offers to purchase the property, stating that he was waiting for the Applicant to sign the offers, yet he quickly signed a “lowball” offer from a neighbour (from whom he had rented a backhoe at significant cost) at $100,000 less than earlier offers that he refused to sign. He said that he refused to list the home because he had to replace the roof of the home; later when confronted with substantial water damage to the home because of leaks in the roof, he said that the condition of the home didn’t matter because it was a “teardown” and it was a commercial property in any event.

[15] Mr. Passfield was also unable to explain the untreated depression that he said now prevented him from working. He also changed his story from when he was questioned by counsel prior to trial in October, 2018. During this questioning he said he was unable to work because of depression; at trial, he said he was not operating his business because he was depressed and also had no funds to operate the business.

[16] During cross examination, he also acknowledged that he did not advise the realtor, Ms. Renshaw, of a vacation that he went on, preventing her from showing the home during that holiday time; later on in the same cross examination he said that the realtor always knew when he was away. Much of his evidence simply made no sense and was both inconsistent and unbelievable much of the time.

[17] In addition, Mr. Passfield was argumentative and evasive during his cross examination. When asked questions, he would ask questions back. He was unresponsive to questions from Mr. Allan and his responses were defiant and obstructive; for example, when he was asked about why the property was not kept in “respectable condition”, his response was that no one defined what a respectable condition was. When asked about his failure to provide disclosure, he made excuses and said that the claims were disproportionate even though he consented to the disclosure that he failed to make. He denied any responsibility for his actions, even though he later said that he took full responsibility for those actions.

[18] In short, I did not find Mr. Passfield to be a credible witness. Where his evidence conflicts with that of Ms. Passfield, I prefer her evidence over his.

ANALYSIS

[19] The sole issue in this case is spousal support. There are two issues before the court:

(a) Is Ms. Passfield entitled to spousal support?

(b) If so, should it be paid by lump sum payment from the proceeds of the home rather than by way of periodic spousal support.

Entitlement to Spousal Support

[20] Prior to ordering spousal support, the court must decide whether the claimant, Ms. Passfield, is entitled to spousal support and on what grounds.

[21] This application is brought under s. 15.2 of the Divorce Act.[^2] The factors and objectives of a spousal support award are set out in that section as follows:

15.2(4) In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including

(a) the length of time the spouses cohabited;

(b) the functions performed by each spouse during cohabitation; and

(c) any order, agreement or arrangement relating to support of either spouse.

15.2(6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should

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

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

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

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

[22] Entitlement to spousal support is either compensatory, non-compensatory or contractual in nature: see: Bracklow v. Bracklow, 1999 CanLII 715 (SCC), [1999] 1 S.C.R. 420. As there are no contractual issues in the present case (the separation agreement only reserved the right to claim spousal support), the basis for spousal support must be either compensatory (due to economic disadvantages arising from the spouse’s role during the marriage or its breakdown) or non-compensatory (such as hardship to a spouse arising from the breakdown of the marriage).

[23] In the present case, there are both compensatory and non-compensatory elements behind the Applicant’s entitlement to spousal support.

[24] The Applicant says that she is entitled to spousal support because of her role in caring for the children and in her role as a homemaker within the household. I do not believe this to be the case. The evidence shows that the Applicant was working as a computer analyst for an architectural firm prior to the birth of the parties’ children. She said that she left the job prior to her second son’s birth in December, 1987 because of her child rearing responsibilities. She said that, because of those duties, she gave up career opportunities and that she was forced to accept lesser employment after separation with an environmental sciences magazine, where she works today.

[25] If the Applicant was primarily responsible for the household duties and childrearing, this does not appear to have slowed down her career. By October, 1988, only months after the birth of their second son, both the Applicant and the Respondent became co-owners of a floor covering franchise, Camden Carpets, which the parties operated together in Aurora, Ontario. After a fire, the parties lost that business and, after going bankrupt, went into partnership in Total Floor Covering, which was the business that the parties continued to run from the matrimonial home up to the date of separation. When the parties separated, the Applicant gave up her partnership interest in that business and the Respondent took over the business as a sole proprietorship. The separation agreement that the parties signed in October, 2010 contemplated the husband registering the business as a sole proprietorship.

