COURT FILE NO.: FC-17-1352-00
DATE: 20220825
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Gordon Freedman
Applicant
– and –
Rashell Freedman
Respondent
Self-represented
Nancy Deskin, Counsel for the Respondent
HEARD: In writing
REASONS FOR JUDGMENT
EBERHARD J.
INTRODUCTION
[1] At its essence, family law of support and equalization is rather simple. We gather the facts of income and net worth, apply to each case the same support guidelines and the same deductions and exclusions, apply some arithmetic and enjoy the benefits of reliable computer calculations to take into account more complicated tax, interest and economy of scale implications and presto: a predictable number appears, designed by research, to be fair and uniform across place, social and wealth barriers.
[2] At its essence, family law of support and equalization is rather simple. We gather the facts of income and net worth, apply to each case the same support guidelines and the same deductions and exclusions, apply some arithmetic and enjoy the benefits of reliable computer calculations to take into account more complicated tax, interest and economy of scale implications and presto: a predictable number appears, designed by research, to be fair and uniform across place, social and wealth barriers.
[3] Nevertheless, justice participants struggle daily in pursuit of the fair numbers.
[4] The first challenge is to get the facts of income and net worth. So, legislation and courts speak to the disclosure of information that will reveal the facts.
[5] Sometimes the information about income or net worth is unavailable because the person with that information has not participated in the litigation though served. Sometimes the disclosure is ordered but the person with that information has refused to comply whereupon the person is barred from further participation, their pleadings are struck and they may not appear as the matter proceeds.
[6] The absence of participation inevitably puts the trier of fact into an uncomfortable position because judges are accustomed to hearing one side of the story and then the other side of the story and seldom is one side totally correct and the other totally incorrect. But, deprived of the other side of the story, the trier of fact must decide based on the evidence provided by the one who is participating.
[7] In such case adjudication proceeds by way of an uncontested trial. Most times the person claiming support or equalization files an affidavit for uncontested trial, (23C) and a judge considers the evidence, the estimates based on information available and, where pleadings have been struck for non-disclosure, adverse inferences may be drawn.
[8] Many times, when considering a 23c affidavit, a judge will have questions or require better information. By preliminary endorsement the claimant is given opportunity to file supplementary material which the judge will then consider before rendering judgment.
[9] The analysis of evidence to calculate income or net worth is the daily activity of a family court judge whether in conference to guide and encourage settlement or in adjudication. Nothing in what follows in this lengthy judgment is in any way outside the constant, repeated, experienced, commonplace task that is the work of the family law judge.
[10] What is unusual in the present case is the large numbers and the complication of how the Applicant (from whom support and equalization is claimed) earned his income and stored his net worth.
[11] In the present case, this complication required, in addition to the usual 23c affidavit, an oral hearing for the Respondent (who claims support and equalization) to explain the materials filed.
[12] I released a preliminary endorsement immediately thereafter, raising as is commonplace in the 23c process, questions and requiring further proof specifically and in general. Supplementary material has now been received, including the report of a forensic accountant and his acknowledgement of Expert’s Duty. I remind myself that the expert’s opinion must be grounded in facts the court accepts.
[13] At the hearing and in my preliminary endorsement I emphasized a theme much as stated by Kurz J in Sharma v Sharma 2018 ONSC 862 para 67:
Although the father’s failure to provide the required disclosure allows the court to draw an adverse inference and impute income, there nonetheless has to be an evidentiary basis for the imputation. As Gillese J.A. wrote for the Ontario Court of Appeal in Dryygala v Pauli 2002 CanLII 41868 (ON CA), [2002] O.J. No 3731(OCA):
[44] Section 19 of the Guidelines is not an invitation to the court to arbitrarily select an amount as imputed income. There must be a rational basis underlying the selection of any such figure. The amount selected as an exercise of the court’s discretion must be grounded in the evidence.
[14] That said, the very integrity of family court process would be compromised if a sophisticated, obstructionist litigant could achieve the benefit of an order less than would have been made if the facts, withheld by him, had been disclosed.
PRELIMINARY MATTERS
[15] On June 24, 2019 by order of Jain J, the Applicant’s pleadings were struck with respect to issues of child support, spousal support and property division/equalization and he was noted in default. As is customary in such circumstances, the Respondent has filed a 23c affidavit for uncontested trial. It is voluminous and complicated so she was directed to appear to present the case orally.
[16] Although the Respondent in this litigation, perhaps causing some linguistic confusion, it should be at all times remembered that the Respondent Wife/Mother is the claimant in this trial.
THE CLAIM
[17] In an uncontested trial the moving party may only seek relief claimed and served in the proceeding in which the responding party’s pleadings have been struck. In her Answer the Respondent claimed the following relief (emphasis added to claims at issue in this trial):
- A divorce.
