COURT FILE NO.: FS-20-19119
DATE: 20210526
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FERRIS BLEDIN
Applicant
– and –
ADAM BLEDIN
Respondent
Martha McCarthy and Jessica Grys, for the Applicant
Alexandra Carr, for the Respondent
HEARD: May 13, 2021
ENDORSEMENT
P.J. Monahan J.
[1] The Applicant and the Respondent (the “parties”) were married on December 11, 2016 and separated on June 1, 2020. They have one daughter, H, born August 23, 2017.
[2] Since the parties separated in June 2020, they have continued to reside in the matrimonial home, albeit separate and apart. They have implemented a shared parenting schedule, pursuant to which H is in the care of the Applicant 8 days out of 14 and in the care of the Respondent 6 days out of 14. However, they have been unable to agree on a parenting schedule that would apply once they begin living in separate residences. They have also been unable to settle the terms of an order for temporary child and spousal support.
Parenting Issues
a. Background
[3] Although the parties have had a shared parenting schedule for H since their separation, the Applicant has raised a variety of concerns regarding the Respondent’s ability to care for H, including that he suffers from extreme anxiety and that she believes he has abused recreational and prescription drugs. Further, in November 2020, the Applicant alleged that the Respondent was masturbating while lying next to H on a bed. (This allegation was investigated by the CAS, following which the file was closed and no further action was taken.)
[4] As a result of the Applicant’s concerns, the parties agreed to jointly retain Howard Hurwitz to undertake a s. 30 Custody and Access Assessment. Mr. Hurwitz interviewed the parents, conducted observational visits with each parent while they were caring for H, and interviewed a number of personal collateral contacts.
[5] On March 22, 2021, Mr. Hurwitz convened a disclosure meeting with both parties and their counsel at which time he released his recommendations for a 2–2–3 shared parenting schedule for H. At the end of the disclosure meeting, counsel for the Applicant requested a separate meeting with Mr. Hurwitz. Mr. Hurwitz then met separately with each party and their counsel. That evening, Mr. Hurwitz released revised recommendations which included a ‘transition plan’ requiring the Respondent to have a live-in nanny on overnights when H is in his care, for the first 90 days after the parties begin living in separate homes.
[6] Both parties agreed to the 2-2-3 shared parenting schedule recommended by Mr. Hurwitz. In addition, the Respondent agreed to the 90-day transition plan involving the nanny. However, the Applicant argued that the transition plan recommended by Mr. Hurwitz was insufficient, and that at the end of the initial 90 days there should be an ‘independent review’ to determine if the requirement to have a nanny during the Respondent’s parenting time should be continued.
[7] The Respondent takes the position that the concerns raised by the Applicant regarding his ability to parent H are unfounded. Nevertheless, in an effort to resolve the matter, he has now agreed to continue to have a live-in nanny during his parenting time up until trial (i.e beyond the initial 90-day transition period recommended by Mr. Hurwitz). However, the Respondent’s willingness to continue to employ a nanny during his parenting time is subject to two conditions:
i. the Respondent’s parenting time with H should not be shortened or affected in any way if the nanny is unable to work occasionally due to illness, holiday or some other cause beyond his control; and
ii. the cost of the nanny should be shared in proportion to each of the parties’ incomes and taken into account in the determination of spousal support.
[8] In her March 26, 2021 Notice of Motion the Applicant did not raise any issue with respect to the Respondent being required to return H to her care if the nanny was occasionally unavailable. However, in response to the Respondent having raised the issue, the Applicant takes the position that if the nanny is not available on an overnight during the Respondent’s parenting time, H must be returned to her care. (The Applicant is agreeable to having H in the Respondent’s care during the daytime even if the nanny is not available.) The Applicant also argues that the Respondent should fund 100% of the cost of the nanny, and that those costs should not be taken into account in determining the level of spousal support payable by the Respondent.
[9] Despite the considerable volume of materials filed on this motion, it is apparent that the parties are now in substantial agreement on the parenting issues regarding H. They agree to an interim 2-2-3 parenting schedule for H. They also agree that on an interim basis until trial the Respondent should employ a live-in nanny on the days when H is in his care. They are further agreed that if the nanny is unavailable during the day when H is in the Respondent’s care, there is no need to return her to the care of the Applicant.
