Albaum v Albaum, 2021 ONSC 3106

COURT FILE NO.: FS-20-19412-00

DATE: 20210426

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

DONNA JODI ALBAUM

Applicant/Moving Party

– and –

LORNE HOWARD ALBAUM

Respondent/Respondent Party

Avra Rosen and Kelly Eckert, for the Applicant

Cheryl Goldhart and Megan O’Neill, for the Respondent

HEARD: April 13, 2021

ENDORSEMENT ON MOTION

P.J. Monahan J.

1The Applicant seeks an order for interim spousal support in the amount of $82,551 per month retroactive to August 1, 2019. This quantum of support is premised on the Respondent’s average income for support purposes over the last four years as being $2.264 million, and based on the midrange of the Spousal Support Advisory Guidelines (the “SSAG”).

2The Respondent acknowledges that the Applicant is entitled to spousal support. However, he argues that it is simply not feasible within the confines of a one-hour motion to properly review and assess the voluminous affidavit evidence and the competing and untested expert reports. Accordingly, he submits that the only way to deal with the case justly is to set the matter down for trial where the court will have the benefit of a complete evidentiary record, including cross-examination. In the alternative, if it is determined that an order for interim spousal support is appropriate, then the Respondent seeks an order based on his 2021 income, which he argues is nil, and the Applicant’s 2020 income, which he argues is $281,577.

3For the reasons that follow, I order the Respondent to pay interim spousal support in the amount of $65,625 per month, commencing February 1, 2021.

Background

4The Applicant (who is 56 years old) and the Respondent (who is 57) were married on November 19, 1989 and separated in September 2018. They have two adult children, JA (age 25) and RA (age 23).

5It is acknowledged that the parties had a traditional marriage in which the Applicant gave up her career following the birth of their two children and was primarily responsible for their care as well as for managing the household. It is further acknowledged that the Respondent was the primary income earner during the marriage. While he is trained as a lawyer, he has not practiced law for many years and the majority of his income is earned through the making of mini-tender offers.¹

6Over the past number of years, the Respondent’s mini-tender business has been very successful. While the parties do not agree on his income for spousal support purposes, the Respondent’s own expert acknowledges that over the past three years, the Respondent’s annual income for support purposes has averaged approximately $1.8 million.

7Both parties also acknowledge that they lived a privileged lifestyle during the marriage. Their children attended private schools and studied abroad while in high school. The family frequently took vacations to a wide variety of international destinations, travelling first-class or business class and staying in luxury hotels.

8During the marriage, the Respondent conducted his mini-tender business through TRC Capital Inc. (“TRC Capital”), which is wholly-owned by the Applicant. The Applicant also owns a number of related companies which were used during the marriage to earn income, hold assets and minimize taxes. The Respondent states that he put each of these corporations in the Applicant’s name to protect them from any claims that may arise against him in his role as a lawyer. During the marriage, most of the parties’ personal expenses were funded through one or more of these corporations.

9For a period of time following the parties’ separation in September 2018, the Respondent continued to conduct his mini-tender business through TRC Capital, and the parties continued to fund their personal expenses through that company. However, in August 2019 the Respondent left TRC Capital and thereafter continued his mini-tender business through a previously inactive company wholly-owned by him, TRC Capital Investment Corporation (“TRC Investment”).

Issues

10Since it is acknowledged that the Applicant is entitled to spousal support, the only issues that arise on this motion are as follows:

a. the respective incomes of the parties;

b. the quantum of support payable; and

c. the commencement date.

Relevant Legal Principles

11The principles applicable to motions for interim spousal support are not in dispute. In addition to the factors and objectives set out in s. 15.2 of the Divorce Act, the following principles established by the relevant jurisprudence² are relied up by both the parties in support of their respective positions on this motion:

a. on applications for interim support the Court does not engage in a comprehensive review and analysis of the parties’ circumstances, which is better left for trial. The court achieves “rough justice” at best;

b. the purpose of interim relief is to provide the parties with reasonable arrangements to meet the needs and means of the parties until trial. Therefore on applications for interim support, the Applicant’s needs and the Respondent’s ability to pay assume greater significance; and

c. 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 the payor’s ability warrants it.

