Court File and Parties
COURT FILE NO.: FS-23013-20 DATE: 2021-11-08 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Clyde Hourtovenko Responding Party/Applicant
– and –
Karen Hourtovenko Moving Party/Respondent
COUNSEL: Réjean Parisé, for the Applicant Kim S. Kieller, for the Respondent
HEARD: July 13, 2021
DECISION ON MOTION
CULLIN J.
Overview of the Motion
1This is a motion, brought by the respondent, seeking an interim determination of the issues of spousal support and child support. Specifically, the respondent asks the court to determine:
a. The respective incomes of the parties for the purpose of calculating support;
b. The respondent’s entitlement to interim spousal support; and,
c. The quantum of interim child and spousal support having regard to the parties’ incomes.
2For the purpose of this motion, the respondent is seeking that support be determined commencing March 15, 2021, without prejudice to her position regarding support prior to that date.
3The respondent also asks that she be designated as the sole beneficiary of the applicant’s life insurance policies as security for support. The applicant has currently designated the children as his beneficiaries.
4The respondent’s notice of motion requests a declaration that she be solely responsible for all decisions in the management of Riverside Cardiac Clinic Inc. as the corporation’s sole shareholder, officer, and director. Counsel for the respondent advised that no determination was being sought with respect to this issue; it will therefore be marked as withdrawn, without prejudice to the respondent’s ability to pursue it at a later date.
5The applicant takes issue with the respondent’s calculation of his income as well as her own income for the purpose of determining support.
6The applicant acknowledges that child support is payable but takes the position that all the children are entitled to financial support, and not just the child who resides with the respondent. Quantum of child support is therefore an issue.
7With respect to spousal support, the applicant takes issue with the basis of the respondent’s entitlement to spousal support, as well as the quantum of spousal support.
Factual Background
Biographical Information
8The applicant and the respondent were married on October 9, 1993 and separated sometime between July 25, 2019 and July 28, 2019. The applicant is currently 58 years of age and the respondent is 53 years of age.
9The applicant is a cardiologist practising in Sudbury. This was his profession when the parties married.
10The respondent is self-employed as a clinical psychotherapist through a corporation owned by her called LifeZone Inc. (“LifeZone”).
11The applicant and the respondent are the parents of three adult children Lauren age 24, Tayler age 22 and Cameron age 20. Initially following the separation, the children resided with the respondent.
12In January 2021, Lauren moved in with the applicant. She remained there until April 2021, when she moved to Waterloo to reside with her boyfriend. She was previously enrolled in part-time studies at Cambrian College in Sudbury, but she struggled due to health issues. She worked part-time at Cambrian College during 2021. Lauren’s current status was not clear in the affidavit materials; there was no evidence either about her attendance at post-secondary education or her employment, if any.
13In February 2021, Tayler moved to Alberta to reside with her boyfriend. During the 2020-2021 academic year, she took a “gap year” from her post-secondary studies; she worked during that time. There is evidence that she was accepted to the University of Calgary to continue her studies, presumably commencing in September 2021.
14Cameron continues to reside with the respondent and is in full-time attendance at Laurentian University. He works part-time at Mark’s Work Warehouse and at the applicant’s office.
Marital Roles and Finances
15There is little debate that the applicant was the principal income-earner during the marriage. He had an extremely successful practice as a cardiologist and typically earned close to, if not more than, one million dollars annually.
16There is some debate about the respondent’s role during the marriage. It is the respondent’s evidence that she was the primary caregiver to the children and managed the household. She took online courses to further her education, and she worked within the applicant’s practice, but her career was subordinate to his. She opened LifeZone during the final years of the marriage.
17The applicant contends that the respondent substantially benefitted from his support of her career advancement throughout their marriage. When the parties married, the respondent was a registered nurse with a college diploma. During the marriage, the respondent completed her BScN, MBA, and PhD. She now has designations as a Nurse Practitioner (RN(EC)), and a clinical psychotherapist, as well as additional certifications as a Life Coach, a Neuro-Linguistic Programmer, and a Hypnotherapist (among others). The applicant contends that he subsidized not only the respondent’s education, but also the services of nannies and housekeepers to support the respondent as she pursued those initiatives. The respondent acknowledges the support of her education but minimizes the extent of the household support that she received.
18The parties’ finances are convoluted. At the time of their separation, they (either personally or through corporations) owned real estate in Ontario (Sudbury and Toronto), Nova Scotia, and Florida. They used some of these properties as recreational properties, but also rented all of them (with the exception of the matrimonial home) to generate income through a corporation called Riverside Cardiac Clinic Inc. (“RCC”); the respondent is the sole shareholder, officer, and director of RCC.
19In addition to these interests, the applicant had a professional corporation (Dr. Clyde Hourtovenko Medicine Professional Corporation, or “MPC”) and the respondent had her psychotherapy practice which she operated through the LifeZone corporation. The parties also had investments.
20It is the applicant’s evidence that the parties were sometimes living “pay-to-pay” notwithstanding the fact that they were generating substantial income.
21At the time of the motion, the parties had sold all their real estate with the exception of: (1) the matrimonial home in Sudbury, which is in the respondent’s name and in which the applicant resides; and; (2) a commercial property on Armstrong Street in Sudbury which is owned by RCC and from which the respondent operates her psychotherapy clinic. The respondent indicates that the Armstrong Street property is currently listed for sale.
22With respect to liabilities, the parties owed mortgage and credit debt. Some of the debt was incurred to purchase real estate and was secured against the matrimonial home. There is joint legacy debt outstanding with respect to the Florida property. The applicant was also the guarantor of debts owed by RCC. The current status of the RCC debts is unclear; the respondent takes the position that the applicant is not entitled to an accounting because he is not a shareholder of RCC.
23The applicant earns income from two sources: (1) OHIP billings (from his practice and from work in Hospitals); and, (2) “testing” revenue (from reviewing and interpreting cardiac tests). The applicant also receives a government subsidy to fund the expense of a nurse practitioner in his office. Presently, all the applicant’s income is paid to MPC. Historically, the applicant diverted a substantial portion of his income and his government subsidy to RCC. This allocation permitted the funds to be drawn upon by the respondent for the benefit of the family at a lower tax rate.
