Court File and Parties

Oshawa Court File No.: FC-19-1877 Date: 2020-03-24 Ontario Superior Court of Justice

Between: Annetta Wange, Applicant And: Randall Brown, Respondent

Counsel: Lisa Baumal, for the Applicant Julie Layne, for the Respondent

Heard: March 9, 2020

Reasons for Decision

Leibovich J.:

[1] The applicant has brought a motion for interim spousal support. There are very few facts that are not in dispute, including the date of separation. The parties were married in 1996. They have no children. They separated in 2014 or 2015. The applicant had worked for the respondent’s company throughout the marriage, although the exact amount of time she spent working is in dispute. Upon separation it seems to have been agreed that the applicant and the respondent would each be paid the same amount from the respondent’s company until the company was sold. The applicant claims she was fired from the company at the beginning of 2019 and the respondent claims that she quit. The applicant submits that she has a desperate need for support, as she was fired, and the respondent has the ability to pay and he has underreported/masked his income. The respondent states that the applicant’s financial difficulties are not the result of their separation but because she quit her job at his company and because she has, post separation, built a massive extension to her new house. In addition, she has stolen significant amounts of money from his company, hurting it and him and disentitling her to support.

Factual Background

[2] The parties were married on September 15, 1996, and separated, according to the applicant, on August 1, 2015, and according to the respondent, on September 27, 2014. They have no children. The applicant states that she and the respondent separated on August 1, 2015 when the applicant purchased her current residence. However, she states that they did not physically separate until the respondent moved into his current condominium in March 2017. The applicant moved into her new house in June 2017. The respondent states that the separation date is September 27, 2014, when he made an offer to purchase his current residence.

[3] The respondent owns a die company called Die-Tech Toll & Design. It has a production line, a wire EDM line, and a tooling line. On May 28, 2019, the respondent incorporated a new company called D-T Wire EDM Services.

[4] The applicant states that when she met the respondent, she was employed as a sales/marketing manager for a technology company earning approximately $120,000 a year. When they were married, she had another job as Director of Technical Training that paid $86,000 a year. She started working for the respondent’s company in the year 2000 until January 2019. She worked full time for the respondent’s company as of 2002. She states that she was paid different amounts over the years ranging from nothing to $71,500. She was not paid her worth and she was often paid much less than what her T4 indicated. As a result of being the spouse of the owner, she did not have any premiums deducted and she was ineligible for unemployment insurance benefits in 2019. The applicant states that she and the respondent agreed that following separation the applicant could work in the respondent’s company until it was sold. According to the applicant, she and the respondent agreed to receive the same salary from the company in 2017 and 2018. In 2017 she was paid $101,000 and in 2018 she was paid $92,500. The respondent agreed that they would each receive $6,000 a month in salary once the applicant left the matrimonial home, but not because her work with the company merited that salary, but as a way to keep the peace between them pending a final resolution. He stopped making the payments in December 2018 because there was not enough money left in the company.

[5] There is no dispute that in 2019 the applicant earned $16,975, working part time as a sales administrator in a new job. She expects to earn $30,000 in 2020.

[6] The respondent does not dispute the amounts the applicant claimed she earned, but states that they both agreed to withdraw from the company what the company could bear at the time. He states that the applicant only worked sporadically for his company during the marriage, a few hours per week. The respondent states that the applicant’s pre-marriage work was always sporadic because she was in conflict with her employers. He states that during the marriage the applicant started her own company during the time, called Indulgences (a gift basket company). The parties do not agree on who owns this company, each claiming the other owns it. The respondent states that he contributed financially to the applicant’s company while the applicant states that she contributed financially to the respondent’s company.

[7] The applicant states that she was fired from the respondent’s company, Die-Tech Toll & Design, after she took a three-week vacation in December 2018. The respondent states that the applicant was not fired, but rather she abandoned her job by taking three weeks of unauthorized vacation.

[8] While it appears that the original plan was for the parties to split the sale of the matrimonial home equally, it is evident that the applicant received the bulk of the proceeds. Using the applicant’s numbers, set out at paragraph 76 of her affidavit, she received approximately $666,000, while the respondent received approximately $355,000. Using the respondent’s numbers, the applicant received approximately $700,000 from the sale of the matrimonial home while the respondent only received $259,969.18.

