COURT FILE NO.: FS-19-13819
DATE: 20210827
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
KAREN ELENA ECHEVERRIA VILLATORO
Applicant
– and –
BORIS VILLATORO
Respondent
- and –
MARIO ASCENCIO and MARTA GLORIA ASCENCIO
Co-Respondents
Sandra Lozano and Lester R. Cuellar, for the Applicant
Shelly Kalra, for the Respondent
Elena E. Mazinani, for the Co-Respondents
HEARD: May 20 and August 11, 2021.
ENDORSEMENT
P.J. Monahan J.
[1] The Applicant, Karen Echeverria (“Karen”), has brought a motion for interim child and spousal support, both on an ongoing basis and retroactive to the date of separation, as well as for an order permitting her to collect rental income from a property located at 17 Teignmouth Avenue in Toronto (the “Teignmouth Property”) which she jointly owns with the Respondent, Boris Villatoro (“Boris”). The motion originally came before me on May 20, 2021.
[2] At that time, Boris argued that he was unable to pay child or spousal support since his income was zero and, therefore, Karen’s support motion should be dismissed in its entirety. He also sought an order for the sale of the Teignmouth Property with the net proceeds to be held in trust pending further court order.
[3] The Co-Respondents, Mario and Marta Ascencio (respectively “Mario” and “Marta” and collectively “the Ascencios”), who are Boris’ parents, sought an adjournment of Karen’s support motion in order to permit them to conduct questioning of the other parties.
[4] After hearing argument from counsel, I adjourned Karen’s support motion to August 11, 2021 in order to permit each of the parties[^1] to question the others, with such questioning to be concluded by June 30, 2021. Pending the return of the motion, I ordered Boris to continue making uncharacterized payments of $3,500 per month to Karen that had been ordered on consent by Nakonechny J. at a case conference in February 2021, and I required Boris to continue paying the ongoing costs associated with the parties’ matrimonial home at 51 Goodwood Avenue in Toronto, where Karen has been residing since the parties separated. I also ordered the Teignmouth Property to be sold and set out a process for the listing and sale of the property.
[5] Although questioning by counsel for Karen and Boris, respectively, took place as scheduled, counsel for the Ascencios, Ms. Mazinani, cancelled her questioning that had been scheduled for June 28, 2021. Ms. Mazinani then sought an urgent appearance before me in advance of the return of Karen’s motion on August 11, 2021, in order to seek a further adjournment of the motion.
[6] Counsel for the parties appeared before me on August 9, 2021 in order to consider Ms. Mazinani’s request (on behalf of the Ascencios) for a further adjournment. Ms. Mazinani explained that she had cancelled her questioning of the other parties that had been scheduled for June 28, 2021 on the basis that, in her view, Karen had not been cooperative during her questioning by Boris’ counsel on June 25, 2021. Because Ms. Mazinani was of the view that any questioning she might conduct of Karen would have been futile, she cancelled the questioning of both Karen and Boris that had been scheduled for June 28, 2021. In her submissions on August 9, 2021, Ms. Mazinani argued that a further adjournment of Karen’s support motion was necessary in order to permit her to proceed with questioning of Karen.
[7] I dismissed the Ascencios’ request for a further adjournment. If a deponent in a proceeding refuses to answer questions and the counsel posing the questions regards the refusals as unjustified, the appropriate course of action is to seek a ruling from the court on the issue. Rather than proceed in that manner, Ms. Mazinani unilaterally cancelled her questioning before the questioning had even commenced. Moreover, Ms. Mazinani had no explanation as to why Karen’s claimed lack of cooperation caused her to cancel her questioning of Boris.
[8] Karen’s support motion, which includes claims for child as well as spousal support, has already been delayed three months so as to permit questioning by all parties to take place. Ms. Mazinani failed to take advantage of the opportunity for questioning provided. In these circumstances, I ruled that it would be manifestly unfair and contrary to the interests of justice to delay argument of Karen’s support motion any further and ordered the hearing of the motion to proceed as scheduled on August 11, 2021.
[9] As will be apparent in the discussion that follows, this litigation has been conducted in a highly acrimonious manner, with parties accusing the others of fraud, misappropriation of funds, theft and other misconduct. Although this is a motion for interim support only, I have found it necessary to consider, at least in a preliminary way, the merits of these competing accusations, assess the credibility of the parties, and make certain findings of fact.
[10] Any such findings are of course without prejudice and subject to the determinations that will be made by the trial judge. Nevertheless, I observe that despite the serious allegations of misconduct made by the parties against each other, much of the alleged misconduct has in fact been admitted or not been contested by the relevant party. Moreover, each of the parties has been questioned on their respective affidavits, which has made it possible to make a preliminary assessment of their credibility.[^2] I have therefore found it possible to make the findings required in order to resolve the issues raised by the relief sought on this motion.
Background
a. The parties
[11] Karen and Boris met in El Salvador in 1997 and were married on August 20, 1998. At the time of their marriage, Boris was 24 years old and living with his parents in Toronto, while Karen was 18 years old and a resident of El Salvador.[^3] In 1999, Karen immigrated to Canada and joined Boris in the Ascencios’ home in Toronto.
[12] On October 13, 1999, Karen and Boris had their first child, BOV. By this time, Boris had graduated from an accounting program at Humber College and begun working in a tax-preparation business that had been started by his father some years before.
[13] In 2001, Boris purchased a residential property located at 670 Manning Avenue in Toronto. The family (including the Ascencios as well as Boris, Karen and their son BOV) moved into the Manning Avenue residence, and the tax-preparation business began operating out of the basement of that home.
[14] In 2006, the Ascencios moved into a home they had purchased on Earlscourt Avenue in Toronto. However, the tax-preparation business continued to be operated out of the basement of the Manning Avenue home.