24The respondent earns income from two sources: (1) professional income from her practice with LifeZone; and, (2) rental income from the Armstrong Street building owned by RCC. The Armstrong Street property is rented both to LifeZone and to arm’s length parties.
Support Since Separation
25The respondent submits that “no support in any form” was paid by the applicant for the children for 9 months post-separation, or for her for 16 months post-separation. That position is not supported by the evidence.
26Between the date of separation and December 2019, $413,170.07 was deposited from the applicant’s practice into RCC. Both the applicant and the respondent had access to those funds, and the respondent acknowledges that she used those funds to support herself and the children.
27Commencing in March 2020, the applicant paid child support in the amount of $6,683.00 per month. The first month, he paid the child support directly to the children, but subsequently paid it to the respondent.
28This arrangement continued until Lauren moved to the applicant’s residence in January 2021 and Tayler moved to Alberta in February 2021. Since then, the applicant has paid child support to the respondent in the amount of $2,880.00 per month for Cameron. He also pays $500.00 per month directly to Cameron.
29The applicant pays $2,000.00 per month directly to Lauren and $2,000.00 per month directly to Tayler to assist with their living expenses. He has been making these payments since they moved to Waterloo and Alberta. The applicant also pays $700.00 per month for the vehicle expenses (primarily insurance) for all the children.
30The total amount being paid by the applicant for the benefit of the children is $8,080.00 per month.
31There is a RESP established to assist with the children’s educational expenses. The applicant’s Financial Statement, sworn April 9, 2021, indicates that there was $54,000.00 in the RESP as of the end of February 2021. The children continue to access these funds to assist with their post-secondary education expenses.
32The applicant currently pays spousal support to the respondent in the amount of $4,500.00 per month. This is payable pursuant to a without prejudice agreement dated November 26, 2020.
33The applicant has made other payments toward expenses for the benefit of the respondent and the children since the separation. Conversely, the respondent has been required to make substantial payments to satisfy liabilities owing by RCC; she submits that she has accessed funds through the corporation, through credit facilities, and through the sale of the parties’ real estate to make those payments.
Positions of the Parties
The Applicant
34The applicant argues that his pre-separation work habits are unsustainable. He submits that he was working 80 to 90 hours per week at the behest of the respondent to fund her self-improvement initiatives and lifestyle.
35It is the applicant’s evidence that, even prior to the separation, he spoke to the respondent about burnout and about scaling back his hours. He submits that the average annual income of a cardiologist working in Ontario is $500,000.00 to $550,000.00.
36The applicant argues that he was required to maintain his frenetic work pace during the latter half of 2019 and throughout 2020 to maintain the parties’ financial obligations. Those obligations were primarily the carrying costs of the parties’ real estate portfolio. As the majority of the real estate has been sold and the related obligations discharged, he has reduced his working hours to 45 to 50 hours per week throughout 2021.
37The applicant projects his 2021 income to be $596,000.00, relying on the report of Laura Sandblom of KPMG, dated April 19, 2021.
38The applicant argues that the respondent has been uncooperative in providing financial disclosure, both about her income and about their assets and debts. He submits that the respondent has received significant proceeds from the sale of their real property, and that she has not accounted for those funds. It is his position that, based upon the information available, the respondent’s income should be assessed in a range between $260,000.00 and $350,000.00.
39With respect to spousal support, the applicant argues that: (1) the respondent has not been disadvantaged by the marriage and is not entitled to receive spousal support; (2) if the respondent is entitled to receive spousal support it should not be compensatory support; (3) nurse practitioner income should be imputed to the respondent in the amount of $167,000.00, as she has the qualifications and funding is available to pay her this salary; and (4) funds received by the respondent since separation through RCC and LifeZone should be imputed to her as income.
40With respect to the quantum of support, the applicant argues that an appropriate range of child support for Cameron would be $3,635.00, based upon an income of $350,000.00 for the respondent and no spousal support payable, and $4,510.00, based upon an income of $302,884.00 for the respondent and $920.00 per month of spousal support payable.
The Respondent
41The respondent argues that she has been in a financially precarious position since the separation. She submits that the applicant has obstructed the litigation with his failures to provide financial disclosure and to pay an appropriate amount of support; he has only responded when forced to do so. In the interim, she has been required to live on credit and to access COVID relief funds through her business.
42The respondent does not appear to dispute that the applicant was working long hours. She describes him as a, “hard worker” and notes that, “[his] need to work always came before our family”. The respondent’s argument suggests that she does not believe that the applicant intends to permanently reduce his work hours or his income.
43The respondent argues that she is entitled to compensatory spousal support. She submits that she was, first and foremost, a caregiver and homemaker. The children’s needs were addressed, and their activities completed before she attended to her online studies. She acknowledges that she had assistance from a housekeeper but argues that would not have been unusual for a family with their income.
44With respect to her employment, the respondent submits that she has not worked as a nurse practitioner for over 14 years. She cannot work in that capacity on her own, and the funding that she secured is specific to the applicant’s practice. She submits that she has transferred that funding to the applicant’s practice to subsidize the nurse practitioner that is employed by him, and that the subsidy should be considered in calculating his income.
45The respondent argues that the applicant was the principal income-earner and that her income was subsidized by RCC. As RCC has lost the income that it received from the applicant and has sold its income-generating real estate portfolio, it can no longer provide that subsidized income. Although the respondent receives income from LifeZone, it is insufficient to meet her needs and does not reflect the status quo on the date of separation.
46The respondent also submits that she is facing significant contingent tax liabilities from the sale of the real properties that were owned by RCC.
47The respondent argues that the applicant is living in the lap of luxury while she struggles to meet her financial obligations. She notes that she was required to remit $308,000.00 to the Canada Revenue Agency for tax liabilities related to the parties’ use of funds from RCC, while the applicant has purchased a new villa in Florida for $250,000.00 (USD) and golfs nearby using a private membership.
