Overview

1The parties married on December 11, 2005. They have two children one is 16 and the other is in university. The parties disagree as to when they separated. The respondent says it was April 15, 2016. The applicant states it was October 24, 2016. This issue is important as it relates to the applicant’s claim for the equalization payment involving the respondent’s business.

2The applicant commenced an application in 2022 seeking an equalization payment from the sale of the matrimonial home and from the value of the respondent’s business.

3The respondent brings this interim motion because he submits the business is failing and he is impecunious and requires spousal support.

Position of the parties

4The parties present very different accountings with respect to who paid for what in relation to the matrimonial home and expenses and what each party is owed in an equalization payment. It is impossible to resolve most of these issues in this short motion.

Position of the Respondent

5The respondent owns a company called Koben Systems Inc. He states that the company has never gotten off the ground and has fallen on hard times. He has reduced his office space. The company is currently being sued by the Government of Ontario for $2.6 million and is undergoing a forensic audit in preparation of a judicial review with the Ministry of Transportation. The CRA sent a payroll assessment stating Koben owes $338,593 in taxes. He states that his income in 2022 was just $22,264.92, which is slightly less than he has earned in previous years.

6The respondent submits that he is destitute and requires spousal support. He pays $2,600 per month in rent and has only $500 in his saving account. He submits that the applicant is aware of his financial situation given that she loaned him $12,000.

7On January 12, 2023, the matrimonial home was sold. The remaining net sale proceeds of $509,351 are currently held in trust. The respondent seeks the release of his half, minus $98,826 which he acknowledges is owed to the applicant.

8In the alternative, he seeks $60,000 so that he can pay for his lawyer’s fees to level the playing field. He seeks approximately $47,000 to pay for lawyer fees. He also owes his accountant approximately $15,000. He states that he does not have access to any of his 2022 or 2023 business records because his accountant has denied him access to QuickBooks because he has not paid his fees.

9The respondent submits that the applicant’s claim for equalization payment is statute barred and, in any event, she would not be entitled to the amounts she claims with respect to the value of the business at the date of separation because she did not materially assist in obtaining the government loan as she claims. He also claims that she owes various sums to him in the equalization because he paid for the upkeep of the matrimonial home and did several repairs and upgrades on the matrimonial home.

The applicant’s position

10The applicant submits that spousal support should not be ordered. The respondent was not dependent on the applicant during the marriage and was not disadvantaged when the parties separated. The applicant has not sought any financial support since the date of separation and his income has not substantially changed. The applicant submits that this motion is retaliation because the applicant ordered the sale of the matrimonial home and she refused to consent to the release of further funds.

11The applicant submits that the respondent is not impecunious. He continues to operate the business and failed to produce adequate disclosure to demonstrate need. He has produced no records for 2023 or 2023. She submits that he is appearing to run the business at a loss because he is being sued.

12The applicant submits that the respondent has not been forthright about his financial circumstances, which has made it difficult for the applicant to determine the value of the business and his income. She submits that the income reported on his line 150 of his tax returns is not reflective of his true income.

13Based on her preliminary valuation of the business for 2021, the company generated revenues of $559,000. The company made investments of $760,00 and the respondent is owed $1,191,503 in shareholder loans. (The respondent submits that the loans are unrecoverable and that the investment amounts are not accurate). The business had several other expenses, such as travel, which the applicant submits are personal benefits to the respondent. The applicant submits that the 2021 business records do not show a company on its “last leg.”

14The applicant submits that based on the respondent’s financial statement, he must be earning more money than the $22,000 he claims because his expenses are over $90,000 and he only has $13,000 in credit card debt and the line of credit has not increased. She also submits that the respondent has travelled to Belize twice since December 2022 and other places in North America. He has also not paid anything toward the s. 7 expenses of their children from 2019 to 2023.

15The applicant owns her own business and works on contract. Her income in 2021 was $301,973 (which included a severance package) and in 2022 it was $163,053.89. She submits that she lives off her savings between contracts. She purchased a used vehicle. She has lived within her means and the respondent has not.

16The applicant further submits that no monies should be released from the sale of the home. This is the only money available to the applicant to recoup the monies that she says she is owed on the equalization payment and if this money is released the respondent will have no reason to participate in the litigation.

Issue #1: Should the Court order spousal support?

17 Section 15.2 of the Divorce Act provides that the court may make an interim order for spousal support. In considering the issue of support, the court considers the “condition, means, needs and other circumstances of each spouse” including the length of time the parties cohabitated, the functions performed by each spouse, and the functions each party performed during the cohabitation.