Custody and Access
- An order that Rashell Lee Freedman, the Respondent, shall be granted sole custody of the children of the marriage, namely;
a. Hannah Leah Freedman, born March 14, 1995,
b. Aliyah Serina Freedman, born November 6, 2001,
c. Zevan Jacob Freedman, born December 29, 2006,
d. Tahlia Elizabeth Freedman, born August 23, 2009,
e. Noah Albert Freedman, born February 26, 2013,
f. Liam George Freedman, born February 26, 2013,
pursuant to section 16(2) of the Divorce Act, or section 21 Children's Law Reform Act.
An order setting an interim and permanent access schedule for the Applicant.
An order that the Respondent will make important decisions about the children's welfare, after consulting with the Applicant, including decisions about the children's education and health.
An order restraining the Applicant pursuant to section 46(1) of the Family Law Act or section 35(1) of the Children's Law Reform Act and that the Applicant shall not come within 200 metres of the matrimonial home at 307 Pine St., Collingwood, Ontario, except when it is known that the Respondent is not present and only for the purpose of exercising access to the children.
An order that the Applicant shall be prohibited from removing the children from the Province of Ontario.
An order that the Applicant shall deliver up the children's passport to the solicitor for the Respondent to be held pending further agreement or court order.
An order for an assessment by a qualified psychologist of the issues of custody of and access
An order that this matter be referred to the Children's Lawyer to provide such services, under section 89(3.1) and section 112 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as they deem appropriate for the children.
An order, as incident of access, that the Applicant attend anger management counselling.
Support
An order for interim and permanent support for the Respondent and the children of the marriage retroactive to the date of separation in an amount to be determined pursuant to the Divorce Act, or the Family Law Act.
An order the Applicant pay to the Respondent interim and permanent child support for the children of the marriage in accordance with the Child Support Guidelines, retroactive to the date of separation, pursuant to section 15.1 (1) of the Divorce Act or section 33 of the Family Law Act.
An order that the parties share children's special or extraordinary expenses, in proportion to their respective incomes, pursuant to section 7 of the Child Support Guidelines, retroactive to the date of separation.
An order that the Applicant pay to the Respondent spousal support for the Respondent in an amount commensurate with the Applicant's income, retroactive to the date of separation pursuant to section 15.2 (1) of the Divorce Act or section 33 of the Family Law Act.
An order for compensatory support by way of lump sum of and/or periodic compensatory support.
An order that all support payments be retroactive to the date of separation of the parties pursuant to subsection 34 (1) of the Family Law Act.
An order that all support payments be increased annually on the anniversary date of the order by the percentage change in the Consumer Price Index for the City of Collingwood for prices of all items since the same month of the previous year as published by Statistics Canada.
An order requiring the Applicant to designate the Respondent as the irrevocable beneficiary of her life insurance policy or policies.
An order requiring the Applicant to maintain dental, medical and extended health coverage for so long as the Respondent or the children are entitled to support from the Applicant through his place of employment.
An order requiring the Applicant to obtain if he does not have any, and designate the Respondent and the children of the marriage as irrevocable beneficiaries of his life insurance policy or policies pursuant to subsection 34 (I) (i) of the Family Law Act.
An order requiring the Applicant to secure the spousal support payments by a charge on property, or otherwise, and/or by a designation of the Applicant's interest in a pension or other benefit plan pursuant to sections 34(1)U) and 34(1)(k) of the Family Law Act.
An Order that the Applicant pay the Respondent a lump sum support pursuant to section 33 and 34(1)(b) of the Family Law Act.
Property & Equalization
An order for exclusive possession of the matrimonial home, municipally known as 307 Pine St., Collingwood, Ontario, and the contents thereof, pursuant to section 24 of the Family Law Act.
An order for an equalization of net family property of the Respondent and the Applicant, or in the alternative an Order for an unequal division of net family property in favour of the Respondent.
An order requiring the Applicant to have his assets and business interests valued by a certified business valuator, at his expense.
An order requiring the Applicant to reimburse the Respondent for all expenses that she has paid on his behalf since separation;
An order restraining the Applicant from depleting any property under his control and requiring him to preserve all such property until further order of this Court pursuant to s. 12 of the Family Law Act.
An order restraining the Applicant from molesting, harassing or annoying the Respondent and requiring him to enter into a recognizance as determined appropriate by this Honourable Court.
An order for the accounting of all property in which the Applicant held an interest at the date of marriage, the date of separation, presently, and at the date of trial.
An order that the Applicant pay all or part of the repairs and maintenance of the matrimonial home, and other liabilities arising in respect of it, or to make periodic payments to the Respondent for those purposes.
