COURT FILE NO.: FS-19-94161
DATE: 2020 12 10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Shahinda Lokhandwala
Sarah Boulby and Kenneth Fishman, for the Applicant
Applicant
- and -
Imran Khan, 9633880 Canada Inc., Zarinataj Khan and Ishaq Khan
James Edney and Joseph Slavec for the Respondents Imran Khan and 9633880 Canada Inc.
George Karahotzitis and Melanie Larock for the Respondents Zarinataj and Ishaq Khan (not appearing on this motion)
Respondents
HEARD: December 7, 2020
REASONS FOR DECISION
LEMAY J
[1] I have been case-managing this matter since late May of this year. There have been a series of motions in this matter since I became the case management judge, including a motion for sale of the matrimonial home (2020 ONSC 3209), a motion on disclosure (2020 ONSC 6857) and an urgent motion on whether or not a planned sale of business could proceed, in which oral reasons were given last week.
[2] This motion is brought by the Respondent, Imran Khan, in order to vary the support order made by Bielby J. on June 17th, 2019. The Respondent brings this motion on the basis that the Order of Bielby J. was an “interim interim” Order, and that a review of this order was clearly contemplated by Bielby J. when he issued his decision. In addition, the Respondent alleges that there are errors in the Order of Bielby J. that should result in a change of that Order.
[3] The Applicant opposes this motion on the basis that there is no “better information” as required by the Order of Bielby J. In any event, the Applicant argues that the Divisional Court has already ruled on this matter (see 2019 ONSC 6346).
[4] For the following reasons, the Respondent’s motion is dismissed.
Background Facts
a) The Parties
[2] The Applicant Shahinda Lokhandwala and the Respondent Imran Khan were married in September of 2002 and separated in September of 2018. In addition, the parents of Imran Khan, Ms. Zarinataj Khan and Mr. Ishaq Khan, are Respondents to this litigation. Given that the only parties that appeared on this motion were Ms. Lokhandwala and Mr. Khan, I will refer to them as the Applicant and the Respondent in these reasons.
[3] There are also two corporations that are part of the litigation. One is 963380 Canada Inc. (“963 Corporation”), and the other is 02932293 B.C. Ltd. (“Cellicon”).
[4] The Applicant and the Respondent moved to Canada in 2012, and incorporated a business selling cellphones. This company was operated as Cellicon. At the time of incorporation, Cellicon was incorporated in the name of Zarinataj Khan, one of the other Respondents. As a result of a reorganization in 2015, Imran now owns 50 percent of the shares of this company. The Applicant alleges that the company is beneficially owned in equal portions by herself and the Respondent. The Respondent does not accept this position. I do not have to resolve this issue on this motion.
[5] In addition, the Respondent incorporated 963 Corporation with a business partner in 2016. This business is a purchaser, warehouser and reseller of cell phone inventory. Many of the clients of this business are Cellicon stores, including the corporate stores.
[6] As I have noted above, the Respondent’s parents are also parties to this action. Other than noting that they are parties, their interests are not engaged by this motion and they did not participate in the motion at all.
b) The Business
[7] Cellicon operates a series of stores across Canada, with the bulk of them based in British Columbia and Ontario. Some of these stores are owned and operated by Cellicon directly, while others are run by operators under Franchise Agreements.
[8] 963 Corporation purchases cell phone inventory and re-sells it to the operators. These sales may be mandated by the Franchise Agreements. The two companies are related entities.
[9] It is common ground that both the Applicant and the Respondent played a role in the business prior to the parties’ separation in September of 2018. It is also common ground that the Applicant was no longer involved in the business as of November 5th, 2018. However, the relative roles that each played in the businesses is a question of significant dispute.
[10] On this motion, the Respondent claims that the Applicant prepared the accounting records from the time of the marriage through until November 5th, 2018. On his view, the Applicant had control of all these records, and was the one who was responsible for the accounting documentation.