18The court is also required to consider the factors set out in s. 15.2(4) of the Divorce Act and the objectives of spousal support set out in s. 15.2(6).

19On an interim support motion, needs and ability take on greater significance and the need to achieve self-sufficiency is of less importance. In addition, an interim support order should only be granted where there is a prima facie case for entitlement: Joyce v. Joyce, 2015 ONSC 4311, at para. 34 & 35. The court is not to engage in an in-depth analysis of the parties’ circumstances. The moving party is only required to make out a reasonable case for standing and entitlement before the court will assess the parties’ means and needs: Hopkinson v. Hopkinson, 2023 ONSC 1583 at para. 14.

20The Supreme Court of Canada articulated the fundamental principles with respect to entitlement in Moge v. Moge, 1992 25 (SCC), [1992] 3 S.C.R. 813 and Bracklow v. Bracklow, 1999 715 (SCC), [1999] 1 S.C.R. 420. There are three bases for entitlement: i) compensatory, ii) non-compensatory, and iii) contractual or consensual.

21Compensatory support arises where it would be just to compensate a spouse for their contributions to the marriage or for sacrifices made or hardships suffered because of marriage.

22Non-compensatory support includes consideration of needs and means and considers the economic disadvantage suffered from the breakdown of the marriage.

23In this case, the claim by the respondent is for non-compensatory support.

24To determine the needs of the respondent, the court must first determine whether the court accepts the income claimed by the respondent. The respondent’s income on line 150 of his tax returns is as follows:

2017: 22,500
2018: $21,00
2019: $30,000
2020: 27,000
2021: 23,800
2022/2023: $22,264.92 (no notice of assessment filed)

25The applicant submits that the respondent earns much more than is claimed on his tax returns and that his failure to provide disclosure means that the court cannot ascertain what his needs are at this time.

26 Section 19 of the Federal Child Support Guidelines, SOR/97-175 permits the court to impute income that the court thinks is appropriate in the circumstances where:

(d) It appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;

(f) the spouse has failed to provide income information when under a legal obligation to do so;

(g) the spouse unreasonably deducts expenses from income;

(h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax;

27The onus is on the party seeking to impute income to establish an evidentiary basis that the other party is under-reporting their income: see Homsi v. Zaya, 2009 ONCA 322, 248 O.A.C. 168, at para. 28.

28Where a party fails to provide full financial disclosure relating to income, the court is entitled to draw an adverse inference and to impute income to that party: see e.g., Pustai v. Pustai, 2018 ONCA 785, at para. 38: see also Federal Child Support Guidelines, SOR/97/-175 ss. 21-24.

29Determining the amount of income to impute to a party is a matter of discretion for the trial judge. The only limitation on the discretion of the court is that there must be some basis in the evidence for the amount that the court has chosen to impute. See Korwin v. Potworowski, 2007 ONCA 739, 43 R.F.L. (6th) 1.

30I agree that there are legitimate reasons to be concerned that the respondent’s income is higher than what is claimed on line 150 of his tax returns. I also have serious concerns that the respondent has not prepared his accounting records for the business such that the court does not have the most up-to-date financial information or his personal income for 2022 and 2023, and I have considered denying any spousal support pending disclosure of these records.

31I have decided against that because the evidence before me is that since the date of separation, the respondent on his tax returns has consistently earned less than the applicant. The applicant has not demonstrated on the balance of probabilities, that the respondent earns an income similar to her income over the past five years. The respondent has therefore met his onus in demonstrating a prima facie case of need given the considerable gap in the incomes since the date of separation. As such, in deciding to order spousal support whether the company is now on its “last legs”, is of no moment. In contrast, the truth of that assertion is highly relevant in determining whether to release any funds.

32In contrast to the respondent’s declared income, the applicant has earned the following in the past three years:

2020: $115,000
2021: $301,973 (this included a severance package)
2022: $163,053.89

33I am satisfied that the respondent has demonstrated for the purpose of interim spousal support that he has a non-compensatory claim. His income since the date of separation has consistently appeared to be lower than the applicant’s and there is a significant disparity in their incomes. While the applicant submits that the respondent does not need support because he has not sought it earlier there is a prima facie basis to find that he needs some support given the debts he has incurred, including failing to make the mortgage payments, failing to pay his accountant and lawyer, and the monies he owes the CRA.

34I agree with the applicant that she should not be forced to support the respondent because he wishes to pursue his own business interests and choices to earn an income that is less than what he is capable of earning. However, the applicant did not provide the court with any evidence to suggest what sort of income the respondent is capable of earning given his educational background. As such, on this interim motion, I am imputing a minimum wage income of $33,280 to the respondent.

