COURT FILE NO.: FS-22-0083-000 DATE: 2023-09-29
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Sandra Lopez, Applicant v. Frank Lopez, Respondent
HEARD: September 28, 2023 BEFORE: Fitzpatrick J.
COUNSEL: S. Bachinski, for the Applicant C. Arnone, for the Respondent
Endorsement on Motions
[1] Both parties bring motions seeking various relief. In terms of the numbers of heads of relief, the majority were items relating to disclosure post questioning. After some preliminary discussions with counsel, I advised that the items of relief relating to disclosure or return of personal items claimed by both parties were not of a sufficiently significant import to allow for, or warrant consideration, in the one hour the parties had booked for this motion. For example, part of the relief claimed by the applicant, (“Sandra”) was return of a laundry list personal items including a plastic leaf rake and attachments to a Dyson vacuum.
[2] Counsel agreed it made sense for them to try and work out these various subordinate disclosure issues outside the motion process. I made no determinations on the merits of any of these claims for temporary relief.
[3] What was incredibly significant was the respondent’s (“Frank”) request that the court terminate an existing without prejudice temporary spousal support order that sees Frank pay Sandra $11,000 per month. This issue was well worth the motion.
Background
[4] The parties were married September 4, 1993. They were in their mid-twenties at the time. They separated February 6, 2021.
[5] There were two children of the marriage. They are now adults. Neither of these parties have dependents.
[6] Sandra is a Registered Nurse. Frank is a Chartered Accountant. Sandra worked full time as a nurse during the first four years of marriage. She switched to part time when their first child was born. She suffered a back injury in 2005. She asserts her part time employment situation has been advised by her doctor and the Occupational Health and Safety committee of her employer the Thunder Bay Regional Health Sciences Centre.
[7] Since 2017 Frank has conducted his professional practice through a professional corporation, the Franco Lopez Professional Corporation (“FLPC”). FLPC was a partner with a national accounting firm Grant Thorton LLP (“GT”). FLPC is no longer a partner with GT. The circumstances of that change in relationship garnered the most attention in argument before me.
[8] The matter had a case conference in August 2022. The parties consented to a without prejudice order at that time. The material portion of that order for the purposes of this motion was the following order of Newton J. dated August 9, 2022, under the Divorce Act that:
On a without prejudice basis to either party, the Respondent shall pay temporary spousal support in the amount of $11,000 per month commencing September 1, 2022. Either party may bring a motion on spousal support issues.
[9] Questioning occurred in May 2023. The parties have a settlement conference scheduled in January 2024.
Positions of the Parties
[10] Frank claims his professional corporation was terminated from its relationship with GT effective December 31, 2022. Two letters from GT were in the materials before the Court which have a bearing on this issue. They were dated November 17, 2022, and November 18, 2022. They were presented to the Court as Exhibits to both the parties’ affidavits.
[11] Frank relies on the provisions of the letter of November 18, 2022, to argue it was GT and not FLPC who decided to terminate the relationship. Notwithstanding the decision of GT, these letters characterize the actions of FLPC as a “voluntary withdrawal” from the partnership as contrasted with an “involuntary withdrawal” from the partnership. Frank argues that he was presented with a “fait accompli” and he only agreed to treat the matter as a voluntary withdrawal so as to maximize the amount FLPC would receive during the period following the termination. Frank characterized these amounts as “severance pay”.
[12] FLPC received an income allocation from GT for 2022 of $662,543.00. GT continued to pay “income continuance” to FLPC until August 31, 2023. FLPC is also entitled to receive a separate stream of post withdrawal income for 120 months. This is in the amount of $8,956 per month. Frank argues that continued receipt of this amount is contingent on him and his professional corporation honouring a non-competition agreement. Frank explains this is neither he nor his professional corporation are actively providing accounting services to any one at the present time.
[13] Frank also claims Sandra has refused to agree to treat payments he made on a voluntary basis prior to the consent order of Newton J. as being taxable in her hands and deductible to him.
[14] Frank argues Sandra has no need for interim spousal support. His income has dropped precipitously and he has no ability to pay the quantum he consented to when his income was in the mid $600,000 per year range.
[15] Sandra argues Frank is intentionally underemployed. She argues the November 17, 2022, letter from GT demonstrates that FLPC voluntarily withdrew from the partnership. Frank is perfectly capable of earning an income consistent with what he was earning at the end of the relationship. As such the court on this motion should impute income to him in the range of $546,000 to $662,000 per annum, and at a minimum dismiss Frank’s motion to terminate the order of Newton J. Sandra argues she needs spousal support to pay her monthly bills and expenses.
The Law
[16] The order of Newton J. on its face clearly indicated the order was without prejudice and either party could move for a further order with respect to spousal support. The usual requirement for a material change to alter a temporary order is not engaged in this matter.
[17] This motion is governed by the provisions of section 15.2 of the Divorce Act. The relevant jurisprudence has established on applications for interim support the Court does not engage in a comprehensive review and analysis of the parties' circumstances, which is better left for trial. The Court achieves "rough justice" at best. The purpose of interim relief is to provide the parties with reasonable arrangements to meet the needs and means of the parties until trial. Therefore, on applications for interim support, the Applicant's needs and the Respondent's ability to pay assume greater significance. Further an interim support order should be sufficient to allow the applicant to continue living at the same standard of living enjoyed prior to separation if the payor's ability warrants it. (Christodolou v. Christodolou [2021] O.J. No. 5007 para. 26).
[18] The Court has the jurisdiction to impute income to a party for the purpose of determining a quantum of temporary spousal support. The test for the imputation of income is the same as that developed in the jurisprudence for imputing income for child support (Bagust-Homes v. Devine, 2023 ONSC 2978, para. 42).