[11] On this motion, the Respondent argues that she was not really the accountant and that she has not ever taken a bookkeeping course. She says that all she did was write cheques, make notes in her own spreadsheets about monies received by Cellicon for rent and management fees, and log information about the Corporate stores for a period of time. The Applicant was also involved in hiring for the stores and some back-office functions that she alleges she performed under the direction of the Respondent. There were other tasks performed by the Applicant as well.
[12] I will have more to say about the financial management issues later in these reasons.
[13] It is clear that the businesses provided the bulk of the income for this family. It is much less clear how much money the business earned, or has been earning, both before and after separation. That question has founded a great deal of the litigation in this case.
c) The Order of Bielby J.
[14] The Applicant brought a motion for child and spousal support before Bielby J. on June 17th, 2019. Voluminous materials were filed for that appearance, and I was referred to those materials in the proceeding before me. The Applicant’s motion was on a short motions list. The Applicant was seeking support based on the imputation of income to the Respondent of between $800,000.00 and $1 million. The Respondent sought imputation of income of around $200,000.00, although his position was not as specific as the Applicant’s position.
[15] The Respondent acknowledged before Bielby J. that his income tax returns were not dispositive of his income. Indeed, his suggestion was that his income should be based on the pre-tax earnings of the business as a maximum, with a range that exceeded his Line 150 income on his income tax returns.
[16] After hearing argument, Bielby J. issued an endorsement in which he stated:
[36] For the purposes of interim support at this stage, I will rely on the income I will attribute to both spouses and the appropriate Guidelines in determining the quantum of support.
[37] I am not prepared to accept the figures propose [sic] by either party. I am not able to resolve the conflicting financial information before me. Any support order I make at this stage will be subject to review on better information.
[38] With respect to the income to attribute to the Respondent the best evidence I have is the statement of income for 0932293 B.C. Ltd (Cellicon) for the eight month period ending, April 30, 2019. However, the earnings before tax figure for those eight months is akin to what the respondent submits is his annual income. What about the other four months? I don’t accept that there will be no income earned over that period. In any event in a few months the 12 month figure should be available and support revisited.
[39] Further, the final four months will conclude on August 30th which I suggest includes a portion of the back to school period.
[40] A straight extrapolation of the eight month figure would suggest an annual income of $633,798. At this stage I will accept that the next four months may not be as lucrative and will, for my purposes impute to the Respondent an annual income of $575,000.
[41] With respect to the Applicant while I agree she has had a historical source of income, it is a very large leap to suggest an imputed income of $100,000. I while [sic] however take into account the monies she has received and impute to her an annual income of $30,000. While it was submitted that the Applicant has not received any monies from the corporate source in 2019, there are still six months left in the year.
[17] Based on these reasons, Bielby J. ordered the payment of support in the amount of $7,177.00 per month on account of child support and $12,000.00 per month on account of spousal support.
[18] The Respondent complied with this Order from the date it was issued through to March 31st, 2020. After that time, he has not complied with the Order, except as described below. The Respondent also appealed this Order to the Divisional Court. I will address that appeal below.
d) The Events Since March of 2020
[19] In mid-March of 2020, the global COVID-19 pandemic came to Canada. As a result, many of Cellicon’s stores were required to close their operations. The Respondent alleged that this event resulted in him immediately not being able to continue his spousal support payments.
[20] As a result, the Respondent did not pay the spousal support amounts for April of 2020 through to September of 2020. However, the Respondent did bring an urgent motion at the end of May 2020 for the sale of the matrimonial home in Vaughan. This property had been vacant since the fall of 2018 and had been the subject of much litigation.
[21] The Applicant responded to the motion for the sale of the matrimonial home by arguing that the Respondent should not be allowed to bring the motion to sell the house because he was in breach of the Order of Bielby J. Counsel argued that I should apply the provisions of Rule 1(8) to preclude this motion from being heard. I dismissed this argument, but I directed that the arrears of child and spousal support should be paid out of the proceeds of the matrimonial home when the sale of the home closed in September of 2020.
[22] As part of the case-management process, I have also addressed disclosure and expert report issues and have placed this matter on the trial list for the blitz in May of 2021.