[10] Thus the only remaining issue in dispute with respect to parenting is an extremely narrow one: if the nanny is occasionally unavailable on an overnight when H is scheduled to be in the Respondent’s care, should the Respondent be required to return H to the Applicant?
b. Should the Respondent be required to return H to the Applicant if the Nanny is occasionally unavailable on an overnight when H is scheduled to be in his care?
[11] The Applicant’s concerns regarding the Respondent’s ability to care for H on overnights appears to have originated in an incident that took place in August 2020. The Applicant alleges that she arrived home during one evening to find H screaming in her bedroom and the Respondent passed out and unresponsive in his bedroom. (The Respondent denies the Applicant’s account of this incident.) The Applicant states that following that incident, she made it a point to be home on the evenings when H was in the Respondent’s care, until the Respondent hired a nanny in the fall of 2020.
[12] In considering whether the Respondent should be required to return H to the Applicant’s care if the nanny is occasionally unavailable to work during the overnight hours, I note that courts will only order that a parent’s time with a child be supervised when there is credible evidence that unsupervised access presents a meaningful threat to a child’s well-being.
[13] In my view, no such evidence has been presented by the Applicant. Over the past year, H has been cared for by the Respondent 6 days out of every 14 with very few issues or complaints. Apart from the single incident in August 2020, the circumstances of which are disputed, there does not appear to have been any difficulties on overnights when H has been in the Respondent’s care.
[14] The Applicant has raised a variety of concerns with respect to the Respondent’s mental health, as well as concerns that he may be abusing prescription or non-prescription drugs. The Respondent acknowledges his mental health issues and, to his credit, has sought treatment for them. The Respondent has provided a letter from a treating psychiatrist who reports that he is mentally stable and does not require ongoing psychiatry. The Respondent has also provided the results from three drug tests which indicate that at the relevant time he had not used drugs or alcohol at a concentration greater than permissible limits.
[15] The Applicant agrees that she is not concerned for H’s well-being if she is in the Respondent’s care during the day without the nanny being present. This suggests that the concerns identified above are not so serious as to require the general supervision of the Respondent’s parenting time with H. With respect to the overnights when H is in the Respondent’s care, the nanny will in fact be present for most of those occasions. It should also be remembered that H is now nearly 4 years old and, if she has difficulties at night, she can get out of bed and wake the Respondent.
[16] Given these circumstances, I am not persuaded that it would be in H’s best interests to require that she be returned to the Applicant’s care if the nanny is not available to work on an overnight due to illness, holiday or some other reason beyond the control of the Respondent. In fact, such a requirement could well cause confusion and disruption to H’s schedule, since the nanny may be unavailable to stay overnight on short notice. I therefore decline to impose the condition sought by the Applicant on the Respondent’s parenting time.
[17] I would also observe, for clarity, that the requirement that the Respondent employ a nanny during his parenting time is an interim without prejudice measure until trial. It is subject to variation by further court order or by the parties on consent.
c. Should the cost associated with the nanny be treated as a s.7 expense and shared in proportion to the parties’ incomes?
[18] The Applicant argues that the nanny is supervising the Respondent’s access with H and, as such, the cost associated with her services does not qualify as a child care expense pursuant to s. 7 (1) (a) of the Child Support Guidelines (the “Guidelines”).
[19] In fact, the nanny was hired in the late fall of 2020 to provide child care for H. She is an employee who has neither the mandate, the training or the ability to supervise the Respondent’s parenting of H, circumstances which are acknowledged by the Applicant herself in her materials filed on this motion. Simply put, the nanny’s role is that of a nanny, not the supervisor of the Respondent.
[20] Although the Respondent denies that he should be required to employ a nanny, he has agreed to do so in order to resolve the parenting schedule and permit the parties to move to separate residences. The Applicant insists that the nanny is essential, given concerns she has regarding the Respondent’s mental health and alleged substance abuse, yet refuses to share in the cost.
[21] In these circumstances I find that the cost of the nanny is a child care expense incurred in accordance with the criteria in s. 7(1) (a) of the Guidelines, the cost of which should be shared in accordance with s. 7(2).