48With respect to the children, the respondent submits that Lauren and Tayler have both withdrawn from parental control and are no longer eligible to receive child support. If any support is paid to them, it is being done voluntarily and not as a result of any legal obligation. The respondent argues that any financial support being paid by the applicant to Lauren and Tayler should not be considered when determining the quantum of child and spousal support that she should receive from the applicant.
49The respondent is seeking a determination that the applicant’s income for the purpose of quantifying support is $1,085,666.00, while her income is $84,000.00. On an interim basis, the respondent is seeking child support for Cameron in the amount of $7,635.00 per month, and that he be permitted to access the RESP to pay for his post-secondary education expenses. She is also seeking interim spousal support in the amount of $25,928.00 per month. She asks that support commence March 15, 2021.
The Law
The Divorce Act
50This is a divorce proceeding, governed by the provisions of the Divorce Act, R.S.C., 1985, c.3 (2nd Supp.).
51Pursuant to s.15.1(2) of the Act, a court may make an interim order requiring a spouse to pay for the support of any or all of the children of the marriage. Pursuant to s.15.1(3), a court making an interim order is required to do so in accordance with the applicable guidelines.
52Pursuant to s.15.2(2) of the Act, a court may make an interim order requiring a spouse to secure and/or pay a sum determined to be reasonable by the court for the support of the other spouse. Pursuant to s.15.2(3), the court may impose terms, conditions, or restrictions on the order as it deems appropriate.
53Sections 15.2(4) and 15.2(6) of the Act speak to the factors to be considered when making an interim order for spousal support, as well as the objectives of such orders. The court is required to consider the, “condition, means, needs and other circumstances of each spouse”, including the length of their cohabitation, their roles in the relationship, and any relevant arrangements between the parties, whether ordered or otherwise. The objective of the order should be to recognize and address any economic advantages or disadvantages arising from the marriage or its breakdown while also promoting self-sufficiency where practicable.
54Pursuant to s.15.3(1) of the Act, child support is given priority over spousal support.
Federal Child Support Guidelines
55The Federal Child Support Guidelines (SOR/97-175) (“CSG”) provide a uniform code to guide the court in determining the quantum of child support. Some of the guidelines are mandatory, while others are discretionary. For the purpose of the present motion, the following guidelines are relevant:
a. For children over the age of majority, the court may order the payment of the Guideline amount or, if it considers that approach inappropriate, another amount having regard to the condition, means, needs and other circumstances of the child. (s.3(2))
b. Where the income of the paying spouse is over $150,000.00, the court may order the Guideline amount, or may order the Guideline amount for the first $150,000.00 of income and a discretionary amount having regard to the income in excess of $150,000.00, the circumstances of the child, and the ability of each spouse to contribute to the child’s support. (s.4)
c. In determining a party’s income for the purpose of assessing child support, the court may consider their pattern of income, fluctuation in income, and receipt of any non-recurring amounts. (s.17(1))
d. The considerations in determining corporate income are set out in s.18.
e. The court may impute income to a party in circumstances where it is of the view that a party’s declared income is not reflective of their de facto income or income-earning ability. (s.19(1))
Spousal Support Advisory Guidelines
56Unlike the CSG, the Spousal Support Advisory Guidelines (“SSAG”) are, as the title suggests, advice. They are not mandatory, but they are widely used by counsel and the court to determine the appropriate range of spousal support having regard to factors including the parties’ incomes, the parties’ ages, the length of the marriage, and the parties’ child support obligations.
57The SSAGs are intended to apply to both interim and final orders.
Interim Spousal Support - Considerations
58The legal principles to be considered by the court in addressing the issue of interim spousal support were summarized by Sherr J. in Samis (Guardian of) v. Samis, 2011 ONCJ 273, [2011] O.J. No. 2381. Briefly, they are as follows:
a. The burden on a motion for interim spousal support is to demonstrate that a triable case exists, and in particular that there is a prima facie case for entitlement. The overall merits of a claimant’s case for spousal support are to be determined by the trial judge at a final hearing;
b. It is not necessary for the court to conduct a complete inquiry to determine the extent to which either party suffered economic advantage or disadvantage as a result of the relationship;
c. Interim support provides income for a dependent spouse and is intended to address short-term hardship and to maintain the accustomed lifestyle of the parties from the time the proceedings are instituted until trial;
d. Interim support is to be based on the parties' means and needs. The need to achieve self-sufficiency is of less importance; and,
e. Interim spousal support should be ordered within the range of the Spousal Support Advisory Guidelines (Ottawa: Minister of Justice and Attorney General of Canada, July 2008), unless exceptional circumstances dictate otherwise.
59Where there is a delay in advancing a claim for interim spousal support, some cases have linked the test for interim spousal support to the likelihood of success at trial: Belcourt v. Chartrand, 2006 11925 (ON SC), [2006] O.J. No. 1500.
Entitlement to Spousal Support
60In assessing the entitlement to spousal support, the court must consider the three bases which have been identified in the case law namely: compensatory, non-compensatory, or contractual support.
61No contractual basis for spousal support has been identified in the evidence before me. I therefore will not address this criterion further.
62Compensatory spousal support was first recognized by the Supreme Court of Canada in Moge v. Moge, 1992 25 (SCC), [1992] 3 S.C.R. 813. The conceptual basis for this type of support was succinctly described in Ludmer v. Ludmer, 2013 ONSC 784 (para. 215):
This is in recognition that upon marriage breakdown, there should be an equitable distribution between the parties of the economic consequences of the marriage. Specifically, compensatory support is intended to compensate a spouse upon relationship breakdown for contributions made to the relationship and to recognize sacrifices made and the advantages to one spouse and disadvantages to the other, both during and after breakdown of that relationship. It is to compensate for foregone careers and missed opportunities during the marriage, and to serve as reimbursement for hardships accrued as a result of the marriage breakdown.
63Non-compensatory spousal support was first recognized by the Supreme Court in Bracklow v. Bracklow, 1999 715 (SCC), [1999] 1 S.C.R. 420. It involves an assessment of need and considers not only an inability to meet necessities, but also a decline in a party’s standard of living following the separation.
