NEWMARKET COURT FILE NO.: FC-18-56374-00 DATE: 20200707 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Susan Lynn Jerome, Applicant AND: Brian Earl Jerome, Respondent
BEFORE: The Honourable Mr. Justice D.A. Jarvis
COUNSEL: Helen McCullough, Counsel for the Applicant Glenn Ridler, Counsel for the Respondent
HEARD: In Writing
RULING ON MOTION
[1] On June 18, 2020 I granted the applicant (“the wife”) leave to proceed with a motion dealing with disclosure from the respondent (“the husband”), sale of the parties’ matrimonial home and support. Directions were given. The motion was heard by teleconference on June 29, 2020. The husband audited: the wife did not.
[2] On October 30, 2019 Bennett J. made a temporary Order (“the Order”), on consent, dealing with the parties’ financial affairs and, in particular, the winding up of their landscaping business and sale of their home. Pursuant to the Order each party was also entitled to withdraw funds from the business account to meet their expenses. The wife says, and the husband disputes, that he has disobeyed the Order.
[3] Before argument started, the parties advised that they had resolved the issue dealing with the sale of the matrimonial home and so it is unnecessary to deal with it. The other two issues will be addressed separately.
Disclosure
[4] The parties owned a landscaping and snowplowing business on the valuation date (April 30, 2018). [1] The wife handled paying the business bills under the husband’s direction and he managed the business, dealing with clients and employees. The Order contained directions for the winding up of the business and distribution of its assets.
Pending the closing of the sale of the Matrimonial Home and the auctioning off of the assets of Jerome’s Landscaping & Snowplowing pursuant to the paragraphs above, the Respondent shall deposit all funds generated from the operation of Jerome’s Landscaping & Snowplowing into the BMO business bank account ending ***766.
The Respondent shall provide a list to the Applicant of all open contracts currently held by Jerome’s Landscaping & Snowplowing, which shall include proof of the amount(s) being charged in relation to each contract so that the Applicant can satisfy herself that the Responding is depositing all funds generated into the BMO business banking account ending ***766.
The Respondent shall be permitted to pay the ongoing operating expenses associated with Jerome’s Landscaping & Snowplowing from the BMO business bank account ending ***766 pending the closing of the sale of the Matrimonial Home and the winding up of Jerome’s Landscaping & Snowplowing pursuant to the paragraphs above. The Respondent shall be required to keep records of all expenses withdrawn from the account and if the Applicant questions any such expenses then the Respondent shall be obligated to provide proof of the expense by way of cheque or receipt, including proof of all wages paid to third parties in relation to the operation of Jerome’s Landscaping & Snowplowing. If a business expense is paid by credit card and then the credit card is paid off using the BMO business bank account ending ***766, the Respondent shall provide the credit card statement to the Applicant to verify this expense.
[5] In pre-Order pleadings and her motion evidence the wife alleged that a significant component of the business revenue was unreported cash. In a June 17, 2019 affidavit the wife listed client account summaries from 2012 to 2018 that identified clients by name, whether written contracts existed, the amounts paid and whether those payments were deposited to the business account or paid in cash. It is not an unreasonable inference from the above-referenced terms of the Order that the wife was concerned that the husband would not only continue the practice of accepting cash for services rendered but also that those funds would be directed elsewhere than to the business or the parties jointly.
[6] By letter dated December 19, 2019 Ms. McCullough wrote to Mr. Ridler to advise that the husband had not complied with the Order and alerting Mr. Ridler that the husband appeared to be advertising landscaping and snowplowing services in his own name. A recent advertisement from a local paper was provided.
[7] The husband did not provide the disclosure requested until June 24, 2020 and then only after the wife was granted leave to proceed with her motion (the urgency of which he had opposed). [2] In argument, the husband stated that the business only had three written contracts when he left the matrimonial home in January 2019 and lost one of those contracts for the 2019-2020 season. Much of the business was performed for private residences for which there was never anything written. Mr. Ridler acknowledged that the husband had not provided a list of those clients. The husband said that he was unable to provide a list of the business’ “open contracts” because he had been excluded from the matrimonial home since January 24, 2019 after he had been charged with assaulting the wife.