Child and Spousal Support
a. Issues
[22] Since the parties propose to implement a shared parenting schedule, they agree that their respective child support obligations should be set off against each other, pursuant to s. 9 of the Guidelines. The parties also agree that the Applicant’s annual income for child support purposes is $67,184. Further, as set out above, I have determined that the cost of the nanny is a s.7 expense that should be shared in accordance with their respective incomes. The Respondent has also agreed, on an interim without prejudice basis, to commence paying spousal support to the Applicant once they begin living in separate residences.
[23] Thus the only issues remaining in dispute in relation to child and spousal support are the following:
i. The Respondent’s income for support purposes; and
ii. The quantum of spousal support that should be paid by the Respondent on an interim without prejudice basis.
[24] By way of overview, I note that the principles applicable to motions for interim child and spousal support are not in dispute. In addition to the factors and objectives set out in s. 15.2 of the Divorce Act, it is well established that 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 purpose of interim relief is to provide the parties with reasonable arrangements to meet the needs and means of the parties until trial. The court achieves "rough justice" at best.[^1]
b. The Respondent’s Income for Support Purposes
i. Respondent’s Receipt of Capital Distributions from Trust
[25] While the Respondent operates a merchandising apparel business, the source of most of his income during the marriage is attributable to a trust settled by the estate of his late mother in 2015 (the “Trust”). The beneficiaries of the Trust are the Respondent or a designated charity. The trustees are RBC Wealth Management, which controls all investment decisions and exercises full discretion as to the distributions paid to the Respondent. The Respondent has no independent right to withdraw money or exercise decision-making in relation to the Trust. The Trust issues a T3 slip to the Respondent for all of the investment income earned by the Trust each year, and these amounts are reported on the Respondent’s income tax return.
[26] None of the above is in dispute. Where the parties differ is how to characterize and treat distributions to the Respondent from the capital of the Trust in excess of its earned income. The Applicant argues that distributions from the Trust, whether in the form of income or capital, are part of the Respondent’s “means” and should be taken into account in determining his income. The Respondent, on the other hand, argues that distributions of capital are not “income” for purposes of the Guidelines and should not be factored into the determination of his income for spousal support purposes.[^2]
[27] As an expert report prepared for the Respondent by Marmer Penner Inc. (the “MPI Report”) indicates, the distributions of capital from the Trust during the marriage have been substantial. The MPI Report prepared two scenarios in relation to the calculation of the Respondent’s income from 2017-2020. “Scenario One” calculates his income without inclusion of capital distributions from the Trust, and “Scenario Two” shows his income with the capital distributions included.
Table One
MPI Calculations of the Respondent’s Guidelines Income 2017-2020
| Projected 2020 | 2019 | 2018 | 2017 | |
|---|---|---|---|---|
| Scenario One | $133,000 | $201,000 | $60,000 | $90,000 |
| Scenario Two | $309,000 | $281,000 | $240,000 | $161,000 |
[28] As the MPI calculations illustrate, without the capital distributions, the Respondent’s average income over the four-year period is $121,000, whereas if the capital distributions are included, his average income would be approximately $247,000. Moreover, the MPI calculations do not include any “gross up” on the capital distributions to take account of the fact that such amounts are not taxable.
[29] Thus the following two issues arises in relation to these capital distributions:
are encroachments on the capital of the Trust that are distributed to the Respondent to be included in the calculation of his income for spousal support purposes in the relevant year;[^3] and
if the answer to the first question is “yes”, should the capital distribution in a particular year be “grossed up” to take account of the fact that no income tax is paid on such distribution?
ii. Should distributions from the Trust’s capital be included in the calculation of the Respondent’s income for support purposes?
[30] Section 15.2 (4) of the Divorce Act requires the court making an interim order for spousal support to take into consideration the “condition, means, needs and other circumstances of each spouse…” In determining the “means” of a spouse with an obligation to pay spousal support, the starting point of the analysis is that spouse’s “income” as determined in accordance with line 150 of his or her Income Tax Return.[^4] But s. 19 (1) of the Guidelines also provides discretion to a court to impute such amount of income to a payor spouse that it considers appropriate in the circumstances, including the following:
(e) The spouse’s property is not reasonably utilized to generate income;
(h) the spouse derives a significant portion of income from dividends, capital gains or other sources of income that are taxed at a lower rate than employment or business income or that are exempt from tax; and
(i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.
