In a motion brought before the Ontario Superior Court of Justice, an applicant sought an order for interim spousal support in the amount of $82,551 per month, asserting it was pursuant to the Spousal Support Advisory Guidelines. The respondent, however, claimed his income for 2021 was zero.
Husband is a Successful Businessman and the Family’s Primary Income Earner
The parties to the motion were married in 1989 and separated in 2018. They have two adult children.
The wife gave up her career to take care of their children and to manage the family household. The husband was the primary income earner during the marriage. The husband was a trained lawyer but earned the majority of his income by making mini-tender offers.
The husband’s business had been very successful and the couple and their children enjoyed a lavish lifestyle.
The husband conducted his business through a main corporate entity of which he was the sole owner. He owned a number of related corporations during the marriage that were used to earn income, hold assets and minimize taxes. The corporations were owned under the wife’s name to protect the husband from potential claims made against him in his role as a lawyer. During the marriage, most of the couple’s personal expenses were funded through one or more of these corporations.
The wife filed a motion with the court seeking an order for interim spousal support in the amount of $82,551 per month, retroactive to August 1, 2019. She based her claim on the husband’s income over the four previous years, which she claimed to be $2.264 million.
Husband Claims His Income for 2021 Is Zero
The husband did not dispute the wife’s entitlement to spousal support. However, he claimed that there was too much evidence for the case to be settled by a motion and asked the court to set the matter down for trial. In the alternative, he claimed that, if an order would be made by the court, his 2021 income should be assessed at zero and the wife’s 2020 income should be assessed at $281,577.
The husband and wife both submitted their own expert reports on the husband’s income for the period of 2017 to 2020. The numbers presented different results and the amount of his annual income varied from year to year. The husband’s expert estimated that his average income over the past four years equalled $1,801,000, while the wife’s expert estimated it at $2,264,000.
The husband explained that the fluctuations in his income were the result of the nature of his business. Additionally, he noted that it had been his practice to maintain significant working capital in his operating corporation to pay for fixed expenses required to prepare, advertise and make mini-tender offers.
The husband, therefore, argued that, given the volatility of his income, the court should take a cautious approach in determining his income for support purposes. For instance, the husband explained that, despite past earnings, in 2021, his main corporation had not made any money and was operating at a loss and his income was zero. Therefore, if the court ordered a substantial amount of spousal support, he would be required to encroach on his capital and undermine the future success of his business. He submitted that this would negatively impact both him and his wife as well as the children.
Court Finds Husband Consistently Earned Substantial Income
The court found that, despite the fluctuations in income and the different expert estimates, it was evident the husband had consistently earned substantial income through his mini-tender business. Adopting the husband’s proposed need for caution, the court chose to accept the husband’s expert evidence as to his past income. However, the court also noted that at the end of the 2020 fiscal year, the husband’s company had approximately $1.344 million in working capital, which the court determined to be more than sufficient to fund its operations for a substantial period of time. Additionally, the court observed that the husband’s assets in his personal investment account had increased by over $1 million since January 2020, such that the balance in that account as of February 28, 2021 was approximately $1.49 million.
In light of these considerations, the court found little risk of harm to the husband’s ongoing business operations, or of hardship to him personally, in determining his income for support purposes to be $1.8 million. As for the fact that he had not yet earned any income in 2021, the court noted that had been in a similar position in March of 2020 and yet had ended the year with pre-tax corporate income of nearly $2.2 million.
The court then found that, since the couple’s separation, the wife had not earned any employment income. It refused to impute any income to the wife from the various corporations she owned on the husband’s behalf, finding that the husband himself had set up the corporate structure in order to minimize taxes and personal liability. The court, therefore, imputed the wife’s income at zero.
In the result, based on the couple’s respective imputed incomes, the court ordered the husband to pay the wife a monthly spousal support payment of $65,625.
The court dismissed the wife’s request for retroactive support.
Contact Feigenbaum Law for Advice on Spousal Support Payments and other Family Financial Matters
At Feigenbaum Law, lawyer and accountant Mark Feigenbaum provides clear, pragmatic, interdisciplinary advice on separation, divorce, and related family law matters. Mark helps clients minimize their legal and financial risks. Contact Mark online or call him at (905) 695-1269 or toll-free at (877) 275-4792 to book a consultation.