[23] In the meantime, the Applicant had been paying modest amounts of support, although not the amounts ordered by Bielby J. As I understand it, he paid approximately $11,500.00 in the time period between April 1, 2020 and the closing date of the matrimonial home. The rest of the child and spousal support that was unpaid up to that point was paid out of the proceeds of the sale. This meant that the Respondent was current in his obligations to the end of September.
[24] The Respondent immediately fell into arrears in October and has not paid any support (except for one $2,000.00 payment) for October, November and December of this year. This brings me to the positions of the parties.
Positions of the Parties
[25] The Respondent argues as follows:
a) He has provided better information for his income for the years 2018 and 2019. As a result, he is seeking a change in the amount of income that is imputed to him back to the date that the order of Bielby J. was made, as well as a repayment of alleged overpayments he has made to the Applicant. He seeks the repayment of these alleged overpayments on this motion.
b) The business has been without income since March of 2020 and, as a result, the Respondent’s income should be imputed as $0, and an order should be issued staying the payment of child and spousal support from October 1st, 2020 forward.
[26] As part of his argument, the Respondent asserted that, even on the calculations of Bielby J., he has overpaid the Applicant. In particular, he argues that he has paid the bulk of the children’s section 7 expenses, which amount to approximately $6,600.00 per month. He acknowledges that these expenses (especially the private school fees) have been paid jointly since June of this year.
[27] The Applicant resists the Respondent’s motion on the basis that the material before me does not amount to “better information” within the meaning of the endorsement of Bielby J., as it is all information that has been prepared by relying on the Respondent rather than any third parties. As a result, the Applicant argues that I should not be revisiting an interim order, especially only five months from the trial date.
[28] In terms of post-pandemic events, the Applicant argues that, while the business may very well have suffered a decline in income, it is impossible to know what the income has declined to. The Applicant argues that, even if this decline is factored in, it might still produce an income for the Respondent that is higher than what Bielby J. imputed on the motion. Finally, in terms of the section 7 expenses, the Order of Bielby J. is all-encompassing, and I should not be revisiting it.
Issues
[29] I have to determine the following three issues on this motion:
a) Does the Order of Bielby J. permit me to re-visit the support calculations in this case?
b) If the answer to the first question is yes, should I revisit those calculations?
c) In any event, do I have the jurisdiction to consider the payment of section 7 expenses?
[30] I will consider each issue in turn.
Issue #1- Can I Revisit the Order of Bielby J?
[31] Yes.
[32] In this case, the Respondent appealed the findings of Bielby J. to the Divisional Court. Part of the reasons for the appeal was that Bielby J. did not apply a section 9 offset because he was allegedly under the mis-apprehension that the children were living primarily with the Applicant.
[33] In their reasons (2020 ONSC 6346), the Divisional Court assumed, without finding that the motions judge had made a palpable and overriding factual error and denied leave to appeal anyway. Corbett J., writing for the Court, stated (at para 5):
[5] In family law, temporary support orders are designed to establish or maintain a reasonable state of affairs pending trial. Unless expressly stated otherwise, these orders are without prejudice to adjustment by the trial judge. Interlocutory appeals in family law matters are costly, time-consuming, and tend to impair the reasonable and efficient course of those proceedings. Errors in temporary support orders – even ones that are straightforward – are almost always better addressed at trial rather than by way of interlocutory appeal. As argued by the responding party in her factum, “instead of expending their scarce resources on a potential appeal from a [temporary] Order, the parties should focus their attention on resolving the case on a final basis.”
[34] I should note parenthetically that the Respondent’s counsel argued that an error had been made by Bielby J., and the Applicant’s counsel thought that it was possible that an error had been made in respect of the section 9 offset. However, on close inspection of the materials before Bielby J., paragraph 130 of the Applicant’s Affidavit sworn May 15th, 2019 appears to request full child support in spite of the 50/50 living arrangement. As a result, it is not clear that an error was even made.