[15] In 2013, Boris and Karen jointly purchased a house at 51 Goodwood Avenue in Toronto and began residing there. On July 9, 2014, Karen and Boris had a second son, MJV.
[16] Boris and Karen separated in 2019, although there is a dispute as to whether the separation occurred in June or September of that year. Karen states that the parties separated on June 17, 2019, the day after she was assaulted by Boris.[^4] Boris states that the parties did not separate until September 8, 2019, following a family trip to El Salvador. Karen commenced this litigation in November 2019.
[17] Since their separation, Karen has continued to reside at the matrimonial home on Goodwood Avenue with their two children. BOV, who is 21 years old, is an undergraduate student at the University of Toronto and expects to graduate later this year, while MJV, who is 7, attends primary school.
[18] After the separation, Boris initially moved in with his parents at their home on Earlscourt Avenue. However, in 2021 he moved into the Manning Avenue residence, where he currently resides.
b. The tax-preparation business and Ascencio & Associates Inc.
[19] Following his arrival in Canada in 1982, Mario began operating a number of businesses. One of them was a tax-preparation business which he initially operated as a sole proprietorship.
[20] After Boris joined the tax-preparation business in 1999, Mr. Ascencio shut down most of his other businesses and focused his attention almost exclusively on tax-preparation. Karen also began working in the tax-preparation business.
[21] In 2006, Mario incorporated Ascencio & Associates Inc. (“AAI”) and the tax-preparation business began operating through AAI. Mario, who by this time was in his early ‘60s, began reducing his involvement in the business and Boris took on increasing responsibility for management and direction of the company.
[22] The parties are agreed that over the past 15 years AAI’s business has flourished and the company has been extremely profitable. The parties are also agreed that a significant proportion of the company’s revenues were received in cash and were never reported on the company’s books and records or to the Canada Revenue Agency. The parties used such unreported revenue to fund their personal expenses. For his part, Boris has admitted that he used at least $100,000 annually out of the cash revenues of AAI to fund living expenses for himself, Karen and their children, while the Ascencios acknowledge that together they utilized approximately $50,000 annually from AAI’s cash revenues to fund their living expenses.
[23] The parties further acknowledge that none of these cash receipts was reported on their personal income tax returns. Boris and Karen received T4s from AAI each year reporting their respective incomes to be approximately $20,000. Mario and Marta did not report any income from AAI, and Mario’s financial statement filed in August 2020 described himself as being “unemployed” since 2010. Mario and Marta’s personal tax returns declared their annual incomes to be approximately $20,000 each, consisting of Canada Pension Plan income, Old Age Security payments and modest rental income.
[24] In an affidavit filed in advance of the May 20, 2021 attendance, Boris claimed that his employment with AAI had been terminated on May 7, 2021, through an email sent by Ms. Mazinani to his counsel and counsel for Karen. However, during his questioning on June 23, 2021, Boris modified his position on this issue and described himself as having been “laid off” rather than terminated. Since Boris’ employment status with AAI is material to the issues raised on the support motion, I assess the credibility of his claims in this regard in some detail below.
c. Karen and Boris enjoyed a lavish lifestyle throughout their marriage
[25] Karen and Boris agree that they lived a lavish lifestyle throughout their marriage, including international luxury travel, the purchase of designer clothes and luxury goods, and the acquisition of high-end automobiles. This lifestyle was largely funded by unreported cash income received from AAI. Boris admits that he would routinely transfer money between AAI corporate accounts and his personal accounts as needed to fund expenses, credit card payments and lines of credit. Boris would also freely use AAI credit cards as he saw fit to fund his and Karen’s personal expenses.
[26] Numerous examples of Boris treating AAI funds and accounts as his own were provided by Karen, none of which was contradicted by Boris. By way of example:
i. Boris admits that he purchased a BMW X6 sports car for $156,549 in November 2019, using approximately $120,000 from AAI funds and obtaining the balance of the purchase price from a line of credit secured against the Manning Avenue property;
ii. in the same month, Boris purchased a Rolex watch for $18,800 that he saw at a duty-free shop because he believed the watch would appreciate in value, drawing down on a line of credit;
iii. in April 2020, Boris used AAI funds to pay off his personal credit card balance of $9,232 and transferred $20,425 from an AAI account into a personal bank account; and
iv. in April 2021, Boris wrote cheques to himself from AAI totaling $23,000, characterizing such payments as rent payments from AAI for the use of the basement at 670 Manning Avenue. In fact, Boris admits that these rental payments were deliberately inflated so that he could use the funds to pay off his credit cards and other personal expenses.
[27] The parties further agree that funds from AAI were used to purchase properties in Toronto and elsewhere. In addition to the matrimonial home on Goodwood Avenue, the parties purchased a vacation home in Costa Rica, as well as the Teignmouth Property. Boris also used AAI funds to purchase a property on St. Clair Avenue in Toronto (which was subsequently sold at a profit). It also appears that AAI funds were used to purchase a number of properties in Costa Rica. Boris takes the position that these foreign properties are owned by AAI or the Ascencios and therefore they do not need to be taken into account in the calculation of his net family property (NFP). Karen argues that regardless of who holds formal legal title to these foreign properties, they are beneficially owned by Boris and should be included in his NFP.[^5]
[28] Boris says that his parents were aware that he was using funds from AAI to fund his and Karen’s personal expenses. However, he does not believe that his parents were aware of how much money per year he and Karen were actually taking out of AAI revenues, as the majority was received in cash. Indeed, until now, he himself did not even realize how much money was being taken from AAI. He maintains that he always intended that he would pay these funds back into the company once their property investments proved fruitful.