[31] Subsection 19 (1) (e) makes it plain that a spouse must reasonably utilize their property to generate income and that a failure to do so may result in the imputation of income. However, while property must be reasonably utilized to generate income, courts have generally not required a payor spouse to draw down or dispose of their property or capital in order to fund support payments. As the Court of Appeal noted in Bak v Dobell, the Guidelines proceed on the assumption that child and spousal support are based on a payor’s income rather than their capital, and “while income from investments is part of a payor’s total income, his or her underlying investments are not.”[^5] Thus in Laurain v Clarke, Price J. declined to impute income on annuity payments being received by a payor spouse on the basis that they were payments of capital, not income generated by capital.[^6] The Respondent relies on the distinction between income and capital to argue that, whereas income generated by the Trust is appropriately included within his Guidelines income, distributions of capital are not.
[32] The difficulty with the Respondent’s argument is that s. 19 (1) (i) of the Guidelines specifically provides that it is appropriate to impute income on “income or other benefits” received from a trust. What this broad language suggests is that Parliament has made a determination that distributions from a trust, whether from the income or the capital of the trust, constitute part of the “means” of the payor spouse and may be taken into account in calculating a spouse’s income for support purposes.
[33] This was the conclusion reached in Jackson v. Jackson, where Pardu J. found that the receipt by the husband of approximately $105,000 annually from the capital of a trust should be considered to be a “benefit from the trust” and imputed as income pursuant to s. 19 (1) (i) of the Guidelines.[^7] In fact, if the words “income or other benefits from the trust” did not extend to capital distributions paid or payable to a beneficiary, s. 19 (1) (i) would have no practical effect. This is because amounts payable to a beneficiary out of the income of a trust are already taxable and included as line 150 income. By providing that income may be imputed on “income or other benefits” received or receivable from a trust, Parliament must have intended to go beyond amounts that are already taxable and permit inclusion of capital distributions as a “benefit” received from the trust.
[34] To be sure, s. 19 does not require the automatic inclusion in Guidelines income of all amounts received from a trust, since courts have the discretion to impute such amounts as are considered appropriate in the circumstances. In Clapp v Clapp, one spouse had received a number of capital distributions from a trust, with these amounts having been used primarily to renovate a family cottage and to purchase certain vehicles.[^8] The last such capital distribution had occurred over seven years prior to the parties’ separation, and the cottage and the vehicles were being included in the equalization of net family property. In these circumstances Price J. declined to impute the capital distributions as Guidelines income.
[35] In contrast, in the case at bar the capital distributions to the Respondent were utilized in order to fund the parties’ living expenses during the marriage. In fact, as Table One above indicates, over 50% from the Respondent’s income over the past four years consisted of capital distributions from the Trust. These amounts were either paid to the Respondent or to third parties directly to cover the parties’ ongoing expenses.
[36] In my view, these are precisely the kinds of payments that s. 19 (1) (i) was intended to capture. Accordingly, I find that the capital distributions from the Trust to the Respondent are appropriately considered in the determination of his Guidelines income.
iii. Should capital distributions from the Trust be grossed up for income tax purposes?
[37] The Respondent argues that even if the capital distributions from the trust are included in his Guidelines income, it would be unfair to “gross up” those distributions to take account of the fact that they are not taxable. He calculates that if he is required to pay child and spousal support based on what the Applicant claims is his “grossed up” income of $477,000, his total child and spousal support payments would be disproportionately high, surpassing the amount of income distributions he receives from the Trust each year. The Respondent also argues that in cases where capital distributions from a trust have been included in a spouse’s Guidelines income, the amounts have not been grossed-up to reflect their tax-free status.[^9]
[38] The table amounts for child support as well as the support ranges in the Spousal Support Advisory Guidelines are calculated on the assumption that the income of the payor spouse is subject to tax. It is for this reason that, where income is received free of tax, it is appropriate to ‘gross up’ that income to reflect the amount of taxable income that would be required in order to generate that amount of after-tax income. Otherwise, support payors who receive income free of tax would be paying child and spousal support at far lower effective rates than those whose incomes are subject to normal rates of tax.
