Relief Requested

[1] The Applicant brings a motion requesting the following temporary relief:

(a) commencing January 1, 2022 and on the first of every month thereafter, that the Respondent pay to the Applicant spousal support in the amount of $7,017 per month;

(b) an Order that the Respondent maintain $1,500,000 in life insurance as security for the spousal support obligation and designating the Applicant as irrevocable beneficiary;

(d) that the net proceeds from the sale of the Chevrolet Silverado, in the amount of $4,963.07, be held in trust by Ms. McMurtry.

Brief Factual History

[2] The parties were married on May 21, 1995 and separated on May 1, 2019.

[3] There are two children of the relationship namely, S.P. born in 2003 and Z.P. born in 2004.

[4] S.P. is no longer a child of the marriage. She has not completed her credits for high school and is not currently engaged in full-time studies.

[5] Z.P. is a child of the marriage and is currently enrolled in grade 12. She resides with the Respondent.

[6] During the marriage, the Respondent was the primary income earner and the Applicant was primarily responsible for caring for the children and maintaining the home.

[7] The Applicant was employed at Fabricland as an assistant manager until Z.P.’s birth in 2004. Following Z.P.’s birth, the Applicant stopped working outside of the home. When the children were in primary school the Applicant had a very modest income providing lunch duty supervision at the children’s school. Once the children were in high school the Applicant commenced employment, initially on a part-time basis, and later on a full-time basis at Pet Valu and Bulk Barn. Currently the Applicant works full-time for Bulk Barn and earns an annual salary of $32,688.

[8] The Respondent is an IT security consultant. At the time of separation, he was self-employed at Fixion, a company he owned jointly with the Applicant. The Respondent was the sole operator of Fixion. Fixion is no longer a going concern. The Respondent is now the sole shareholder of Rigo Solutions Inc. (hereinafter ‘Rigo’). Effective May 31, 2021 the Respondent’s income comes from Rigo.

[9] Both companies are, essentially, personal services corporations. Rigo has a single client, SoftSolutions. Rigo has one employee, the Respondent. Rigo does not rent space and the expenses claimed as deductions from gross income are peppered with personal expenses.

Spousal Support

Law

[10] Section 15.2 of the Divorce Act,[^1] states:

Spousal support order

15.2 (1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse.

Interim order

(2) Where an application is made under subsection (1), the court may, on application by either or both spouses, make an interim order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse, pending the determination of the application under subsection (1).

Terms and conditions

(3) The court may make an order under subsection (1) or an interim order under subsection (2) for a definite or indefinite period or until a specified event occurs, and may impose terms, conditions or restrictions in connection with the order as it thinks fit and just.

Factors

(4) In making an order under subsection (1) or an interim order under subsection (2), 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

Spousal misconduct

(5) In making an order under subsection (1) or an interim order under subsection (2), the court shall not take into consideration any misconduct of a spouse in relation to the marriage.

Objectives of spousal support order

(6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should

(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;

(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.

1997, c. 1, s. 2.

[11] The general principles guiding the exercise of the court’s discretion when dealing with support pending trial were summarized by Penny J. in Knowles v. Lindstrom,[^2]

It is well-established that interim support motions are not intended to involve a detailed examination of the merits of the case. Nor is the court required to determine the extent to which either party suffered economic advantage or disadvantage as a result of the relationship or its breakdown. These tasks are for the trial judge. Orders for interim support are based on a triable or prima facie case. An order for interim support is in the nature of a “holding order” for the purpose of maintaining the accustomed lifestyle pending trial, Jarzebinski v. Jarzebinski, 2004 CarswellOnt 4600 (ONSC) at para. 36; Damaschin-Zamfirescu v. Damaschin-Zamfirescu, 2012 ONSC 6689, 2012 CarswellOnt 14841 (ONSC) at para. 24.

[12] In Cassidy v. McNeil,[^3] at para 68 the Ontario Court of Appeal stated that spousal support should be based not on a budget of expenses of the recipient but on income sharing. Further, in the absence of the opportunity to carry out an in-depth analysis of the parties’ circumstances, which is better left to trial, the court tries to achieve "rough justice."

[13] Section 18 of the Child Support Guidelines states:

Shareholder, director or officer

(1) Where a parent or spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the parent’s or spouse’s annual income as determined under section 16 does not fairly reflect all the money available to the parent or spouse for the payment of child support, the court may consider the situations described in section 17 and determine the parent’s or spouse’s annual income to include,

(a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or

(b) an amount commensurate with the services that the parent or spouse provides to the corporation, provided that the amount does not exceed the corporation’s pre-tax income. O. Reg. 391/97, s. 18 (1).

[14] During submissions, the Respondent, quite appropriately, agreed that the Applicant had an entitlement to temporary spousal support and that the quantum should fall in or about the mid-range of spousal support as set out in the Spousal Support Advisory Guidelines.