Positions of the Parties on this Motion
[29] On this motion, Karen is seeking the following relief:
a. commencing September 1, 2021, an order that Boris pay interim without prejudice child support for the two children of the marriage of $6,130 per month, and interim without prejudice spousal support of $9,788 per month, based on Boris’ imputed annual income for 2020 of $487,783 and Karen’s annual income of $30,000;
b. an interim without prejudice order that Boris pay $447,010 in arrears of child and spousal support from June 2019 to August 2021, based on Boris’ imputed income of $688,635 in 2019 and $487,783 in 2020, and Karen’s annual income of $30,000;
c. an order that the arrears of support owing by Boris be paid out of his share of the net proceeds from the sale of the Teignmouth Property;[^6]
d. an order that Boris pay all arrears owing as of August 6, 2021 for the mortgage, property taxes and insurance associated with the Teignmouth Property and the jointly owned property at 51 Goodwood Avenue in Toronto; and
e. an order permitting Karen to register a preservation order dated January 15, 2021 against the property at 670 Manning Avenue in Toronto.
[30] At the May 20, 2021 attendance, Boris took the position that Karen’s motion should be dismissed in its entirety since his income had been reduced to zero and his credit cards and lines of credit were “maxed out”. According to Boris, his employment with AAI had been terminated on May 7, 2021, and he was unable to secure alternate employment because of his April 15, 2021 criminal conviction for assaulting Karen. Boris also argued that any claims for retroactive child and spousal support should be deferred until trial.
[31] At the argument of the motion on August 11, 2021, Boris modified his position, disclosing that he had recently secured employment as a financial consultant with MH Alliance at an annual income of $33,600.[^7] Based on this income level, he was prepared to pay child support for their younger son, MJV, in the amount of $288 per month. However, he maintained that he had no obligation to pay child support for their older son, BOV, who is now 21 years old and expected to graduate from university in the fall of 2021. Boris further maintained that Karen had no entitlement to spousal support and thus her motion for spousal support should be dismissed. In addition, he sought an order that Karen be entirely responsible for the payment of the expenses of the matrimonial home at 51 Goodwood Avenue, since she was residing there.
Issues
[32] The following issues arise for determination on this motion:
a. What is Boris’ income for support purposes, on an interim without prejudice basis?
b. What is Karen’s income for support purposes, on an interim without prejudice basis?
c. What amount of ongoing child support should be paid by Boris on an interim without prejudice basis?
d. Does Karen have a prima facie entitlement to spousal support?
e. If Karen does have such a prima facie entitlement, what amount of spousal support should be ordered on an interim without prejudice basis?
f. Should an order for retroactive child and/or spousal support be made at this time or should the matter be deferred until trial?
g. How should the proceeds of the sale of the Teignmouth Property be dealt with?
h. Who should be responsible for the ongoing expenses associated with 51 Goodwood until trial, and for any arrears owing in respect of the jointly owned properties on Goodwood and Teignmouth?
i. Should a preservation order be registered against the property at 670 Manning Avenue in Toronto?
[33] 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, the following principles established by the relevant jurisprudence[^8] are of particular relevance on this motion:
i. 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;
ii. 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
iii. generally interim spousal support should only be ordered if the recipient has established a prima facie entitlement to support. However, if an interim support order is issued, it should generally be sufficient to allow the recipient to continue living at the same standard of living enjoyed prior to separation if the payor’s ability warrants it.
Boris’ Income for Support Purposes
a. Boris’ income from November 2019 to May 2021
[34] Boris has failed to produce any meaningful evidence of his income since the commencement of this litigation in November 2019. His income tax returns from 2017 to 2020 show his line 150 income varied from a low of $16,144 in 2017 to a high of $26,653 in 2019. However, Boris has acknowledged that his line 150 income bears no relationship to his actual or real income in those years, since he admits that he used at least $100,000 annually in unreported income from AAI to fund personal expenses.
[35] Beyond admitting that he withdrew “at least $100,000 annually” from AAI, Boris has failed to provide even an estimate of his actual income from AAI since November 2019. In fact, Boris’ position on this motion is that he does not know how much money he was accessing from AAI revenues in a given year. Nor has Boris retained an independent professional to provide a credible accounting of his personal use of AAI revenues.[^9]
[36] Faced with Boris’ refusal to provide any assistance in determining his income, Karen was forced to retain her own independent business valuator, Patrick McCabe of McCabe Valuations (“McCabe”), in an attempt to calculate Boris’ income for support purposes. McCabe prepared an assessment of Boris’ income dated August 6, 2021, based on a review of Boris’ income tax returns, AAI’s corporate tax returns, AAI’s bank account activity, and various other documents provided by Karen.
[37] Based on this review, McCabe provided the following estimates of Boris’ income for the last four years:
2020 $490,212
2019 $688,635
2018 $390,555
2017 $255,865
[38] I recognize and acknowledge the difficulties faced by McCabe in attempting to estimate Boris’ income for these years, particularly given the fact that the majority of Boris’ income was received in cash. Nevertheless, McCabe may well have overestimated Boris’ cash income. For example, based on an analysis of the affidavits provided by the parties, McCabe concluded that in 2019 Boris withdrew a total of $175,000 in cash for personal use from AAI’s bank accounts. This included the $120,000 used by Boris to purchase the BMW X6 in November 2019, as well as an additional $50,000 in AAI funds that he withdrew in January 2019. However, McCabe then added an additional $100,000 in undisclosed income received from AAI in 2019, on the basis of Boris’ admission that he withdrew at least this amount in cash from the company annually. McCabe therefore concluded that in 2019, Boris withdrew approximately $272,000 in cash from AAI. Yet Boris’ admission that he withdrew at least $100,000 in cash annually from AAI might well be interpreted as including monies used for the purchase of the BMW X6 in November 2019, as well as the $50,000 withdrawn from AAI in January 2019. It is not clear that these amounts should be added together (as McCabe has done) in order to arrive at an estimate of Boris’ cash income in 2019.