64Income discrepancy alone does not create a claim for non-compensatory support. There must be some evidence that the claimant has suffered a disadvantage arising from the breakdown of the relationship. In some cases, it may be enough to demonstrate that the claimant no longer enjoys the lifestyle that accompanied the parties’ pooled resources (Lamb v. Watt, [2017] ONSC 5838, para. 28).
Calculation of Interim Spousal Support
65As noted, interim spousal support is typically awarded within the range of the SSAGs. For high income-earners (for the purpose of the Guidelines, individuals earning more than $350,000.00 annually), the court may elect to depart from the SSAGs. The Saskatchewan Court of Appeal identified the following principles in Potzus v Potzus, 2017 SKCA 15 (para. 128):
The Revised Guide summarizes the principles that have emerged from case law addressing incomes above the $350,000 ceiling:
The formulas for amount are no longer presumptive once the payor’s income exceeds the “ceiling”.
The ceiling is not an absolute or hard “cap”, as spousal support can and usually does increase for payor incomes above $350,000.
The formulas are not to be applied automatically above the ceiling, although the formulas may provide an appropriate method of determining spousal support in an individual case, depending on the facts.
Above the ceiling, spousal support cases require an individualized, fact-specific analysis. It is not an error, however, to fix an amount in the SSAG range … Evidence and argument are required.
Where the payor’s income is not too far above the ceiling, the formula ranges will often be used to determine the amount of spousal support, with outcomes falling in the low-to-mid range for amount. How far is “not too far above” is still not clear. Somewhere between $500,000 and $700,000, it seems.
Once the payor’s income is “far” above the ceiling, then the amount of support ordered will usually be below the low end of the SSAG range, but SSAG ranges are still calculated and sometimes the outcome will fall within the SSAG range.
66At the end of the day, the court has an overriding discretion in deciding whether an award of spousal support is appropriate and, if so, in what amount. The exercise of such discretion will depend on the particular facts of each case, having regard to the factors and objectives established in the governing legislation (Moge v. Moge, (p. 866); Bracklow v. Bracklow, para. 53).
Analysis
Determination of Income - Issues
67Neither party comes to court with clean hands with respect to the issue of income disclosure.
68The applicant was initially forthcoming with his 2017, 2018, and 2019 financial disclosure. The disclosure of his 2020 income and his expert’s report was promised several times and not delivered. The report of Laura Sandblom of KPMG, dated April 19, 2021, was eventually served on June 30, 2021 and was accompanied by her reports of June 21, 2021 and June 25, 2021.
69While the June 25, 2021 report commented about the respondent’s income and was based on late-delivered disclosure from the respondent, there was no explanation for the delayed delivery of the reports of April 19, 2021 and June 21, 2021. Those reports addressed the applicant’s income and were based upon information which was in the possession and control of the applicant. Their late delivery deprived the respondent of the opportunity to have her expert meaningfully comment on the applicant’s position that his income is declining.
70To the applicant’s credit, he provided 2020 and projected 2021 income information to the court for use in this motion. The same cannot be said for the respondent. Her corporate fiscal year ended December 31. She failed to file an expert’s report, 2020 financial statements, or her 2020 personal income tax return, to assist the court in understanding her current income. The Line 101 income disclosed in her 2020 tax return was received anecdotally through the applicant’s expert.
71The respondent also failed to disclose the disposition of the proceeds of sale of the parties’ real estate portfolio. This information has been requested by the applicant. The respondent argues that the applicant is not entitled to the information as the properties were beneficially owned by RCC, which is her corporation. This position is not only misinformed, but also left the court with gaping hole where there should have been information about the current status of RCC.
72The applicant is entitled to full disclosure about the disposition of the net sale proceeds. First, most of the properties were legally owned jointly, notwithstanding their beneficial ownership. There remains a legal argument about entitlement to the proceeds. The applicant is entitled to disclosure about the disposition of the proceeds so that he can assess whether he wishes to pursue that argument.
73Second, the applicant was (and perhaps still is) the guarantor of the debts of RCC. Those debts were to have been satisfied with the proceeds of sale. The applicant is entitled to information about the status of those financial obligations, regardless of his position within in the corporation.
74Third, and most importantly, both the applicant and the court are entitled to know what assets and liabilities RCC currently has, how its assets are invested, what interest or other income it may be earning, and what expenses it is incurring. RCC is a source of income for the respondent (and indeed at the date of separation was the primary source of the respondent’s income). This disclosure is relevant to the issue of support, and in particular spousal support.
75In disposing of this motion, I will be making an order requiring the respondent to provide particulars to the applicant of the disposition of the proceeds of sale for all real property in which RCC had a beneficial interest, as well as the particulars of any monthly income she is generating from any net proceeds of sale.
Applicant’s Income
76The applicant’s expert concludes that the applicant’s 2020 income for support purposes was $803,448.00 (Report of Laura Sandblom, KPMG, dated June 21, 2021) and projects that the applicant’s 2021 income will be $596,000.00 (Report of Laura Sandblom, KPMG, dated April 19, 2021).
77The respondent’s expert concludes that the applicant’s income was $964,000.00 in 2017, $923,000.00 in 2018, and $1,029,000.00 in 2019. This opinion considers both the income of the applicant’s professional corporation and the income paid to RCC (Report of Vivian Alterman, AP Valuations Limited, dated February 19, 2021).
78Neither of the reports of Laura Sandblom assist in the review of the applicant’s pre-separation income. Her comments regarding the applicant’s 2017, 2018 and 2019 income only considered the earnings reported on the applicant’s personal income tax returns, which reflected the income of the applicant’s professional corporation and not the income diverted to RCC.
79In reviewing the parties’ expert reports, I noted several points of similarity. Both deducted the carrying charges and interest expenses reported on the applicant’s personal income tax returns. Both “grossed up” reported dividend income and capital gains to reflect the actual amounts received. Both added a personal portion of vehicle expenses claimed of 25%. While each approached the issue of corporate pre-tax income versus dividend income differently, the net result was similar. The respondent’s expert added back the home office expenses deducted while the applicant’s expert did not; the expense and gross-up were nominal, totalling $3,641.00.
