Whether Payor has Obligation to Retain an Expert to Determine Income
Does a payor have an obligation to retain an expert to determine his income for support purposes?
There is little case law on expert determination of income. There is more case law on whether a spouse is required to obtain an expert valuation of property. That case law can be applied by analogy.
The onus of establishing the value of property is on the party owning it.
Michi v. Michi, [2008] O.J. No. 121 (S.C.J.) at para. 55
Di Luca v. Di Luca (2004), 1 R.F.L. (6th) 162, [2004] O.J. No. 711 at para. 10
Greenwood v. Greenwood (1989) 18 R.F.L. (3d) 273, [1989] O.J. No. 37 (S.C. – Master)
Although a value must be provided for every asset in a party’s net family property statement or financial statement, it is not necessary to provide a valuation, that is, a professional valuator’s report, unless the need for one is shown. See Di Luca v. Di Luca (2004), 1 R.F.L. (6th) 162 (Ont. S.C.J.) at paragraph 10:
The Family Law Act contains provisions designed to ensure full and fair disclosure of assets and income so as to foster early settlement of all of the issues. Section 8 of the Act imposes an obligation on each party to deliver a sworn statement disclosing particulars of that party’s property, debts and other liabilities. Each spouse has the burden of establishing the value of the property that she or he owned on the valuation date (see: Menage v. Hedges (1987), 8 R.F.L. (3d) 225). The obligation on the owner of an asset can extend so far as to require the owner to obtain an expert evaluation (see: Greenwood v. Greenwood (1988), 18 R.F.L. (3d) 273).
In Kaptyn Estate v. Kaptyn (2008), 43 E.T.R. (3d) 311, [2008] O.J. No. 4288, 2008 CarswellOnt 6441 (S.C.J.), the court pointed out that the FLA and the FLR do not require appraisals or valuations of assets. See para. 11:
11 There is no requirement in the Family Law Act, the Family Law Rules requiring the Respondents to obtain appraisals or valuations of the assets of John Kaptyn or his estate. I agree with the statement of D.J. Gordon J. in Michi v. Michi, [2008] O.J. No. 121, 2008 CarswellOnt 118 that it is unacceptable to record “unknown” in the required financial statement. It is also well known since the oft-cited case of Menage v. Hedges (1987), 8 R.F.L. (3d) 225 that the onus of establishing the value of property is on the party owning same. However, the only requirement in the Rules is that the Respondents be able to provide a sworn financial statement with figures they are prepared to defend as bona fide estimates of their belief. The figures must be based on an adequate factual foundation, after having made a reasonable investigation.
Similarly, there is no requirement in the Family Law Rules or the Child Support Guidelines for a support payor to retain an expert to determine his or her income for support purposes. Neither rule 13 of the Family Law Rules nor sections 21 to 25 of the Child Support Guidelines contains such a requirement.
In Bak v. Dobell, 2007 ONCA 304, 38 R.F.L. (6th) 7, [2007] O.J. No. 1489, at paragraph 30, the court said:
To maximize predictability and consistency, Parliament provided a definition of income that is clear and unambiguous and that significantly narrowed the scope of judicial discretion. Section 2 restricts “income” to a person’s “annual income determined under sections 15 to 20.” Section 16, the one directly applicable to this case, provides that a “parent’s or spouse’s annual income is determined using the sources of income set out under the heading Total income’ in the T1 General form issued by the Canada Revenue Agency”. Thus, income for support purposes is presumptively the payor’s income as it appears on line 150 of his or her income tax return. This restricts the definition of presumptive “income” to income that is subject to taxation. In this way, a payor’s income can be easily ascertained by reference to the payor’s income tax return.
The context of this statement in Bak v. Dobell is that the mother of a child wanted gifts made by the father’s father to his psychiatrically disabled son to be imputed to the father as income for child support purposes. The court declined to do so in the circumstances of the case. The statement above underlines that, under s. 16, the default or presumptive income is the Line 150 income.
Sections 17 to 19 of the Guidelines permit the court to diverge from the s. 16 determination of income, but they do not require an expert income determination.
Although an expert determination of income is not required by the legislation, each party has the onus of establishing his or her income to the satisfaction of the court. In some cases, an expert valuation of a payor’s income may become necessary as an evidentiary matter.
