Court File and Parties

Court File No.: FS-22-31558 Date: 2024-02-29

Superior Court of Justice - Ontario

Re: Ruth Nancy Cibuku, Applicant (Moving Party) And: Aldi Cibuku, Respondent (Responding Party)

Before: Kristjanson, J.

Counsel: Jen Yii Liew, Counsel for the Applicant Elizabeth Mourao, Counsel for the Respondent

Heard: At Toronto by videoconference August 8, 2023

Endorsement

[1] This is a decision on spousal and child support. It was heard as part of a long motion also dealing with school choice. The school choice decision is reported at Cibuku v Cibuku, 2023 ONSC 4576.

[2] The parties began cohabiting in September 2012. They have two children, age 10 and age 9. The wife has not worked outside the home since the birth of the first child and is wholly financially dependent on the husband. The respondent father owns shares and participates in several of his family’s businesses, and his income is derived solely through various corporations.

[3] There is a dispute as to date of separation. On the husband’s evidence it was December 2019, and on the wife’s, March 2022. It was thus a relatively short marriage, approximately 7-9 years. The parties were in their late 30’s at the time of separation.

[4] The wife seeks child and spousal support. Although entitlement may be contested at trial, the husband concedes entitlement to spousal support on a without prejudice basis for the purposes of the motion. There was a dispute about the parenting arrangements. The parties have subsequently agreed to a without prejudice shared parenting arrangement, with the husband having 6 of 14 nights. I base support on a shared parenting arrangement, subject to adjustment at trial.

Interim Spousal Support and the SSAG’s

[5] The wife seeks an interim order for spousal support pursuant to s. 15.2(2) of the Divorce Act, RSC 1985, c 3 (2nd Supp). Relevant factors to be considered are set out in s. 15.2(4) of the Act. The court is to consider the means, needs and circumstances of each spouse, including the length of time the spouses cohabited, and the functions performed by each spouse during cohabitation. The objectives of spousal support, as set out in s. 15.2(6) of the Divorce Act, are to: (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 of time.

[6] Between the date of separation and this decision, the husband has been paying 100% of the costs of the matrimonial home (including occupancy costs, although only the wife resides in the home). These payments including the mortgage, property tax, home insurance, repairs, utilities, cable, internet, maintenance, and repairs. The husband has paid the wife’s car leases, car insurance and gas. These costs amount to approximately $8,318 per month. The husband states he provides the wife with income splitting from the company ($3,600 per month) and pays $3,000 per month toward the wife’s credit card. These sums are tax-free to the wife. In addition, the husband alone was paying for private school tuition (approximately $80,000 per year), until June 2023. Since separation, monthly payments to the wife or on the wife’s behalf, excluding tuition, have been approximately $14,918 (although this includes the husband’s portion of the mortgage, property tax, and property insurance).

[7] I apply the SSAG’s to determine both spousal and child support. The Revised User’s Guide states on page 15:

The Advisory Guidelines are intended to apply to interim orders as well as final orders. The interim support setting is an ideal situation for the use of guidelines. There is a need for a quick, easily calculated amount, knowing that more precise adjustments can be made at trial. Traditionally, interim spousal support was based upon a needs-and-means analysis, assessed through budgets, current and proposed expenses, etc. All of that can be avoided with the SSAG formulas, apart from exceptional cases.

[8] The SSAG range for the with child support formula for shared custody cases includes the amount of spousal support that will generate a 50/50 NDI split. In this case, it means extending the range downward to capture the 50/50 NDI point. Lest this seem unfair, I note that the SSAG Revised User’s Guide states at page 57 that once the payor’s income is “far” above the ceiling, as is the case here, then the amount of support ordered will usually be below the low end of the SSAG range.

[9] Equal NDI should be the starting point to determine the amount of spousal support in shared custody cases under the SSAG. Equal NDI accomplishes the transfer of child support and spousal support from the higher-income shared custody parent to the lower-income parent. This reflects the fundamental social policy behind the holding in Contino v. Leonelli-Contino, 2005 SCC 63, [2005] 3 S.C.R. 217, at para. 85.

What is the Husband’s Income?

[10] The starting point for determining income under the Child Support Guidelines must always be income tax returns, as set out in section 16 of the Guidelines. The husband’s line 15000 income was $257,256 in 2020, $179,779 in 2021 and $246,927 in 2022. The line 15000 income does not represent income available for support purposes. The husband has paid a significant amount of money for family and personal expenses through his various companies.

