COURT FILE NO.: FS-21-00026828-0000
DATE: 20221104
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DAVID KENNETH FORD
Applicant
– and –
KERSTIN WALDHART
Respondent
Bryan Smith and Sarah Conlin for the Applicant
Julie Hannaford/Anita Volikis for the Respondent
HEARD: August 30, 2022
shore, j.
ENDORSEMENT
[1] The Applicant Husband is seeking a temporary order for spousal support in the sum of $49,000 per month and the shared use of the Florida condominium.
[2] The parties were married for nearly 31 years. They separated in January 2020. The parties have one child of their relationship, a daughter. The daughter attended law school and is articling this year.
[3] The biggest dispute between the parties relates to the income to be used for both parties in calculating spousal support. Each of the parties retained a valuator to determine the Wife’s 2021 income. Each of the valuators provided different scenarios for the Wife’s 2021 income. Their positions for the Wife’s income range from a low of $413,000 to a high of $1,740,000, depending on the valuator and the scenario.
[4] For the reasons set out below, on a without prejudice basis, I find the Respondent Wife shall pay the Applicant Husband spousal support in the sum of $20,000 per month based on an income of $720,000 for the Wife. The amount of support paid to the Applicant Husband is on the assumption that he will continue to receive an additional $15,000 per month from the Wife’s company.
[5] The Applicant Husband’s motion for use of the Florida condominium is dismissed.
Position of the parties:
[6] The Husband is asking for spousal support in the sum of $49,000 per month, based on the Applicant Wife’s alleged income of $1,170,000. The Husband relies on his expert valuator’s report to determine the Wife’s income.
[7] The Wife submits that the uncharacterized payments of $15,000 per month, as agreed to in the commercial litigation file, should continue pending trial and there should be no order made for spousal support. In February 2021, the Husband commenced a commercial action naming the Wife and the adult child as Respondents, for his alleged improper dismissal from Caledonia Plastics Inc (“CPI”). CPI is a company owned by the Kertin Waldhart Family Trust (“the KWL Trust). The Trust was settled during the marriage and owns all of the common shares of CPI. The Wife and the child are the trustees of the trust. The Wife, the Husband, and the child are beneficiaries of the trust. The Wife owns 200 Class B special shares of CPI.
[8] In the alternative, the Wife submits that spousal support should be paid based on her income of $713,000. The Wife relies on her expert’s report to determine her income.
Interim Spousal Support:
[9] Under s.15.2(2) of the Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.), the court may make an interim spousal support order. In making an interim order, the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including:
a) The length of time the spouses cohabited;
b) The functions performed by each spouse during cohabitation; and
c) Any order, agreement or arrangement relating to support of either spouse. s.15.2(4)
[10] Under s.15.2(6), an interim or final spousal support order should meet the following objectives:
a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and
d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period
[11] The primary goal of interim spousal support is to provide income for the dependent spouse from the time the proceedings are commenced until the trial. Interim support is meant to be in the nature of a “holding order” to, insomuch as possible, maintain the accustomed lifestyle pending trial. On interim support motions the court does not embark on an in-depth analysis of the parties' circumstances which is better left to trial.
[12] On an interim basis, the claimant’s needs, and the respondent’s ability to pay, often assume a greater significance than some of the other statutory objectives, such as the need to achieve self-sufficiency.
[13] When determining whether to make an order for interim spousal support, the court in this case must determine:
a) Is the Husband entitled to spousal support?
b) If yes, then what are the parties’ incomes for support purposes?
c) Once entitlement and income are determined, what quantum of support is appropriate in this case?
Entitlement:
[14] The first question this court must determine is whether the Husband has an entitlement to support. Entitlement is a threshold issue. This is not in dispute in this case.
[15] The party claiming temporary spousal support has the onus of establishing that there is a triable (prima facie) case, both with respect to entitlement and quantum. The merits of the case in its entirety are to be dealt with at trial.
[16] In considering the issue of entitlement on a needs basis, the court should consider the length of marriage/cohabitation, any drop in standard of living, and the economic hardship arising as a result of the breakdown of the relationship. This is all to assess inter-dependance.
[17] Both parties are 68 years old. The parties were married for approximately 31 years and separated in January 2020. They have one child, who is 33 years old, who is currently articling, having graduated from law school. There is no question that this was a long-term relationship.
[18] Entitlement on a needs basis will generally be found in cases where there is a significant income disparity at the time of the initial application. See: Spousal Support Advisory Guidelines: The Revised User’s Guide, April 2016: Professor Carol Rogerson and Professor Rollie Thompson (“SSAGs”). In the case before me, there is a large discrepancy in the parties’ incomes (regardless of whether I accept the Husband’s calculations or the Wife’s calculations of the Wife’s income).I find that the Husband suffered an economic hardship as a result of the breakdown of the long-term relationship. There is no question that the Husband cannot afford to maintain a standard of living similar to that enjoyed by the parties during the relationship.