[39] Similarly, McCabe found that Boris accessed $50,000 in AAI funds in January 2018, based on the information provided in Karen’s May 10, 2021 affidavit. McCabe then added to that $50,000 an additional $100,000 in cash withdrawals based on Boris’ admission that he withdrew this amount annually. McCabe therefore concluded that Boris accessed a total of $150,000 in AAI funds in 2018. Again, it could well be that the $50,000 accessed by Boris in January 2018 should be included as part of the $100,000 in cash that he admits withdrawing annually, rather than added to that amount.
[40] To be sure, Boris has an obligation to provide adequate records of his income and expenses in order to enable the court to determine his income,[^10] and he has manifestly failed to do so. In such a case, it is open to the court to draw an adverse inference and impute income to the party who has failed to comply with his disclosure obligations.[^11] At the same time, in my view it is appropriate to exercise a degree of caution before imputing large amounts of income based on a vague and uncertain record. As MacLeod J. noted in Van Haren v. Stewart, there are pragmatic reasons for such caution.[^12] Even though temporary support orders are without prejudice to the findings at trial, setting temporary support at a level which turns out to be artificially high (or artificially low) may well result in large claims for retroactive adjustments at trial. The need for such large adjustments may well inappropriately incentivize the parties to continue the litigation rather than resolve the matter without the necessity of a trial.
[41] In this case, it is entirely reasonable to find that Boris withdrew $100,000 in cash annually from AAI, for the obvious reason that he has admitted doing so. Beyond that, the evidence as to what amounts Boris withdrew from AAI in a given year is unclear and inconclusive. That is a matter to be determined at trial. For purposes of this interim support motion, I will proceed on the basis that, from the commencement of the litigation in November 2019 until at least May 2021, Boris accessed $100,000 in cash annually from AAI for personal use, based on his admission to this effect. Not only must such amounts be included in his income for support purposes, but because they were received free of tax they must also be “grossed up” to the amount of taxable income that would have been required in order to generate $100,000 annually on an after-tax basis, in accordance with s. 19 (1) (h) of the Federal Child Support Guidelines (the “CSG”).[^13]
[42] Other aspects of McCabe’s report are more straightforward. In particular, McCabe points out that AAI has deducted at least $10,000 in expenses annually relating to repairs and maintenance of buildings and vehicles, as well as for operating costs such as Internet, electricity, water, heat and telephone. Given that AAI operates out of the basement of Boris’ personal residence at 670 Manning Avenue, these expenses could reasonably be regarded as payment of Boris’ personal expenses. Boris has failed to produce an income report of his own or filed any evidence contradicting McCabe’s analysis. I therefore accept McCabe’s conclusion that a minimum of $10,000 in corporate expenses of AAI in each year should be considered to be personal expenses of Boris and be imputed to him in the calculation of his income since separation, in accordance with s. 19 (1) (f), (g) & (h) of the CSG. In addition, these amounts should be grossed up on account of the fact that no tax was paid on them.[^14]
[43] It is also obvious that Boris’ declared line 150 income for the relevant years should be included in the determination of his income for support purposes.
[44] I therefore find Boris’ annual income for purposes of interim without prejudice support from November 2019 until May 2021 to be as follows:
Declared employment income from AAI $21,000
Declared rental income $5,000
Boris’ unreported withdrawals of cash from AAI $100,000 (plus income tax gross-up)
Payment of Boris’ personal expenses by AAI $10,000 (plus income tax gross-up)
[45] After applying the income tax gross up on the relevant amounts, I find Boris’ annual income for support purposes for the period of November 2019 until May 2021 to be $209,355.
b. Should Boris’ income be reduced on account of the alleged termination of his employment by AAI on May 7, 2021?
[46] As noted above, Boris claims that his employment with AAI was terminated on May 7, 2021, through an email sent by Ms. Mazinani to counsel for Karen and Boris. The entirety of this email reads as follows:
Counsel,
After the preliminary review of the disclosure my clients have concerns about Ms. Echeverria and Mr. Villatoro’s misappropriation of funds from Ascencio.
Please advise of your client’s position in relation to consent to amend the Answer(s) filed by my clients to make a cross-claim against Ms. Echeverria and Mr. Villatoro, by May 11, 2021.
Effective immediately, Mr. Villatoro’s employment with Ascencio & Associates Inc. is terminated.
Mr. Villatoro and Ms. Echevarria shall return all the company’s property to our office by May 11, 2021.
Regards,
Elena E. Mazinani
Barrister & Solicitor
[47] In a subsequent May 14, 2021 affidavit, Mario claimed that he had only recently learned that Boris and Karen had been using AAI funds to pay their living expenses. Upon learning this, Mario decided to terminate Boris’ employment with AAI. Boris says that following his termination from AAI, he was unemployed until July 2021, when he secured employment as a financial consultant with MH Alliance at an annual salary of $33,600.
[48] In assessing the credibility of these claims, I begin with the observation that Mario’s account of the circumstances leading to Boris’ termination is on its face simply not believable. Boris and Karen’s annual T4 income from AAI was just $20,000 each. How could Boris and Karen have lived a lavish lifestyle involving the purchase of luxury goods and extensive international travel when their respective incomes from AAI were supposedly less than minimum wage in Ontario? It was obvious that they had to have been using funds generated through AAI to fund their lifestyle, and it was equally obvious that Mario must have been aware of this fact. What made Mario’s position in his May 14, 2021 affidavit even more preposterous was that (as he subsequently disclosed in his questioning on June 23, 2021), he and his wife Marta had themselves been withdrawing approximately $50,000 per year from AAI to fund their own personal expenses, in precisely the same manner as Boris.
[49] In fact, Mario subsequently admitted that he had misrepresented his supposed lack of knowledge of Boris’ use of AAI funds. During his questioning on June 23, 2021, Mario admitted that he had been aware of the fact that Boris had been using AAI funds for many years in order to purchase real property in Toronto. However, during his questioning he continued to insist that he didn’t know until very recently that Boris was also using AAI funds to finance his family’s lavish lifestyle.