[39] I see no reason why a different result should obtain in the case of distributions of capital from a trust. I have earlier found that all amounts payable from the Trust to the Respondent should be included within his Guidelines income. Since the capital distributions are received tax free, as a matter of principle they should be gross-up to reflect the amount of taxable income that the Respondent would have been required to earn to net him the same amount after-tax.[^10]
iv. Determination of Respondent’s Guidelines Income
[40] Having found that the Respondent’s income should be determined as set out above, it remains to arrive at an appropriate calculation of his Guidelines income on an interim basis.
[41] The Respondent takes the position that, assuming the cost of the nanny is included as a s. 7 expense, his Guidelines income should be calculated as $266,275. This is based on his 2020 income, which MPI calculates as $309,000, but backing out a number of capital distributions that the Respondent maintains were used to fund certain non-recurring expenses, particularly the ongoing cost of this litigation.
[42] The Applicant retained her own expert, Cohen Hamilton Steger (“CHS”), to prepare calculations of the Respondent’s Guidelines income. CHS critiqued the analysis of MPI and came up with their own calculations of the Respondent’s Guidelines income, using the same assumptions utilized by MPI in the latter’s Scenario One and Scenario Two. In addition, CHS included a “Scenario Three” in which the capital distributions from the Trust were grossed-up to take account of their tax-free status. (As noted above, MPI did not gross-up the capital distributions received from the Trust.)
[43] The results of CHS’ analysis are set out in Table Two below.
Table Two
CHS Calculations of Respondent’s Guidelines Income 2017-2020
| Projected 2020 | 2019 | 2018 | 2017 | |
|---|---|---|---|---|
| Scenario One | 146,000 | 214,000 | 63,000 | 92,000 |
| Scenario Two | 333,000 | 294,000 | 244,000 | 164,000 |
| Scenario Three | 477,000 | 355,000 | 327,000 | 196,000 |
[44] Comparing the two sets of calculations, it is evident that the differences between the respective experts under Scenario One and Scenario Two are relatively modest. For the 2017 to 2019 years, the CHS income calculations for each year are, on average, about $7,000 higher than MPI’s. The differences in 2020 are somewhat larger, perhaps attributable to the fact that MPI undertook its analysis a few months before year end whereas CHS performed its calculations in March of 2021.
[45] As might be expected, the CHS income calculations under Scenario Three, in which the capital distributions from the Trust are grossed-up, are significantly higher than those of MPI. The variance in 2020 is particularly large, with CHS estimating that the Respondent’s income for the year to be $477,000, an increase of over $120,000 from CHS’ own calculation of the Respondent’s 2019 income. This large jump in CHS’ calculations for 2020 seems consistent with the Respondent’s position that he incurred a number of significant non-recurring expenses in the year, which he argues should be backed out of his income calculation.
[46] If I accept the Respondent’s position that his income in 2020 was anomalously high, this suggests that greater weight should be given to his income in 2019 and 2018. In those years, CHS estimates that his Guidelines income ranged from a low of $327,000 in 2018 to a high of $355,000 in 2019. I do not have the benefit of a calculation by MPI of the Respondent’s income with the Trust’s capital distributions grossed-up. However, given that MPI’s income calculations under Scenarios One and Two were somewhat lower than those of CHS, it can be expected that the same would be the case if MPI were to calculate the Respondent’s income with a gross up of capital distributions from the Trust.
[47] As discussed above, on motions for interim support the court does not undertake a comprehensive analysis of the payor’s income and attempts to achieve rough justice at best. In the absence of a calculation from MPI, it is appropriate to calculate the Respondent’s income at the lower end of the CHS calculations for 2018 and 2019. I therefore find that the Respondent’s Guidelines income on an interim without prejudice basis to be $327,000 a year.
c. Quantum of Child and Spousal Support Payable by the Respondent
[48] Based on the Respondent’s annual income of $327,000 and the Applicant’s annual income of $67,184, the Respondent’s monthly table child support for one child is $2573 while the Applicant’s monthly table support for one child is $626. After set-off, the Respondent shall pay the Applicant $1947 per month in table child support.