[35] In any event, the issue of the section 9 offset is not a matter for me to consider. The Divisional Court has ruled, in this case, that it is to be left to the trial judge and I am bound by that ruling. In any event, tinkering at the margins of a support order is something that the Divisional Court has warned against.
[36] This reasoning is consistent with other decisions on this subject. As the Court of Appeal noted in Wharry v. Wharry 2016 ONCA 930 (at para. 62), an interim order is no more than a “rough estimate” of the parties’ income. It is a temporary determination, that may be superseded by an order made at trial. Galea v. Galea 2017 ONSC 6335.
[37] Indeed, in Driscoll v. Driscoll 2009 CanLII 66373 (ON SC), 2009 CarswellOnt 7393 [2009] O.J. No. 5056, Lemon J. citing from Robles v. Kuhn 2009 BCSC 1163, [2009] B.C.J. 1699, outlines a series of factors that should be considered by the Court. In his list of criteria, Lemon J. notes that “on interim support applications, the Court does not embark on an in-depth analysis of the parties’ circumstances which is better left to trial. The court achieves rough justice at best.”
[38] Further, once an interim order is established, the parties are discouraged from litigating over it. In Lakhtakia v. Mehra, 2020 ONSC 2670, Horkins J. stated (at para. 19):
[19] Temporary orders are meant to provide “a reasonably acceptable solution to a difficult problem until trial” (Sypher v. Sypher (1986), 1986 CanLII 6337 (ON CA), 2 R.F.L. (3D) 413 (Ont. C.A.); see also Chaitas v. Christopoulos (2004), 2004 CanLII 66352 (ON SC), 12 R.F.L. (6th) 43 (Ont. S.C.)). Variations of temporary orders are not encouraged and should not become the focus of the parties’ litigation. Parties must devote their attention and resources to achieving a final resolution.
[39] In the case before me, the interim order is a bit different. Bielby J. clearly envisioned a review of his order on “better information”. As a result, I do have jurisdiction to revisit the matter and adjust the support if there is better information. However, my determination of whether “better information” exists must be made in the context of both the appeal to the Divisional Court and to the overall policy reasons why Courts do not favour adjusting interim support orders once they are made.
[40] To that end, I note that there is case-law provided by the Respondent outlining the factors that I should consider in setting the support amounts. That case-law only becomes relevant if I determine that there is “better information” in the record before me. I turn to that question now.
Issue #2 – Should I Revisit the Calculations of Bielby J. on the Basis of “Better Information”?
[41] No.
[42] As I have noted above, there are strong and well-settled policy reasons why a judge should not revisit an interim support order, even if that order was an “interim interim” order. In the case, absent “better information” as defined by Bielby J., his Order should not be revisited. The Divisional Court has made that clear to both the parties and to this court.
[43] The question I must address is whether I have “better information” than Bielby J. had when he made his decision. I am of the view that I do not have better information.
[44] In order to understand my reasons for this conclusion, it is important to divide my analysis and deal with the time period before March of 2020 separately from the time period after March of 2020. The arguments for each time period are different, as is the evidence.
[45] I should note that my comments are a summary of some of the key points that I have seen in the materials that the parties have provided. Given the fact that we have a mediation scheduled for next week, both counsel advised that they wished to receive this decision the same week that the motion was argued. Therefore, out of necessity, my reasons are of a summary nature
a) The Pre-March 2020 Time Period
[46] Counsel for the Respondent argues that the additional financial information that he has filed from Cellicon and from 963 Corporation is “better information” that shows that the Respondent’s income is significantly lower than the income Bielby J. found. I disagree.
[47] I start by noting that there are two businesses in this case. The businesses are interrelated, and the income from each business changes from year to year. As a result, it is difficult to see precisely what the income numbers are from year-to-year or how they fluctuate.
[48] This brings me to my second concern. At the motion before Bielby J. in 2019, the Respondent advised that he would be providing expert reports from an accountant at BDO and an income valuator at Fuller Landau LLP.