[9] It is evident from the material filed, and not in dispute, that the applicant built a significant addition to her new house, and to use the applicant’s own words “it doubled her living space”. The respondent states that he believes the extension must have cost $300,000. The respondent has linked the financing of the extension with his assertion that the applicant has misappropriated hundreds of thousands of dollars from his company. The applicant denies the allegations but states that she did pay some personal expenses through the business but with the complete approval of the respondent. The respondent has provided, at Tab C of his affidavit, a list of questionable transactions that his accountant Mr. Benjamin found. The respondent states that the payments involve paying for contractors for the applicant’s new home extension through the business and other personal debts. The list attached at Tab C simply lists items. It is devoid of details or receipts. The respondent states that once the full audit is completed a report will be provided. The applicant states that she has financed the cost of the renovation with a construction’s mortgage, which has since morphed into her current $550,000 Scotiabank mortgage. She states that she never would have done this if she was not fired and had secure employment with the respondent’s company.

Law

[10] Spousal support is governed by s. 15.2 of the Divorce Act, R.S.C., 1985, c. 3. Under s. 15.2(4) the court must consider the “condition, means, needs and other circumstances of each spouse” taking into account the following factors:

(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.

[11] In determining entitlement, the court must take into account the objectives of a spousal support order as set out in s. 15.2(6) which reads as follows:

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; and

(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.

[12] When making an interim order, the test is reasonableness: section 15.2(2) of the Divorce Act states:

Where an application is made under subsection (1), the court may, on application by either or both spouses, make an interim order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse, pending the determination of the application under subsection (1).

[13] There are three grounds for entitlement to spousal support: (1) compensatory; (2) contractual; and (3) non-compensatory; Bracklow v. Bracklow, [1999] 1 SCR 420, [1999] S.C.J. No. 14, at para 15. The applicant has stated that the court should consider spousal support on the basis of her needs. The applicant further states that her application to the court includes a compensatory component as she contributed greatly to the respondent’s business, at the expense of her own career, and that she was the person primarily responsible for the family home and their multiple cats and dogs that they treated like children.

[14] A review of the authorities reveals the following principles which ought to be considered in deciding whether to make an order for interim support:

1. On applications for interim support the applicant's needs and the respondent's ability to pay assume greater significance;

2. An interim support order should be sufficient to allow the applicant to continue living at the same standard of living enjoyed prior to separation, if possible, if the payor's ability to pay warrants it;

3. On interim support applications the court does not embark on an in-depth analysis of the parties' circumstances which is better left to trial. Where there is a need to resolve contested issues of fact, especially those connected with a threshold issue, such as entitlement, it becomes less advisable to order interim support. However, in a motion for temporary spousal support, the claimant does not have to prove entitlement on the balance of probabilities as he or she would have to at trial. He or she need only show a prima facie case for entitlement;

4. On interim applications the need to achieve economic self-sufficiency is often of less significance;

5. Imputing income to a payor may only be done on a rational basis, grounded in the available evidence; and

6. Interim support should be ordered within the range suggested by the Spousal Support Advisory Guidelines unless exceptional circumstances indicate otherwise.

See Cassidy v. McNeil, 2010 ONCA 218, 99 O.R. (3d); Drygala v. Pauli (2002), 164 O.A.C. 241 (CA) at para. 44; Demers v. Demers, 2019 ONSC 6111; Samis (Guardian of) v. Samis, 2011 ONCJ 273, 2 R.F.L. (7th) 476; Patang v. Miral, 2018 ONSC 6430.

Analysis

Has the applicant established a prima facie case for entitlement?

[15] Without a finding of entitlement, even in the case of an interim order, there can be no order for spousal support: Cassidy v. McNeil, 2010 ONCA 218, 99 O.R. (3d).

[16] It is not disputed that post separation the parties attempted to resolve matters between them without the assistance of the court. The applicant states that the parties agreed that in 2017 and 2018 the parties would each receive the same salary from the company. The applicant was paid $101,000 in 2017 and $92,500 in 2018. These amounts were, according to the applicant, higher salaries that she had ever been paid by the respondent’s company. The respondent’s affidavit reflected a similar position, although the numbers do not exactly match the applicant’s reported income. The respondent stated that he agreed that they would each receive $6,000 a month in salary once the applicant left the matrimonial home. Importantly, the respondent stated that this amount did not reflect a salary that the applicant actually earned but was a means to “keep the peace between them pending a final resolution”. This was, in my view, a homemade interim spousal support order.

[17] There is no dispute that the applicant’s financial situation changed dramatically in January 2019 when she stopped working for the respondent’s company. I do not accept the respondent’s position that the applicant quit her job. There is no evidence that she resigned. Rather, the evidence shows that the respondent fired her after she took what the respondent describes as an unauthorized vacation, coupled with his belief that she was stealing money from his business. I decline to pass comment on whether it was appropriate to fire the applicant, merely that she was fired. She did not quit, nor would it have made sense for her to quit given her rising debt. The applicant’s income dropped to $16,975 in 2019. She expects to earn $30,000 in 2020, which is significantly lower than in 2018 or 2017.

