Court File and Parties
BARRIE COURT FILE NO.: FC-18-548-00 DATE: 20191209 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: David Thomas McCombe, Applicant AND: Laura Marie McCombe, Respondent
BEFORE: The Hon. Madam Justice S.E. Healey
COUNSEL: M.A. Cummings, Counsel for the Applicant C. Allen, Counsel for the Respondent
HEARD: November 29, 2019
Endorsement
The Nature of the Motion
[1] This is a motion for disclosure brought by the respondent, Laura McCombe, and a cross-motion for disclosure and suspension of spousal support brought by the applicant David McCombe.
[2] Laura wants David to provide all disclosure listed in exhibit “K” to her affidavit sworn October 21, 2019. She also seeks disclosure relating to his purchase of a building lot located in Clarksburg, Ontario, as well as documents showing the sources of bank deposits listed in exhibit “L” to her affidavit.
[3] David wants an order that spousal support be suspended from September 18, 2019 until trial, and an order that the matter proceed to trial immediately. He also seeks proof of how Laura’s supplementary Visa card is being paid, as well as statements from various TD bank accounts and a TFSA account. He also seeks an accounting for educational trust funds in Laura’s control for each calendar year starting in 2015.
Disclosure Order of December 7, 2018
[4] These motions stem from an order made by Justice Graham on December 7, 2018. Paragraph 3 of that order provides:
The Applicant David Thomas McCombe shall identify which disclosure listed in Exhibit “O” and in the bank and credit card statements from 2014-2018 both personal and business of the Affidavit of Laura McCombe dated October 11, 2018 has been provided and when, if it has not been provided, when it will be provided or reasons why it will not be provided, on or before January 15, 2019.
[5] Paragraph 4 of that order required Laura to provide outstanding disclosure.
[6] Paragraph 5 permits either party to bring a motion to deal with disclosure issues arising from their Minutes of Settlement.
[7] The evidence on this motion establishes that David has provided disclosure, and substantial amounts, pursuant to that order. As has Laura.
[8] Exhibit “K” to Laura’s affidavit sworn October 21, 2019, which forms the basis of her motion, is not the same document as the earlier exhibit “O” referenced in the order of December 7, 2018. Exhibit “K” is an extrapolation of exhibit “O” and is a more detailed account of the various categories of items listed in exhibit “O”. As her lawyer explained, it is a “living document” which has been updated from time to time as the disclosure has been given. It allows Ms. Allen and Laura to track what has been received, and the details of the information that remains outstanding.
[9] David similarly has his own tracking document, which is Exhibit “S” to his affidavit sworn October 31, 2019. In that document he sets out the answers that he has given to all requests, and maintains that no request remains unanswered.
Motion to Change
[10] David brought this Motion to Change in April 2018. Since the final order the children have been attending postsecondary school and not living with Laura. He has also been paying 81% of s. 7 expenses, which he believes are no longer being incurred. Further, his income has decreased and Laura’s has increased. He believes that he has overpaid both child and spousal support and seeks a downward adjustment of both retroactively.
[11] In her Response to the Motion to Change, Laura seeks to retroactively increase both child and spousal support based on her belief that David’s income is higher than it was at the time of the final order.
[12] The final order that the parties seek to change is that of Justice Sproat dated May 2, 2014. The failure of David to provide accurate information in that litigation was addressed in the Reasons at para. 33, where Justice Sproat listed several reasons why he “did not have complete confidence in David’s credibility and reliability and subsequently his calculations’. His Reasons also referenced how Laura had “labored long and hard to arrive at income figures to attribute to David”, and he found a number of difficulties upon how she premised her numbers.
[13] The order of Justice Sproat requires each party to provide annual financial disclosure. Neither was perfect in doing so, but David provided nothing at all until the spring of 2018. He blames this on Laura’s failure to sign a document; this will be a matter for the trial judge to decide.