80Given that the methodology used by Ms. Sandblom and Ms. Alterman appears to be substantially the same, I accept that the information provided by Ms. Sandblom accurately reflects the applicant’s 2020 income. The adjustment for the non-recurring pandemic-related subsidies is an arguable issue, but I note that adjustment was $23,678.00 and therefore it did not factor significantly into my analysis.
81The significant reduction in the applicant’s 2021 income is more problematic.
82In explaining the significant downward shift of the applicant’s income between 2020 and 2021, Ms. Sandblom identified the following: (1) a projected decrease in revenue of $155,091.00; and (2) an increase in the wages and benefits paid to the nurse practitioner of $104,383.00. The nurse practitioner’s role in the practice has apparently been augmented to permit the applicant to reduce his working hours.
83I accept the increase in the expense for the nurse practitioner’s wages and benefits.
84I also accept that the applicant has made adjustments to his practice to discontinue his unsustainable work schedule of 80 to 90 hours per week. I do not find that the applicant’s decision to cease working at this pace results in him being, “intentionally underemployed”. No person should be required to sustain this pace, even on an interim basis, against their own best interests. I find that this decision by the applicant is reasonable, and that doing so still leaves him and his family with a disposable income that exceeds that of the majority of the population.
85I have more difficulty accepting the projected decrease in the applicant’s revenue based solely upon his earnings in January and February 2021. There are many reasons that the applicant’s earnings could have been reduced in January and February 2021. The applicant has, for example, purchased a new condominium in Florida. It would be reasonable to expect that he would be there during the winter months, which would impact his income.
86I accept that the applicant may have worked additional hours in 2020 to maintain the financial obligations related to the parties’ real estate portfolio, and that there may be a further decrease in his income this year. In my view, a more reasonable approach is to project adjustments to the applicant’s pre-separation average income. Taking that average income ($972,000.00) and adjusting it to reflect his projected changes in revenue and expenses for 2021 ($259,474.00), leaves a resulting net income of $712,526.00. This is the income that will be used for the purpose of calculating the applicant’s interim support obligations.
Respondent’s Income
87Determining the respondent’s income can best be described as a “shell game”. It is apparent that significant revenue has historically flowed into her corporations, but it is less apparent where it has all gone. There are considerable gaps in the evidence, particularly as it pertains to the respondent’s current income.
88The absence of information regarding the income drawn by the respondent from RCC and LifeZone in 2020 leaves me to infer that the information would not have been of assistance to the respondent and that the income that I am being urged by her to accept for support purposes is under-reported.
89There are no less than three income figures for the respondent in the evidence before me:
a. The respondent’s expert concludes that the respondent’s income was $140,000.00 in 2017, $139,000.00 in 2018, and $90,000.00 in 2019. For 2017 and 2018, this opinion considers both the respondent’s income and income that was flowed through to her by the applicant’s professional corporation (Report of Vivian Alterman, AP Valuations Limited, dated February 19, 2021).
b. The respondent’s expert concludes that the respondent’s income was $81,000.00 in 2017, $82,000.00 in 2018, and $90,000.00 in 2019, when one considers only the respondent’s income and not the income flowed through from the applicant’s professional corporation (Report of Vivian Alterman, AP Valuations Limited, dated February 19, 2021).
c. The applicant’s expert notes that the respondent’s personal income tax return for 2020 disclosed an income of $96,200.00 with no supporting T4’s. She also notes that the balance sheet for LifeZone for the 2020 fiscal year discloses a personal draw by the respondent of $206,684.00 which is not reported as a dividend on her 2020 income tax return (Report of Laura Sandblom, KPMG, dated June 25, 2021).
90I am cognizant of the fact that a precise determination of the respondent’s income is not expected at this stage of the proceeding. That will be an issue for trial, where the court will have the benefit of the oral evidence of the parties’ experts.
91Having said that, I am also cognizant of the fact that the respondent is the legal owner of the majority of the assets accumulated during the parties’ marriage. It is probable that she will owe a substantial equalization payment to the applicant. A significant overpayment of spousal support now could wreak financial havoc for the parties in the future, particularly for the respondent who will be required to finance the equalization and any overpayment amounts.
92In reviewing the evidence available to me, I have ascertained the following:
a. Historically, RCC derived its income from professional fees directed from the applicant’s practice, rental income from the parties’ real estate portfolio, and administration fees paid to it by LifeZone.
b. Presently, RCC likely derives its income from administration fees paid to it by LifeZone, investment and interest income from the net proceeds of the sale of its real estate portfolio, and rental income from the Armstrong property (unless that income continues to be retained by LifeZone).
c. There is no evidence before the court regarding the 2020 actual income or the 2021 projected income of RCC. This information is in the possession and control of the respondent, who has elected not to make it available to the court.
d. LifeZone derives its income from the respondent’s psychotherapy practice. Historically, it has also collected and retained the rental income from the Armstrong property.
e. There is no evidence before the court regarding the 2020 actual income or the 2021 projected income of LifeZone. This information is in the possession and control of the respondent, who has elected not to make it available to the court.
f. The gross income of LifeZone (practice income and rental income) was $176,796.00 in 2017, $283,281.00 in 2018 and $324,595.00 in 2019.
g. The gross expenses of LifeZone were $145,143.00 in 2017, $222,178 in 2018, and $232,493.00 in 2019. The corporation’s retained earnings were $8,309.00 in 2017, $35,243.00 in 2018 and $89,100.00 in 2019.
h. In 2019, LifeZone’s expenses included $39,410.00 for training and education, $27,796.00 for advertising and promotion, $51,460.00 for wages and benefits, and $17,362.00 for inventory purchases of resale items. The wages and benefits were paid primarily to arm’s length employees, and it was the first year that wages and benefits were an expense item.
93The applicant’s affidavit of April 9, 2021 refers to an entity operated by the respondent called High Rise Group Enterprises (“High Rise”). There is no information in the materials before me explaining what this entity is and whether it operates independently of the respondent’s other businesses. The applicant indicates that High Rise rents office space in the Armstrong property; it is not clear to me whether this is the rental income reflected in LifeZone’s financial statements.