[18] As asked and noted by McDermot J. in Lamb v. Watt, 2017 ONSC 5838 at para. 27:

Does this applicant have a prima facie non-compensatory entitlement to spousal support? It is clear that income discrepancy alone does not create a non-compensatory claim: see Fisher v. Fisher, 2009 ABQB 85 and Calvert v. Stewart, 2009 CarswellOnt 671 (C.J.). There must be some evidence that the disadvantage to the recipient spouse must arise from the breakdown of the marriage.

[19] In my view, there is some evidence that the applicant is disadvantaged as a result of the breakdown of the marriage. The applicant now finds herself in a position she would have been in upon separation had the parties not agreed that she would continue working at the respondent’s company. That arrangement ended and the applicant found herself looking for (and eventually finding part time) work after an 18-year marriage with the respondent being her most recent employment reference.

[20] In concluding that the applicant has demonstrated a prima facie case, I am not stating that there are no triable issues on this point. The respondent is correct in noting that the applicant received the majority of the income from the sale of the matrimonial home and decided to place a costly addition to her new house, incurring significant debt. But a trial issue does not negate a prima facie case. As stated by McDermot J. in Lamb v. Watt at para. 25:

[…] A motion for temporary spousal support is not the same, however, as a motion for summary judgment. In the latter case, where the court finds a triable issue, a trial is likely necessary. Unlike summary judgment, an order for temporary spousal support is not a final decision but a temporary order intended to address short term hardship which has arisen from the breakdown of the marriage as discussed above. To suggest that the motion be dismissed by raising a triable issue results in too great a burden on the recipient, as the issue of entitlement is often disputed by the support payor and there is often conflicting evidence on the issue of entitlement. Were Mr. Dart correct, many recipients would be deprived of much needed support, as it would be necessary to wait for trial to obtain financial relief.

[21] Similarly, the respondent states that the applicant has disentitled herself to support because she misappropriated hundreds of thousands of dollars from his business. The applicant denies this and states that any of her personal expenses paid by the respondent’s business were done with the respondent’s knowledge. It is evident that a number of non-business expenses by both parties were charged to the respondent’s business. However, at this stage it is impossible to determine, based on the material provided, if the applicant has misappropriated funds. All that has been provided at the moment is a one-page list of questionable expenses. While on the surface the list does appear to contain expenses not connected to the respondent’s business, it is not even attached to the affidavit of the person who conducted the review. The respondent promises that a report will be forthcoming. This is an issue that can only be resolved at trial after the filing of a report and supporting documents and the cross-examination of witnesses. It is impossible to decide this issue based on the material filed on this motion.

Does the respondent have the ability to pay?

[22] It is very difficult to ascertain what the respondent’s true income is based on the material filed. On January 27, 2020, Nicholson J. ordered that:

1. The Respondent shall produce an income valuation report from a Certified Business Valuator within the time frame provided under the Rules (past three years) and shall also produce scope of review documents.

2. The Respondent shall produce a business valuation report, including scope of review documents, from a Certified Business Valuator as at September 27, 2014, within the time frame provided under the Rules. The Applicant reserves her right to seek an Order requiring that the Respondent produce a report on her date of separation (August 1, 2015).

3. The parties agree to make best efforts to produce the following disclosure on or before March 23, 2020: a) Disclosure of any and all supporting documentation for the Applicant’s and the Respondent’s assets and liabilities as at both dates of separation (September 27, 2014 and August 1, 2015). b) Copies of all personal and corporate debts and credit account statements in the Applicant and the Respondent’s names (sole and joint with third parties) from September 1, 2014 to present. c) Both parties shall provide a detailed accounting of the total cost of and payment for any renovations and/or additions put in their property after purchase of either party’s currently owned real property, including but not limited to copies of all quotes provided, invoices prepared and proof of source of payment of these invoices. d) Proof of all efforts the Applicant has made to secure full-time employment since December 2018. e) The Respondent shall produce any documentation in his or his counsel’s possession supporting his assertion that the Applicant owns a corporation.

4. The Respondent shall provide proof available to him with respect to his claim regarding the Applicant’s misappropriation of funds from his company before the Settlement Conference in this matter.