[49] The Respondent argues, as he has throughout, that the delay in the financial records is the Applicant’s fault. He argues that she was the one who was responsible for all the bookkeeping for Cellicon. The problem with this argument is that there are e-mails that suggest otherwise. One example is an exchange between Mr. Ashish Patel and the Respondent on January 30th and 31st, 2017 that reads as follows:
On Mon, Jan 30 ,2018 at 6:58 PM, Imran Khan wrote:
Ashish,
Please see the attached 2016 Corporate store sales report, also included you will find the management fees collected for Oct, Nov & Dec.
In addition, I collected approx $80K in revenues from the sale of 3 locations. Remaining documents to be sent are bank statements for:
Acc 7690: Sept & Nov
Acc 7682: Sept to Dec
All others [sic] bank statements have been sent. Also, kindly let me know the exact amount of payroll I need to take for which I have already paid Payroll taxes. At the end of the year we can see if the dividends need to be extracted as well.
Thanks.
Imran Khan
Venture Capital & Private Equity Director
[50] This contemporaneous e-mail suggests that the Respondent had a more active role in the bookkeeping for Cellicon. However, it is not my role to resolve that dispute on this motion. Indeed, there is other evidence proffered by the Applicant that is equally concerning. She asserts (as noted at paragraph [11] above) that she had not even taken any courses in bookkeeping. In his reply Affidavit, the Respondent points to a transcript allegedly from the City College of Chicago that shows that the Applicant has taken a financial accounting course and a managerial accounting course.
[51] I make no final conclusions on this evidence. It is not my role. I simply point this evidence out to demonstrate that the Court does not, at this point, have a complete record and that there appear to be frailties with the evidence being tendered by both sides.
[52] The evidence I have in this case, other than the financial statements (which I will come to), is data that was prepared by the Respondent. Counsel for the Applicant asks me to draw an adverse inference from the Respondent’s failure to produce any expert reports in spite of the fact that he has been asserting that he will produce these reports for more than a year.
[53] I am concerned with the fact that I have no independent expert reports from the Respondent in this case. He has been in control of the business for more than two years, and I have no good explanation as to why expert reports have not been prepared and presented.
[54] Disclosure is ongoing in this case. Therefore, I understand that the Respondent may not yet be in a position to provide a final expert report from either the business valuator or from BDO. However, this does not explain why there is no new evidence from either of these experts.
[55] In the case of BDO, the Respondent has spent approximately $100,000.00 on their services. The Respondent has no obligation to produce a report from BDO. However, the fact that he has not even produced a letter from BDO authored in the last year about his 2018 or 2019 income is concerning. It suggests that the experts have not provided conclusions (or are not prepared to provide conclusions) to support the Respondent’s position. In short, there is some support for the adverse inference that Ms. Boulby asks me to draw. I am not prepared to go so far as to draw an adverse inference, however. For my purposes, it is sufficient to conclude that the absence of expert reports is a significant absence of “better information”.
[56] My third concern is with the cash payments that are alleged to have been received by Cellicon and not documented. The Applicant has provided numerous Affidavits in which she has stated that these cash payments have been received, and that the parties regularly had substantial amounts of cash in their home.
[57] The Respondent denies these allegations. He has alleged that the Applicant misappropriated cash from the business in her role as an accountant, and that he did not know that there was cash being kept by the Applicant. The problem with the Respondent’s position is that it appears to be contradicted by some of the e-mails in the materials that I have.
[58] It is possible that the Respondent’s assertions about the cash are correct. However, in the absence of a complete review of the financial affairs of Cellicon and its related entities, it is difficult to reach any firm conclusions about whether there was (or continues to be) an unreported cash element to the parties’ business. In any event, this type of analysis is best left to a trial to determine.
[59] This brings me to my fourth concern with the information provided by the Respondent. I have reviewed the financial statements in detail, and I acknowledge that they were prepared on the basis of an engagement letter, which is a more rigorous review of the financial information than merely collating the information provided by the Respondent.
