



COURT OF APPEAL FOR ONTARIO

CITATION: Dreesen v. Dreesen, 2021 ONCA 557

DATE: 20210805

DOCKET: C68996

Fairburn A.C.J.O., Harvison Young and Jamal JJ.A.

BETWEEN

Tracey Catherine Dreesen

Applicant (Respondent)

and

Stefan Siegfried Dreesen

Respondent (Appellant)

Gary S. Joseph and Julia McArthur, for the appellant

Victoria E. Craig, for the respondent

Heard: June 10, 2021 by video conference

On appeal from the order of
    Justice Michael R. Gibson of the Superior Court of Justice, dated December 22,
    2020.

Harvison Young J.A.:

[1]

The appellant father appeals from the dismissal of his motion to
    decrease the quantum of the child and spousal support payable to the respondent
    mother on the basis that the loss of his job in July 2017 had been a material
    change and that his subsequent income had dropped significantly. He also
    appeals from the motion judges refusal to terminate spousal support.

[2]

The central issues in this appeal are whether the motion judge erred in imputing
    the fathers pre-tax corporate income in calculating his income available for
    support, and whether he erred in ordering step-down spousal support rather than
    terminating spousal support as the father sought.

[3]

The relevant facts may be briefly summarized. The parties were married
    in 2000 and separated in 2012. The parties minutes of settlement on child and
    spousal support were reflected in the consent order of Miller J. dated August
    2, 2017, although the minutes of settlement had been executed earlier in April
    2017. The order of Miller J. provided that, among other things:

·

both parties would pay set-off table child support in accordance
    with the
Federal Child Support Guidelines
, S.O.R./97-175 (CSG), based
    on the fathers income per his notice of assessment of the previous year or
    that may otherwise be imputed to him and based on the greater of the mothers actual
    income or $48,000;

·

in the event of a material change in circumstances, either party could
    seek a variation of the child support arrangements;

·

the parties would adjust child support on a going forward basis every
    year based on their respective incomes in the prior year, the living
    arrangements of the children, and the CSG;

·

the father would pay the mother compensatory spousal support in
    the amount of $4,292 per month based on the mothers imputed income of $48,000
    and the fathers annual income of $257,312;

·

spousal support could be changed if there is a material change in
    circumstances, even if the change was foreseen or foreseeable; and

·

there would be a review of spousal support in October 2019, which
    would be an assessment of the mothers efforts to become self-sufficient.

[4]

When the parties entered their minutes of settlement, the father was
    employed by Yellow Pages, but he had also started his own business in 2012,
    Volt Media Inc., which acquired another corporation, Smart Workplace Inc., in
    2018. He was laid off from Yellow Pages in July 2017. He commenced a motion to
    change on June 28, 2019 which was ultimately heard on September 1, 2020 on the
    basis of affidavit evidence. In the meantime, he had unilaterally reduced
    support to reflect what he claimed his actual income was at that point. In his
    motion, he sought to have his child and spousal support reduced retroactively and
    going forward and to terminate spousal support.

[5]

The motion judge found that the father had not demonstrated a material
    change in circumstances warranting a retroactive or ongoing reduction in child
    support. The fathers employment with Yellow Pages ended in July 2017, prior to
    the date of Miller J.s order, and it was known at that time. Further, the
    father continued to have significant self-employment income available for
    support. The motion judge accepted the mothers submission that the fathers
    income had actually increased since the date of Miller J.s order. It was
    appropriate to add back the pre-tax corporate income and any unreasonably
    deducted expenses to the fathers income for child support purposes in this
    case, where the father was the sole shareholder and director of two
    corporations and had complete control over the income that he was paid. The
    motion judge determined that it was also appropriate to average the last three
    years of the fathers income from 2017-2019, such that his average income was
    $401,534.67. The total amounts of the fathers child support arrears and
    spousal support arrears were $81,407 and $52,626, respectively.

[6]

For child support going forward, the motion judge ordered that the
    father pay set-off table child support based on incomes of $401,502 imputed to
    the father and $48,000 imputed to the mother. The motion judge also found that
    the mother had made efforts to become self-sufficient but that she continued to
    have need for support. He noted that the mother was agreeable to a step-down
    and ultimate termination of spousal support and that step-down support would
    best balance her ongoing entitlement to compensatory and needs-based support
    with the need for her to transition to full self-sufficiency. He ordered the
    full spousal support amount of $4,292 per month for the year following the
    October 2019 review date, followed by a three-year step down and termination of
    spousal support after a final payment in September 2023.