Income of the Applicant

[15] In calculating an appropriate level of spousal support, the incomes of the parties are informative. The Applicant is a T-4 employee. She works full-time and earns $32,688 per annum.

Income of the Respondent

[16] The Respondent’s income is more complicated. An income valuation report dated May 26, 2021 and completed by Robert Deacon, CPA, CA, CBV, CFE was provided at the request of the court. The valuation report examined the Respondent’s 2020 income from Fixion.

[17] Following a review of the valuation report I note the following:

(a) the Respondent’s gross income dropped significantly from 2018 and 2019 to 2020;

(b) income valuation was not completed for the 2018 and 2019 taxation years as a result of deficiencies in information provided to Mr. Deacon by the Respondent. The information, I am told, is not forthcoming because the Respondent’s accountant passed away. In terms of commentary, I do not understand why the information is not available from the accountant’s firm, the accountant’s executor, or from other sources;

(c) Mr. Deacon relied on unaudited Financial Statements. Mr. Deacon made the assumption, except as stated in the report, that the Financial Statements and Income Tax Returns were accurate and complete and he had not ‘attempted to verify the accuracy of this information’;

(d) Mr. Deacon made the assumption that the company paid no discretionary expenses with an element of personal benefit to the Respondent other than as identified in the report; and

(e) pre-tax earnings were not included in income because the Respondent stated that: a) he needs to be financially prepared in case he is between contracts; b) he wants to develop application software and needs resources to do so; and c) in case he is unable to work as a result of his illness, he needs a reserve.

Respondent’s 2020 Income

[18] For the taxation year 2020, Mr. Deacon concluded that the Respondent’s income was $82,584.

[19] The 2020 expenses claimed include depreciation and vehicle expenses for a total of $15,447 per annum. While Revenue Canada may accept these expenses, I do not see, on the evidence before me, why these expenses are necessary for the work performed.

[20] By virtue of the use of the word ‘may’ in section 18 of the Child Support Guidelines, the court has discretion to add all or part of a corporation’s pre-tax income to a payor’s income if the payor’s annual income, as determined under section 16 of the Child Support Guidelines, does not fairly reflect all money available to the payor for the payment of support.

[21] I have considered the following three questions in considering pre-tax income:

(a) does the Respondent have control over dividend declarations?;

(b) is there a business reason for retaining the earnings?; and

[22] The Respondent does indeed have control over the payment of pre-tax income as the sole shareholder.

[23] The Respondent has provided no business reason acceptable to me for the exclusion of certain pre-tax income. Sensible people put away a portion of their income for a ‘rainy day.’ The Applicant and the Respondent are encouraged to do so. Should there be a gap in a contract, both parties will need to access their ‘rainy day’ fund. It is counterintuitive to think that the Respondent is entitled to hold back a portion of his pre-tax earnings from income as a form of income insurance while the Applicant is not afforded the same luxury.

[24] The Respondent’s argument that he he wants to develop application software and needs resources to do so is not persuasive. The contract signed with SoftSolutions, his only client, makes no reference to software development. Accordingly, software development is not a business reason sufficient to withhold certain pre-tax income.

[25] Ultimately, from the vantage of a personal services company, income occurs when the Respondent works. Including pre-tax income in the Respondent’s annual income determination will not impact the health of the business. Accordingly, I have decided to exercise my discretion and include pre-tax income in the Respondent’s annual income.

[26] When 2020 retained earnings are added to the Respondent’s income, the Respondent’s income is approximately $100,000 before adding back and grossing up certain personal expenses.

Respondent’s 2021 Income

[27] For the 2021 taxation year, there is no income valuation report.

[28] As stated, the Respondent is the sole shareholder of Rigo. Rigo has one client – SoftSolutions. On January 9, 2021, Rigo and SoftSolutions signed a contract. Pursuant to the contract, Rigo is to provide SoftSolutions with consulting, coaching, and training related to business performance through agile practices. Pursuant to the contract, the Respondent receives remuneration in the amount of $140 per hour. Invoices are to be advanced every two weeks with payment due 30 days after invoice. There are no restrictions in the contract regarding the number of hours that may be billed. I am mindful that the Respondent does not have carte blanche to bill as many hours as he desires. There must be a nexus between coaching/training/consulting and the invoices advanced.

[29] At the commencement of the motion the court requested the Respondent provide the total amount invoiced in 2021. Surprisingly, the information, which should have been readily available, was not filed with the court in advance of the motion. An exceedingly rudimentary excel spread sheet was provided that summarized the invoices. Supporting invoices were not provided and they must be provided to the Applicant forthwith.

[30] The total amount Rigo invoiced SoftSolutions in 2021 was $76,708. It is noteworthy that some months – January, May, September, and December - had no billings/receipts reflected on the spreadsheet. One would not have expected there to be any entries for January 2021 as the contract was executed on January 9, 2021 and invoices are to be submitted every two weeks. It was surprising to see no entries for May, September and December.