An order that the applicant provide all documentation to the Respondent's accountant, so the Respondent can complete her tax filing, and requiring the Applicant to pay all associated fees with the completion of tax filings.
An order for pre-judgment and post-judgment interest pursuant to the Courts of Justice Act.
An order for costs on a full recovery basis pursuant to Rule 24 of the Family Law Rules.
Such further and other relief as counsel may advise and this Honourable Court deems just.
[18] At the oral hearing phase of the uncontested trial, the Respondent was seeking:
Support
- An Order that the Applicant pay child support to the Respondent for the 5 children of the relationship, namely:
i. Aliyah Serina Freedman, born November 6, 2001;
ii. Zevan Jacob Freedman, born December 29, 2006;
iii. Tahlia Elizabeth Freedman, born August 23, 2009;
iv. Liam George Freedman, born February 26, 2013; and
v. Noah Albert Freedman, born February 26, 2013 (the "Children").
in the amount of $31,024.00 per month that is based on an imputed income of $1,519,668.00 per annum notwithstanding his failure to provide any substantive financial disclosure.
An Order that the Applicant pay spousal support to the Respondent in the amount 0f $21,994.00 per month that is based on an imputed income of $1,519,668.00 per annum notwithstanding his failure to provide any substantive financial disclosure.
An Order that the Applicant pay to the Respondent the sum of $2,285,008.00 for arrears of child support retroactive to the date of separation, namely, May 18, 2015 and specifically for a total of 80 months in the respective below amounts which are pursuant to an imputed income to the Applicant for the following years with $16,000.00 of the total subtracted from what the Applicant has already paid as set out in the Order of Justice Jain, dated January 17, 2020:
(a) June 1, 2015 to May 31, 2016: $1,080,000.00 for arrears totaling $266,772.00;
(b) June 1, 2016 to May 31, 2017: $1,134,000.00 for arrears totaling $279,732.00;
(c) June 1, 2017 to May 31, 2018: $1,190,700.00 for arrears totaling $293,340.00;
(d) June 1, 2018 to May 31, 2019: $1,312,747.00 for arrears totaling $307,362.00;
(e) June 1, 2019 to May 31, 2020: $1,378,384.00 for arrears totaling $322,362.00;
(f) June 1, 2020 to May 31, 2021: $1,447,303.00 for arrears totaling $338,388.00;
(g) June 1, 2021 to May 31, 2022: $1,519,668.00 for arrears totaling $354,924.00.
- An Order that the Applicant pay to the Respondent the sum of $1,338,220.00 for arrears of spousal support retroactive to the date of separation, namely, May 18, 2015 and specifically for a total of 80 months in the respective below amounts which are pursuant to an imputed income to the Applicant for the following years:
(a) June 1, 2015 to May 31, 2016: $1,080,000.00 for arrears totaling $171,809.00;
(b) June 1, 2016 to May 31, 2017: $1,134,000.00 for arrears totaling $182,474.00;
(c) June 1, 2017 to May 31, 2018: $1,190,700.00 for arrears totaling $192,560.00;
(d) June 1, 2018 to May 31, 2019: $1,312,747.00 for arrears totaling $201,506.00;
(e) June 1, 2019 to May 31, 2020: $1,378,384.00 for arrears totaling $219,631.00;
(f) June 1, 2020 to May 31, 2021: $1,447,303.00 for arrears totaling $244,726.00;
(g) June 1, 2021 to May 31, 2022: $1,519,668.00 for arrears totaling $263,932.00.
- An Order that the Applicant pay to the Respondent the sum of $288,760.97.00 for arrears of section 7 expenses retroactive to the date of separation, namely, May 18, 2015.
Equalization
- An Order that the Applicant pay the Respondent an equalization payment of $6,306,183.00 based on the evidence presented regarding all of his business interests, offshore accounts, and general assets notwithstanding his failure to provide any substantive financial disclosure.
Enforcement
- An Order that the following individuals and companies be added to this proceeding or ordered to attend judgement debtor examinations solely for the purpose of enforcement to collect all outstanding amounts owing to the Respondent for child support, spousal support, court costs and equalization payment on the basis that all such companies and individuals have been sheltering money for the Applicant before and after the date of separation on May 18, 2015:
(a) Andy Mazer
(b) Michael Inskip, CEO Fairway Greens Cannabis
(c) Matt Lussier-Price, Fairway Greens Cannabis
(d) Craig Row, Fairway Greens Cannabis
(e) Katie Wang, Aventum Law
(f) Mark Weir, Aventum Law
(g) Jessica Willis, Applicant’s common law spouse
(h) Irwin Freedman, Applicant’s father
(i) Florence Freedman, Applicant’s mother
An Order that the balance of the monies in the offshore account #143-77AF-8 with Temple Financial Group be paid out to the Respondent.