[26] Although I believe that Ms. Passfield was responsible for the majority of the household management, including raising the children, cooking, cleaning and homemaking responsibilities, I do not believe this affected her career opportunities. I do not believe that there was an economic cost to the Applicant resulting from her household duties; in fact, the evidence satisfies me that, notwithstanding her household duties, she operated the family businesses as an equal partner of the Respondent and she carried out many of the office functions connected with the business. Certainly, the Applicant was well able to testify as to the legitimacy of the expenses written off by the Respondent against business income. I do not believe that the Applicant was put at a disadvantage as a result of her homemaking and child-care roles within the marriage.

[27] However, Ms. Passfield was put at a disadvantage because of the role she took up in the businesses operated during marriage. She gave up her career as a computer analyst to go into business with her husband, a career that she was not able to return to nearly 20 years later. And when the marriage ended, she gave up her position in the partnership that she had with her husband without any compensation whatsoever. It appeared to be clear that the business had no value for equalization purposes and the Applicant effectively abandoned her equalization claim in this proceeding. She suffered a loss as a result of her duties within the business which she carried out throughout the marriage because she gave up her own career in order to operate the business as a partner of her husband. As a result, Ms. Passfield suffered a disadvantage because she received nothing for her partnership interest, yet had to start over in her career later in life without any significant work experience. Therefore, she has a compensatory entitlement to spousal support.

[28] She also has a clear non-compensatory claim. She agreed to leave the matrimonial home when she separated from her husband in 2009. She had to borrow $8,000 partly to obtain a residence for herself and pay first and last months’ rent. She has worked at a variety of jobs, most recently for an environmental publication and her income in her best year was $43,748.64 per annum. One year she worked cleaning the local post office to make ends meet. On average, Ms. Passfield’s income has been under $40,000 per year.

[29] In the meantime and, until recently, the Respondent has continued to operate the business that the parties built up during marriage. He has continued to live in the matrimonial home throughout; the Applicant on the other hand has been through a series of short-term rentals and at one point lived with her mother.

[30] According to the parties’ tax returns, their respective incomes between 2013 to 2017 was as follows:

Year	Husband’s Gross Business Income	Husband’s Net Business Income	Wife’s Income from Employment
2013	Not provided at trial	Not provided at trial	$36,372.20
2014	$166,156.49	$46,372.52	$37,627.80
2015	$286,565.93	$21,354.40	$38,232.68
2016	$183,650.62	$42,727.82	$47,196.14[^3]
2017	$70,058.70	($22,515.04)	$43,748.64[^4]

[31] The Respondent’s income on paper appears to be the same as that of the Applicant. However, the Applicant led substantial evidence at trial which indicated that the Respondent’s income was well beyond hers. That evidence could only be led for 2014 and 2015: the Respondent’s disclosure regarding business expenses of 2016, 2017 and 2018 was never delivered contrary to the consent order of Douglas J. made on April 3, 2018, (re 2016 and 2017) and contrary to undertakings given by the Respondent during his questioning that took place on October 15, 2018 (re 2017 and 2018).[^5] However, it is clear that, after separation, the Respondent continued to earn the income that provided the parties with their lifestyle throughout the marriage. There was also evidence of substantial expenses written off against that business income, and used for purposes not always related to the operations of Total Floor Covering. That income was claimed for tax purposes against business income even though not used in the business, thereby improperly reducing the Respondent’s income. As well, the Respondent’s failure to provide disclosure leads to an adverse inference against the Respondent as far as his income is concerned; taking that into account and, as set out below, it is apparent to me that income must be imputed to the Respondent well beyond that of the Applicant.

[32] Although not raised by the Respondent, there is an issue as to whether delay may affect the Applicant’s entitlement to spousal support. The parties initially separated in 2009 but the application was only begun in 2016, a seven-year delay.