[60] However, on reviewing these statements, I have a number of concerns with the Respondent’s assertion as to what the business’ income was for 2018 and 2019. Those concerns include:
a) As discussed previously, there is an open question as to whether there is a “cash component” to this business.
b) The statements themselves make it clear that inventory is not something that the accountants can provide any conclusions on. As a result, it is difficult to know what the actual sales of the business were.
c) There are no similar statements for 963 Corporation.
d) As mentioned previously, there are issues about whether there are personal expenses being run through the business, even if these expenses are legitimate business expenses. I cannot determine that from the statements that I have.
[61] Finally, I should address the Respondent’s assertion that the “better information” that Bielby J. was envisioning was the 12-month financial statement for 2009. In support of this position, counsel for the Respondent relies on the comments made at the end of paragraph 38 of Bielby J.’s endorsement. A review of Bielby J.’s endorsement makes it clear that more evidence was expected than simply the 12-month financial statements. Specifically, Bielby J. notes that expert reports are pending.
[62] In any event, the problems with relying solely on the 2018 and 2019 statements even as reviewed by the accountants remain as I have described. The information in these statements is simply not sufficient “better information” that would justify an adjustment to the support ordered by Bielby J., particularly given that we are only five months from trial.
[63] As a result, I am not prepared to make any adjustments to the support payable by the Respondent for the period prior to March of 2020.
b) The Post-March 2020 Time Period
[64] The Respondent argues that his income has decreased to nothing since the commencement of the pandemic. In support of this position, counsel for the Respondent points to three issues that are illustrated by the financial statements I have for 2020:
a) the default on the Management Service Fees (“MSA Fees”);
b) the defaults on rents from the franchisees;
c) the decline in the revenues for the business.
[65] There are numerous problems with these submissions. I will address the first two issues together. The agreements between Cellicon and its franchisees are such that the franchisees pay Cellicon the MSA fees as well as rent. Cellicon holds the leases and is, I understand, ultimately responsible for the payments of the leases.
[66] In support of the assertion that the MSA fees and the leases are in arrears, counsel for the Respondent relies on a series of letters sent by Pallet Valo LLP to Cellicon’s franchisees. These letters invite Cellicon’s franchisees to negotiate over lease payments and the MSA fees payments that they are all required to make under the terms of their agreements with Cellicon.
[67] These letters suggest that Cellicon is having significant problems with the collection and remittance of rent. However, there are no replies to these letters from the individual franchisees and there are no significant documents from the landlords about the status of the leases. The documents that I have received are all from September and early October, and show some arrears relating to three or four of the locations only. There is no updated information to show either what efforts were made to pay these amounts or whether there was any follow-up with the franchisees.
[68] These landlords are sophisticated commercial entities, and I would expect that there would be information directly from those landlords about the status of leases on a timely basis. There is very little such evidence. The only other evidence that I have is an e-mail from a Mr. Jeffrey Bercowitz, who is a lease broker. That e-mail outlines certain positions that the landlords are allegedly taking. However, again there is no documentation from the landlords themselves. These are sophisticated commercial entities. I would expect that there would be documentation to support the Respondent’s position.
[69] Given the lacunae in this evidence, it is difficult to accept the letters from Pallet Valo LLP or the other documentation respecting leases as substantiating the fact that the business is not making any money. I hasten to add that the few documents from independent sources do show that the business may be having some problems.
[70] That being said, however, there is very little evidence on the motion that does not originate from (or was prepared by) the Respondent. As an example, he has provided a whole series of spreadsheets and tables that show how much money is owing from various franchisees. The problem with these spreadsheets is that they do not provide any corroboration other than the Respondent saying that the monies are owing. One would expect to find demand letters or other correspondence to support the failure of the franchisees to make these payments. Other than the correspondence from Pallet Valo LLP described in paragraph [66] above, there is very little independent evidence.
[71] Second, there is the cash on hand in the Cellicon business. I acknowledge that the cash on hand went down from 2019 to 2020. However, there were two significant reasons for this change. First, there were transfers to shareholders and related entities of approximately $180,000.00. Second, there was a substantial increase in the professional fees that were paid of nearly $60,000.00 from 2019 to 2020. I will return to the professional fees as a separate issue below.