94The applicant submits that nurse practitioner income in the amount of $167,000.00 should be imputed to the respondent. He submits that the respondent has the qualifications to work as a nurse practitioner, and that the funding is available for her to work in any clinic which is prepared to employ her.
95The respondent submits that she has not worked as a nurse practitioner for several years, and that the funding that she arranged has been retained by the applicant and is being used to pay his nurse practitioner. She further submits that it would be challenging for her to secure a position in Sudbury, even with funding, as she would be required to work with another physician; she believes that she would not be an attractive candidate within the close-knit medical community in Sudbury given her separation from the applicant.
96I am not prepared to impute nurse practitioner income to the respondent. It is clear that she has not worked in this capacity for several years, and it is not reasonable to expect that she will be able to resume a career in this field at this time, particularly given her commitments to her psychotherapy practice.
97The applicant further submits that the court should consider the draw referenced by Laura Sandblom in her report of June 25, 2021 and impute income to the respondent of $206,684.00. I also do not accept this submission.
98In my view, it would be unfair and potentially prejudicial to the respondent to impute the entire LifeZone draw as income without reviewing the 2020 financial statements for both RCC and LifeZone and without receiving expert evidence about the purpose and significance of this draw. The question of whether this should be characterized as income for the purpose of support is a live issue. The respondent should not be required to deplete her capital assets in order to support herself pending trial (Elgner v. Elgner, 2009 68827 (ON SC); Goeldner v. Goeldner, 2005 455 (ON CA)). Further, it is not clear to me that she benefitted from the funds, or whether they were used to satisfy the joint obligations of the parties; I note, for example, that the respondent has been required to remit $308,000.00 in income taxes following the personal use of corporate funds by herself and the applicant.
99The respondent submits that the conclusions reached by Vivian Alterman in her report of February 19, 2021 should prevail when determining the respondent’s income for the purpose of interim spousal support. I disagree.
100It is my view that an adverse inference should be drawn from the respondent’s failure to provide any information to the court regarding her 2020 income. If this information were favorable to the applicant one would have expected it to be featured front and centre in her arguments. It was not.
101Several significant events have occurred since the 2017 to 2019 fiscal years considered by Ms. Alterman. The parties have divested themselves of the majority of their real estate portfolio and are no longer liable for the carrying costs of those properties. The proceeds of the sale of those properties exceeded their associated liabilities, leaving residual funds from which investment income could be generated without encroaching on capital. Significant expenses of LifeZone such as training and education, and advertising and promotion, would likely have been reduced by the pandemic. In my view, these events have more likely than not given rise to additional available income for the respondent.
102The respondent’s 2020 personal income tax return has apparently disclosed income of $96,200.00 on line 101. It is my view, on the evidence before me, that it would be appropriate to impute double that amount to the respondent as her income for the purpose of determining support. If this results in an underpayment or an overpayment of support, an appropriate adjustment can be made at trial.
103An income of $192,400.00 will therefore be imputed to the respondent for the purpose of calculating the applicant’s interim support obligations.
Support
104Eventually, the funds paid and received by each of the parties since the separation will have to be agreed upon or resolved through a forensic accounting. A determination will have to be made regarding the amounts owing or overpaid for past child and spousal support. That is not an issue that will be resolved with this motion.
105What is clear is that any suggestion that the respondent and the children were left destitute while the applicant basked alone in the luxury of his substantial income is hyperbole. While the applicant has not been restrained in spending money on himself, he has paid and continues to pay for his family; the question is whether the payments that he is currently making are appropriate based on the information available or whether they should be adjusted pending trial.
Child Support
106The Supreme Court of Canada in Francis v. Baker, 1999 659 (SCC), [1999] 3 S.C.R. 250, made the following statement regarding the objectives to be considered by the court in making an order for child support (para. 41):
…even though the Guidelines have their own stated objectives, they have not displaced the Divorce Act, which clearly dictates that maintenance of the children, rather than household equalization or spousal support, is the objective of child support payments. Section 26.1(2) of the Act states that “[t]he guidelines shall be based on the principle that spouses have a joint financial obligation to maintain the children of the marriage in accordance with their relative abilities to contribute to the performance of that obligation”... While standard of living may be a consideration in assessing need, at a certain point, support payments will meet even a wealthy child’s reasonable needs. In some cases, courts may conclude that the applicable Guideline figure is so in excess of the children’s reasonable needs that it must be considered to be a functional wealth transfer to a parent or de facto spousal support…courts should not be too quick to find that the Guideline figures enter the realm of wealth transfers or spousal support. But courts cannot ignore the reasonable needs of the children in the particular context of the case as this is a factor Parliament chose to expressly include in s. 4(b)(ii) of the Guidelines. Need, therefore, is but one of the factors courts must consider in assessing whether Table amounts are inappropriate under s. 4. In order to recognize that the objective of child support is the maintenance of children, as well as to implement the fairness and flexibility components of the Guidelines’ objectives, courts must therefore have the discretion to remedy situations where Table amounts are so in excess of the children’s reasonable needs so as no longer to qualify as child support. This is only possible if the word “inappropriate” in s. 4 is interpreted to mean “unsuitable” rather than merely “inadequate”.
107The respondent submits that child support should be payable for Cameron in the amount of $7,635.00 per month based upon an attributed income of $1,085,666.00 for the applicant. In addition, she submits that his post-secondary education expenses should be paid from the RESP established for the children. This would result in an annual payment of child support in the amount of $91,620.00, in addition to Cameron’s post-secondary education expenses which would be paid from the RESP.
108The Guideline amount of support for the applicant’s determined income of $712,526.00 is $5,349.19 per month. This would result in an annual payment of child support in the amount of $64,190.28, in addition to Cameron’s post-secondary education expenses which would be paid from the RESP.
109This request by the respondent is not only “inappropriate”, it is shocking. While no post-secondary education budget has been provided, I feel confident in concluding that Cameron’s budget while attending undergraduate studies at Laurentian University and living at home comes nowhere close to the amount requested.