In G.V.Q. v. M.L.Q., 2012 ONSC 4250, [2012] O.J. No. 3676, the father was self-employed and controlled several corporations in Canada and the U.S.A. He failed to make complete financial disclosure. The mother retained an expert to do a report on his income; the father retained an expert to critique the mother’s expert’s report, within a framework set by the father.
On the father’s application for, among other things, a determination of child and spousal support, Justice Czutrin said, regarding the father’s income:
It was the father’s responsibility to provide each of the experts the necessary documentation that an expert is of the opinion is required to support their conclusions. In the end, where there is a dispute over the facts, I, as a judge, need to draw conclusions on the facts in dispute in the experts’ reports. The control of the evidence as to the areas in dispute was with the father. As I again repeat, he had the onus to satisfy the court on the facts and provide an expert report as to his income for guideline purposes.
The father failed to do so. He did not call his accountant, who could have provided critical evidence on many issues and in particular the statement attributed to him by one expert and denied by the other. He could have provided factual information about incomes, expenses and how income allocation and expenses are determined.
It was not up to the mother or her counsel to attempt to prove what was in the control of the father.
While the father is articulate, well prepared and bright, he is not independent of the issues. Once more, I repeat, the father had the initial and ongoing obligation to satisfy the court as to his guideline income. He should have hired his own expert to do the income analysis and provided the expert full access to his accountant and all the individuals he now suggests Ms. Prussky should have talked to. He never instructed Mr. Brooks to counter Ms. Prussky’s analysis with a full analysis. He did not call his accountant or any other witnesses to provide factual evidence to challenge Ms. Prussky’s assumptions or to support statements that his new wife is being paid by “industry standards.”
The father was in control of expense and income distribution. He was in control of how he managed his end of the court process, who he would and would not call, and who would be subject to cross examination. He failed to satisfy me as to his income for any year.
In the event that this case ever returns to the court based on an allegation of change of circumstances due to the father’s income, the father bears the onus of proof. Following Ms. Prussky’s methodology and my findings, the father is to provide full and complete disclosure of all of his companies’ revenues, proof of and detail of all expenses paid personally and otherwise, and have his expense income analysis prepared by a duly qualified expert familiar with income calculations for support purposes. The income analysis should begin with 2011 income.
In C.L.Y. v. D.G.Y., 2013 ONSC 6550, [2013] O.J. No. 4841, the court granted the applicant wife’s motion for a determination of the parties’ incomes and a temporary order for child and spousal support. The mother’s position was that on the motion, child and spousal support should be based on the father’s Line 150 income, in accordance with s. 16 of the Guidelines. The father’s position was that certain non-cash benefits that were included in his Line 150 income should not be included in his income for support purposes.
At paragraphs 38-39, Justice Stevenson said:
On the evidence before me, I am not prepared to determine child and spousal support on this motion on any income other than line 150 of the respondent’s income as set out in section 16 of the Guidelines. As submitted by counsel for the applicant, the Ontario Court of Appeal in Bak v. Dobell, stated that income for support purposes is presumptively the payor’s income as it appears on line 150 of his or her income tax return. The respondent has provided various documentation and tax calculations that he himself prepared with respect to his income and what he deems to be appropriate income for support purposes, but he has not provided any expert analysis in order to assist the Court with a determination of his income.
It is very difficult at this stage of the proceedings without the benefit of expert reports and cross-examination, to properly determine this issue. The best evidence before the Court at present is the respondent’s Income Tax Return from 2012 which sets out the respondent’s line 150 income as $217,007. I note that in previous years the respondent’s income has been significantly higher and this may be attributable to the fact that a large part of the respondent’s income is derived of commission income. There was no suggestion by the applicant’s counsel that any income other than the respondent’s line 150 income from 2012 should be used for the purposes of this motion. There was also no evidence from the respondent of a current income earned to the date of the hearing of the motion for the Court to consider.
Again, an expert income analysis is not a statutory or regulatory requirement. It may be an evidentiary requirement if the court is not able to reach a determination of his income without it. If your client’s business operations are complex and his financial affairs are difficult to understand, an expert income report may be necessary. If he can provide full and fair disclosure of his income by means of a properly completed financial statement, backed up with the appropriate documents, an expert determination of his income is not required.
Maryelle Symons
Barrister & Solicitor