[49] Given the shared parenting arrangement, a 50/50 split of net disposable income (“NDI”) is appropriate on a temporary support motion. As the attached Divorcemate calculation indicates, this results in monthly spousal support of $5350 payable by the Respondent to the Applicant. In addition, the Applicant is responsible for contributing $1193 to the $3583 monthly cost for the nanny, and for 33% of H’s other s. 7 expenses.
Disposition
[50] Order to go as follows:
a. On a temporary without prejudice basis, H shall have parenting time with each parent on a “2-2-3” schedule, as follows:
i. H shall have parenting time with each parent on alternate weekends from Friday pickup from school or 5 pm on non-school days until 5 pm on Sunday evenings;
ii. In Week 1, H shall have parenting time with the Applicant from Sunday evening at 5 pm until Wednesday morning drop off at school or 5 pm on non-school days, and H shall have parenting time with the Respondent on Wednesday from pickup after school or 5 pm on non-school days until Friday morning drop off at school or 5 pm on non-school days;
iii. In Week 2, H shall have parenting time with the Respondent from Sunday evening at 5 pm until Wednesday morning drop off at school or 5 pm on non-school days, and H shall have parenting time with the Applicant on Wednesday from pickup after school or 5 pm on non-school days until Friday morning drop off at school or 5 pm on non-school days;
b. On a temporary without prejudice basis, the Respondent shall have a live-in nanny during his parenting time pending further court order or written agreement, provided that if the nanny is not available for work for illness, holiday or other reason through no fault of the Respondent, H’s parenting time with the Respondent shall proceed in any event;
c. On a temporary without prejudice basis, commencing the first day of the first month that the parties begin to live separate and apart;
i. the Respondent shall pay child support in the amount of $1947 and spousal support in the amount of $5350 per month;
ii. The Applicant shall pay $1193 towards the cost of the live-in nanny’s compensation, as a s.7 expense; and
iii. the Applicant shall otherwise contribute 33% towards H’s other special and extraordinary expenses on an temporary basis, provided the expense(s) in question are agreed to by the parties before the expense(s) are incurred, such consent not to be unreasonably withheld.
[51] I invite the parties to attempt to resolve the issue of costs. In the event that they are unable to do so, they shall each serve and file costs submissions of no more than 5 pages, not including Bills of Costs or Offers to Settle, within 10 days.
P. J. Monahan J.
Released: May 26, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FERRIS BLEDIN
Applicant
– and –
ADAM BLEDIN
Respondent
ENDORSEMENT
P. J. Monahan J.
Released: May 26, 2021
[^1]: Samis (Litigation Guardian of) v. Samis, 2011 ONCJ 273 at para. 43.
[^2]: I note that the Respondent agrees that distributions of capital from the Trust should be taken into account in determining his income for child support purposes. Further, the Respondent is prepared to have the capital distributions included in calculating his income for spousal support, but only on condition that the nanny expenses he incurs are considered to be a shared s. 7 expense.
[^3]: As noted above, the Respondent is prepared to include the capital distributions in calculating his income for spousal support purposes, but only on condition that his nanny expenses are considered a s. 7 expense. Moreover, the Respondent does not agree that the capital distributions should be “grossed up” to reflect the fact that they are not taxable. It is therefore necessary to determine whether the capital distributions should be considered as income for spousal support purposes.
[^4]: See the Guidelines, s. 3 (1) and 16.
[^5]: Bak v. Dobell, 2007 ONCA 34 at para. 52.
[^6]: Laurain v Clarke, 2011 ONSC 7195, at para. 103.
[^7]: Jackson v Jackson, 1997 CanLII 12392 (ON SC), [1997] O.J. No. 4790.
[^8]: Clapp v Clapp, 2014 ONSC 4591.
[^9]: See, for example, Jackson v Jackson, supra, where the annual capital distribution of $105,000 was included in income, but not grossed-up. Note, however, that there was no discussion in the court’s reasons of whether the capital distribution should be grossed-up and it is not clear that the issue was raised or considered.
[^10]: As explained below, I find the Respondent’s Guidelines income to be substantially less than the $477,000 posited by the Applicant, with the result that even with a gross-up on capital distributions, Respondent’s child and spousal support obligations will not be disproportionately high given his total Guidelines income.