An Order transferring the 1964 Corvette purchased in April 2015, VIN #40837SJ04737 to the Respondent.
An Order for damages in the amount of $549,760.00 to cover all of the expenses and legal fees the Respondent has incurred to defend herself against creditors of the companies the Applicant placed in the Respondent's name but that were in his control.
Costs on a full indemnity basis which shall be fixed at $410,344.00, namely the amount of legal fees incurred by the Respondent since the inception of this Application in 2017 taking into consideration that all interim cost orders were never paid.
[19] As indicated, in any uncontested trial it is important to confirm that the requested relief was claimed in the pleadings to which the party in default had opportunity to respond.
[20] I find that the remedies sought are within the claims made in the pleadings except the requests under the heading of Enforcement in paragraph 7 and damages in paragraph 10. Enforcement after judgment may be addressed under Rule 27 of the Family Law Rules. Damages were simply not claimed and the Respondent relies on post separation obligations in her calculation of net worth to bring hers below zero notwithstanding that she has title to the matrimonial home and its value is her date of separation asset.
[21] At trial the Respondent moderated her section 7 claims.
[22] In supplementary materials, basing her claims on the expert’s opinion of income and net worth of the Applicant, the Respondent has modified her claims in a further 23c affidavit wherein at paragraph 4 she sets out annual arrears of child and spousal support to 2021 supported by SSAG calculations.
[23] The total child support arrears claimed are: 1,793,064.
[24] The total spousal support arrears claimed are: $1,129,952.
[25] For ongoing support she claims, on imputed income of $1,215,734 for child support $24,946 a month and for spousal support $16,946 a month.
ANALYSIS
INCOME OF THE APPLICANT
[26] Common to the challenge of fixing quantum in all family law support issues is the determination of the income of the payor.
[27] In her first 23c affidavit the Respondent sets out numerous income sources and presents her own evidence and such documentation as she can muster, sometimes supported by the affidavits of others, and relying on adverse inference since the Applicant did not provide agreed and ordered disclosure that would prove or disprove the Respondent’s knowledge and speculation about the Applicant’s income.
[28] The Respondent asserts the Applicant has income from the following sources (among others of which she has too little knowledge to specify):
Aventum IP Law (exhibits H, E, I, J,)
Incogna and PCCSO (exhibits K,)
Sole Proprietorship BIN 300589975 (EXHIBIT m)
RESPONDENT’S CLAIM FOR IMPUTED INCOME
[29] Claim June to May annually, grossed up 5% annually from 2015:
15/16 $1,080,000 now per expert $864,000
16/17 $1,134,000 now per expert $907,200
17/18 $1,190.700 now per expert $952,560
18/19 $1,312,747 now per expert $1,050,198
19/20 $1,378,384 now per expert $1,102,707
20/21 $1,447,303 now per expert $1,157,842
21/22 $1,519,668 now per expert $1,215,734
[30] On all the evidence I do not have anything at all to indicate what the Applicant actually earns, now or since 2015 date of separation. This judgment is entirely a process of determining his historical patterns for earning income, known potential sources of income and imputing what he could and should be earning based on inferences from evidence of what he has earned in the past, adverse inferences from non-disclosure of ordered documentation to demonstrate what he actually earns, and the principles relating to underemployment. The Federal Child Support Guidelines set out such a process in Section 15-25. The quantum of income is also the basis for application of the Spousal Support Guidelines. It is the daily task of family courts to opine or determine income based on a multitude of factors. I undertake that task now:
[31] There is evidence that the Applicant’s principle occupation is as a patents lawyer and a patents agent. His own law firm merged with Aventum and there is evidence he has renewed his credentials to practice law. A law suit (exhibit y) filed against him in 2016 provides independent confirmation in paragraph 8-12 that he provided his professional services through Freedom 25 Investments Inc. (one of the Freedman Group of companies in the Respondent’s name), that his work involved expertise in tax law and financial strategies.
[32] In her supplementary 23c affidavit at tab E, are civil claims filed by the Applicant in 2022 against the Respondent and the Respondent’s spouse (CV- 22-47 and CV-22-46 ) alleging intentional interference with his efforts to earn a living, specifying income losses to Aventum of “many thousands of dollars a year” because of communications sent to partners at Aventum, clients of Aventum and advisors, executives and shareholders of Fairway Green Cannabis. The claim asserts “loss of income, loss of the value of his options, and loss of contract work, all of which combine to form his income” With his usual caginess, the Applicant names no figure for damages from loss of income.
[33] There is evidence that he has invested in and become involved in developing new ventures in which his patents expertise is a marketable advantage and provides him with insight and opportunity to invest in profitable ventures.