[19] On an interim basis, I am satisfied on a prima facie basis that the Husband is entitled to spousal support on a needs basis.
[20] There does not seem to be a strong compensatory claim for support, but it is difficult to make any real determination on the incomplete record before the court. The Husband is making a compensatory claim based on his alleged involvement in building up CPI, the Wife’s company. This will need to be addressed at trial.
[21] The next step is for the court to determine the parties’ incomes.
Income of the parties:
[22] Before the court can determine the correct quantum of support, I must determine the income of the parties.
Husband’s income:
[23] The Wife submits that the Husband should be imputed with income as he is voluntarily unemployed.
[24] The Husband has both a law degree and an engineering degree. He worked for Dysart Facility Limited Partnership from approximately 1997 until 2019 when the company was wound up. The Husband’s evidence is that he has not earned an income from Dysart since 2016.
[25] The Husband worked for CPI for many years, first as a consultant and then as an employee. CPI is a company owned by the Wife and started by her parents in 1984. CPI manufactures and sells plastic materials, they have approximately 20 employees and their gross revenue for the last few years has been approximately $5 million. The Husband was compensated for his work and was earning a salary of $225,000. However, his employment was terminated, allegedly for cause, on January 18, 2021. The Husband started a wrongful dismissal action. He is also making claims for oppression and associated remedies. It is in the context of that lawsuit that the Wife agreed to pay the Husband an uncharacterized sum of $15,000 per month. The money is being paid by the company, so that the Husband is paying tax in this income. There is a dispute if the amount should have been paid on a net or gross basis. This will be factored in when determining the appropriate order for spousal support.
[26] The Husband is currently unemployed and submits that at 68 years old, he is entitled to retire. Whether the Husband (or the wife, given that they are similar in age) has an obligation to continue working at this age is something that will need to be addressed at trial.
[27] On a temporary basis, I am not prepared to impute income to the Husband , although adjustments may need to be made to spousal support if he receives severance of any remuneration as a result of the litigation. This does not in any way preclude the trial judge from imputing income on a retroactive basis.
Wife’s Income:
[28] The Wife continues to earn a decent income from CPI, although the exact amount is in dispute and will be addressed below.
[29] The starting point for determining income under the SSAGs is the definition of income under the Federal Child Support Guidelines (“CSGs”) (SSAGs, s. 3.3.2). The SSAGs and the CSGs are virtually identical: see Mason v. Mason, 2016 ONCA 725, 132 O.R. (3d) 641 (Ont. C.A.), at para. 53 and Halliwell v. Halliwell, 2017 ONCA 349, 138 O.R. (3d) 671 at para. 90.
[30] Section 16 of the CSGs sets out the general rule that income is determined using the sources of income set out under the heading "Total income" in the T1 General form issued by the Canada Revenue Agency ("line 150 income"):
- Subject to sections 17 to 20, a parent's or spouse's annual income is determined using the sources of income set out under the heading "Total income" in the T1 General form issued by the Canada Revenue Agency and is adjusted in accordance with Schedule III.
[31] Sections 17 and 18 permit a court to depart from line 150 income where the court is of the opinion that the determination of the spouse's line 150 income would not be the fairest determination of income. Section 17(1) allows a court to consider patterns or fluctuations in a spouse's income over the last three years. Section 18 allows the court to add all or part of the pre-tax corporate income for the most recent taxation year to a corporation of which a spouse is a shareholder to that spouse's income. Section 19 addresses imputing income to a spouse and sets out a non-exhaustive list of circumstances in which income may be imputed:
- (1) the court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include,
(g) the spouse unreasonably deducts expenses from income.
[32] In calculating the Wife’s income, Mr. Ranot, the Husband’s expert, starts with Mr. Pont’s calculations (the Wife’s expert) and adds back in various expenses. He adjusts for the following:
a) Adds back legal fees paid through the company allegedly for the Wife’s family law litigation;
b) Adds back the $60,000 paid to the Husband under the court order ($15,000 per month) and deducted as a business expense;
c) Adds back $50,318 for salary paid to Vanessa, the parties’ daughter, in a year when she was articling full-time at a law firm;
d) Adds back tax credits for research and development, in the sum of $102,989, that were allegedly deferred to the next tax year; and
e) Adds back $65,000 for meals and travel, including the car payments for the Husband and Vanessa.
[33] The amounts added back for payment of personal expenses were then grossed up for taxes.
[34] The Wife submits that on an interim motion, the court should not embark on an in-depth analysis on income and the decision on an interim motion is meant achieve “rough justice at best”. But even the Wife’s expert accepts that the Wife earns more than set out in her income tax returns. Mr. Pont’s starting point is $713,000, using his third scenario where he adds back $289,331 for accrued legal fees that were not paid in that fiscal year. I have used this scenario as the starting point for my analysis because the $289,331 had not been paid in that year.