[33] Firstly, the Applicant testified that there was a reconciliation which took place between 2013 and 2014. The Respondent denied this to be the case. This issue became largely irrelevant as it was raised because of a limitations issue concerning the Applicant’s equalization claim which has now been abandoned. However, I have already commented on the Respondent’s credibility in general, and I generally prefer the evidence of the Applicant. Moreover, in light of the Respondent’s behaviour in delaying and impeding the sale of the home, I also find that it is more than likely that he would have effected a reconciliation to obtain a renewal of the mortgage, which the Applicant would normally not have had to provide under the separation agreement. It may be recalled that the agreement spoke of the October, 2013 expiry of the mortgage, and required the home to be sold in the year prior to that. I find that the final separation of the parties was April 1, 2014 as asserted by the Applicant.

[34] As well, even if there was no reconciliation, cohabitation was still 26 years in length. There is no limitation period for commencement of spousal support proceedings and a seven-year delay would not be unreasonable where cohabitation was in the range of 26 years. It is important to note that there is no prejudice to the Respondent for the delay and the Applicant is not seeking retroactive spousal support: see Seigel v. Siegel, [2002] O.J. No. 5340 (S.C.J.) and Kopunovic v. Cukotic-Kopunovic, [1996] O.J. No. 82 (Gen. Div.). The fact that the spousal support claim would survive this delay is also supported by the fact that the separation agreement reserved the parties’ rights to request spousal support indefinitely.

[35] As a result, and based upon the Applicant’s reduction in her standard of living which occurred after the date of separation, I find that the Applicant has a reasonable non-compensatory claim for spousal support against the Respondent. She also has a compensatory claim for spousal support based upon her role during marriage as partner with the Respondent in the family business.

Payment of Lump Sum Spousal Support

[36] The Applicant does not seek periodic spousal support. She seeks, instead, lump sum support payable by the Respondent in the form of his equity in the matrimonial home.

[37] That home has been sold and there were problems with the closing which, according to the Applicant, arose from flooding in the basement of the home and deep ruts on the property caused by the Respondent. The closing date was the first day of trial and as the trial was being conducted, there were updates every day. The major issue, as I understood from both the Applicant’s counsel and the Respondent, was the demand by the purchasers for a $10,000 holdback to clean up the property and arising from the condition of the property on closing. The closing still had not been completed on the last day of trial when submissions were being completed; the parties expected the closing to take place that day as escrow funds had been delivered the day before. However, the exact amount of net proceeds was unknown at the completion of the trial.

[38] The parties agreed that about $206,000 would be available from the matrimonial home, leaving $103,000 for each party. At the close of trial, I ordered $7,400 to be released to the Applicant from the Respondent’s share of the home, which constituted an award of costs and occupation rent owing by the Respondent under a previous order made in this proceeding. Therefore, as set out above, the net proceeds left to the Respondent would be in the approximate amount of between $95,000 and $96,000.

[39] Mr. Passfield did not want to pay any support whatsoever to the Applicant. He denied entitlement, which I have addressed above. However, he also denied that his income would warrant any payment of spousal support. He says that his income is correctly reflected by his tax returns, which would mean that, according to the chart set out above, in some years, he earned substantially less than did the Applicant. He says that he is presently unable to work because of depression and that he currently has no income.

[40] As well, if Mr. Passfield is ordered to pay spousal support, he said during his final submissions that he would prefer an order for periodic spousal support. He does not agree with any order that he pay lump sum spousal support. The Respondent seeks an order that his share of the net proceeds be paid to him without further deduction.

Imputation of Income

[41] The first issue to be addressed is Mr. Passfield’s actual income because lump sum spousal support cannot be quantified until the court finds the amount of periodic support payable.

[42] Applicant’s counsel, Mr. Allan, seeks to impute income to the Respondent of $75,000 per annum in addition to his actual taxable income and, as a guide, relies on the grounds for imputation of income under ss. 19(1)(a), (f) and (g) of the Child Support Guidelines.[^6] The criteria for imputation of income under s. 19 of the CSGs have been applied to issues of spousal support in the past: see, for example, Rilli v. Rilli, 2006 CanLII 34451 (ON SC), [2006] O.J. No. 4142 (S.C.J.).