[34] A law suit filed by the Applicant against Incogna Inc and PCCSO in 2017 claimed $150,000USD on a contracted price for 10 months work. It further claimed that on a quantum meruit basis, at his hourly rate of $550/hour would be $900,000USD. Converting that to Canadian dollars and annualizing it over 12 months the Respondent calculated those assertions by the Applicant represent income at $1,080,000. He also claimed an equity interest in the company. She further asserts that the Applicant would be simultaneously working on other projects.
[35] The evidence is that he diverted his earnings to the Freedman Group of companies which were registered in the Respondent’s name. She had no information or control of revenues. She did however incur the tax liability in her name. In an affidavit filed by the Applicant in 2018, he asserted that the Respondent (the Freedman Group of companies in her name which he “managed”) made $75,000 a month day trading and $4.5 million investing in 2.5 years, elsewhere deposing that at their peak the companies were doing $2.5 million in annual revenue.
[36] In her second 23c, the Respondent files evidence that her signature written on Freedman Group documentation is forged.
[37] There is evidence of a diversion of $500,000 to an offshore account through Temple Investments. A calculation is provided as to the expected growth of the investment in accordance with their own documentation predicting increase in value such that on date of separation value in Canadian dollars of $$1,274.159. In the analysis of the Applicant’s income this property is relevant only because in 2018 the balance was only $658,453USD, suggesting that the Applicant was receiving the expected growth as income rather than the asset increasing in value at the anticipated rate.
[38] There is evidence of a venture the Applicant joined and netted a profit of $4,000,000. The Applicant stated to the assessor in 2018 that the family could live off that. I infer that it produced income. He also acknowledged they lived extravagantly and that as ”the rational one who knew the family finances” he should have controlled the spending, which he attributed to the Respondent, that depleted their assets. However, there is evidence that the Applicant continued to work, except for a brief hiatus in Hawaii, so it was not necessary to deplete that capital. Income should therefore still be available unless he has decided to deplete capital instead of pursuing income in accordance with patterns prior to date of separation. He has not been paying child or spousal support. Supposing an unlikely 1% return that would yield annual income of $40,000. 5% would return $200,000 and 10% some $400,000. The Applicant complained that the Respondent was spending $30,000 a month, or $360,000 annually. Her claim for child support is in a similar lofty amount. Obviously, whether his complaint is accurate or not, this family spent lavishly.
[39] There is argument that income would increase annually. 5% a year is suggested. While that could be possible for income from employment, I find that profits from investments and ventures would tend to be irregular and uneven, defying the chart put forward by the Respondent to estimate the Applicant’s income year over year.
[40] The Applicant told the assessor in 2018 he was earning $75,000 a year. His latest financial statement in 2021 filed as exhibit 1to the Respondent’s affidavit assert both self-employed and unemployed and acknowledges annual income of $20,000.
[41] So, in her original 23c, the Respondent did provide evidence but little assistance by way of confirmation of her methods in analyzing it to come up with an income figure.
[42] In her supplementary material, in response to my preliminary endorsement, the Respondent proffers the “Forensic Accounting Report” of John N. Douglas BSc, CFI, CFE, CPA, CA. I find his CV meets the requirements to establish his expertise, unchallenged of course, and in my gate-keeping role, find his evidence necessary.
[43] The expert averts to the items mentioned and specific enterprises the Applicant was involved with and cross checks against banking and tax and Freedman Group information available. It is consistent with the evidence before me from the original material at trial. It is more specific than the broad statements the Respondent made in her claims. It continues to be based on incomplete information and, of course it is uncross-examined.
[44] The expert finds that the Applicant’s income, based on his previous patterns, would be as follows:
2015 $864,000
2016 $907,200
2017 $952,560f
2018 $1,050,198
2019 $1,102,707
2020 $1,157,842
2021 $1,215,734
[45] So, taking the evidence, for what it is: that the Applicant is a licensed lawyer with expertise in tax and finance as part of his patents practice; that the Applicant has a demonstrated history of putting title and income into other people or company names, that the Applicant previously avoided obligations to his first spouse by putting property in the Respondent’s name, that the Applicant refused to comply with disclosure orders that were necessary to ascertain his income sources and quantum, that he has previously generated income to live lavishly; I find that he has the potential to earn income from a variety of pursuits, that he has the skill and experience to earn income from a patents practice, investment, development of new ventures and that he is intentionally underemployed during the currency of his matrimonial litigation.
[46] No precision is possible, but on all the evidence before me I find that, if he tried, he could make an annual income of $1.2million. However, I must recognize that income arising in the manner described will not be regular. The fruits of his labours will come in from time to time. Perhaps there will be years, when even for a diligent investor/inventor/facilitator, earnings will be sparce and he will need to draw on previous earnings. Therefore, I moderate my finding as to the average income the Applicant should be making if he were not underemployed. My intention is to impute an average income that will not be unrealistic to maintain but also not to reward him for his failure to disclose by a finding of less income than would have been proven if he had provided the disclosure as he was required by court order to do.