[35] I will now go through the adjustments made by Mr. Ranot, set out above.
[36] One discrepancy in the calculations between Mr. Ponte and Mr. Ranot appears to be just over $150,000 in legal fees paid to Teplitsky Colson LLP, and the experts through the company, plus the gross up for tax purposes. Unknown to the court at this time is whether Teplitsky Colson LLP acted for the company in the commercial lawsuit or only in the divorce and how much should be added back. Teplitsky Colson LLP has many lawyers that do not practice family law, but other areas such as employment, civil and corporate/commercial law. It is quite possible (or even likely) that their services were entirely for the divorce proceeding, in which case fees paid by CPI should be added back as personal expenses paid by the company. But on the record before me, I have no way to know. I have not included these fees in my calculations. The Wife, who likely knows the answer to this question would be wise to adjust her support payments accordingly, if needed.
[37] Whether Venessa was properly employed by CPI or not, is something to be determined after questioning, and possibly not until trial. I have not included this in the calculations.
[38] It is also unclear to me whether the $15,000 uncharacterized payment was to be paid from the Wife or from the company. But in any event, the spousal support amount will take into account this payment as taxable income to the Husband, on the assumption that it will continue pending trial. If it changes then there needs to be an increase to the spousal support payments. Whether this amount should be added back to the Wife’s income can be determined at trial.
[39] It is not unusual for personal expenses to be run through a business to be added back and grossed up in determining income for support purposes. From my review of Mr. Ponte’s report, it appears he added back some amounts for meals, travel, car and professional fees, to the tune of $24,952. The full breadth of expenses to be added back will have to wait until trial. However, the $4,000 paid for the child’s car insurance should clearly be added back and grossed up. After gross up for taxes (at 53.3% used by Mr. Ponte) it adds $6,132 to the Wife’s income.
[40] I would add CPI’s pre-tax corporate income to the Wife’s income. Given the line of case law in this area, this amount would be added as available income to the Wife. This amount was also included in Mr. Ponte’s calculations.
[41] Finally, whether the SR&ED tax credits are to be included in income in the year they are received or the year for which they correlate can be left for trial.
[42] The Husband’s income for support purposes is $15,000 per month, or $180,000 per year. The Wife’s income for interim support purposes is rounded to $720,000.
[43] Now that the parties’ respective incomes have been determined, I turn now to consider the quantum of support.
Quantum of Support:
[44] I am still surprised when a party brings a motion for support and fails to file an updated financial statement. Yet this is what has happened in this case. The last financial statement filed by the Husband is from May 2022, prior to the Husband receiving a $1.35 million advance on the equalization payment. In fact, his first affidavit for this motion, sworn in July 2022, references the fact that he has just received the advance and he does not know how it will be applied as of yet. When making an argument on the basis of need, it would be pertinent and indeed, useful to have also filed an updated financial statement in support of the motion. This is even more important in this case where the Husband’s argument for need is based on servicing his debt which may or may not have been paid off or down from the advance payment.
[45] The Husband relies on the case of Drouillard v. Drouillard, 2012 ONSC 4495, for the proposition that on an interim basis the court should generally follow the Spousal Support Advisory Guidelines (SSAGs). But in Drouillard, the payor’s income was well under the $350,000 ceiling. In the case before me, the payor’s income is well above that ceiling. For a payor spouse with an income above the SSAGs ceiling of $350,000: the ceiling does not operate as a hard "cap"; the formulas give way to discretion; the analysis is fact-specific; and the SSAG ranges remain relevant.
[46] In balancing the factors in a long-term marriage, where the payor's income is above $350,000, the SSAGs recommendation is that the payment of spousal support range between 37.5% and 50% of the gross income difference between the spouses: Halliwell para. 52.
[47] The Husband also refers to the case of Offley v. Offley, 2018 ONSC 624 for the proposition that for long term marriages with incomes over $350,000, it is appropriate to order a 50/50 sharing of net disposable income. While Mesbur J. ended up ordering a 50/50 sharing in that case, Mesbur J. still went through a detailed analysis of the needs of the recipient wife and determined that there was insufficient income to cover the parties’ expenses, so she ordered “rough justice” of each receiving 50% of the net disposable income and each having to figure out how to meet their deficit each month.
[48] A party’s accustomed standard of living during a relationship is an appropriate part of context upon which need should be based. See: McIntyre v. Winter, 2020 ONSC 4376; Blackstock v. Comeau, 2018 ONSC 193, 4 R.F.L. (8th) 317. On an interim basis, means and needs become more important that other factors. The word “need” is not limited to one’s basic needs. It can be interpreted to cover situations where a spouse suffers a significant decline in the standard of living, he or she enjoyed during the relationship. See: McIntyre v. Winter, 2020 ONSC 4376 at para. 54; Nixon v. Lumsden, 2020 ONSC 147 at para. 195.