The Respondent’s Income for Support Purposes

12Each of the parties has filed expert reports calculating the Respondent’s income for support purposes. As might be expected, the experts differ as to the Respondent’s income, as set out in the table below:

Respondent’s Income for Support Purposes

Year

2017

2018

2019

2020

4-year average

3-year average

Applicant’s expert

$2,690,000

$1,996,000

$2,733,000

$1,638,000

$2,264,000

$2,122,000

Respondent’s expert

$1,786,000

$2,327,000

$2,333,000

$758,000

$1,801,000

$1,806,000

13Apart from the differences between the respective expert’s income calculations, what is evident from this table is that the Respondent’s income has varied significantly from year to year. This is because the Respondent’s mini-tender business is transaction-based and he only earns income when a mini-tender is successful. For this reason, the Respondent indicates that his practice has been to maintain significant working capital in his operating corporation to pay for fixed expenses required to prepare, advertise and make mini-tender offers. He also attempts to keep a cushion to pay for family expenses during those periods when he is not earning income.

14Despite this income volatility, when viewed over the lens of a 3- or 4-year period, it is evident that the Respondent has consistently earned substantial income through the mini-tender business. Even the Respondent’s expert finds that his income over the past 4 years has averaged approximately $1.8 million annually. Moreover, the Respondent’s expert factored into his calculation the fact that, although TRC Investment had adjusted pretax corporate income of $2.191 million in 2020, the Respondent took the position that none of the retained earnings was available for distribution.³ Although the Respondent’s expert did not fully accept the Respondent’s position in that regard, the expert ultimately concluded that only $496,000 of TRC Investment’s 2020 income was available for spousal support purposes, which was a key consideration leading him to conclude that the Respondent’s total income for the year was just $758,000.⁴

15The Respondent argues that, given the volatility in his income, the court should take a cautious approach in determining his income for support purposes. For example, in the 2021 fiscal year, the Respondent states that TRC Investments has not made any income and is operating at a loss. The Respondent argues that if he is required to make a substantial spousal support payment based on his prior years’ income he may be required to encroach on his capital, thereby undermining the future success of his mini-tender business. This would in effect ‘kill the goose that lays the golden egg’, to the ultimate detriment of both parties and their children.

16I accept the need for caution in determining the Respondent’s income on a motion for interim support, particularly where the court has not had the benefit of a complete record, including cross-examination. It is for that very reason that, for purposes of this motion for interim without prejudice support, I am prepared to accept the conclusions of the Respondent’s expert. As noted, the Respondent’s expert has taken into account the Respondent’s view that it is necessary and appropriate to build up significant working capital in the form of retained earnings in TRC Investments. At the end of the 2020 fiscal year, TRC Investments had approximately $1.344 million in working capital. Even on a conservative approach, these retained earnings should be more than sufficient to fund the operations of TRC Investment for a substantial period of time. It also appears that, quite apart from the mini-tender business, the value of Respondent’s assets in his personal investment account has increased by over $1 million since January 2020, such that the balance in that account as of February 28, 2021 was approximately $1.49 million.

17In light of these considerations, I see little risk of harm to the Respondent’s ongoing business operations, or of hardship to him personally, in determining the Respondent’s income for support purposes on an interim without prejudice basis to be $1.8 million. This is his average income over the past three years as determined by his own expert, who has proceeded cautiously and accepted the need to build up substantial working capital in TRC Investment. As for the fact that the Respondent has not yet earned any income in fiscal 2021, he was in a similar position in March of 2020 and yet ended the year with pre-tax corporate income of nearly $2.2 million.

18While the Respondent’s income fluctuates from one year to the next, he has demonstrated a consistent ability to earn substantial income from the mini-tender business. He is now operating the business through a new corporation but the nature of the business remains the same. I therefore find the Respondent’s income for support purposes on an interim without prejudice basis to be $1.8 million.

Applicant’s Income

19Since the parties separated, the Applicant has not earned any income from paid employment. Nevertheless, the Respondent argues that her income for support purposes should be found to be $281,577, based on the income of the various corporations that she owns.

20The income to which the Respondent refers is based on income which he earned in previous years and which was paid to or earned by various corporations owned by the Applicant. This corporate structure was set up by the Respondent in order to minimize taxes and personal liability.

21Since the parties separated, the corporations owned by the Applicant have declared pretax corporate income and been required to pay substantial corporate and personal taxes to CRA. There has been very limited evidence filed on this motion describing the transactions in which these corporations have engaged since separation, and for whose benefits various payments have been made. These are complex issues which will need to be resolved by the trial judge.

22For purpose of this of the present motion, it is clear that since separation the Applicant has not been engaged in paid employment and has not actually earned any income herself. I therefore find that her income for purposes of this motion to be nil.