[50] Then, during oral submissions on the argument of the motion on August 11, 2021, Mario changed his position on this issue yet again. His counsel advised the court that Mario and Marta now acknowledge that they were in fact aware that Boris had been using AAI revenues to fund his family’s lifestyle during his marriage. However, the Ascencios thought Boris was only using about $50,000 a year in this way, rather than an amount in excess of $100,000, as Boris has admitted.
[51] Given these admissions, it is now clear that Mario and Marta were well aware for years of the fact that Boris was treating AAI funds as if they were his own. It follows that Mario could not have terminated Boris’ employment with AAI on May 7, 2021 because of a recent discovery of misappropriation of funds by Boris. Not only was Mario well aware for years of Boris’ use of AAI revenues for his personal expenses, both Boris and Mario have subsequently admitted that Boris’ employment with AAI has not actually been terminated. Instead, they are now taking the position that Boris has been “laid off” from AAI.
[52] This change in position regarding Boris’ employment status with AAI emerged during the questioning that took place in late June. When Boris was asked by Karen’s counsel whether it was correct that he was “fired” from AAI on May 7, 2021, Boris replied that “[i]t was May 7 of 2021 I was laid off.” In his evidence, Mario also described Boris as having been “laid off” from AAI. However, neither Boris nor Mario provided any further information about the terms of this alleged layoff. Nor could Boris provide an explanation as to why he still had access to his AAI email account weeks after his supposed layoff from the company.[^15]
[53] Given the complete and deliberate lack of transparency with respect to Boris’ alleged “layoff” from AAI, it is unknown how long this “layoff” is expected to continue and when he might be called back to resume working for the company. In these circumstances, I draw the adverse inference that, whether or not Boris has been working for AAI since May 7, 2021, he could return to his former position as President of the company at any time. In fact, it is unclear how the corporation can operate effectively without him, since on the evidence he has been the directing mind and has exercised complete control over the business for at least the past decade.
[54] Having drawn this adverse inference, I make the further finding that Boris is intentionally under-employed within the meaning of s. 19 (1) (a) of the CSG. As the Court of Appeal has explained in Drygala v. Pauli,[^16] a support payor is “intentionally underemployed” if, through a voluntary act, they earn less than they are capable of earning. Conversely, there is no intentional under-employment if “through no fault or act of their own, spouses are laid off, terminated or given reduced hours of work.” Since I have found that Boris could resume working at AAI despite his layoff, his failure to do so constitutes an “intentional act” that supports a finding that he is under-employed.
[55] I should add that, even if I had found that Boris was terminated or laid off from AAI and is currently unable to return to work there, I still would have found that he is under-employed within the meaning of s. 19 (1) (a) of the CSG. As Pazaratz J. has held in Rogers v. Rogers, where a spouse has deliberately engaged in reckless behaviour which has caused him to become unemployed, he cannot then expect his dependent children to pay the price for his misconduct:
[The Applicant] may not have quit his job. But he created and controlled the circumstances under which his job was terminated. He made conscious decisions to do things – illegal things – with the full knowledge that his reckless and anti-social behaviour would make him unavailable (let alone, unacceptable) for employment. The net result is the same as if he had handed in his resignation. [^17]
[56] In oral argument, Boris’ counsel referred to certain cases in which a court has taken into account a reduction in a support payor’s income even though that income reduction resulted from criminal or other misconduct on the part of the support payor.[^18] Depending on the particular facts of the case, there will certainly be instances where a spouse’s support obligations may be reduced even though a drop in income has been caused by the payor’s misconduct. But this would only be appropriate where the support payor has made full and complete income disclosure, provided a credible account of the circumstances leading to the change in his/her employment status, and provided appropriate documentation confirming same. Boris has done none of those things. In these circumstances, it would be grossly unfair and arbitrary, as well as inconsistent with the “primary objective” of the Family Law Rules as set out in Rule 2, to permit Boris to rely on his own misconduct as an excuse for reducing his support obligations.
[57] I therefore find that Boris is intentionally under-employed pursuant to s. 19 (1) (a) of the CSG. I also impute his income at the level I found he was earning between November 2019 and May 2021, and find that his current income for support purposes is $209,355.
Karen’s Income for Support Purposes
[58] Karen’s evidence is that her current annual income is approximately $30,000. Following the parties’ separation, she commenced a small tax-preparation business of her own. She indicates that the annual revenue from that business is approximately $27,000, and her net business income after expenses is approximately $,5000 per year. However, since March 2020, her largest source of income has been $1,800 per month which she has been receiving through the Canada Recovery Benefit (CRB) from the Government of Canada. She expects these CRB payments to terminate within six months, which will bring her annual income well below $30,000. However, for purposes of this interim support motion, she is prepared to proceed on the basis that her income is $30,000.
[59] Boris argues that Karen’s income is uncertain as there are many discrepancies in her most recent financial statement. For example, Boris objects to various deductions from Karen’s business income, including amounts she spent on subcontractors, expenses for utilities, as well as motor vehicle expenses. Boris also argues that Karen is capable of earning at least $70,000 through her tax-preparation business on the basis that she has taken over 700 clients from AAI.
[60] The difficulty with Boris’ position in this regard is that during Karen’s June 25, 2021 questioning, Boris’ counsel failed to ask about any of these matters. Instead, Ms. Kalra focused her questioning of Karen on a variety of intrusive personal matters, most of which were irrelevant to this interim support motion. For example, Ms. Kalra asked Karen whether she had had a relationship with anyone other than Boris prior to getting pregnant with their son BOV in 1998 and, further, whether she would provide an undertaking to speak to BOV about him taking a paternity test. Karen was also asked about when she had started dating her current boyfriend; who had paid for her “tummy tuck” surgery in El Salvador in 2019; whether she had “partied” with a person who had undertaken repairs to her home; and what her parents and sister in El Salvador do for a living. When Karen’s counsel rightly objected to these questions on the basis that they were irrelevant to the issues on the motion and/or were simply inappropriate, Ms. Kalra responded that “I am allowed to ask whatever question I want.”