[23] This motion for interim spousal support has proceeded in the absence of the information ordered on January 27, 2020 by Nicholson J. The respondent’s income comes from two sources, rental income from his investment condominium and income from his company. The respondent has stated that his rental income in 2019 was $6,737.03 after deductions were made for expenses. The respondent has stated that he received $20,000 in salary from his company in 2019. He stated that his company, because of the applicant’s misappropriation of funds and the general condition of the economy, is operating hand to mouth. The applicant states that the $20,000 salary does not reflect the true financial benefit that the respondent receives from his company. [1]

[24] The criteria for imputing income set out in the Federal Child Support Guidelines, SOR/97-175 has been applied to the provision of spousal support: see for example Rilli v. Rilli; Rushton v. Cuff, 2020 ONSC 490 at para. 19. Section 18 of the Guidelines gives the court discretion to attribute some or all of the pre-tax income of a corporation to the shareholder, director or officer personally or, in the alternative, to attribute an amount less than or equal to the pre-tax corporate income that is commensurate with the services that the parent provides to the corporation. The text of section 18 reads:

18(1) [where] the court is of the opinion that the amount of the spouse’s annual income as determined under section 16 does not fairly reflect all the money available to the spouse for the payment of child support, the court may consider the situations described in section 17 and determine the spouse’s annual income to include:

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

b. an amount commensurate with the services that the spouse provides to the corporation, provided that the amount does not exceed the corporation’s pre-tax income.

(2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits to or on behalf of persons with whom the corporation does not deal at arm’s length must be added to the pre-tax income, unless the spouse establishes that the payments were reasonable in the circumstances.

[25] The true state of the respondent’s company and the financial benefit that he derives from it are impossible to fully ascertain in the absence of the information ordered by Nicholson J., let alone cross-examination on these documents. However, as noted, on an interim support application the court does not embark on an in-depth analysis of the parties' circumstances, which is better left to trial. I am satisfied however that the evidence in this motion does support the applicant’s submission that the respondent’s $20,000 salary does not reflect the true financial benefit that he receives from his company, having regard to the following:

1. The company’s statements show that the company does pay for a significant amount of the applicant’s food and entertainment expenses. In 2019 the company listed $12,252 for such expenses, compared to $686 the year before and, according to the respondent, he has minimal staff (one employee and one contract staff);

2. The company paid $19,000 for the respondent’s family law legal fees. Similarly, the 2019 company statement shows a $30,000 increase in professional fees from 2019 to 2018;

3. The respondent bought a new car with a value of $65,000. The company paid for the car and for half of the cost of gas; The respondent has stated his salary for 2019 was $20,000. The respondent is the director of the company and sets his own salary. During oral submissions, counsel for the respondent states that the “management salary” listed in the 2019 company statement is the respondent’s salary, although the numbers do not exactly align. The statement reflects a $20,842 management salary and the respondent’s T4 shows a $20,000 salary. In addition, management salary was not listed as an expense category for 2018 showing that, assuming that the management salary is the respondent’s salary, the respondent has, after this dispute with the applicant arose, changed the manner in which he determines his salary;

4. The company statements show that from 2018 to 2019 gross revenue fell by $200,000, but costs of goods sold only decreased by $32,000. No explanation has been given for this discrepancy; and

5. The company statements show that there has also been a significant increase from 2018-2019 in repairs and maintenance, without any explanation.

[26] The above assists in determining that the respondent’s company is healthier than the respondent claims and he has received a higher financial benefit than line 150 of his 2019 income tax statement suggests. At this stage I can only provide a reasonable estimate, but, in my view, the respondent’s 2018 tax assessment, which predates the break down of the parties’ own interim solution, is a better barometer of the respondent’s income. Line 150 of the respondent’s 2018 tax statement reveals an income of $89,287. I note that adding back the legal fees, food and gas expenses at a grossed-up amount to his reported 2019 income would result in a similar amount. Using the mid range point of the Spousal Support Advisory Guidelines, the respondent is required to pay the applicant $1,556 a month.

[27] I therefore order that: a. The respondent pay the applicant temporary spousal support in the amount of $1,556 per month, commencing April 1, 2020; b. The respondent continues to maintain the applicant as a beneficiary under the medical and extended health care plan available to him through his employment, to the extent that the plan allows; and c. On consent that the respondent provide the Certified Business Valuator he has retained to prepare his income report and business valuation report, that being Martin Pont and/or anyone else he retains, a copy of the Application issued on November 26, 2019, as part of his scope of review documents.

[28] I decline, on this motion for interim spousal support, to order the respondent to obtain and maintain life insurance to secure his spousal support obligations.

Justice H. Leibovich Released: March 24, 2020

[1] The applicant has claimed that the respondent also received cash income from other off-the-books projects like the sale of scrap metal. The applicant has stated that the exact amount of cash income generated from the sale of scrap metal is unknown, but she estimated that it was between $50,000-$60,000, although she has not explained how she came to this estimate. The respondent agrees that he received cash income but that the cash was accounted for in the company’s books. I have not considered, in determining the respondent’s income, any such “undisclosed cash income”.