[72] The transfers to shareholders are of some concern to me. On March 18th, 2020, Cellicon wrote a cheque for $100,000.00 to Zarinataj Khan, one of the shareholders. In his Affidavit, the Respondent deposes that this transfer was made prior to the commencement of the pandemic. The problem with this statement is that the pandemic was already a significant issue, as schools had been closed and gatherings had been reduced. As a result, it is difficult to understand why cash would be taken out of the business by a shareholder at what could likely be a critical time for the business.
[73] The other transfer of significance was a transfer to the related party, 963 Corporation. As I will discuss, both corporations have been paying legal fees in this matter.
[74] When these transactions are considered, it is difficult to accept that the business has earned no income in 2020 and that its cash flow is critical, as is suggested by the Respondent. Indeed, given the gaps in the evidence it is difficult to know how much the business has been earning in 2020.
[75] There was also an interesting change in the Affidavit materials that the Respondent filed on this motion. In his original Affidavit on October 31st, 2020, the Respondent swore that he had only taken $30,607.00 out of the business. His Affidavit details the uses for these expenses. However, the Respondent filed a further Affidavit on November 20th, 2020 in which he deposed that he had actually taken out $106,000.00 from the business, which included items such as the carrying costs for the matrimonial home.
[76] Counsel for the Applicant argues that the timing of this new Affidavit is suspicious because it was filed very shortly after my disclosure decision was made. I accept Mr. Edney’s statement that he and his client had been planning to provide this supplementary Affidavit before my decision on disclosure had been released. However, that does not obviate the concern I have. The difference between these amounts is very significant. The fact that the Respondent missed such a significant issue raises questions about the completeness and accuracy of the information that he has provided to the Court on this motion.
[77] Third, while the income of the business has gone down, there was a significant expenditure for this litigation from the funds of the business for 2019 and 2020. There are arguments about whether these expenditures are properly incurred by the business. I do not intend to resolve those issues. However, I would note that they provide an alternative explanation as to why the business is not as profitable in 2020 as it was in 2019.
[78] Fourth, the documentation that has been provided remains incomplete. As was the case on the original motion before Bielby J., there is evidence to suggest that significant personal expenses (including cell phone bills and other expenditures) are being run through the business. In the absence of an expert’s report, or indeed any analysis of these potential expenses, it is difficult to quantify how much of these expenditures are personal expenditures or how much they change the income of the business.
[79] Fifth, the statements for 2020 run to the end of October. There is evidence in the materials before me that suggest that the months of November and December are two of the busiest months for a retail operation. As a result, it is difficult to know with certainty as to whether the business is going to earn more income in November and December, or whether the franchisees will make more payments in those months.
[80] Finally, there is the evidence of the payments that the Respondent has made to his niece, who is apparently working at Cellicon. According to the Respondent, his niece is an employee of Cellicon, and has a high degree of responsibility. To date (being the end of November) she has been paid approximately $78,000.00, and the Respondent has apparently also paid the lease on a BMW for her.
[81] This evidence contradicts the Respondent’s assertion that the business is on the verge of bankruptcy for two reasons:
a) Regardless of whether the niece has a “high level of responsibility” or not, an annualized salary of over $85,000.00 is a very high salary for a business that is on the verge of bankruptcy. It is especially concerning when this salary is being paid to a non-arms-length party.
b) In the letter that the Respondent had Mr. Edney send to the Applicant’s counsel on March 27th, 2020, the Applicant was advised that all employees of Cellicon were terminated. As a result, the hiring (and payment) of the Respondent’s niece suggests that the business is now performing better than it was in March of 2020.
[82] For all these reasons, I simply do not have enough credible, detailed and independent information to make a determination that there has been a significant change in the income of the business, and that this change has dropped the Respondents’ income to a level that is substantially below the imputed income found by Bielby J.
[83] It is possible that, if this were a motion to determine the incomes of the parties at first instance, lower (or higher) numbers might be ordered. Of necessity, the “rough justice” that flows from an interim support order may differ from judge to judge.