[43] The sections in question read 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,

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

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

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

[44] Mr. Allan says that the Respondent became intentionally underemployed when he ceased working and his income reduced because of his “depression” in 2017 and 2018. To get to the point where this becomes meaningful to the income to be imputed, the court must firstly examine what the Respondent actually made in the years prior to his reduction in his income. This involves imputing income to the Respondent under s. 19(1)(g) of the CSGs, insofar as the Applicant claims that the Respondent has wrongfully written certain expenses off against his business income, and that his business income was substantially in excess to that declared by the Respondent.

[45] Imputing income involves the court reviewing the legitimacy of the expenses written off against income and determining whether the deductions are reasonable within the meaning of s. 19(1)(g) of the CSGs. In dealing with this issue, the onus of proof shifts from one party to the other.

[46] In Bekkers v. Bekkers, 2008 CarswellOnt 173 (S.C.J.), R.J. Smith J., in hearing an interim motion, considered an assertion by the claimant that the support payor had the onus of proving that all of his business deductions were reasonable; Justice Smith disagreed, stating that, in fact, “the party making the allegation bears the onus of providing evidence of what expenses are being unreasonably deducted.” [para. 22]. The fact that the party asserting that income is to be imputed bears some evidentiary burden of proof is confirmed by our Court of Appeal in Homsi v. Zaya, 2009 ONCA 322, 2009 CarswellOnt 2068 where G.J. Epstein J.A. stated at para. 28 that, “The onus is on the person requesting an imputation of income to establish an evidentiary basis for such a finding.”

[47] However, the onus does not always remain with the party seeking to impute income. Once the party seeking imputation of income provides an evidentiary basis for that assertion, the onus shifts. There is good reason for this: the evidence regarding business expenses and deductions is largely in the hands of the party who earns that income and he or she is best able to address that issue. Therefore, once the party seeking imputation has established the claim for imputation, at least on a prima facie basis, the onus shifts to the responding party. M.J. Nolan J. stated in Joy v. Mullins, [2010] O.J. No. 4202 (S.C.J.) [at para. 60], following Bekkers,

[T]here is an onus on the moving party who alleges that deductions are unreasonable to introduce evidence that establishes, if believed, that the expense deductions claimed were unreasonable which then shifts the burden onto the claiming party.

[48] As stated in Homsi, the claimant need not prove all of the facts leading to imputation of income; she needs only provide an “evidentiary basis.”

[49] There was no formal income valuation provided in this matter. There are, however, several grounds upon which Ms. Passfield alleges that her husband improperly wrote off expenses which were not related to his business. These were limited to the taxation years of 2014 and 2015: those were the only years for which Ms. Passfield’s counsel received disclosure of the evidence for the Respondent’s business expenses. Ms. Passfield gave testimony regarding the following:

(a) Ms. Passfield put into evidence a cheque dated October 1, 2014 which was payable from the business account for the mortgage on the matrimonial home.[^7]

(b) Ms. Passfield entered into evidence a cheque from the business account dated October 27, 2014 which was to pay a lawyer to contest an impaired driving charge against the parties’ son.[^8]

(d) Ms. Passfield provided evidence that the business purchased a pair of sunglasses for the Respondent.[^10]

(e) Ms. Passfield provided a vet bill dated December 10, 2014 that had been paid for by the Respondent’s business.[^11]

(f) Ms. Passfield complained of a number of hotel bills that were for personal use that were charged to the business. She said that she was present for these events, and testified that they were personal in nature. The hotel bills totaled $1,273.38 for 2014.[^12]

(g) Ms. Passfield put into evidence two invoices from a neighbor, Kytech Machine Works Ltd., for more than $31,000 each for rental of a backhoe in 2014 and 2015.[^13] She pointed out that this was for grading fill which was delivered to the matrimonial home property and was unrelated to the floor installation business that the Respondent was operating.

(h) Ms. Passfield complained about a number of invoices from King Contracting.[^14] The invoices in 2014 appear to be in respect of building materials, again unrelated to a floor installation business. The 2015 invoices are related to lumber and materials for “office/warehouse renovations”. The 2014 invoices total $22,035; the 2015 invoices are for a total amount of $21,413.50.