[8] Having received the husband’s disclosure shortly before this motion proceeded, Ms. McCullough took issue with and sought the court’s assistance in obtaining the following disclosure from the husband:
(a) On May 14, 2020 the business account recorded a $16,143 withdrawal that the husband said was to pay for insurance for the previous year that he had never renewed. No supporting documents were provided or an explanation why the husband would be paying retroactively for insurance never needed; (b) The wife wanted to know the purpose for, and needed the supporting documents relating to, insurance payments made to Stewart Insurance and Commonwealth Insurance ($135.04 monthly); (c) The statements for the husband’s Cashback Mastercard (account ending in #7333) from and after April 12, 2019. The husband had provided statements up to April 11, 2019 but maintained that as this facility was opened after separation its further disclosure was not relevant to the parties’ “property division”; (d) Disclosure of all accounts opened by the husband alone or with any other person after the valuation date.
[9] Mr. Ridler argued that the husband had been complying with the Order and that his primary focus was winding up the company, although it was apparent from the parties’ evidence that little had been done in that regard and, according to the wife (as already noted), the husband continued to advertise in his own name for work and drivers after the date of the Order. There was no evidence that the business lost clients (excepting one of the written contracts) after January 2019, that the husband wasn’t working after that date or that he wouldn’t know the identities of those clients with whom he or the business had “open” contracts from and after January 24, 2019 and for which he was paid in cash.
Support
[10] The Order did not deal with support as a discrete item of relief but provided for payment of the expenses for the matrimonial home and financial assistance to the parties. This was to be funded from the business account. The Order provided as follows:
As it relates to the BMO business bank account ending ***766, the parties agree that pending the sale of the Matrimonial Home and the winding up of Jerome’s Landscaping & Snowplowing pursuant to the paragraphs above, the following amount shall be withdrawn: a. Susan shall be permitted to withdrawn $2,500 per month, commending November 1, 2019 and on the 1st day of each month thereafter, which shall be applied towards the carrying costs of the Matrimonial Home pending sale. In the event the parties’ son vacates the Matrimonial Home, this amount shall increase to $3,000 per month, commencing on the first day of the month after the son vacates the Matrimonial Home. b. Susan shall be permitted to withdraw $1,500 per month, commending November 1, 2019 and on the first day of each month thereafter, for her personal use. c. Brian shall be permitted to withdrawn $2,500 per month, commending November 1, 2019 and on the 1st day of each month thereafter, for his personal use.
The Applicant’s gas, car insurance and maintenance shall be paid from the BMO business bank account ending ***766, up to a maximum of $500 per month pending the winding up of Jerome’s Landscaping & Snowplowing.
The Respondent’s vehicle costs will continue to be run through the BMO business bank account ending ***766 as a business expense.
Unless otherwise outlined above related to the BMO business bank account ending ***766, neither party shall withdraw any funds or pay any personal expenses from this account.
[11] The wife’s motion was prompted by a letter from Mr. Ridler on June 2, 2020 that due to COVID-19 the business was not able to earn income and so the husband was “no longer able to maintain funds in the business account for Ms. Jerome to withdraw on a monthly basis”. In Mr. Ridler’s June 24, 2020 letter to Ms. McCullough that accompanied the husband’s affidavit of the same date, the husband took the position that he would contribute $2,500 as and for his share of the house expenses by direct payment to the wife from his own resources. There were no other funds available so the wife would have to pay for her share of those expenses and her personal expenses from her own funds. She was working as a housekeeper earning about $800 monthly.
[12] Neither party provided the court with an updated financial statement.
Analysis
[13] The Order contemplated that the parties, particularly the husband, would continue to operate the business for the benefit of both parties until its affairs were wound up. The wife alleged, and the husband did not dispute, that a substantial part of the business income was received in cash. There is an obvious reason why a service provider may choose to work on a cash basis as did the parties in this case: there are few ways to confidently determine and trace income or revenue when there are no records.