[84] However, my task is not to make a decision ab initio. My decision is also not to sit on appeal from the Order of Bielby J. The Divisional Court has already done so and determined that leave should not be granted to appeal Bielby J.’s order. My role is to determine whether there is any “better information” than what was before Bielby J.
[85] Counsel for the Respondent argues that the completed financial statements are better information. For the reasons that I have set out above, those financial statements do not provide a complete picture of the Respondent’s income. There are still significant problems with the evidence in this case, and the evidence is still open to numerous interpretations.
[86] Therefore, there is no reasoned basis for the Court to reach a different conclusion than Bielby J. did on the basis that there is “better information” before the Court for either the period before the pandemic started or for the period after the pandemic started. As a result, I am not prepared to adjust the child and spousal support payments ordered by Bielby J., even after the pandemic started.
Issue #3 – What Should be Done with Section 7 Expenses?
[87] The Respondent raises a significant concern about section 7 expenses. He argues that the Order of Bielby J., combined with the fact that the Respondent has (until June of this year) paid all of the section 7 expenses, resulted in an unfairness to the Respondent.
[88] The Applicant argues that Bielby J. has made an order that addresses the issues of child support on a global basis. In any event, the Applicant argues that the Respondent’s income, especially prior to March of 2020 is higher than the amount imputed to him by Bielby J. As a result, the Applicant argues that any adjustments for these expenses should be left to trial.
[89] On this point, I accept the Applicant’s position for three reasons. First, the issue of section 7 expenses was raised by both parties in their materials on the motion before Bielby J. For example, in her Affidavit of May 15th, 2019 (at paragraph 143), the Applicant asked for an order for the Respondent to pay all the special and extraordinary expenses. Similarly, in his Affidavit of May 24th, 2019, the Respondent asked for a split of 69 percent to 31 percent for section 7 expenses. As a result, this issue was raised before Bielby J. and may very well be encompassed in his order.
[90] Second, the parties have now addressed this issue between them. Specifically, the most significant expense is the private school fees for the children. Those expenses have been paid for the 2020-2021 school year out of the proceeds of the matrimonial home. The rest of the expenses at this point have been reduced significantly because the children are no longer participating in activities due to the pandemic-related shutdown.
[91] Finally, these types of adjustments are the sort of adjustments that should be left to trial. An accounting of this sort on an interim motion is not the sort of exercise that the Court should be engaging in. However, I do acknowledge on this issue that the Respondent may very well have a legitimate concern.
[92] For these reasons, I am not making any adjustment to the amounts owing by the Respondent on account of the section 7 expenses that he has paid. That is an issue for the trial judge.
Conclusion
[93] For the foregoing reasons, I am dismissing the Respondent’s motion. The Order of Bielby J. remains in force.
[94] The costs of this motion are left to the trial judge. I have made that decision in spite of the fact that the Applicant has been successful on this motion, and I do so in spite of the fact that there could be offers to settle this motion.
[95] I do this for two reasons. First, and most importantly, there has clearly been some change in the fortunes of Cellicon. The fact that we cannot quantify either what that change is, or whether that change brings the Respondent’s income below what Bielby J. has imputed on an interim basis does not mean that the Respondent’s motion was without merit. Indeed, it may turn out that the Respondent was right. If the Respondent was right, then the Applicant should not be entitled to costs for taking what would turn out, in retrospect, to have been an unreasonable position.
[96] Second, even if there were offers to settle, it will be difficult to weigh them properly given the fact that we do not know whose position is reasonable at this point. For those reasons, costs of this motion are reserved to the trial judge.
[97] Finally, I thank counsel for their assistance with this motion, and for their patience as we navigated some significant technological issues with the materials.
LEMAY J
Released: December 10th, 2020
COURT FILE NO.: FS-19-94161
DATE: 2020 12 10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Shahinda Lokhandwala
Applicant
- and -
Imran Khan, 9633880 Canada Inc., Zarinataj Khan and Ishaq Khan
Respondents
REASONS FOR DECISION
LEMAY J
Released: December 10th, 2020