Income Reports and Pre-Tax Business Losses

[11] The husband retained an expert, Mr. Steven Ranot, to prepare income reports for 2020-2021. The 2022 Report was not available at the time of the motion. I accept the adjustments made which add discretionary and personal expenses back into income, and the gross-up for tax purposes. The reports add back into income the salaries paid to both Mr. Cibuku and to Ms. Cibuku (as part of income splitting). Finally, the income reports add to Mr. Cibuku’s income the amount of pre-tax corporate income from the husband’s business interests deemed attributable to him in each year. For each year there are two scenarios: Scenario 1 includes pre-tax corporate losses; Scenario 2 excludes pre-tax corporate losses.

[12] In late 2020 and into 2021, the husband opened two new fast-food burger restaurants. There are significant, non-recurring costs associated with the two new restaurants. The husband’s 2021 income is $680,000 if the corporate losses associated with the start-up businesses are included in his income, and $940,000 if they are excluded. For 2020, the husband’s income is $600,000 if the corporate losses associated with the start-up businesses are included in his income, and $610,000 if they are excluded.

[13] The decision as to how to deal with non-recurring capital or business investment losses is discretionary. It is dealt with in section 17(2) of the Child Support Guidelines. This section allows the court to adjust the amount of the loss, including related expenses and carrying charges and interest expenses, to arrive at such amount as the court considers appropriate for the fairest determination of income for support purposes. This is often considered as part of a pattern of income pursuant to section 17(1) of the Guidelines.

[14] A common reason for a separated spouse to seek to include pre-tax corporate losses is to artificially minimize income for support purposes. That pretext does not apply here: see O'Kane v Lillqvist-O'Kane, 2022 ABKB 661 at para. 190. The husband incurred legitimate pretax corporate losses to get two new business ventures off the ground, which the parties will benefit from if the businesses are successful.

[15] The Child Support Guidelines approach to income determination is summarized as follows in Mason v. Mason, 2016 ONCA 725 at paras. 162-163:

[162] For the purposes of this appeal, I see the highlights of the income determination provisions of the Guidelines as being:

• s. 15 provides that a spouse’s annual income is determined in accordance with ss. 16 to 20;
• s. 16 provides that, subject to ss. 17 to 20, a spouse’s annual income is the spouse’s line 150 [now, line 15000] income;
• under s. 17, if a court determines that s. 16 produces an amount that would not be the fairest determination of annual income, the court may have regard to the spouse’s income over the last three years to determine a fair and reasonable amount in light of, among other things, any pattern of, or fluctuations in, income;
• under s. 18, if the spouse is a shareholder, director or officer of a corporation and the court determines that s. 16 produces an amount of annual income that does not fairly reflect all the money available to the spouse to pay support, the court may determine the spouse’s annual income to include all or part of the pre-tax income of the corporation for the most recent taxation year; and
• s. 19 sets out a non-exhaustive list of circumstances in which a court may impute income to a spouse.

[163] In my view, the scheme of these provisions is that s. 18 permits a court to take an annual snapshot of a spouse’s income – and include in it pre-tax corporate income from the most recent taxation year. If the corporation suffered a loss in the most recent taxation year, no amount of pre-tax corporate income may be included. Under s. 17 however, the court may determine an amount that is fair and reasonable having regard to the spouse’s income over the last three years in light of, among other things, any pattern of, or fluctuations in, income over the three-year period. And “income” for that purpose may include amounts of pre-tax corporate income added to line 150 [now, line 15000] income under s. 18 for each of those years.

[16] The expert reports include pre-tax corporate income or losses from the husband’s business interests deemed attributable to him in each year, the personal/discretionary expenses paid by the corporations, and the salaries paid to both Mr. Cibuku and Ms. Cikubu, the latter as part of income-splitting.

[17] Given that the corporations incurred legitimate business losses in 2020 and 2021, I find the amount of income that most fairly reflects income available for support purposes to be determined by including the business losses in income. Mr. Cibuku’s income should be set based on $680,000 for 2021. Once the 2022 income report is available, the parties will be able to adjust income, on an interim basis. This is the fairest way of determining income available for support purposes in accordance with the Guidelines. Once that report is available, a judge may determine that the three-year averaging approach as set out in section 17 of the Guidelines is the fairest approach, or may adopt some other approach.

Lifestyle/Budget Arguments

[18] I comment on the other arguments raised by the wife. The wife urged an approach based on pre-separation lifestyle, and an approach based on her budget. Given the difficulties with the contested evidence, particularly the proposed budgets of the wife, and each party’s evidence about lifestyle, I have determined income in accordance with the Guidelines, and apply the SSAG’s.