35I am satisfied that it is appropriate that the applicant pay the respondent spousal support commencing on August 1st, 2023, in the amount of $2,082 per month which is the mid-range of spousal support based on the applicant’s income of $163,054 and the respondent’s income of $33,280.

36While this was not pursued in oral submissions, the respondent also claims retroactive spousal support, I am not prepared to make an interim order for retroactive spousal support. Given the disparity between the parties regarding who paid for what over the past years and who is owed what, it would not be appropriate to make such an order on an interim basis.

Issue #2: Should the court release the funds from the sale of the home?

37On October 14, 2022, the matrimonial home sold for $1,677,000. Following the sale of the home the parties agreed to release $65,000 from the net sale proceeds to each party on a without prejudice basis. The balance currently held in trust is $509,351.05.

38The respondent seeks an order that his share of the net sale proceeds from the matrimonial home be released immediately or in the alternative, an advance of $60,000. He submits that he requires this money so he can level the playing field in the litigation.

39The respondent submits there is no basis to hold these funds as the applicant’s claim for equalization is statute barred because he states the date of separation was April 2016, not October 2016 as the respondent claims. This is not an issue that the court can resolve on a motion.

40The respondent further submits that even if the applicant’s claim is not statute barred, he will not owe her all the money held in trust. He submits that there are amounts that he is owed that offset what she claims she is owed. For example, he submits that he made extensive renovations and repairs on the home since the date of separation and that he should be reimbursed for those costs.

41In addition, the respondent submits that he was solely responsible for the payments towards the home insurance. As of 2018, he made payments towards the mortgage and property taxes. He submits that the applicant owes him 50 percent of those costs. The applicant counters that the respondent had the benefit of living in the matrimonial home and he therefore owes her occupational rent.

42The respondent also submits that his company is owed money because the company paid down the line of credit. He denies the applicant’s assertion that the increase in the line of credit from the date of separation was solely his debt.

43The applicant is opposed to any further release because she will not be able to recover any of the money she is owed on the equalization payment if further monies are released.

44The applicant claims that even without her receiving an interest in his company as part of an equalization payment, he still owes her more money than is currently held in trust.

45The respondent’s share held in trust is $254,662.50 The respondent admits that out of this money he owes the applicant, $98,826.07 for the taxes paid, $12,000, for the loan. This means the amount remaining is $143,836.43. The applicant has several other claims including $51,000 for child expenses from January 2019 to April 2023, and claims for equalization for $42,416 without including the value of the company. The applicant also claims that at the date of separation, the line of credit was at $390,485.36. As of the date of sale it was $575,901.04. The applicant submits that the increase was accumulated by the respondent. These amounts do not even include any equalization claim in relation to the respondent’s business.

46Rule 24(18) of the Family Law Rules gives the court discretion to order a party to pay an amount of money to the other to cover all or part of the expenses of carrying the case, including lawyer’s fees. Interim disbursements should be ordered to “level the playing field” and ensure each party can equally provide or test disclosure. The court’s discretion should be informed by fairness and balance between the parties to avoid distorted or unfair litigation outcomes.

47In Stuart v. Stuart, 2001 28261 (ON SC), [2001] O.J. No. 5172, Justice Rogers sets out various principles that apply in determining whether to release funds:

The ordering of interim disbursements is discretionary.
A claimant must demonstrate that absent the advance of funds for interim disbursements, the claimant cannot present or analyse settlement offers or pursue entitlement.
It must be shown that the particular expenses are necessary.
Is the claim being advanced meritorious?
The exercise of discretion should be limited to exceptional cases.
Interim costs in matrimonial cases may be granted to level the playing field.
Monies might be advanced against an equalisation payment.

48I find that the respondent’s failure to provide business records from September 2021 onwards is fatal to his request to release the funds to pay for counsel as he requested when all the circumstances are considered.

49I have concluded that at this stage the only funds that should be released are monies to be paid to the accountant so that the respondent can obtain his QuickBooks records from the accountant and disclose them to the applicant. I am not prepared to release any further funds at this time for the following reasons.

50The court is in a catch 22 position. It is the respondent’s onus to demonstrate that he requires the disbursements of the funds, yet he claims that he cannot obtain the very disclosure necessary for the court to make that assessment.

51Without having a better idea of the company’s current finances including its assets that could be drawn upon, the court cannot make a proper assessment that absent the advance of funds for interim disbursements, the claimant cannot pursue his legal rights with respect to the equalization payment.