Further Disclosure from David
[14] Laura’s position is that she needs all the information that is currently documented as still outstanding in exhibit “K”. She needs it to reveal David’s true income, because the information provided by him so far is incomplete. He is self-employed and she alleges that he has always mixed business and personal expenses in his bank accounts and credit facilities. As such, detailed financial disclosure is required to substantiate the amounts claimed on his personal tax returns and to determine all sources of income available to him. Laura notes that he also has rental and investment income, and uses various methods to deflate his income for support purposes. She says that his lifestyle does not accord with the income that David asserts that he has been earning, and which has been calculated in a report produced by BDO for him in this proceeding. There is also the matter of a corporation, Timberlane Construction Services Limited (“TCSL”), that was dissolved by David in 2017. The parties were each 50% shareholders. Laura alleges that TCSL had financial assets that still existed at the time of Justice Sproat’s order and that David has appropriated that money without accounting for it in his income.
[15] Laura has retained an accountant, Ted Pollock, to provide an opinion about David’s income since 2014. Mr. Pollock has provided a letter dated November 3, 2019 outlining the information that he requires in order to complete his work. It indicates that some of the disclosure requested by Laura, as outlined in exhibit “K”, is not required. Laura takes the position that he has been unable to begin his work without financial information that has not yet been provided.
[16] David’s position is that Laura’s requests for income disclosure are overreaching. Despite that, he has capitulated and completely answered all the disclosure requested by Laura in exhibit “O”. She remains unsatisfied. He characterizes the position taken by her in her extrapolated exhibit “K” as falling into one of these categories: requested have been answered, requests that have been answered but about which Laura states arguments; requests that are overly broad; requests that are irrelevant to the material issues or of little probative value; requests that are excessive or violate the principle of proportionality; requests that are confusing or a repeat of earlier questions; and improper questions. Further, every time that there is a delay in the trial he has to continue to update the disclosure and his Form 13 financial statements, creating a never-ending loop of demands from Laura. He states that she has delayed in retaining an expert to respond to the BDO report, using her disclosure requests as a tactic to continue to receive spousal support (there has been an order made earlier suspending child support pending trial).
[17] The difficulty with David’s position is that he agreed to an incredibly onerous, detailed, omnibus disclosure order. His complaints on this motion boil down to how onerous it has been for him to comply, but that he has done so. My assessment is that Laura’s exhibit “K” may contain more detail in terms of what aspects of each category remain outstanding from her point of view, but the chart does not add anything to the level of detail that was initially sought and ordered. The order that David agreed to does not simply require documents, but explanations. I am satisfied that Laura has not been seeking more information than David already bound himself to provide.
[18] However, my review of exhibits “O”, “K” and “S” together with the parties’ affidavits does not permit me to conclude whether information remains outstanding from David. It is not possible to make a definitive call one way or the other without assessing credibility and looking at the volumes of disclosure. However, I can conclude from those exhibits that Laura now has more information in her possession than was in BDO’s when its income report was prepared.
[19] I also note that David has taken the position in his exhibit “S” that no more information will be provided with respect to his 2014 income because income for that year was determined at the trial before Justice Sproat. Justice Sproat determined David’s income at February 2014 to be $85,000 per year. David now wants that figure re-calculated to $66,000, for the purpose of adjusting support payments for 2015 because of a reduced 2014 income. He also seeks a return of “overpayments” of s. 7 expenses for 2014. Accordingly, his position is untenable; proof of income for the 2014 tax year is required to be produced by him as he has placed it in issue on this Motion to Change.
[20] I believe that the only way to move forward with this case is to put in place a process to move it toward trial.
[21] In doing so, the question to which the court must direct itself is whether, if various items of information are still outstanding, they are relevant enough to the issues in the case that David should be required to pursue them if still outstanding. In deciding whether the item has sufficient relevance, the case law requires that the court bear in mind the primary objective of the Family Law Rules, subsection 2(3), which is to enable the court to deal with cases justly. Subsection 2(3) outlines that dealing with a case justly includes:
(a) Ensuring that the process is fair to all parties; (b) Saving expense and time; (c) Dealing with cases in ways that are appropriate to its importance and complexity; and (d) Giving appropriate court resources to the case while taking account of the need to give resources to other cases.
[22] Rule 2(3) of the Family Law Rules must inform the extent and nature of the disclosure demanded of a party: Boyd v. Fields, 2006 CarswellOnt 8675 (Ont. S.C.J.), at para. 12-14; Chernyakhovsky v. Chernyakhovsky, 2005 CarswellOnt 942 (Ont. S.C.J.), at para. 8; Jakubowski v. Kopacz, 2014 ONSC 6592, at paras. 12-13; Kovachis v. Kovachis, 2013 ONCA 663, at para. 34.