[47] Further, by making a finding of an average income year over year I am attempting to simplify future considerations: by reviewing courts; or courts considering a Motion to Change; or indeed for the calculation of ongoing support as the entitlement to child support changes because of the child no longer being dependent or the child requiring contribution for post secondary education. My figure is lower than the expert opines he could be making but it is an average that will not require adjustment in bad years when, even if he were not underemployed, he cannot earn that amount.
[48] I find that the Applicant’s average annual income is $800,000 and so impute that income for the purposes of determining his support obligations from 2015 and thereafter.
[49] As this case made its way through the court process interim support was ordered. Such temporary orders are, by their nature, based on incomplete evidence and are therefore intended to be subject to adjustment after trial and are replaced by the final order. Accordingly, my order will replace the temporary support previously ordered from the date of the commencement I name.
DATE OF COMMENCEMENT
[50] Support obligations arise from the date of separation.
[51] The Respondent claims from the date of separation which is stated as May 2015 but they continued under the same roof. By 2018 there was a nesting order. I will therefore consider whether my support order should commence at some date other than the date of separation.
[52] In her endorsement of June 24, 2019, at exhibit b, Jain J finds at paragraph 6 and thereafter “the Applicant has continued to avoid paying for the routine upkeep of the matrimonial home (where the children reside) though ordered on April 3, 2019. I infer therefore that sometime before that the Respondent and the children required support and the Applicant was not paying.
[53] Support obligations commence at the date of separation but can be delayed if the support is being otherwise addressed by payments for the well-being of the spouse and children. During the nesting phase the parenting schedule was essentially 50/50 but disparity of income would demand some flow in support to the parent, here the Respondent Mother, with the lower income.
[54] I raise these issues but have no evidence to support a different start date than the date of separation in 2015. It was the Applicant who commenced proceedings in 2017 but in her Answer the Respondent claimed support. By February 2018, the court order includes the requirement that the Applicant pay household expenses and a without prejudice $1000 per month in spousal support. By the time of nesting in 2018 I can infer the Applicant had stopped making payments in lieu of support by the findings of Jain J. These are my only clues. It is unsafe to depart from any date except date of separation in this uncontested proceeding.
[55] However, the evidence is that, with some interruptions, the parties were either living separate and apart in the matrimonial home with the children or, in 2018, nesting week about in the matrimonial home with the children. There is the judicial finding that the Applicant did not pay expenses as ordered for the matrimonial home. Spousal support should therefore commence in 2015 as the Applicant did not make other payments in lieu of spousal support.
[56] He did have shared parenting until the end of 2018, more or less, so Child Support Guidelines section 9 requires an analysis of whether full table support should be paid, a set off or some moderation based on the caselaw. I have no evidence for a Contino analysis so a set off is the closest I can calculate a recognition of the principle.
[57] I have made SSAG calculations from 2015 to present with the Applicant’s income at $800,000 and the Respondent’s income as set out in her SSAG calculations supported by her income tax material in exhibit L1.
[58] In the years 2015 to 2018 inclusive I have calculated on the basis of shared parenting. From 2019 to present the children are in the exclusive care of the Respondent.
[59] On this basis I find and so order that the Applicant should have been paying the following amounts for child support and for spousal support from the date of separation. This order adjusts and replaces the temporary orders.
[60] Further, in her supplementary 23c affidavit at tab 3 under the title “Applicant’s Payments Post-Separation/FRO Schedule A”, the Respondent acknowledges payments of $404,833.86 from FRO collection, withdrawals from Temple Group in 2020 and 2021, and direct payments or payments of expenses 2017 to 2019 This allows me to make a finding of arrears owing as of July 1, 2022:
Year
Monthly Child Support
Annual
Monthly Spousal Support
Annual
Total
2015
16,077
7 months 112,539
11,484
7 months 80,388
192,927
2016
16,631
199,572
11, 749
140,988
340,560
2017
16,283
195,396
11,444
137,328
332,724
2018
16,449
197,388
11,183
134,196
331,584
2019
16,631
199,572
11,231
134,772
334,344
2020
16,631
199,572
11,027
132,324
331,896
2021
16,631
199,572
11,120
133,440
333,012
2022
16,631
6 months 99,786
11,533
6 months 69,318
169,104
Total due
1,403,397
962,754
2,366,151
Total paid
404,833
Arrears as of July 1, 2022
998,564
962,754
1,961,318
[61] The Respondent also claimed arrears for Section7 expenses in exhibit n at $288,760.97, later moderated to include only education and orthodontic expenses.