[19] In her draft Order on the motion, the wife proposed three separation options for determining support:

(i) Option 1: $60,000 monthly support, uncharacterized. (ii) Option 2: $34,000 monthly support, uncharacterized. (iii) Option 3: Spousal support in the amount of $19,448 per month, and child support in the amount of $11,557 per month, in the total amount of $31,005.

[20] Support in the amount of $60,000 per month equates to after-tax income of $720,000, grossed up for taxes equivalent to approximately $1.4 million. There is simply no evidence on which I could find annual income of $1.4 million. The husband has virtually no liquid assets. From their respective sworn financial statements, the wife has $128.04 in monies in the bank. The husband has $115.46. The parties jointly own a home with a large mortgage. The respondent holds shares in several family corporations, which are not liquid, and most of the corporations are jointly owned.

[21] The wife seeks to rely on lifestyle evidence. Apart from the fact that the lifestyle evidence comes with little in the way of estimates as to cost, the evidence is contested. One example is the matrimonial home. The wife state that they jointly owned a large home in the city with a value of $2.5 million. But the husband notes that after marriage, the parties lived with his parents for three years. The home was purchased for $1,070,000 in 2015. To buy the house, the parties borrowed $200,000 from the wife's parents and the husband had to access some of his equity in a corporation. Still unable to qualify for a mortgage on their own, the husband's brother co-signed the mortgage, and went on title. Today, a mortgage of $791,808.57 remains on the property.

[22] Another example is the “yacht”. The wife states that the husband had a “yacht” where they enjoyed entertaining. The husband states that a family corporation owns a boat (2001) that was purchased through financing by the husband's father for $120,000.00 many years back. The income reports also show that the boat is owned by a family corporation: the amounts attributed to Mr. Cibuku’s personal use are allocated to him for income purposes. The wife states they took lavish trips. The husband states that other than their honeymoon, their trips generally involved visiting family around the world, and were generally paid by credit card points. Other than that, they took one week package sun holidays. The wife points to the luxury cars owned by the parties. In fact, the parties do not own any cars: they are all leased by the corporations. The personal use element is added back into Mr. Cibuku’s income in the expert reports. He also points to a history of borrowing from the corporations to fund an unsustainable lifestyle, and refinancing the house because of debt.

[23] The wife has produced several budgets to demonstrate her needs. The figures in the budget in the wife’s Financial Statement appear inflated, and the husband’s evidence is that the budget does not reflect standard of living during the marriage. For example, the wife’s budget of $45,251 per month includes:

• $26,400 a year on concerts/shows/games
• $78,960 a year on vacations, far more than during the marriage
• $24,000 a year on clothing for two children, who at the time attended private school/wore uniforms
• $24,000 a year on a housekeeper 2x a week, at $250 a day. The husband’s evidence is that during the marriage they had a cleaning lady who came in one day a week, at a lower cost, the wife does not work, and the children are at school full-time.

[24] The wife had prepared at least 3 budgets, June 19, June 8, and the June 2023 financial statement. The number diverge widely and cannot be reconciled, nor relied upon. The discrepancy casts doubt on the wife’s real budgetary needs. It also does not consider the money available for living costs in the two-household family.

[25] I find that the most reliable evidence of the husband’s income, which should be used to set interim spousal and child support, is the income reports of Mr. Rano and determinations under the Child Support Guidelines. The amount of money available through the husband’s income also demonstrates what can be sustainably funded as lifestyle, post-separation.

Wife’s Income for Support Purposes

[26] The wife has not worked since the birth of the first child a decade ago. The husband seeks to impute a minimum income of $50,000 to the wife, given that the wife is both college and university educated, she worked prior to the birth of the eldest child in 2014 making $40,000, is approximately 40 years of age and has no health impediments. And the children are in full time schooling.

[27] The wife, on the other hand, stresses that she has not worked outside the home for nearly a decade. In response to a disclosure request, the wife confirmed that she had applied for two jobs in the 1.5 years since separation. She did not present the court with any plan for educational upgrading. No other explanation for not working or pursuing upgrading was provided.

[28] In determining whether a party is intentionally underemployed for the purposes of imputing income pursuant to section 19(1)(a) of the Child Support Guidelines, the Court of Appeal in Drygala v. Pauli, 61 OR (3d) 711 at pp. 717-718 at para. 23, set out the following three questions:

(a) Is the party intentionally under-employed or unemployed? (b) If so, is the intentional under-employment or unemployment required by virtue of reasonable health or educational needs? (c) If not, what income is appropriately imputed?