[61] To be fair, not all of Ms. Kalra’s questions were irrelevant, as she did ask Karen whether she was earning unreported income from the tax-preparation business that she had commenced following her separation from Boris. Karen replied that in late 2019 and early 2020 she had received modest amounts of income in cash. However, Karen went on to state that, since the onset of Covid-19 in March 2020, she no longer accepted cash and insisted that all payments be made electronically, in order to reduce any potential exposure to Covid-19 by herself or the parties’ seven-year-old son MJV. This explanation appears reasonable and there is no evidence to the contrary.
[62] As for the argument that Karen has taken over 700 clients from AAI and is capable of earning $70,000 or more annually, Boris has not tendered any direct evidence in support of his claims. As such, at this stage, his claim that Karen is capable of earning $70,000 or more in business income is merely an unproven assertion.
[63] I therefore accept Karen’s evidence regarding her income and find, for purposes of this interim support motion, that her income is $30,000.
What Amount of Ongoing Child Support Should be Paid by Boris on an Interim Without Prejudice Basis?
[64] There is no dispute that Boris has an obligation to pay child support for their younger son, MJV, who is seven years old and living with Karen. However, Boris takes the position that as their older son BOV expects to graduate from his undergraduate university degree program in November 2021, he should be regarded as independent for child support purposes.
[65] Karen has indicated that BOV intends to apply for law school this fall and hopes to commence legal studies in 2022. Given the fact that BOV is still a student and may well continue full-time university studies for some time in the future, I regard it as premature to terminate child support payments for him at this time. If BOV’s circumstances change in the future, the matter can always be reviewed. I therefore find that on an interim without prejudice basis both BOV and MJV remain children of the marriage and are entitled to child support.
[66] I have earlier found Boris’ income to be $209,355. Table child support for two children at this income level is $2,789 per month. I order Boris to pay this amount of monthly child support commencing September 1, 2021.
[67] With respect to s. 7 expenses, given the respective incomes of the parties, Boris is responsible for 73% of these costs while Karen is responsible for 27%. The party proposing to incur a s. 7 expense shall inform the other party in advance and attempt to secure agreement on the issue. In considering any proposed expenses, the parties shall be guided by the historical experience with respect to such expenses during the marriage.
[68] In the event that the parties are unable to agree on a proposed expense, the party proposing to incur the expense may proceed to incur the expense anyway, with ultimate responsibility for the expense being determined at trial.
Does Karen have a Prima Facia Entitlement to Spousal Support?
[69] Neither party devoted particular attention to the issue of whether Karen has a prima facie entitlement to spousal support. However, Boris has disputed Karen’s entitlement to spousal support on the basis that she is capable of earning an income of $70,000 or more and has no need for support.
[70] I have already rejected Boris’ submission in this regard and found that Karen’s income for support purposes is just $30,000. Based on her most recent financial statement, it is clear that this level of income is insufficient to meet her current needs. It is also far less then she was receiving during the marriage. Karen is also the primary caregiver for their younger son who is living with her, which will limit her ability to earn income for many years into the future
[71] I therefore find that Karen has established a prima facie entitlement to spousal support on both compensatory and non-compensatory grounds.
What Amount of Spousal Support Should be Ordered on an Interim Without Prejudice Basis?
[72] Although the Spousal Support Advisory Guidelines (SSAG) are advisory only and not legally binding, they set out a useful starting point for determining the quantum of spousal support on an interim basis. In this case, although the parties disputed their respective income levels, neither of them contested the relevance and application of the SSAG.
[73] As noted above, Boris takes the position that he has no means to pay spousal support since he was terminated or laid off from his employment with AAI and is currently earning just $33,600 per year from MH Alliance. I have already explained in some detail above why I reject this claim and will not repeat that analysis here.
[74] There is a further relevant consideration in assessing whether Boris has the capacity to pay spousal support in accordance with the level of income I have imputed to him. At a case conference in February 2021, he agreed to make uncharacterized payments to Karen of $3,500 per month. In addition, Boris has been continuing to pay the carrying costs for the Goodwood Avenue matrimonial home, which he estimates amount to approximately $2,500 per month. Thus, the combined payments being made by Boris as of February 2021 have totaled $6,000 per month. In granting Boris’ request for an adjournment of the support motion on May 20, 2021, I ordered Boris to continue making these payments until the return of the motion.
[75] Based on the respective incomes of the parties as found above, the midrange of the SSAG suggests a monthly spousal support payment of $2,769, which would be tax deductible to Boris. Thus, on the assumption that Boris would no longer be required to pay the carrying costs of Goodwood (a matter I consider below), his ongoing child and spousal support obligations would actually decrease from those that he voluntarily agreed to make in February 2021.
[76] Taking these circumstances into account, I find that Boris has the means to pay spousal support based on his imputed income, and Karen has a need for this support since her income is just $30,000.
[77] I therefore order Boris to commence making spousal support payments of $2,769 per month commencing September 1, 2021.
Should Retroactive Child and/or Spousal Support be Ordered at This Time?
[78] I have given careful consideration to the issue of whether it would be appropriate to make a retroactive order for child and/or spousal support.
[79] On the one hand, Boris has failed to provide any meaningful basis for calculating his income since the parties separated in 2019. He should not benefit from his failure to satisfy his disclosure obligations.