[62] I am aware that as the Applicant’s income is over $150,000 the Child Support Guidelines may not be appropriate for a strict calculation of table support.
[63] Looking at the whole of the circumstances I find that the section 7 expenses claimed are of a type that is valid and claimable for contribution in most families. However, with table child support as set out above, those expenses should not be considered extraordinary but well within the expectations contemplated by table support at such a level. Further, the ongoing proof and complication of enforcement of section 7 expenses leads me to the conclusion that they should be subsumed within table support. In this way I am recognizing that the principle that Child Support Guidelines may not apply for strict calculation when incomes are at this level. I am leaving the quantum of table support as strictly, and transparently, calculated but declining to also order contribution to section 7 expenses.
[64] In refusing section 7 expenses now, I do not prevent the Respondent from subsequently making a claim for contribution to post secondary education expenses when and if they arise. Depending on what programs, and where, the children may pursue post secondary education, the expense may bring them into the extraordinary category even when the ordered table support is so high.
[65] I order ongoing child support for 5 children, at the payor’s income imputed at an average of $800,000 annually, at $16,631 a month commencing July 1, 2022.
[66] I am also aware that as the Applicant’s income is over $350,000 the SPOUSAL SUPPORT Guidelines may be inappropriate. However, with the lack of participation of the Applicant, I have no evidence or argument before me to suggest why I should depart from mid range on the SSAGs.
[67] Moreover, in the context of a payor sophisticated in financial matters, adventuresome in investment and the risks of the market, with a demonstrated history of hiding assets and avoiding obligations to a former spouse, a very strong adverse inference arises that the Applicant here must have discerned that he was better off not to disclose his financial position than to have a court decide on the basis of evidence he had been ordered to provide. So, the reliable guideline approach produces the number based on my finding of the Applicant’s average annual income of $800,000. I cannot know if the Applicant has won or lost on his gamble. It is what it is.
[68] As to duration, the parties cohabited from 1988 to 2015. I find that spousal support is both non-compensatory in the sense of need viewed through the lens of comparative parity in post-separation positions after lengthy cohabitation; and compensatory in this case because the Respondent left her education before completion to cohabit with the Applicant and care for his two children of prior relationship. She moved about with him as his career required. She facilitated his business plan by having his income and assets flow through her name thereby imposing debt on her without any control of the assets or enterprises, and by further caring with him for their 5 children in the role of stay at home mother.
[69] The Respondent has remarried. Obviously her current husband has support obligations but I have no evidence that his contribution has eliminated need for spousal support nor does that fact satisfy the compensatory aspect of spousal support.
[70] In all the circumstances I fix no termination date for spousal support. However, it is conceded that upon payment in full by the Applicant of the equalization order which follows in this judgment, the Respondent will have the means for self-sufficiency addressing both the compensatory and non-compensatory aspects of the spousal support obligation.
[71] I fix ongoing spousal support at $11,500 a month commencing July 1, 2022.
EQUALIZATION AND EQUALIZATION PAYMENT (ep)
[72] On this issue, $6,000,000 is claimed by the Respondent as an equalization payment. To determine whether an equalization payment is owed, I turn to the familiar process of comparing the Respondent’s NFP as against the Applicant’s NFP on the date of separation.
[73] In the present case there is a question of beneficial ownership versus which party has title. On the evidence before me I make the finding that the Applicant was, as he stated to the assessor in 2018, the spouse with financial insight in the family, that the Respondent had title to businesses and assets completely “managed” by the Applicant to the point that she had no control and no access to the value of the asset and that the Applicant could and did use and manipulate the assets as his own. As a result, those companies and investments are properly listed as the Applicant’s assets. The debt however, because she can do nothing to shift that to the Applicant, must remain on the Respondent’s side of the NFP statement.
[74] As a result, even though she has retained the matrimonial home as it was in her name, on the evidence hereafter discussed, the Respondent’s net worth is less than zero. The Respondent’s NFP statement shows $1,469,805.59 as her total assets on the date of separation including the matrimonial home in her name. Due to debt of $619,531.49 and date of marriage assets of $1,055,200 (ironically including a $1million investment that the Applicant put into her name to avoid including it in his assets in divorce proceedings with his previous spouse) totaling $1,674,731, her net worth shows as less than 0.
[75] That leaves the sole question for equalization as a determination of the quantum of the Applicant’s net worth. At trial, the Respondent alleged $19,148,399.40 which would require equalization of $9,574.70. in this proceeding she requested an order for $6million.