[19] In Drygala v. Pauli (2002), at para. 23, Gilles, J.A. set out the questions a court should ask when considering whether a spouse is intentionally under-employed or unemployed:
a. Is the spouse intentionally under-employed or unemployed? b. If so, is the intentional under-employment or unemployment required by virtue of his reasonable educational needs? c. If no, what income is appropriately imputed in the circumstances?
Disposition
[20] In my view Sandra has sufficient income from her employment and from her investments that she is able to meet her day to day needs until trial. I have reviewed her financial statement dated September 1, 2023. It is unexceptional save for an entry claiming monthly legal expenses of $8,231.21. Practically this represents over half of the declared monthly expenses. This seems to me to be an excessive amount on an annual basis. Further Sandra indicates she has social assistance income of $655.72 a month which seems surprising for a person who is employed and earned employment income of $55,789.25 in 2022. She incurs no monthly rental or mortgage expenses which is generally a large portion of the expenses for a person who no longer has any dependents. Her financial statement shows a large credit card debt but no corresponding monthly expense to pay it off. Otherwise, she has no debt. Her financial statement does disclose significant assets which generates in the order of $1,400 a month in investment income. In my view, the material Sandra has filed does not demonstrate she has a need for temporary spousal support. She has not placed material before the Court which would demonstrate that her standard of living will be materially impacted if no support is paid pending trial.
[21] Further I am not prepared to impute income to Frank as urged by Sandra. I say this because I find, referring to the first branch of the Drygala test, that Frank is not intentionally underemployed.
[22] I accept Frank’s argument that it was GT, and not him, who decided to terminate the relationship with FLPC. I say this because of my review of the letter of November 18, 2023. It states:
Further to your Withdrawal Agreement dated November 17. 2022. you have asked us to confirm to you how the discussions around your withdrawal from the Grant Thornton LLP partnership were originated and the implications of not reaching an agreement. We confirm that the decision to approach you about your withdrawal from the firm originated at the national level and was supported by the National Management Committee. I first raised the issue with you to commence the discussions in my role as Regional Managing Partner with responsibility for the Northern Ontario Business Unit. Our partnership agreement requires that management negotiate with a partner to try to reach an agreement on a withdrawal arrangement before we can rely on Section 9.03 Involuntary Withdrawal of Partners. If management had not been able to reach an agreement with you regarding your withdrawal from the firm, it was management's intention to bring the matter to the Partnership Board in accordance with the terms of section 9.03. I can't say what the outcome of that process would have been because it is hypothetical and the Partnership Board makes its own independent decision but the terms of the' Partnership Agreement allow for an involuntary withdrawal on 6 months notice and that would have been management's recommendation to the Partnership Board. If you chose to have this matter go before the Partnership Board you may have had to incur further legal fees and from management's perspective it was likely that the financial terms that you would achieve through that process would not be as favourable as the terms you achieved with the withdrawal agreement. (emphasis added)
[23] In my view, this letter, when contrasted with the letter from GT of the day before, clearly identifies who decided to do what. Frank did not voluntarily withdraw. I agree with the argument of counsel for Frank that this was a “done deal” when it was presented to Frank. In the context of this motion, when the Court is attempting to achieve rough justice, I am persuaded that Frank is not the author of his current financial situation. I accept his explanation as former managing partner of the Thunder Bay office of a national accounting firm, the termination was unexpected and came as a surprise. He did not intend to be unemployed as of November 2022 or after the time the severance payments terminated in August 2023. This represents a serious economic setback for Frank.
[24] Both parties have roughly the same level of investments. These investments generate income. At present Sandra is employed. Frank is not. Frank has some issues with a non-compete agreement that was entered into between FLPC and GT. He is not seeking to challenge the enforceability of that agreement. He argues it would put a long-term income stream or asset payout at risk. His position in that regard will be an issue for trial. However, I see it as a reasonable position in the context of determining what his next moves are going to be in light of the dissolution of his long-term marriage and the challenges that will be posed in the near term litigating this case. It is not a basis to impute income to him on this motion on the basis of the materials filed.
[25] Further there is a genuine issue about Frank’s income in the last years of the marriage. Sandra has retained an expert who attributes substantially more income to Frank than he declared to the Canada Revenue Agency for the 2018 to 2020 period. Again, this is a difficult issue that will be subject of a trial. The allocation of the monies coming to Frank, as well as the continued monthly “post withdrawal income” being paid pursuant to the termination may be considered as assets subject to division in the equalization process. This is also a factor which militates against imputing income to Frank for the purposes of a temporary order.
[26] Frank should not be required to resort to his capital in order to pay interim spousal support (Plaxton v. Plaxton [2002] O.J. No. 1226 para 32). The economic consequences of GT’s decision is causing Frank economic hardship as of now. This hardship should not be exacerbated by requiring him to continue to pay on an order that was consented to in very different circumstances.
[27] For these reasons, Frank’s motion is allowed. Practically, I see it as equitable that temporary spousal support terminate on October 1, 2023 pending trial. Order to go effective October 1, 2023 terminating the spousal support provisions of the temporary order of Newton J. dated August 9, 2022.
[28] I sought the parties’ submissions on costs at the conclusion of the motion. Counsel agreed that the successful party on this motion could expect $5,000.00 inclusive of disbursements and HST on a partial indemnity basis.
[29] Frank was successful on this motion. Sandra shall pay Frank costs of this motion fixed in the amount of $5,000.00 inclusive of disbursements and HST. These costs shall be payable forthwith.
“original signed by” The Hon. Mr. Justice F.B. Fitzpatrick
DATE: September 29, 2023