(i) Ms. Passfield says that she analyzed the 2015 business bank statements and that they showed that the Respondent paid the following from the business bank account in 2015:

(i) Mortgage payments of $23,025;

(ii) ATM Cash Withdrawals of $30,785; and

(iii) Transfers to the Respondent’s personal account of $62,650.[^15]

[50] Mr. Passfield provided some explanation for some of these invoices. He said that he paid for his son’s criminal lawyer because his son worked for his business part-time and he needed to drive for the business. He suggested that the complaint about the magazine subscription was “minor” because the expense was small. He said that he needed the sunglasses for driving to his jobs and that this was therefore a legitimate business expense. He denied that the hotel bills were personal as testified by Ms. Passfield, and suggested that his name on the bill meant that he was the only one who stayed in the room. The costs of the backhoe were a business expense, he suggested, because he was grading the land to place storage containers for his business on the land. He accused Ms. Passfield of forging the King Contracting invoices and denied that these were business expenses.

[51] Mr. Passfield’s position as to his business expenses is deficient. A “business expense” is defined as “any costs incurred in the ordinary course of business.”[^16] Legal expenses for an employee’s impaired charges, sunglasses, magazine subscriptions, hotel stays (unless incurred for work travel) and excavation and grading cannot be included as expenses incurred in the ordinary course of a floor installation business. Even if they are actually related to the business, they were not incurred in the day to day operations of the business, and should not be written off against income. Although the mortgage on the home might be seen as a business expense, as the home was where the parties operated the business from, that would be a mixed business and personal use expense and Mr. Passfield did not testify in his examination in chief as to the allocation of that particular expense or how it was determined. My impression was that Mr. Passfield just wrote off the whole of the mortgage payment against his business income.

[52] Moreover, it appears to me that some of the expenses write-offs were capital in nature and not something that could be deducted against income. Mr. Passfield’s improvements on the matrimonial home as charged by King Contracting or the rental of the backhoe are both capital expenditures, as they are, according to Mr. Passfield, incurred to improve the property from which the business operates and not expenditures which can be written off in order to reduce income.

[53] Each party accused the other of making up the King Contracting invoices. Ms. Passfield says that she received these invoices as part of her husband’s disclosure. In doing her due diligence, she called Jamie Henry, who owns King Contracting, and she testified that Mr. Henry told her that he knew nothing about those invoices. Mr. Passfield on the other hand accused the Applicant during her cross examination of making up the invoices; in his own testimony, he denied ever having seen them. Again, in looking at how the Respondent operated his business, I think it more likely than not that there were supplies from King Contracting which were charged to the business and that Jamie Henry probably would not have wanted to involve himself in this dispute. Moreover, the evidence from Mr. Henry was hearsay and inherently unreliable. I doubt that anyone made up these invoices; I therefore find that these were capital expenditures improperly charged against business income.

[54] There is also evidence that Mr. Passfield had money in his pocket that was well in excess of his declared income. Ms. Passfield analyzed her husband’s personal transfers, payments and withdrawals from his business account in 2015 as being $116,460, a year that Mr. Passfield declared to the Canada Revenue Agency that his income was $21,354.40. As noted by Mr. Allan, Mr. Passfield testified that he had expended more than $60,000 in legal fees since 2016, that he had spent $100,000 on 780 truckloads of fill that he brought into the property and that he purchased a vehicle for $27,000. Considering the minimal income that the Respondent claimed on his income tax returns, from which he had to pay his basic living expenses, it is apparent that the $88,000 debt that the Respondent claimed at the time of trial was not sufficient to explain the $187,000 that the Respondent admitted to having spent in the past three years.

[55] This is especially so where the Respondent did not file an updated financial statement for trial as required by the Rules[^17] and failed to provide disclosure or answer any of his undertakings given during questioning. Part of the disclosure that the Respondent agreed to provide was his credit card statements for his three credit cards which he admitted that he failed to provide for 2017, which would have proved his indebtedness.