RESPONDENT’S EVIDENCE OF APPLICANT’S NET WORTH
[76] In her first NFP statement the Respondent asserts (with notes appearing with a *) that Applicant had the following assets on the date of separation:
4(b) General Household Items and vehicles:
1964 Corvette $172,194
Electronics $3000
Total: $175,194
4(d) Life insurance and Disability Insurance:
Insurance Policy Investment with Temple Financial Group *The letter from Temple Financial Group dated June 2, 2018 indicates that the current vlue of the policies was $658,563.12USD at valuation date
Total: $1,274,159
4(e) Business interests
Freedman & Associates Inc and Freedom 25 Investments Inc. (hereinafter referred to as the freedman companies) *Businesses were completely controlled and operated by Gordon Freedman but listed Rashell as owner $2,500,000
Adscape Media $10,699,046
Total: $13,199,046
4(f) Money owed to you
Money Gordon made day trading using the money generated from companies that were in my name $4,500,000
Total: $4,500,000
TOTAL PROPERTY OWNED ON VALUATION DATE: $19,148,399.40
[77] The Respondent assigns all the debt to herself. The Respondent lists no exclusions for the Applicant such as date of marriage assets. Accordingly her NFP statement characterization of the Applicant’s date of separation net worth stays at the value she ascribes to his assets namely $19,148,399.40.
[78] The evidence originally provided by the Respondent in this uncontested trial had scant connection discernable by me, to the assertions in the NFP that the Applicant’s net worth is $19,148,399.40.
[79] However, in the Forensic Accounting Report, expert Douglas does make sense of the evidence and arrives at valuations of assets at page 53 of his report.
[80] This allowed the Respondent to fill in a new NFP at tab C of her supplementary materials to demonstrate the Applicant’s total asses on valuation date of $12,899,583. Equalization would be $$6,449,971.
[81] Experience tells me, and the total picture in this case supports that it is unlikely that the Applicant had not a single debt or exclusion to deduct from that total net worth but he has deprived me of that evidence by his conduct in this litigation.
[82] The evidence indicates joint debt for which the Respondent remains liable: Freedman and Associates company debt to CRA $318,440 in august 2018 (exhibit 3) now $380,600 with interest; RBC lawsuit (exhibit 4) Costs to defend $7,747, judgment debt $223,572, now $250,000 against both. This total of $549,760 plus continuing interest and penalty is claimed by the Respondent as post separation adjustment and damages but it was neither plead nor was I provided with a legal pathway to make such an order. Rather, I take it into account to balance against my reticence to order an equalization that appears unrealistically lopsided showing assets but no liabilities. I hasten to add that in the context of the Applicant’s demonstrated financial gymnastics, nothing is improbable.
[83] I order that the Applicant pay to the Respondent $6,000,000 by way of equalization.
COSTS
[84] At exhibit 5 of her original 23c affidavit, the Respondent presented legal accounts for her representation throughout this litigation for the whole action and including unpaid prior costs order $410,344 prior to the uncontested trial stage. For that she was charged a block fee of $45,200. Although she has not updated her costs evidence or submissions, I am aware that the Respondent herself retained the services of the expert whose report became necessary to her success in these proceedings.
[85] I am fixing costs, not assessing them but no glaring excesses stand out in the invoices for legal services.
[86] The dominant factors in my costs analysis are set out among the criteria in Rule 24(12) of the Family Law Rules are found at (i) each party’s behaviour, and (ii) the time spent by each party. It can hardly be emphasized enough that the lack of disclosure and consequent non-participation of the Applicant multiplied the complexity, demanded exponentially more effort from the Respondent and the court and stood in the way of truth beyond all reasonableness and proportionality. Full recovery costs are mandated.
[87] The parenting issues of the case, in which the Applicant did participate, occupied much of the time spent. To the extent that the costs were expended on support issues, which I fix at 25%, they shall be enforceable in like manner as support.
[88] I fix costs payable (including previous unpaid costs orders) by the Applicant to the Respondent at $460,000. of which $115,000 is enforceable in like manner as support.
SUMMARY OF ORDERS
[89] Arrears of child support for 5 children from date of separation to June 2022: $998,564.
[90] Arrears of spousal support from date of separation to June 2022: $962,754.
[91] Ongoing child support for 5 children from July 1, 2022 on imputed income of $800,00: $16,631 a month.
[92] Ongoing spousal support from July1, 2022 on imputed income of $800,00: $11,500 a month.
[93] Equalization payment from Applicant to Respondent: $6,000,000.
[94] Costs payable by Applicant to Respondent: $460,000 of which $115,000 is enforceable in like manner as costs.
[95] Support Deduction Order to issue.
CONCLUSION
[96] At its essence, family law of support and equalization is rather simple. And yet, trying to avoid its simple precepts invites self-imposed consequences of tragic magnitude.
Justice M.P. Eberhard
Released: August 25, 2022