52Similarly, the court cannot assess whether any of the expenses proposed by the respondent are “necessary” for the litigation because neither the applicant nor the court has disclosure regarding the state of the company’s assets. At this stage, the respondent has not demonstrated on the balance of probabilities that the company is “on its last leg” because there is a complete lack of disclosure regarding the company since September 2021.

53The respondent submits that he requires the release of the funds to level the playing field, but the playing field is not level already because the respondent has not disclosed his business records from September 2021 onwards to the applicant. The applicant has no way of refuting his assertions regarding the current state of the company and whether the money secured to realize her claims on the equalization payment should be released.

54In deciding that only money owing to the accountant should be released, I have also considered that it is not obvious that the respondent will be owed any money on an equalization payment. I recognize however, that the advance of funds is not limited to this situation, but it is a relevant factor for the court to consider.

55I have also considered the risk that the release of any funds may result in the applicant not being able to recover monies from the respondent if she is successful on her application.

56The court is left in the position of either not releasing any funds and the respondent does nothing to obtain the financial records for the company or the court releases the funds to be paid to the accountant, so the relevant disclosure is provided. I am of the view that the court should exercise its discretion to advance funds solely to the respondent’s accountant so that financial records for the corporation can be obtained and disclosed to the applicant. If after disclosure is obtained, a motion including the relevant disclosure may be heard by the court.

57Although, I am not seized with this matter, I do wish to express my views regarding some of the other items that the respondent seeks disbursements for. I am of the view that not all the legal expenses for this motion are reasonable or necessary. The respondent sought child support in his written materials and then did not pursue it on the motion. There appears to be little basis to grant child support. In addition, while individuals have the right to choose who they wish to represent them, the respondent chose a very senior counsel that charges significantly more per hour than this court often sees, which in my view makes some of those expenses unreasonable. While the respondent is entitled to his counsel of choice, the applicant should not have to fund a counsel that charges significantly more than is commonly seen.

58The amount of $15,000 is to be released to the accountant so that the respondent can access his QuickBooks records and disclose them to the applicant. The respondent will then no longer be able to claim that he does not have access to his business records.

59I dismiss the respondent’s motion to release any further funds without prejudice to the respondent to bring a further motion after he has provided the business records contained in the QuickBooks accounts.

Conclusion

60On a temporary and interim basis, the applicant, Gayle Duncan shall pay to the respondent, Victor Buraconak monthly spousal support in the amount of $2,082 commencing on August 1, 2023.

61The amount of $15,000 is to be released from the respondent’s share of the net proceed of sale from the matrimonial home located at 1292 Crestdale Road, Mississauga, to be paid to CT Accounting Group.

62The respondent is ordered to provide disclosure of his business records, including QuickBooks entries held by CT Accounting Group to the applicant immediately upon receipt of those records.

Costs

63In considering the issue of costs, the Court considers that modern cost rules are designed to foster: i) partial indemnification of the cost of litigation for the successful litigants; ii) encourage settlement between parties; iii) deter and sanction inappropriate behavior by litigants; and iv) that costs must be reasonable and proportionate: Mattina v. Mattina, 2018 ONCA 867.

64The presumption that the successful party is entitled to costs does not mean that the successful party is entitled to whatever costs were incurred. The Court, in assessing costs is still required to consider all relevant factors, including the factors set out in Rules 24(12), 24(4), 24(8) and Rule 18(14) in determining the appropriate award of costs. The Family Law Rules only expressly contemplate full recovery costs in specific circumstances, e.g., where a party has behaved unreasonably, in bad faith or has beat an offer to settle under Rule 18(14).

65The overall objective in determining costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case: see Boucher v. Public Accountants Council of Ontario, 2004 14579 (ON CA), [2004] O.J. No. 2634 (C.A.).

66The respondent was successful in obtaining interim spousal support, although not in the amount he sought. While I did order the release of some funds to pay the accountant, I would not define this as the respondent being successful on the motion. It was only as a matter of necessity that the court ordered the release of those funds. Without the release of those funds neither the applicant nor the court can assess the current state of the respondent’s business. I therefore do not find that the respondent was successful on the second half of the motion. Given that the success on the motion was divided, no costs are awarded to either party.

Justice Dennison

Released: August 28, 2023

COURT FILE NO.: FS-22-103255

DATE: 2023 08 28

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: GAYLE DUNCAN

AND

VICTOR BURACONAK

BEFORE: Dennison J.

COUNSEL: F. Yehia, for the Applicant

D. Gelgoot, for the Respondent

ENDORSEMENT

Dennison J.

Released: August 28, 2023

Duncan v. Buraconak, 2023 ONSC 5998

Case Summary

Overview

Position of the parties