[56] Mr. Allan also pointed out that Mr. Passfield failed to provide his receipts or business bank statements to prove his deductions from his income for 2016, 2017 or 2018. Ms. Passfield was not given an opportunity to determine whether Mr. Passfield’s income tax returns accurately reflected his income for those years.

[57] Under s. 19(1)(f) of the CSGs, the court can draw an adverse inference against a litigant who has failed to provide financial disclosure where under a legal duty to do so. That inference may also be drawn at common law: see Jones v. Hugo, 2012 ONCJ 211 at para. 61 and Mujumder v. Rahman (2018), 297 A.C.W.S. (3d) 810 (Ont. S.C.J.) at para. 9. I have no hesitation in finding that the Respondent’s lack of disclosure was motivated by a desire to minimize his income for support purposes and to reduce his support obligation. I therefore draw an adverse inference against the Respondent as a result, and find that income must be imputed to him based upon that non-disclosure.

[58] In sum, I find that the Applicant has set out an evidentiary foundation for her claim for imputation of income. In his evidence, the Respondent failed to adequately address the concerns raised by the Applicant regarding the Respondent’s business expenses or the funds available to the Respondent in the two years since this litigation began. Because of this, I also impute income to the Respondent.

[59] Finally, I note that Mr. Passfield’s income in 2017 dropped substantially. His gross business income dropped to $70,058.70 and his income tax return disclosed a loss of over $22,000. Mr. Passfield says that he has not worked in his field since April, 2018 and he claims to have been living in his truck at the time of trial.[^18]

[60] Mr. Passfield said in his questioning that he could not work because he was suffering from depression. He had no medical evidence to support this and he admitted that he had not sought out medical treatment or medication for his depression. When asked whether he went to his family doctor, he said he did not have one and could not afford the prescriptions for medication if ordered by a physician. In fact, he acknowledged that the depression was related to the litigation and said that once the litigation was over, he felt that he could go back to work.

[61] I agree that the “depression” Mr. Passfield complains of is related to the litigation. Based upon his lack of cooperation or disclosure, I believe that Mr. Passfield simply does not want to pay any spousal support whatsoever and that once this litigation is over, hopefully for him with a dismissal of his wife’s claim for spousal support, his depression will lift and he will go back to work. Were Mr. Passfield truly unable to work because of depression, he would have done what any normal person would have done, which is to seek out medical assistance in order to address the illness, but he did not. It is also my belief that Mr. Passfield would do anything to avoid his wife’s claim for spousal support; in his questioning by Mr. Allan, he said that he would “probably kill myself” if ordered to pay spousal support.[^19] I therefore believe that Mr. Passfield has made a decision not to work in the time period leading up to trial. He is therefore intentionally underemployed and liable to pay support based upon his income in 2014, 2015 and 2016, which were the last years that he worked full-time.

[62] Mr. Passfield’s later assertion that he did not have cash to invest in the jobs that he was asked to do made no sense. That assertion was not mentioned during his questioning, and I did not understand why he needed cash to work on jobs. If he was saying that he had no credit and could not buy materials, he did not prove this with his credit card statements that he failed to produce. I decline to find that Mr. Passfield was unable to work for any other reason than his refusal to do so.

[63] The Applicant seeks a finding that an extra $75,000 per annum be imputed to the Respondent, which amount she then seeks to gross up for taxes. Assuming that Mr. Passfield will no longer be in a position where he is pouring money into grading and fill as he was with the matrimonial home or legal fees as required by this litigation, this is reasonable. Mr. Passfield gave evidence of expenditures of nearly $200,000 over the past 3 years, and the 2015 analysis by the Applicant of Mr. Passfield’s business bank account show that Mr. Passfield had disposable income of over $116,000 in 2015, more than the income that he declared, plus the $75,000 sought to be imputed by the Applicant. I therefore find that $75,000 in income be imputed to the Respondent in addition to his declared income.