[80] On the other hand, it would be extremely difficult on the record before me to make a determination as to what amount of retroactive child and/or spousal support would be appropriate. There are a number of significant issues that remain in dispute. These include the date of the parties’ separation; the amount that Boris has paid since the parties separated towards the carrying costs of the Goodwood Avenue residence, where Karen has been residing; and the appropriate formula for determining the amount of credit that Boris should receive for the Goodwood payments that he has made. In addition, I note that since the case conference in February 2021, Boris has made a total of $25,500 in uncharacterized support payments to Karen. While the parties agree that Boris should receive credit for these uncharacterized payments, they do not agree on the method whereby such credit should be calculated.
[81] On balance, given these uncertainties, I find it would not be appropriate to make an order for retroactive child and/or spousal support at this time. These issues can be considered and determined on a more complete record by the trial judge.
How Should the Proceeds of Sale of the Teignmouth Property be Dealt With?
[82] The parties have now listed the Teignmouth Property for sale, in accordance with my May 20, 2021 order. I have proceeded on the assumption that the sale will proceed in an orderly way in accordance with that prior order.[^19] In the event that between now and the closing of the transaction of purchase and sale there are any outstanding arrears identified with respect to the Teignmouth Property, Boris shall pay these arrears and be reimbursed for such payments out of the sale proceeds.
[83] Karen has argued that any retroactive child and/or spousal support payable to her should be satisfied through a distribution from Boris’ share of the net proceeds of sale of the Teignmouth Property. Given that I have declined to make any such retroactive support order, this issue no longer arises.
[84] In the alternative, Karen has argued that she should receive an advance on her equalization payment from Boris’ share of the net sale proceeds of the Teignmouth Property. However, she did not seek any such relief in her notice of motion. I find that it would not be appropriate to make any such order without proper notice to Boris.
[85] I therefore decline to order any distribution from the proceeds of sale of the Teignmouth Property at this time. The proceeds of sale, net of closing costs, shall be held in trust pending further court order, without prejudice to further submissions which the parties may wish to make regarding distributions or payments that should be made to either of them, including, without limitation, in respect of costs.
Who Should Be Responsible for the Carrying Costs of 51 Goodwood Avenue?
[86] As noted above, for at least the last 18 months, Boris has been paying the carrying costs of the Goodwood Avenue residence. This was appropriate given the fact that there was no support order in place and Karen would not otherwise have been able to afford to fund those costs.
[87] The situation will change as of September 1, 2021 when the support order I am making will come into effect. Going forward, Karen should be responsible for funding her costs of residential accommodation. If she chooses to continue to live in the matrimonial home on Goodwood Avenue, she should assume responsibility, on a without prejudice basis, for paying the ongoing costs to maintain the property. Ultimate responsibility for any such payments will of course be subject to adjustment at trial.
[88] I also note that at the time of the parties’ separation there was an apartment in the Goodwood residence that was rented to a tenant for approximately $1,300 per month. That tenancy was terminated by Karen at some point in the last year. In the event that Karen decides to resume renting out the apartment in the Goodwood property, on an interim without prejudice basis, she should retain any rental income received, subject to adjustment at trial.
Should the January 2021 Preservation Order be Registered Against the Property at 670 Manning Avenue?
[89] In January 2021, Boris was ordered to preserve the equity in the property at 670 Manning Avenue. However, for reasons that are not entirely clear, this order has not been registered against the property. I therefore grant Karen leave to register the January 2021 preservation order for 670 Manning Avenue in Toronto against the property.
Disposition
[90] Order to go as follows:
a. commencing September 1, 2021, on an interim without prejudice basis, Boris shall make table child support payments to Karen for the benefit of the two children of the marriage, namely BOV and MJV, of $2789 per month, based on his income of $209,355;
b. commencing September 1, 2021, based on Boris’ annual income of $209,355 and Karen’s annual income of $30,000, on an interim without prejudice basis, Boris shall be responsible for paying 73% of the children’s s. 7 expenses and Karen shall be responsible for 27% of such expenses. The party proposing to incur a s. 7 expense shall inform the other party in advance and attempt to secure agreement on the issue. In considering any proposed expenses, the parties shall be guided by the historical experience with respect to such expenses during the marriage;
In the event that the parties are unable to agree on a proposed expense, the party proposing to incur the expense may proceed to incur the expense anyway, with ultimate responsibility for the expense being determined at trial;
c. Commencing September 1, 2021, on an interim without prejudice basis, Boris shall commence making spousal support payments to Karen of $2769 per month, based on Boris’ annual income of $209,355 and Karen’s annual income of $30,000, in accordance with the mid-range of the SSAG;
d. no retroactive child and/or spousal support should be ordered at this time, with that issue to be determined at trial;
e. the sale of the Teignmouth Property shall proceed in accordance with my May 20, 2021 order. In the event that, between today’s date and the closing of the sale transaction there are any outstanding arrears owing with respect to the Teignmouth Property, Boris shall pay such arrears and shall be entitled to be reimbursed for any such payments out of the sale proceeds;
f. I decline to order any further distribution from the net sale proceeds of the sale of the Teignmouth Property at this time. The sale proceeds (net of closing costs) shall be held in trust until further court order, provided, however, that this is without prejudice to further claims which the parties may subsequently wish to advance (whether by way of motion or otherwise) regarding the distribution to them from the sale proceeds of the Property, including, without limitation, in respect of the costs of this motion;
g. Boris is responsible, on a without prejudice basis, for the carrying costs of 51 Goodwood Avenue up to and including August 31, 2021 and shall pay any such costs forthwith. Effective September 1, 2021, on a without prejudice basis, Karen shall be responsible for funding the costs of the Goodwood Avenue property. In the event that Karen elects to resume renting out the apartment located on the property, she may retain any such rental payments on an interim without prejudice basis, subject to adjustment at trial; and
h. Karen is given leave to register the January 2021 preservation order for 670 Manning Avenue in Toronto against the property.
