IN SPOUSAL FEUD, THERE’S NO HIDING THE FERRARI

Payors must fess up, not try to escape support duties, Laurie H. Pawlitza writes.

“If you claim you’re so poor you can’t afford a penny of child support, best not to be driving a red Ferrari convertible. In addition to two Mercedes-Benzes….”

This opening salvo in Benzeroual v. Issa and Farag, a 2017 decision of Justice Pazaratz of the Ontario Superior Court may be unusual, but facts similar to Benzeroual find their way into court more frequently than most people think.

In Benzeroual, the parties lived together, had a daughter and then married, and had a short, unhappy marriage. The husband was diagnosed with serious mental health issues prior to the relationship, and claimed his only income for the purposes of paying child and spousal support was from the Ontario Disability Support Program (ODSP) of about $10,000 annually. An income at that level does not create any obligation to pay child and spousal support under the Child Support Guidelines.

At the time that the motion was heard, the husband lived in the parties’ prior matrimonial home, which remained in the name of his previous girlfriend, Farag.

The wife asked for child and spousal support and asked that income be imputed to the husband of $150,000 annually. Justice Pazaratz had to make a decision on two starkly different versions of the facts.

The wife’s evidence was that throughout their relationship, the husband had “vast amounts of undeclared money” and was always able to maintain a “lavish lifestyle.” He hardly ever put anything in his own name so that he could continue to qualify for his ODSP payments. The wife said that the husband owned or had control of a network of corporations, some of which were placed in his twin brother’s or girlfriend’s name, and he freely accessed money from these corporations for living expenses, including to pay credit cards which both the husband and wife used freely when they were together. Before separation, the husband boasted about how much he was worth.

The husband, on the other hand, said that he was a simple man with health problems which prevented him from working. He said he owned only one corporation and denied owning any other companies, although he agreed he did help his brother in business, and his brother, in turn, allowed him to charge expenses to corporate credit cards. Because his brother was supportive and had to travel frequently, the husband explained away the power of attorney he had for at least one of his brother’s corporations.

In a case where there is such conflicting evidence, how does a judge determine income for support purposes?

Under the Child Support Guidelines (which are used to determine both the amount of child support as well as the amount of spousal support payable), once the court finds there is an entitlement to support, the court must determine the support payable based on the payor’s income.

Justice Pazaratz summarized his dilemma by saying there was “overwhelming disagreement” about the ownership of corporations and assets, and dealt with this by simply saying that “those issues can’t be determined on this motion.” He went on to find, however, that “there is absolutely no disagreement that for years and years and years — before during and after the (husband’s) relationship with the (wife) — every single year the (husband) has been able to spend vast amounts of money on a luxurious lifestyle (and more recently on intensive and aggressive legal services). The money’s coming from somewhere. And so far none of the (Husband)’s vague explanations are very convincing.”

In light of the conflicting evidence, Justice Pazaratz considered whether income should be imputed to the husband. The difficulty he faced, however, was that the husband’s consistent spending patterns and his lifestyle did not qualify as “income” under the Child Support Guidelines, and it is “income” on which support must be based.

In Benzeroual, his Honour criticized the husband’s persistent failure or refusal to provide financial disclosure, which he called “the most basic obligation in family law.” He also identified a problem that often plagues the court: in litigation, “inadequate disclosure creates a strategic advantage — by causing delay, frustration and needless expenses for the opposing party.”

Justice Pazaratz had no difficulty assigning blame for the court’s lack of information, stating that “(the husband) is solely responsible for this quandary … (he) has been stonewalling and playing ‘catch me if you can.’”

In balancing whether income should be imputed to the husband in the payment of support, the judge held that a history of deceptive behaviour or unreported income should increase the likelihood of income being imputed. Justice Pazaratz then held that lifestyle is “evidence from which an inference may be drawn that the payor has undisclosed income that may be imputed for the purpose of determining child support.”

Still, the court was left “to struggle with the question of what to do with a large but unknown amount of mystery money.”

While Justice Pazaratz imputed the husband with an annual income of $150,000 (the exact amount the wife sought to impute), and made child and spousal support orders accordingly, he did not try to mathematically quantify how he arrived at the amount.

Instead, he simply found that “the (wife) has provided sufficient information to justify an imputation of income at $150,000 per year, particularly given the fact that the (husband) is consistently availing himself of large amounts of money he pays no tax on. The (husband)’s ongoing lifestyle and spending patterns are consistent with that range of income.”

Benzeroual demonstrates the difficulty of trying to decide support on the basis of contradictory evidence. And payors trying to escape their support obligations should pay careful attention: opaque disclosure and fancy cars matter.