[64] For the Respondent’s declared income, I am going to average his net Line 150 income from his tax returns for 2014, 2015 and 2016. I decline to use the reduced 2017 income as this is, in my view, a product of the Respondent’s decision not to work at his full capacity. Therefore, I find his declared income to be $36,818. Added to this will be $75,000 as requested by the Applicant. That additional income must be grossed up for taxes because it is undeclared for tax purposes.

Lump Sum Support

[65] Section 15.2(1) of the Divorce Act gives the court jurisdiction to order lump sum spousal support.

[66] Generally, spousal support is payable on a periodic basis and lump sum support is the exception rather than the rule: see Mannarino v. Mannarino, 1992 CarwellOnt 308 (C.A.). For example, spousal support should never be used to effect a property division, for example, in the case of a bankruptcy: see Ross v. Ross, 2014 ONSC 1828 at para. 48. However, under certain circumstances, spousal support can be awarded on a lump sum basis in place of periodic support.

[67] This issue was canvassed at length in Davis v. Crawford, 2011 ONCA 294, 2011 CarswellOnt 2512 (C.A.). After confirming the principle espoused in Mannarino, that property redistribution should not be achieved through an order for lump sum support, Justices Simmons and Lang set out some of the situations where an order for lump sum spousal support might be made [para. 67 and 68]:

The advantages of making such an award will be highly variable and case-specific. They can include but are not limited to: terminating ongoing contact or ties between the spouses for any number of reasons (for example: short-term marriage; domestic violence; second marriage with no children, etc.); providing capital to meet an immediate need on the part of a dependant spouse; ensuring adequate support will be paid in circumstances where there is a real risk of non-payment of periodic support, a lack of proper financial disclosure or where the payor has the ability to pay lump sum but not periodic support; and satisfying immediately an award of retroactive spousal support.

Similarly, the disadvantages of such an award can include: the real possibility that the means and needs of the parties will change over time, leading to the need for a variation; the fact that the parties will be effectively deprived of the right to apply for a variation of the lump sum award; and the difficulties inherent in calculating an appropriate award of lump sum spousal support where lump sum support is awarded in place of ongoing indefinite periodic support.

[68] In Zenteno v. Ticknor, 2011 ONCA 722, the Court of Appeal followed Davis v. Crawford and found that lump sum support should be payable where the trial judge found “evidence of the appellant’s abusive behaviour, intention not to pay spousal support and probable non-compliance with a court order”.

[69] In the present case, there is ample evidence that the Respondent will not follow court orders. He failed to cooperate in the listing and the sale of the matrimonial home and frustrated the sale of the home at every turn, contrary to the order of Kaufman J. made December 7, 2016. There was evidence that the realtor had never had a listing last as long as this one without a sale of the property. Mr. Passfield also failed to provide court ordered disclosure, both making excuses and stating that the disclosure was not warranted. He failed to pay the occupation rent ordered by MacPherson J. on August 17, 2018, stating that he did not have to pay it if he lived in his van and ceased to occupy the property. He did not pay the costs ordered by MacPherson J. All of these are breaches of court orders made in this proceeding and it is doubtful that the Respondent would comply with an order for periodic spousal support; in fact, he actually said that he would kill himself rather than pay it. As well, if the Respondent does earn income, it is self-employed income, notoriously difficult to collect where unpaid.

[70] I therefore find that there is a real risk that the Respondent would not pay periodic spousal support if ordered.

[71] He also did not provide court ordered disclosure or answer undertakings given at his questioning, another of the criteria noted by the Court of Appeal in Davis v. Crawford.

[72] In the present case, there is no evidence of abusive behaviour on the part of the Respondent. However, in Vynnyk v. Baisa, [2007] W.D.F.L. 3269 (Ont. S.C.J.) as aff’d by 2008 CarswellOnt 5629 (C.A.), Klowak J. ordered lump sum spousal support inter alia for the purposes of effecting a clean break between the parties. See also Bhatnagar v. Bhatnagar, 2016 ONSC 3054 where lump sum spousal support was ordered where it would assist a clean break between the parties, and there were assets to pay the lump sum support from.