Quantum of Support Payable

23Based on the Respondent’s income of $1.8 million and the Applicant’s income of nil, the midrange of the SSAGs suggests a monthly spousal support payment of $65,625. This would provide the Applicant with an after-tax income of $33,674 per month.

24As discussed above, in considering the appropriateness of this level of support the primary considerations are the Respondent’s ability to pay and the Applicant’s need.

25I have already determined that the Respondent has the ability to pay this level of monthly support, given his income.

26As for the Applicant’s needs, her most recent financial statement sworn March 9, 2021 indicates that her current monthly budget is $33,660.15. This aligns almost exactly with the after-tax income that she would have available from a support payment of $65,625.

27The Applicant argues that her current budget has been scaled back in light of the restrictions associated with COVID 19 and does not reflect the standard of living she was accustomed to during the marriage. Nevertheless the Applicant’s current monthly budget does appear to provide for a comfortable lifestyle, including over $8300 per month for clothing for herself and their two adult children, over $5,000 per month for health-related expenses and $5,000 per month for vacations, amongst other items.

28A monthly spousal support payment of $65,625 is within the Respondent’s means and meets the Applicant’s current needs. On a without prejudice basis, I order the Respondent to commence paying the Applicant support at this level.

Commencement Date of Support

29The Applicant argues that support should be ordered retroactive to August 2019. Up to this date, the parties’ personal expenses were funded through TRC Capital. Since August 2019 the Respondent has been earning income through TRC Investment rather than TRC Capital, and he has not paid any spousal support. The Applicant argues that she has been required to deplete her capital in order to fund her living expenses and should be reimbursed.

30There are three difficulties with the Applicant’s claim for support retroactive to August 2019.

31First, since the date of separation the value of the Applicant’s property has increased from $5.285 million to $5.410 million, while her debts and other liabilities have decreased from $980,000 to $640,000. In short, her net worth has increased by over $450,000 since the parties’ separation, which seems difficult to square with the Applicant’s claim that she has been forced to deplete her capital to fund her living expenses.

32Second, as discussed above, since the date of separation there has been a complex series of transactions involving various corporations which earned income from the Respondent’s mini-tender business but were owned by the Applicant. It is simply not possible on the limited record before me to determine the legal effect of those corporate transactions for support and equalization purposes. I am reluctant to make a retroactive order for support without a better understanding of the parties’ financial dealings and circumstances since separation.

33Third, if the monthly support order were made retroactive to August 2019, it would require a payment of well over $1 million. I am concerned that a requiring a payment of that magnitude might well cause difficulties with the ongoing funding of TRC Investments. I am also not persuaded on the record before me that the Applicant has a need for a payment of that magnitude at this time, given her own substantial net worth.

34This motion was originally scheduled to be argued in February 2021 but was adjourned. Had it proceeded in February, an order for support would have issued as of that month. I therefore fix the commencement date for the interim support order as February 1, 2021.

Disposition

35On an interim without prejudice basis, commencing February 1, 2021 the Respondent shall pay spousal support in the amount of $65,625 per month, based on the Respondent’s income of $1.8 million and the Applicant’s income of nil.

36The Respondent shall pay the arrears of support owing for the months of February, March and April of 2021 within 30 days.

37I invite the parties to settle the issue of costs. In the event that they are unable to come to a resolution on costs, the Applicant may file written costs submissions of up to five (5) double-spaced pages, not including Bills of Costs or Offers to Settle, by May 10, 2021; the Respondent may file responding costs submissions on a similar basis by May 17, 2021. No further costs submissions will be permitted.

P.J. Monahan J.

Footnotes

1. 1A mini-tender is an offer to purchase a limited number of shares of a public company. The mini-tender is similar to a take-over bid but a mini-tender offer is made at a discount to the current market price as opposed to paying a premium.
2. 2See, in particular, Driscoll v. Driscoll, 2009 66373 (ON SC), [2009] O.J. No. 5056; Damaschin-Zamfirescu v. Damaschin-Zamfirescu, 2012 ONSC 6689.
3. 3The Respondent’s position is that TRC Investments requires an annual float of approximately $1.5 million to fund operating and personal expenses. Because TRC Investment began the year with no retained earnings, the Respondent argues that none of the retained earnings for 2020 is available for distribution.
4. 4In contrast, although the Applicant's expert also recognized the need to build up substantial working capital in TRC Investments given that 2020 was the first year of operations for the company, she nevertheless attributed $1.256 million of TRC Investments’ income to the Respondent for support purposes and calculated his 2020 income as being $1.638 million.