[7]

The appellant father alleges a number of errors that he says warrant
    allowing the appeal and granting the relief he claimed in his motion to change:

1.

The
    determination that the fathers change in financial circumstances did not
    constitute a material change given the language in Miller J.s order that a
    change may be foreseen;

2.

The
    imputation of pre-tax corporate income;

3.

The
    averaging of the fathers income;

4.

The
    failure to terminate spousal support; and

5.

The
    determination of the motion on a written record alone.

[8]

I will address them in turn.

(1)

Material change

[9]

First, I do not agree that the motion judge erred in finding that there
    was no material change to warrant a variation of child support as requested by
    the father. As the Supreme Court made clear in the recent decision of
Colucci
    v. Colucci
, 2021 SCC 24, where the payor applies to retroactively decrease
    child support, the onus is on the payor to establish a past material change in
    circumstances, such as a material decrease in income: at paras. 59-63, 113. Although
    the father is correct that the loss of his employment actually took place around
    three months after the final minutes of settlement were negotiated in April
    2017, despite the fact that the Miller J. order reflecting the agreement was
    not issued until August 2 of that year, this is not a material misapprehension
    of evidence in light of the other reason given for the motion judges decision:
    his income did not, in fact, go down. The father did not meet the threshold
    requirement for a retroactive decrease in support.

[10]

Further,
    even if the motion judge had erred in finding that there was a material
    increase in the fathers income, rather than a decrease, a court would need to
    take into account the fathers disclosure to the mother in determining the
    appropriate date of retroactivity, given the fathers request for a retroactive
    decrease to August 2017:
Colucci
, at paras. 86-90, 95, and 113. The
    father had notified the mother of his lay off and 12 weeks of termination
    compensation in July 2017. However, in these circumstances where the father had
    been building a business, it is difficult to see how this could have
    constituted effective notice, given his failure to provide any disclosure of
    his corporate income at that point: see
Colucci
, at paras. 87-90, 113.

(2)

Imputation of corporate pre-tax income

[11]

Second,
    the father says that the motion judge erred in his application of s. 18 of
    the CSG, which provides that where a spouse is a shareholder, director or
    officer of a corporation and the court is of the opinion that the spouses
    annual line 150 total income does not fairly reflect all the money available to
    them for the payment of child support, a court may add all or part of the corporations
    pre-tax income to the payors income. He argues that his line 150 income should
    have been used instead and that he provided evidence that it was not
    appropriate to add Volt Media Inc.s pre-tax corporate income to his income.

[12]

I
    do not agree that the motion judges acceptance of the mothers position that
    all of the pre-tax corporate income from both corporations, and unreasonably
    deducted expenses, should be added was unfair in these circumstances. I see no
    error in the motion judges finding that his line 150 income did not accurately
    reflect his actual income. The father also did not lead sufficient evidence to
    explain why either corporation needed to retain earnings. In the cases to which
    he refers, such as
Bravo v. Pohl
(2008), 62 R.F.L. (6th) 209 (Ont.
    S.C.) and
Koester v. Koester
(2003), 50 R.F.L. (5th) 78 (Ont. S.C.), the
    payors led extensive and expert evidence on the issue.

[13]

Here,
    the motion judge had no evidence or documentation other than the limited
    disclosure of the father to ground a broader consideration of the nature of the
    corporations business and had no evidence of legitimate calls on its
    corporate income for the purposes of that business: see
Kowalewich v.
    Kowalewich
, 2001 BCCA 450, 92 B.C.L.R. (3d) 38, at para. 58;
Thompson
    v. Thompson
, 2013 ONSC 5500, at paras. 91-93. The fathers explanations for
    retaining income and business expenses were related to only Volt Media Inc. and
    lacked detail or expert evidence.

[14]

He
    stated that he had to pay staff and that it would not be wise to pay all the
    revenue to himself as dividends or salary. He explained that cumulative
    retained earnings from 2012-2018 of around $960,000 were needed for corporate
    tax, an asset purchase of newsletters and subscriptions, cash reserve for
    payroll, a future company office, and nearly $300,000 in disbursements to his father.
    On appeal, he clarified that those dividends to his father were actually paid
    to himself. His breakdown of the cumulative retained earnings from 2012-2018 and
    his general statement about paying staff lacked supporting evidence and did not
    adequately explain why or how much corporate income from 2017 onward needed to
    be kept in Volt Media Inc.

[15]

Similarly,
    his statement that his business expenses listed were reasonable was bald and
    conclusory, and it did not address the specific issues raised in the mothers
    affidavit. For example, she submitted that adding back half of the telephone
    and internet expenses to the fathers income would be reasonable, given that he
    worked from home.