[23] In this case the primary issue is a determination of the parties’ incomes from 2014 to present. Disclosure should be required only for those items that will advance that inquiry.
[24] Mr. Pollock has identified items on exhibit “K” that he does not require for the purpose of calculating or estimating income for David. If any of those items are outstanding, David will be relieved of his obligation to produce them.
[25] Mr. Pollock should be instructed to start his report if Laura intends to rely on it. If Mr. Pollock identifies documents that are crucial to his work and not produced, he should identify precisely what he needs. For the purposes of my order, only information that is critically necessary for a determination of David’s income will be required. An item will only be “critically necessary” if it is impossible to arrive at a reliable number, estimate or range for David’s income in its absence. If the item would be nice to have for greater verification or accuracy, but an estimate or range can be reached without having it, it is not “critically necessary” for the purpose of this order. If it is a “critically necessary” document that would be available through online access to Revenue Canada’s website for CRA Login Services, David must attempt to obtain the missing information slip or other document through that means.
[26] With respect to the back-up documents that prove the expenses claimed by David in relation to any income source, subject to Mr. Pollock identifying any one of them as a critically necessary component of his calculations, I am satisfied that there is likely no further utility to making these requests. David may have no further supporting documents. David may be holding back or hiding something. I have no idea. But the evidentiary and legal burden is on him to prove his income. Failing to satisfy the trial judge of the legitimacy of claimed deductions from income may ultimately lead to an adverse income being made against him. The fact that CRA has assessed his income and implicitly approved the expenses claimed may not be enough to satisfy the court that the expenses claimed are reasonable: s. 19(2) of the Federal Child Support Guidelines.
[27] In January 2019, David purchased a vacant building lot at 6 Deer Lane in Clarksburg. He has included it on his latest financial statement. The value of the lot is shown as $369,000. He also shows debt to his sister in the full amount of the purchase price. In response to Laura’s request on this motion for production of documents relating to this purchase, David balks on the basis that (i) he cannot comprehend what that purchase could have to do with determining his income; and (ii) it is not the subject matter of exhibit “O” to the December 7, 2018 disclosure order and (iii) it is an example of Laura always extending her disclosure requests, which have led to two adjournments of the trial.
[28] These arguments are unsustainable. It is somewhat incomprehensible how, during a time when his income is being closely scrutinized, David believes that the way in which he has structured this transaction could not raise relevant questions about his income and means: Is he building on the lot? Is it on spec or for him to live in? What’s the source of funding for the building costs? What are the terms under which his sister provided the funds? Has he provided a mortgage to her and is it registered? If not registered, why not? How did he purchase a lot without providing a down payment? He addresses none of these obvious questions in either of his two affidavits filed for this motion, even though the transaction is unconventionally structured and requires obvious explanation to dispel the red flags it raises. Especially when there are other questions related to financial entanglement with his sister, for example, why and how she is paying his truck lease payments.
Further Disclosure from Laura
[29] On the cross motion, the only disclosure requests that remained outstanding at the time of argument were those listed in paragraph 2(a), (d) and (f) of David’s motion.
[30] With respect to 2(a), this relates to a supplementary Visa card held by Laura’s father. David wants proof that the payments made on it have been made by Laura’s father, and not Laura. Presumably the concern for David is whether Laura is making those payments from her own funds. The relevance of this is lost on me; Laura has been a T4 employee and no other sources of income are alleged. In his pleading David does not allege that Laura has undisclosed sources of income, but only that she is capable of earning more income than attributed to her in the order of Justice Sproat. Having the information sought does not advance the primary issue – what is Laura’s income from 2014 to present?
[31] With respect to 2(d), David seeks “all statements for undisclosed TD bank account ****764 inception to present”. Laura explains that this was her father’s account, opened in 2019 for the purpose of allowing her access to assist with his banking. It will not be ordered to be disclosed for the same reason set out above.