[73] In the present case, the Respondent says that his own depression would be cured by some sort of clean break between himself and the Respondent; he testified during questioning that this matter was “putting a huge dent in our whole family” and to order periodic spousal support would only continue that. In fact, he threatened self-harm if periodic support was ordered. It would be best to allow for a clean break, which can be achieved through a lump sum award.

[74] For all of these reasons, I find that lump sum spousal support should be payable by the Respondent from his share of the net equity of the matrimonial home.

[75] Ms. Passfield asks only for the Respondent’s net equity in the home. She asks for no more, as she suspects that anything further than the Respondent’s equity in the home would not be collectable.

[76] In Davis, the Court of Appeal said that the court should have regard to the Spousal Support Advisory Guidelines in setting the lump sum support. Mr. Allan provided a SSAG calculation as part of his final submissions. That submission utilizes income that is lower than the averaged income that I used for the Respondent and yet came up with lump sum support amounts that were well over $700,000 as a midpoint value. Mr. Passfield’s equity in the matrimonial home is substantially less than the lump sum award that the Applicant would be entitled to otherwise.

[77] I therefore order that Mr. Passfield shall pay lump sum spousal support to the Applicant in the amount of his net equity in the matrimonial home.

ORDER

[78] There shall be an order to go as follows:

(a) There shall be no order for periodic spousal support as against the Respondent.

(b) The Respondent’s share of the net equity in the matrimonial home shall be paid to the Applicant by way of lump sum spousal support.

(c) The real estate lawyer having conduct of the sale is directed to pay all of the net proceeds of the sale of the matrimonial home located at 75 Albert Street, Mount Albert, Ontario to the Applicant or as she shall direct.

[79] The parties may make written submissions as to costs to my judicial assistant in Barrie, the Applicant first and then the Respondent, on a ten-day turnaround. Costs submissions to be no more than five pages in length, not including offers to settle or the parties’ bills of costs.

J.P.L. McDermot J.

Released: January 28, 2019

[^1]: Trial Ex. 7 [^2]: R.S.C. 1985, c. 3 (2nd Supp.) [^3]: Includes $5,625.82 in self-employed income for cleaning the local post office. Gross business income for that activity was $8,100. [^4]: Includes $6,048.64 in CPP income. [^5]: See Trial Ex. 10. [^6]: SOR/97-175 [^7]: Trial Ex. 16 [^8]: Trial Ex. 17 [^9]: Trial Ex. 18 [^10]: Receipt from Hakim Optical dated August 1, 2014 and entered as Trial Ex. 19 [^11]: Trial Ex. 20 [^12]: Trial Ex. 24 [^13]: Trial Ex. 25 and 27. This was the neighbour who later made the “lowball” offer on the home mentioned earlier in this endorsement. [^14]: Trial Ex. 26 and 28 [^15]: See Trial Ex. 29. [^16]: https://www.investopedia.com/terms/b/businessexpenses.asp [^17]: The Respondent did not file a Trial Record with a recent financial statement as required by subparagraph 4 of Rule 13(12.2). He also undertook to provide an updated financial statement at his questioning on October 15, 2018 which he acknowledged that he did not provide (along with any of the other undertakings given at that questioning). According to the index to the Continuing Record, the last financial statement which was filed by the Respondent was sworn in March, 2018, five months prior to trial. It was not made an exhibit at trial. [^18]: I note that Mr. Passfield’s motivation for not living in the matrimonial home appears to have something to do with the order of MacPherson J. wherein he ordered the Respondent to pay $1,200 per month in occupation rent: Mr. Passfield testified that he thought that he did not have to pay this occupation rent when he had decided to no longer live in the home and therefore moved out in October, 2018, leaving it vacant. [^19]: See Question 917, p. 143 of the Transcript of the Respondent’s questioning (Trial Ex. 33).

Passfield v. Passfield, 2019 ONSC 679

Case Summary

INTRODUCTION

Result

A Note on Evidence

ANALYSIS

Entitlement to Spousal Support

Payment of Lump Sum Spousal Support

Imputation of Income

Lump Sum Support

ORDER

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Issues

Statutory Provisions 2

Legal Tests 2

Legislation 2