[29] The Court of Appeal for Ontario in Lavie v Lavie, 2018 ONCA 10 held at para. 26 that the reasons for underemployment or unemployment (other than health or education) are irrelevant: stating “If a parent is earning less than she or he could be, he or she is intentionally underemployed.” I find that to be the case here.

[30] Separation is a game changer in terms of the duty on each party to make reasonable efforts to earn what they can earn for the purposes of child support. Other than two job applications in 1.5 years, the mother does not appear to have made any reasonable efforts to upgrade her skills, look for a job, or seriously deal with her financial obligations towards the children.

[31] For the purposes of this interim motion, I impute income to the wife of $30,000, which is less than full-time minimum wage work.

Timing

[32] The husband has been paying substantial sums toward private school fees and household and car expenses since separation. He has also paid $3,000 monthly towards the wife’s Visa bills, and the wife has received funds through income splitting. These have all been treated as uncharacterized support, to date.

[33] Figuring out exactly how much has been paid to date, and adjustments required, will need to be done by the parties before trial. Because the husband has been paying uncharacterized support not easily unwound on this motion, I make the support orders effective on a go forward basis from today’s date. It is apparent from the evidence filed on these motions that the classification of post-separation payments and adjustments will be an issue for trial. I decline to deal with the retroactive support claim, given the uncharacterized payments made to date, and direct that it be dealt with at trial.

[34] On a go forward basis, the parties shall share equally the costs of the matrimonial home not associated with occupancy (mortgage, property tax, property insurance). The wife will be responsible for utilities payments, her vehicle and its associated costs, credit card payments, and day to day expenses.

Conclusion

[35] For the purposes of setting interim spousal and set-off child support, I use the father’s estimated income of $680,000 from the 2021 income report, and the mother’s imputed income of $30,000, on a without prejudice basis.

[36] Commencing March 1, 2024, interim spousal support is set at $9,748 per month. Section 7 expenses will be paid 80% by the husband, and 20% by the wife. This is based on the DivorceMate calculations provided to the parties with the following assumptions:

• There is no reduction of spousal support for income over $350,000.
• There are only two income reports available for the husband (2021 and 2022). The lower income of 2020 is excluded; there is no averaging, and the income is based on the 2021 income report figure of $680,000.
• There is no reduction of child support for income over $150,000.

[37] The husband owes monthly child support for two children of $8,437; the wife owes monthly child support of $459; the husband owes $7,978 on a set-off basis.

[38] If there are any issues regarding the DivorceMate calculation, either party shall raise calculation issues within 7 days, by writing to the Court and requesting that the concerns be directed to my attention.

Costs

[39] The parties are encouraged to settle costs. The wife brought this motion for child and spousal support, and was successful in obtaining a support order. However, the amount sought is well below the level sought (50 to 75% lower). The husband’s proposal was a continuation of the status quo, and alternatively, a level much closer to that which I have awarded. Each of the parties may file costs submissions within 14 days, addressing the issue of which party was successful on the motion, and if so, the costs claimed. Submissions shall be 10 pages, plus bills of costs plus offers to settle. Brief reply submissions within a further 7 days, if necessary.

Order

1. Commencing March 1, 2024, on a without prejudice basis the husband shall pay the wife monthly spousal support of $9,748, based on the husband’s estimated 2021 income of $680,000 and the wife’s imputed income of $30,000.
2. Commencing March 1, 2024, on a without prejudice basis the husband shall pay child support in the monthly amount of $8,437.00 for two children based on his 2021 estimated income of $680,000. The wife shall pay child support for two children in the monthly amount of $459 based on her imputed income of $30,000. Set-off child support is owed by the husband to the wife in the monthly amount of $7,978, for two children.
3. A support deduction order shall issue.
4. On an interim and without prejudice basis, section 7 expenses will be paid 80% by the husband, and 20% by the wife.
5. The parties must provide updated income disclosure to the other party by July 1 each year, in accordance with section 24.1 of the Child Support Guidelines.
6. Once the 2022 income report is available, the parties may adjust support based on income, on an interim basis, either by 14B motion on consent, or through a short motion on the regular list.
7. Commencing March 1, 2024, the parties shall equally share the mortgage, property tax and property insurance costs of the matrimonial home.

“Justice Kristjanson”