110The respondent submits that the onus is on the applicant to justify a departure from the Guideline amount of support. I disagree. The court in Francis v. Baker unequivocally stated that the presumption in favour of the Guideline amount does not compel a party seeking to challenge that amount to call evidence, and no adverse inference should be drawn from their failure to do so. (para. 43)
111Where, as here, the amount of support requested represents a gross departure from the reasonable needs of a child of similar age and circumstances, it is my view that the onus should fall on the party requesting support to provide evidence to justify the request. In the absence of such evidence, it falls to the discretion of the court to determine what is reasonable.
112In determining child support, the applicant asks the court to consider the monthly payments that he is making to Lauren and Tayler. The respondent argues that this is not an appropriate consideration, as Lauren and Tayler have withdrawn from parental control.
113I find that it is not necessary for me to consider the payments to Lauren and Tayler to determine an appropriate quantum of child support for Cameron.
114The applicant is currently paying child support to the respondent for Cameron in the amount of $2,880.00 per month. He is also paying $500.00 per month directly to Cameron and is paying the insurance expenses for Cameron’s vehicle. Cameron’s post-secondary education expenses are being paid from the RESP. In addition to this, Cameron is working part-time.
115In my view, the status quo meets (and likely exceeds) Cameron’s needs as a student attending university while living at home. Quite frankly, unless Cameron were attending Harvard or Oxford, this budget would be sufficient to meet his needs as a student attending university even if he were living away from home.
116I am therefore ordering the applicant to pay child support to the respondent for Cameron’s benefit in the amount of $2,880.00 per month, commencing November 15, 2021. I am ordering that commencement date as the evidence before me is that this amount is currently being paid monthly by the applicant and the payments are not in arrears. If I am incorrect about this, the parties may make written submissions to me requesting an alternate start date.
Spousal Support
117In my view, it is not a foregone conclusion that the respondent will be entitled to receive compensatory spousal support. While it is true that the respondent assumed a more “traditional” role in the relationship, the evidence also demonstrates that during the relationship she undertook and completed extensive post-secondary studies. She entered the relationship as a college graduate and exited it with an MBA and a PhD. There is evidence that these efforts were supported, financially and otherwise, by the applicant. In the face of this evidence, whether the respondent was disadvantaged by or benefitted from the relationship is a triable issue.
118It is my view, however, that the respondent has demonstrated a strong prima facie entitlement to receive non-compensatory spousal support. During their relationship, the applicant earned a significant income relative to the respondent. The parties pooled their resources, and by the applicant’s own evidence, the respondent managed the finances and had unfettered access to his income. There can be little doubt that the loss of that access has been a seismic event in the respondent’s life.
119As noted in Samis (Guardian of) v. Samis, the quantum of interim spousal support should, absent exceptional circumstances, be ordered within the range of the SSAGs. Pursuant to s. 9.1 of the Guidelines, a strong claim for compensatory spousal support should result in an order at the higher end of the quantum range. Conversely, a stronger non-compensatory spousal support claim should result in an order at the mid to lower end of the quantum range.
120The applicant argues that the Court of Appeal has found that the SSAGs are not appropriate for determining the support obligations of high-income payors. While appeal cases such as Halliwell v Halliwell, [2017] ONCA 349 (paras. 117 to 120) and Plese v Herjavec, [2020] O.J. 5491 (paras. 57 to 60) note that the SSAGs have less significance in the context of incomes in excess of $350,000.00, I would observe that both of those decisions addressed final support orders. As noted by Gillese, J.A. in Halliwell, “The presence of a ceiling is also meant to address circumstances of high property awards” (para. 121). We are not yet at the stage in these proceedings where property is being divided, and as I have previously noted the respondent should not be expected to encroach upon capital pending trial.
121In argument, the respondent submitted that the goal in making an interim order is to maintain the financial status quo pending trial. She submits that the court is not mandated to conduct a detailed investigation into the merits of the case. While I concur with this position, I would note that the court is required to understand what the status quo is, what income resources are available to the parties on an interim basis, and whether there are any circumstances which may make the status quo unsustainable. Unlike the parties in Nash v. Olsson, 2012 BCSC 1099, this is not a situation in which the respondent has no source of income independent of the applicant. The respondent owns her own business, and the income from that business must be considered as it impacts the respondent’s need for support, and the calculation of the quantum of support pursuant to the SSAGs.
122I also do not agree with the respondent’s characterization of interim spousal support as a form of “wealth redistribution” pending trial. Although the objective of an order should be to ensure that the standard of living of both parties remains close to where it was prior to separation, need remains front and centre in the analysis.
123The respondent’s lack of transparency about her current available income and her excessive and unsupported claim for child support cast a shadow over her claim for spousal support. It is difficult to view her claim for spousal support in the amount of $25,928.00 per month as a credible request reflective either of the status quo or her need.
124When considering the family’s status quo, it is my view that the payments to Lauren and Tayler must be considered. With respect to Tayler, as she continues to attend post-secondary education and is working toward her first degree, she is entitled to receive support from her parents. With respect to Lauren, both parties have acknowledged that she suffers from health issues and that she has special needs. There is little doubt in my mind that, if Lauren continued to reside with the respondent, a request would have been made for child support for her. Her health issues and her needs have not vanished because she is attempting to transition to independence.
125The SSAGs provide the following range of spousal support, based on an income of $712,526.00 for the applicant and $192,400.00 for the respondent, without consideration of child support: Low: $16,253.00, Mid: $18,962.00, High: $21,671.00.
126In my view, having regard to the respondent’s prima facie entitlement to non-compensatory spousal support, her receipt of child support for Cameron, and the shared obligation of the parties to maintain the status quo for Lauren and Tayler, I am ordering the applicant to pay interim spousal support to the respondent in the amount of $12,127.50 per month, commencing November 15, 2021. I am also fixing arrears of spousal support for the period from March 15, 2021 to the date of this order in the amount of $53,392.50, representing the difference between $12,127.50 and the monthly spousal support of $4,500.00 paid by the applicant during that period.