[31] The spreadsheet reveals that the Respondent billed SoftSolutions 548 hours in 2021. That equates to approximately 10.5 hours per week.

[32] It is noteworthy that the Respondent was diagnosed with Parkinsons in 2015. Medical information provided indicates the Respondent should work no more than 16 to 24 hours per week. If I accept the medical letters provided, of which there is a dearth of information, the Respondent is significantly underemployed and working considerably fewer hours than the restrictions set out by his medical providers.

[33] I have not been provided with information about what the Respondent does with the balance of his time outside the 10.5 hours a week that he, on average, bills. Is there other work? Are there other income streams? Is he developing his software as referenced in Mr. Deacon’s valuation report?

[34] On December 21, 2021 the Respondent completed a residential application for rent. In it, and at the end of the year 2021 when he would have quite accurately known the quantity of his billings, he estimated his salary range at $12,000 per month. Allowing for four weeks of holidays annually, and two weeks of sick leave, his annual gross income, before expenses, at that reported salary would be around $126,000. Certainly there are business expenses that are eligible for deduction.

[35] I have concluded, based on all of the evidence before me, including the income stream valuation and the current contract with SoftSolutions, that the Respondent is earning or is capable of earning, $115,000 per annum.

[36] I have considered the mid-range of spousal support as set out in the Spousal Support Advisory Guidelines.

[37] In assessing the Applicant’s needs and the Respondent’s ability to provide support, I have considered the parties’ respective Financial Statements. The Respondent claims annual expenses of $77,000 while the Applicant claims annual expenses of $66,000. I have considered the Applicant’s obligation to provide child support to the Respondent for the dependent child Z.P. (although not part of today’s motion).

[38] I have considered that regard must be made to not just necessaries but to the lifestyle enjoyed during the relationship. There is no doubt that the parties enjoyed a comfortable lifestyle. That lifestyle, though, must be considered in light of the medical reports outlining the Respondent’s illness, symptoms and, perhaps, restrictions on the number of hours he can work.

[39] In obtaining “rough justice”, for a temporary award, I have determined that the Respondent pay to the Applicant spousal support in the amount of $2,250 per month. This quantum is both fair and reasonable.

Life Insurance

[40] The Respondent currently has a life insurance policy with a face value of $1,500,000. The beneficiaries are listed as his children, a niece and a nephew. I was not directed to any evidence that suggested the Respondent’s niece or nephew are his dependents.

[41] The spousal support Order that I have made only requires security in the amount of $700,000.

Disclosure

[42] The parties were able to agree on the issue of disclosure.

Chevrolet Silverado

[43] I am not dealing with the issue of the proceeds from the sale of the Chevrolet Silverado. That issue can be resolved between counsel or determined at trial with the balance of the issues.

Order

Spousal Support

Commencing January 1, 2022 and on the first of every month thereafter, the Respondent pay to the Applicant spousal support in the amount of $2,250 per month.

Life Insurance

The Respondent shall maintain a policy of life insurance on his life with a minimum face value of $700,000.
The Respondent shall name the Applicant as the sole irrevocable beneficiary of $700,000 of the policy proceeds.
The Respondent shall at all times maintain the policy in good standing and shall ensure there is no gap in coverage.
The Respondent shall provide the Applicant with proof of compliance with the insurance provisions within 30 days of this Order.
Upon death of the Respondent, any policy proceeds not required to satisfy the spousal support obligation owed by the Respondent to the Applicant shall be paid to the estate and distributed according to law.
Upon the death of the Respondent, any shortfall in the policy proceeds required to satisfy the support obligation owed by the Respondent to the Applicant shall be binding upon the Respondent’s estate.

Disclosure

Disclosure Order to issue in accordance with the draft signed by me this day.

Costs

If the parties cannot agree on this issue of costs, I will consider their written submissions. The Applicant shall serve on the Respondent and file electronically, through the Trial Coordinator, her written submissions, limited to three pages, exclusive of the Bill of Costs and Offers to Settle no later than February 16, 2022. The Respondent shall serve on the Applicant and file electronically, through the Trial Coordinator, his written submissions, limited to three pages exclusive of the Bill of Costs and Offers to Settle by February 28, 2022. There shall be no right of Reply.

Justice G.A. MacPherson

Date: February 3, 2022

[^1]: R.S.C. 1985 c. 3 (2nd Supp)

[^2]: Knowles v. Lindstrom, 2015 ONSC 1408, at para 8

[^3]: 2010 ONCA 218, 2010 CarswellOnt 1637 (Ont C.A.)

Petersen v. Petersen, 2022 ONSC 808

Case Summary

Relief Requested

Brief Factual History

Spousal Support

Law

Income of the Applicant

Income of the Respondent

Respondent’s 2020 Income

Respondent’s 2021 Income

Life Insurance

Disclosure

Chevrolet Silverado

Order

Spousal Support

Life Insurance

Disclosure

Costs

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Expert Witnesses

Issues

Statutory Provisions 2

Legal Tests 2

Legislation 2