[91] With respect to costs, the parties’ may make submissions not only in respect of the herein motion (including without limitation the appearances on May 20 and August 11, 2021) but also in relation to the June 2021 questioning; the Co-Respondents’ request for an adjournment that was considered on August 9, 2021; and the subsequent dispute in relation to the offer to purchase the Teignmouth Property.
[92] Karen may serve and file written costs submissions of no more than 10 pages, not including Bills of Costs and Offers to Settle, within 10 business days of the release of this Endorsement. Boris and the Ascencios, respectively, may serve and file responding cost submissions of no more than 10 pages each, in each case not including Bills of Costs and Offers to Settle, within 10 business days of the due date for the service of Karen’s cost submissions. Karen may serve and file reply costs submissions of no more than five pages, within five business days of the due date for the service of the cost submissions of Boris and the Ascencios. No further costs submissions shall be permitted.
[93] With respect to next steps, given the nature of the allegations that have been made and the scope and complexity of the issues and arguments that have been raised thus far, it is likely that a trial would be lengthy and extremely costly. After the close of submissions on August 11, 2021, I recommended to the parties that they consider the possibility of mediation or other attempts at resolution.
[94] Accordingly, I direct that this matter proceed to a Settlement Conference before another judge on November 29, 2021 at noon.
P. J. Monahan J.
Released: August 27, 2021
Echeverria v. Villatoro et al., 2021 ONSC 5764
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
KAREN ELENA ECHEVERRIA VILLATORO
Applicant
– and –
BORIS VILLATORO
Respondent
- and –
MARIO ASCENCIO and MARTA GLORIA ASCENCIO
Co-Respondents
ENDORSEMENT
P.J. Monahan J.
Released: August 27, 2021
[^1]: Unless otherwise specified or obvious from the context, references to "the parties" include Karen, Boris and the Ascencios.
[^2]: Although Ms. Mazinani cancelled her questioning of the Applicant and the Respondent, they had already been cross-examined by other counsel.
[^3]: The Ascencio family had immigrated to Canada from El Salvador in the 1980’s.
[^4]: I note that on April 15, 2021, Boris pleaded guilty to charges of assault, assault with a weapon and breach of a recognizance in relation to Karen, and was sentenced to 90 days house arrest.
[^5]: It is for this reason that Karen has added the Ascencios as Co-Respondents in the litigation.
[^6]: Although Karen had originally sought an order permitting her to collect rents from the tenants at the Teignmouth Property, in light of my May 20, 2021 order that the Property be sold, she has modified her claim and is now seeking payment of arrears of support out of the proceeds of sale.
[^7]: Boris filed a letter from MH Alliance which stated that his employment there was non-arm’s length. However, during oral argument, his counsel maintained that this description was in error and his employment by MH Alliance was in fact arm’s-length.
[^8]: See Driscoll v. Driscoll, 2009 CanLII 66373 (ON SC), [2009] O.J. No. 5056 (Ont. Sup Ct); Damaschin-Zamfirescu v. Damaschin-Zamfirescu, 2012 ONSC 6689, O.J. No. 5586.
[^9]: Boris indicated in his materials filed for the May 20, 2021 motion that he had retained an independent professional to provide some sort of assessment of his income. However, the scope of work to be undertaken by this independent professional was unclear. In any event Boris cancelled the retainer for this assessment on the basis that his employment with AAI was terminated on May 7, 2021.
[^10]: See e.g. Njoki v. Gitomeh et al, 2016 ONSC 5012; Gordon v. Wilkins, 2020 ONCJ 115.
[^11]: Meade v. Meade, (2002) 2002 CanLII 2806 (ON SC), 31 R. F. L. (5th) 88 (Ont. Sup Ct).
[^12]: 2017 ONSC 4238 at para 25.
[^13]: For clarity, the $100,000 in AAI income which Boris admits using to pay personal expenses is not income that is being imputed to him but is, rather, his actual income, since he has admitted receiving these amounts. The gross up for income tax purposes is imputed income pursuant to s. 19 (1) (h) of the CSG.
[^14]: I note that the inclusion of $10,000 in Boris' income is likely a significant underestimate of the actual AAI expenses that should be considered to be payment of personal expenses for Boris. For example, McCabe points out that in 2020, AAI deducted $85,979 for the repairs and maintenance of buildings. This presumably involved repairs and maintenance to 670 Manning Avenue, where AAI's business is located, which is owned by Boris. As such, Boris appears to have been utilizing significant revenues from AAI to effect repairs and maintenance of his personal residence, which obviously should be included in his income and grossed up on the basis that no tax was paid on these amounts.
[^15]: During his questioning, Karen's counsel tabled an email showing that Boris was still using his AAI email account as of May 20, 2021.
[^16]: (2002) 2002 CanLII 41868 (ON CA), 61 O.R. (3rd) 711 (ONCA).
[^17]: 2013 ONSC 1997, O.J. No. 1616 at para 51.
[^18]: See e.g. Gordon v. Wilkins, supra note 10, where a lawyer who had been earning in excess of $200,000 lost his license to practice law because of misappropriation of trust funds. He argued that because he was no longer earning any income, he could not afford to pay child or spousal support. Although Sherr J. did recognize that the father's income had been reduced, he also found that this income reduction was directly attributable to the father's own misconduct and reckless behaviour. Sherr J. therefore found that the father was deliberately unemployed by his own actions, without reasonable excuse, and imputed income of $150,000 to him for a six-month period, following which the income imputation would be reduced to $100,000.
[^19]: After this paragraph was drafted and this Endorsement was about to be released, I was advised that in fact a dispute had arisen in relation to the Applicant’s refusal to accept an offer to purchase the Property. Having heard submissions from the parties on August 26, 2021, I issued a separate Endorsement finding that the Applicant’s refusal to accept the offer was contrary to my May 20, 2021 Endorsement. Costs of that appearance were reserved and may be included for consideration as part of the costs submissions to be submitted in accordance with paragraphs 91-92 below.