[14] It is a fair inference from the evidence that the husband continued to operate a landscaping and snowplow business after January 24, 2019 although one not dedicated solely to the family business. Mr. Ridler was careful to emphasize that the husband was complying as best he could with the Order but left unsaid was any suggestion that the husband was not working as before the Order, that the business had sustained a serious downturn in revenue between January 2019 and mid-March 2020 and exactly how the COVID-19 pandemic adversely impacted a business performed from a truck (i.e. snowplowing) or landscaping activities (i.e. outside work). The husband had a clear obligation before, and especially after, the Order to provide the disclosure needed for the wife and, by extension, the court to fairly assess the parties’ claims, and he failed. It wasn’t the wife’s obligation to pursue him. The husband had a clear, financial self-interest in failing to provide to the wife the identities of those clients with whom either the family business or he, operating in his personal name, had open contracts and was paid in cash.
[15] As for the issue of payment of the household and personal expenses, the husband’s position is little more than that the wife must fend for herself and rely on her own savings for her support. That was not what the Order intended. And it is not an acceptable position in law. The husband’s operation of the business was the mainstay of the family’s financial security. The problem though is that there is no current financial information before the court with which to reasonably assess the ability of either party to maintain the house expenses or meet the parties’ support needs, especially those of the wife. The court has no information, for example, as to the monthly running costs for the home and whether payment of its realty taxes could be deferred until completion of its sale.
[16] In my view, the husband should contribute $2,500 from his own funds to the wife to contribute to the home expenses, and $2,000 a month as spousal support comprising the $1,500 ordered by Bennett J. and $500 for her automobile gas, car insurance and maintenance (paragraphs 14b and 15, respectively, of the Order). This will be on a without prejudice basis.
Disposition
[17] Accordingly, the following is ordered:
(a) the husband shall provide to the wife the disclosure set out in paragraph 8 of this Ruling by August 17, 2020; (b) In providing the disclosure with respect to the clients for whom the family business provided services, the husband shall list those clients with whom the business and he in his personal capacity had written, and open, contracts from and after January 14, 2019. This list shall identify the client by name, whether the payment for the service rendered was bank-deposited or paid in cash, and the amounts paid and where deposited if not deposited to the family business account; (c) Failure by the husband to provide the disclosure set out in (a) and (b) above by the August 17, 2020 deadline will result in a $150 daily penalty payable by the husband from his share of the net sale proceeds of the matrimonial home. This amount shall be in addition to the amounts distributable to the parties pursuant to paragraph 4 of the Order upon completion of the sale; (d) The husband shall pay directly to the wife as a contribution to the monthly operating costs of the matrimonial home the sum of $2,500 effective July 1, 2020 characterization of which as entitling him alone to a credit in whole or in part for payment of those expenses being reserved to final disposition of these proceedings; (e) The husband shall pay to the wife for spousal support $2,000 a month effective July 1, 2020 on a without prejudice basis; (f) The husband shall be credited with payments made to the wife from either the business or him from and after July 1, 2020; (g) The parties shall exchange updated financial statements by August 24, 2020; (h) The parties may schedule a next event in these proceedings in accordance with the Notice to the Profession and Family Law Litigants effective June 26, 2020.
[18] A Support Deduction Order shall issue.
[19] In the event that the parties are unable to agree on the costs of the wife’s motion, the following is directed:
(a) The wife shall deliver her submissions by July 17, 2020; (b) The husband shall deliver his responding submissions by July 27, 2020; (c) Reply (if any) by the wife to be delivered by July 31, 2020; (d) All submissions shall be double-spaced and, with respect to (a) and (b) no longer than four pages: reply is limited to two pages. These shall be filed in the Continuing Record. Counsel shall advise the judicial assistant (meghan.billings@ontario.ca) when they have filed their submissions; (e) Offers to Settle, Bills of Costs and any authority upon which counsel may wish to rely shall be filed by the above deadlines but not form part of the Continuing Record; (f) All material may be filed electronically.
[20] In the circumstances of the COVID-19 emergency, this Order is operative and enforceable without any need for a signed or entered, formal, typed Order. Approval is dispensed with. The parties may submit a formal Order for signing and entry once the court re-opens.
Justice David A. Jarvis Date: July 7, 2020
Footnotes
[1] The wife said that the business also provided firewood. [2] 2020 ONSC 3813.