[32] Last, David seeks a proper accounting of educational trust funds by calendar year from 2015 to present. These trust funds were addressed in the order of Justice Sproat. He noted that David consented to an order that these funds be transferred to and managed by Laura, who “shall provide an annual accounting of the fund commencing 12 months after the fund is transferred to her name”.
[33] Laura’s evidence is that she received $69,473.34 from David in October, 2014. She has provided him with some information about the status of this money, sent in an email to him dated January 30, 2019. Its value at January 30, 2019 stands at $73,143.46. There have been some disbursements from the money, and it will have earned interest.
[34] What Laura has provided is not an accounting. An accounting should generally include the information set out in Rule 74.17 of the Rules of Civil Procedure, which details the form of accounts to be compiled by an estate trustee, with necessary modifications. The accounts should make obvious to anyone reading them, year by year, the opening balance of the funds, identify those accounts in which the money is kept, the closing balance, and an explanation for why the closing balance differs from the opening balance by listing those transactions, including interest earned, which added to or subtracted from the opening balance.
[35] Because I have been unable to determine whether critically necessary information remains outstanding from David, his motion to suspend spousal support pending the trial will not be granted.
Order
[36] With respect to Laura’s motion, this court orders:
- Subject to the process set out in paragraph 2 below, David does not have to provide any further information with respect to the following items in exhibit “K”: 2-4, 5-10 to 5-64, 6-65, 7-66, 9-67-71, 13-79, 18-90, 36-141, 37-142, 38-143,75-185, 76-186, 77-187, 60-159 to 70-181. However, if any of these items are identified by Mr. Pollock as being “critically necessary” in order to determine David’s income, he may reference them as set out below.
- If Mr. Pollock identifies any of the items listed above, or an item from the remainder of the list in exhibit “K” to be “critically necessary” to determine David’s income, and has satisfied himself that it has not been produced, the following procedure shall be followed: a) By no later than February 1, 2020 Laura’s lawyer will deliver an affidavit to David’s lawyer from Mr. Pollock explaining why the item is “critically necessary” and confirming that he does not have the document; b) If it is a document that would be available through online access to Revenue Canada’s website for CRA Login Services, David shall attempt to obtain the missing information slip through that means and shall, if available, produce such document to Laura’s counsel by no later than February 15, 2020, and if not available, provide such information to Laura’s lawyer; c) If it is not a document that is available through the CRA Login Services, David will produce it by February 15, 2020, it if it has not already been produced, or provide an explanation to Laura’s lawyer why it is not available; d) If any “critically necessary” items remain outstanding after this process, the parties shall make best attempts to arrange for their two experts to meet by no later than March 15, 2020 to attempt to mutually resolve the parties’ seemingly irreconcilable positions i.e. how one has been able to determine David’s income and the other unable to determine David’s income; e) If no meeting can be arranged, or no consensus or reconciliation is reached by their experts as a result of that meeting, Laura may bring another motion returnable no later than March 31, 2020 seeking further relief from the court with respect to the “critically necessary” documents, but only those outlined in Mr. Pollock’s affidavit.
- Without prejudice to a further motion referenced in 2(e), paragraphs 1, 2 and 4 of the motion is otherwise dismissed.
- David shall provide the following with respect to his purchase of 6 Deer Lane: (a) A copy of the reporting letter with all ledger statements provided; (b) A copy of the cheque, bank draft or deposit slip for the funds used to purchase the lot; (c) A copy of any mortgage, loan agreement, security agreement or other document that evidences the financing provided for the purchase of the property; (d) If no such document exists, an explanation of the terms under which the money was provided for its purchase, by sworn affidavit.
[37] With respect to David’s motion, this court orders:
- Paragraphs 1, 2(a) and (d) are dismissed.
- Paragraph 2 (b), (c) and (e) are granted, on consent.
- Laura shall provide a proper accounting of the trust funds for the years 2015 to 2019 inclusive by no later than February 1, 2020.
[38] Success on these motions has been mixed. If the parties are unable to reach an agreement on costs of the motions, they may submit brief written argument limited to three pages, plus a cost outline and any offers to settle, on the following timeline: Laura, by January 3, 2020; David by January 10, 2020. Counsel may reasonably extend these timelines by mutual agreement, if necessary, as long as they notify the court.