[16]

The
    father also argues that the motion judge failed to set out the what, the why,
    and the how of his decision to impute pre-tax corporate income. While we agree
    that the motion judges reasons are somewhat lean, we are of the view that in
    light of the record as a whole, it is clear why and how the motion judge
    reached the conclusions that he did: see
R. v. G.F.
, 2021 SCC 20, 71
    C.R. (7th) 1, at paras. 69-71. The issues of adding back pre-tax income and certain
    other expenses were squarely before the motion judge and he was alive to the
    issues, especially given the mothers extensive affidavit evidence and
    submissions on the fathers corporate pre-tax income and expenses. It was open
    to the motion judge to consider all the evidence of the parties and make a
    determination on imputing this income. The observations in
Mason v. Mason
,
    2016 ONCA 725, 132 O.R. (3d) 641, at para. 170, are equally applicable here:

Neither party led much evidence,
    be it expert or otherwise, concerning the question of what, if any, amount of
    pre-tax corporate income should be included in the husbands income. As such, a
    court is left to do its best to resolve the issue with the evidence that is
    available. This is also consistent with achieving a just, expeditious and least
    expensive determination of the parties dispute.

(3)

Averaging income

[17]

Third,
    I do not agree that the motion judge erred in averaging the fathers income
    over the past three years for the purposes of ongoing child support calculations.
    The father argues that his line 150 income from 2018 to 2019 was consistent and
    that the most recent year should have been used. The motion judge rejected the fathers
    submission that he had suffered a decline in income. He also rejected the use
    of the fathers line 150 income alone and added pre-tax corporate income and
    unreasonably deducted expenses, which as noted earlier, was not an error. The
    use of a three-year average in these circumstances where the payor is, as he
    said, growing a business, is fair. The father gave no reasons for expecting a
    continuing decline in the success of his businesses. There is no obligation to
    use the most current years income in such a situation where there is reason to
    think it is anomalous.

(4)

Spousal support

[18]

Fourth,
    I do not agree that the motion judge erred in fact or law in his consideration
    of the mothers entitlement to spousal support. He considered the evidence
    before him and concluded that she had a continued entitlement on both a
    compensatory and needs basis and that despite efforts to become
    self-sufficient, she continued to need support. In imposing a step-down in
    support which will terminate after a final payment in September 2023, he found
    that this approach best balances the [mothers] ongoing entitlement to both
    compensatory and needs-based support with the need for her to transition to full
    self-sufficiency: at para. 29. It was open to the motion judge to make this
    finding based on the evidence of the parties.

(5)

Determining the motion on affidavit evidence alone

[19]

Finally,
    I do not agree that this motion should not have been determined on the basis of
    affidavit evidence and that it required
viva voce
evidence. The father
    concedes that there had been no request for questioning and no request that the
    motion judge hear
viva voce
evidence on the motion. Further, directing
    a trial would have resulted in additional delay and expense for the parties. See
    e.g.
Bloom v. Bloom
, 2018 ONSC 5343 (Div. Ct.), at paras. 8-13;
N.L.
    v. R.R.M.
, 2016 ONCA 915, 88 R.F.L. (7th) 19, at paras. 27-28.

[20]

The
    father argues that there was significant contradictory and conflicting evidence
    in the affidavit material. I disagree. The problem here is not that there was
    conflicting evidence, but that the father did not lead evidence that might have
    grounded his claims on the motion. For example, he did not provide sufficient evidence
    of good reasons for the corporations to retain income, or why certain business
    expenses were reasonable, in response to the mothers submissions. In light of
    this minimal amount of evidence, which he submitted late in the day and only
    after great effort on the part of the mother, it was open to the motion judge
    to accept the mothers evidence over the fathers evidence.

[21]

He
    also did not present conflicting evidence on what the mother had done in terms
    of her efforts in seeking employment and becoming self-sufficient. She had already
    admitted in her evidence that her businesses had not made strong profits and
    that one had not made profits at all. Essentially the fathers position was
    that those efforts were insufficient and unsuccessful. It was open to the motion
    judge to consider the evidence of the mothers efforts and come to his own
    determination about whether she had made efforts to or had become self-sufficient.

(6)

Disposition and costs

[22]

For
    all these reasons, I would dismiss the appeal, and order costs to the
    respondent of $14,000, inclusive of disbursements and HST.

Released: August 5, 2021 J.M.F.

A. Harvison Young
    J.A.

I agree Fairburn
    A.C.J.O.

I agree M. Jamal J.A.