[49] The Husband submits that he needs $25,331 net per month to meet his expenses. Post separation, the Husband purchased a waterfront home for just under $1.7 million. He lives with his girlfriend in her home, where they have undertaken renovations. I am not persuaded by the Husband’s argument with respect to his need. He does have debt he needs to service, but the vast majority of the debt was incurred post-separation and was not essential on an interim basis. That is not to say he is not entitled to spousal support but just that his “need” based on the purchase of a $1.7 million recreational property is not going to be a driving factor in my consideration: see Angst v. Angst, 2017 ONSC 5790.
[50] The Husband also received an advance on his equalization payment in June 2022, totaling $1,350,000 from the proceeds of sale of the matrimonial home, title to which was registered in the Wife’s name. The home sold in April 2022. The remaining proceeds, of approximately $1.2 million, remain in trust.
[51] The Wife submits that the Court of Appeal in Halliwell set aside the trial judge’s decision because the trial judge failed to fully consider the effects of the equalization payment on support: see para. 107. The Husband, in the case before me, received an advance on the equalization payment in the sum of $1.35 million. Halliwell was a trial decision for support, not an interim decision. The Wife in Halliwell received an equalization payment in excess of $3 million. The facts before this Court are different.
[52] But, in Offley, the Court, in making an interim order for support, did consider that $1.1 million was released to the Wife from the proceeds of sale of the matrimonial home, which the wife could use to find alternate accommodations and pay her legal fees, on an interim basis. This reinforces my decision above not to give too much weight to the debt related to the post-separation purchase of a home because the debt could have been significantly paid off by the $1.35 million received. Again, it would have been of assistance if the Husband filed an updated financial statement.
[53] The Husband says he needs $25,331 net each month to pay his expenses. That includes $12,237 for two mortgages that would have been paid off or significantly reduced by the $1.35 million advance he received. Again, I do not know the specifics because no updated financial statement was filed.
[54] Using $720,000 income for the Wife and $180,000 income for the Husband, support of $20,000 per month would leave the Husband with approximately $19,000 net per month to pay his expenses. Given that the mortgage payments of over $12,000 per month should (and may likely) have been significantly reduced by the advance equalization payment, this will cover the Husband’s expenses each month and meet his needs. Further, if using the SSAGs as a litmus test, this leaves the Husband with approximately 47% of the NDI and brings him closer to the midrange of spousal support.
Florida Condominium:
[55] The last outstanding issue that remains before me is regarding the condominium in Florida, located at 10733 Mirasol Drive, Miromar Lakes, Florida (“the condo”), that is owned by the KWL Trust ”). The Wife is the trustee and beneficiary. The Husband is a successor trustee but not a beneficiary of the trust.
[56] It is likely that the condo was used as a family residence during the marriage, albeit less so towards the end of the marriage.
[57] Since separation, the Wife and the parties’ daughter, Vanessa, have continued to use the condo. The Wife has continued to pay all of the expenses related to the condo.
[58] Even if the condo was a matrimonial home, I would decline to make an interim order requiring the parties to share the condo, for a number or reasons. The Husband purchased a waterfront property in Ontario and lives with his new partner in another property. He does not need to reside in the condo due to a lack of housing.
[59] The parties also have timeshares in New York and Mexico, which can be used at various locations across the world. It would be very uncomfortable and very difficult for the Wife to have share the condo with the Husband and his new partner, sleeping in the same beds, albeit at different times. It is not necessary on a temporary basis to put the parties and the child in this situation for a vacation property when there are other viable options available to the Husband. The Wife has offered to maintain the timeshares and let the Husband use the timeshares. On a temporary basis, this is the best option.
[60] The Husband’s motion for equal time sharing of the Florida condo is dismissed.
Order to go as follows:
On a without prejudice basis, the Respondent shall pay the Applicant interim spousal support of $20,000 per month, commencing September 1, 2022, and on the first day of each month until varied by court order or agreement. This order has been made on the assumption that the Applicant will continue to receive $15,000 per month from Caledonia Plastics Inc.
The Husband’s motion for equal time sharing of the Florida condo is dismissed.
If the parties are unable to agree on costs within 10 days of release of this order then the Respondent shall serve and file her costs submissions within 20 days of release of this order, and the Applicant shall serve and file his costs submissions within 30 days of release of this order. The costs submissions shall be no more than 2 pages long, plus the bill of costs and offers to settle.
Justice Sharon Shore
Released: November 4, 2022
COURT FILE NO.: FS-21-00026828-0000
DATE: 20221104
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DAVID KENNETH FORD
Applicant
– and –
KERSTIN WALDHART
Respondent
ENDORSEMENT
Shore J.
Released: November 4, 2022