127This order will be without prejudice to any claim by the respondent for retroactive spousal support for the period between the date of separation and March 15, 2021, and any claim at trial by either the applicant or the respondent to adjust spousal support for any period from the date of separation to the date of trial to reflect the actual incomes of the parties.
128In arriving at the figure of $12,127.50, I have taken the midpoint between the low and mid SSAG amounts ($17,607.50), and I have deducted the child support being paid for Cameron ($2,880.00), as well as one-half $5,200.00 ($2,600.00) being the amounts paid directly to Cameron, for vehicle insurance for all three children, and for Tayler and Lauren.
Insurance Designation
129The respondent has also requested an order requiring the applicant to designate her as the irrevocable beneficiary of any life insurance policies available to him. The applicant objects to this request, arguing that he has designated the children as the beneficiaries of his life insurance policies.
130The applicant is the named insured on the following life insurance policies:
a. Policy No. M636843-2, having a face value of $400,000.00
b. Policy No. 3986900-5 Elite 2000, having a face value of $500,000.00 and a cash value on separation of $73,811.07;
c. Policy No. 5181253-9 Sun Term 20, having a face value of $1,000,000.00 and a cash value on separation of $171,526.06;
d. Policy No. 5987380-4 Universal Life, having a face value of $1,500,000.00 and a cash value on separation of $31,530.99; and,
e. Policy No. 5987381-2 Initial Illness, having a face value of $200,000.00.
131The total face value of the applicant’s life insurance policies is $3.4 million. The initial illness policy indemnifies against and is payable upon diagnosis for a specified illness.
132The respondent is the de facto owner of RCC, LifeZone and the matrimonial home, which constitute the bulk of the parties’ assets. RCC alone was valued at approximately $3 million as at the date of separation. In my view, the respondent’s future support is substantially secured through her ownership of these assets.
133Having said that, I recognize that there would be some benefit to the respondent having ready access to liquid funds in the event of the applicant’s sudden passing before the resolution of these proceedings. I am therefore ordering that the applicant irrevocably designate the respondent as the beneficiary of Policy No. 3986900-5 Elite 2000, having a face value of $500,000.00, until otherwise ordered by the court or agreed in writing between the parties.
Disposition
134For the reasons set out above, I make the following orders:
a. Commencing on November 15, 2021 and continuing on the 15th day of each and every month thereafter, the applicant shall pay child support to the respondent in the amount of $2,880.00 per month, for the benefit of the child, Cameron Hourtovenko, born May 7, 2001. This quantum of child support is based upon the applicant’s imputed annual income of $712,526.00, the respondent’s imputed annual income of $192,400.00, and ss. 3(2)(b) and 4(b) of the Federal Child Support Guidelines. This is an interim order, which shall continue until further order of this court.
b. Either party may make written submissions within 30 days of the date of this order requesting that a different date be fixed for the commencement of child support.
c. Cameron Hourtovenko, born May 7, 2001, Tayler Hourtovenko, born August 20, 1999, and Lauren Hourtovenko, born September 4, 1997 (the “children”), will be permitted to access the Family RESP for their post-secondary education costs; the eligible costs will be agreed upon in writing between the parties, with the costs historically paid from the RESP to act as a guideline.
d. The applicant will continue to pay the car insurance expenses for each of the children for so long as they continue to be a child of the marriage within the meaning of the Divorce Act, R.S.C., 1985, c.3 (2nd Supp.).
e. Commencing on November 15, 2021 and continuing on the 15th day of each and every month thereafter, the applicant shall pay spousal support to the respondent in the amount of $12,127.50 per month, based upon the applicant’s imputed annual income of $712,526.00, the respondent’s imputed annual income of $192,400.00, and the parties’ financial obligations to the children of the marriage. This is an interim order, which shall continue until further order of this court.
f. The applicant shall pay arrears of spousal support to the respondent for the period from March 15, 2021 to the date of this order, which arrears shall be fixed in the amount of $53,392.50.
g. The payments ordered in paragraphs (a), (e) and (f) above are without prejudice to the right of either party to make arguments or the ability of the trial Judge to make orders with respect to retroactive and ongoing child or spousal support.
h. The applicant shall designate the respondent as the irrevocable beneficiary of his life insurance policy with Sunlife bearing Policy No. 3986900-5 and having a face value of $500,000.00. This is an interim order, which shall continue until otherwise agreed in writing between the parties or ordered by this court.
i. The applicant shall provide confirmation to the respondent that the designation has been submitted to his insurance provider, as well as confirmation of the available coverage, within 30 days of the date of this order.
j. If, at the time of his death, the applicant has not complied with his obligation to name the respondent as the irrevocable beneficiary of $500,000.00 of his available life insurance policies, this clause shall constitute a first charge against the applicant’s estate in an equivalent amount.
k. The respondent shall, within 30 days of the date of this order, provide particulars to the applicant of the disposition of the proceeds of sale, as well as the particulars of any income she is generating from any net proceeds of sale, with respect to the following properties:
i. 1714 Southview Drive, Sudbury, Ontario;
ii. 12596 Wildcat Cove Circle, Estero, Florida;
iii. 181 Dundas Street, Toronto, Ontario; and,
iv. 8301 Highway 366, Linden, Nova Scotia.
l. The respondent shall, within 30 days of the date of closing, provide particulars to the applicant of the disposition of the proceeds of sale, as well as the particulars of any income she will be generating from any net proceeds of sale, with respect to the property located at 2147 Armstrong Street in Sudbury, Ontario.
m. The respondent’s request that she be solely responsible for all decisions in the management of Riverside Cardiac Clinic Inc. as the corporation’s sole shareholder, officer, and director is withdrawn, without prejudice to the respondent’s ability to pursue this relief at a later date.
135If either party seeks costs for this motion, they may file written submissions consisting of no more than three pages, not including a bill of costs or any offer(s) to settle, by November 21, 2021. The responding party shall have 21 days from receipt to file responding submissions, subject to the same page limit. No reply submissions shall be permitted, without leave.
The Honourable Madam Justice K.E. Cullin
Released: November 8, 2021