Lessard v. Mahoney

2007 BCSC 562 Lessard v. Mahoney

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Lessard v. Mahoney, 2007 BCSC 562 Date: 20070426 Docket: E060983 Registry: Vancouver Between: Marie-Claude Lessard Plaintiff And John Allison Mahoney Defendant Before: Master Hyslop Reasons for Judgment Counsel for the Plaintiff S.N. Mansfield Counsel for the Defendant P. Daykin Date and Place of Trial/Hearing: March 21, 2007 Vancouver, B.C. [1] The plaintiff filed two applications. The plaintiff seeks: 1. A declaration determining the Plaintiff's annual Guideline income; 2. A declaration determining the Defendant's annual Guideline income; 3. An Order pursuant to Part 7 of the Family Relations Act that the Defendant shall pay to the Plaintiff interim periodic monthly support for the benefit of the child, namely: Alyssa Emily Lessard-Mahoney born October 22, 2005, pursuant to the applicable table amount under the Federal Child Support Guidelines retroactive to November 1, 2005; 4. An Order declaring that the expenses associated with the nanny, Eliana Ledesma, is a section 7 extraordinary expense to be shared between the Plaintiff and Defendant in proportion to their respective Guideline income retroactive to April of 2006; [2] The plaintiff further seeks: 1. An Order that the Plaintiff shall have interim sole custody, guardianship and primary residence of the child, Alyssa Emily Lessard-Mahoney born October 22, 2005; [3] In a

cross-application, the defendant seeks: 1. an Order that the Plaintiff and the Defendant shall have interim joint guardianship and custody of the child, Alyssa Lessard-Mahoney, born October 22, 2005; 2. an Order that the Defendant be permitted to take the child, Alyssa Emily Lessard-Mahoney, born October 22, 2005, to his residence in Los Cabos, Mexico for the purpose of exercising access, on terms and conditions that this Court considers appropriate; 3. an Order that the Plaintiff, Marie Claude Lessard, be restrained from changing the residence of the child, Alyssa Emily Lessard-Mahoney, born October 22, 2005, to a place outside the Lower Mainland of British Columbia, without the prior written consent of the Defendant or further Order of the Court; [4] In each of the applications, the parties seek costs against the other. The defendant has abandoned item number 3 of his application. [5] These applications involve a child, Alyssa, born October 22, 2005, whose mother is the plaintiff and whose father is the defendant.

BACKGROUND [6] The plaintiff, age 32, and the defendant, age 57, had a brief relationship resulting in the birth of Alyssa. Alyssa resides with her mother. The defendant sees Alyssa from time to time. [7] The plaintiff has no other children. She was previously married; this marriage ended in divorce in July of 2006. In December of 1999, the plaintiff and her former husband moved to British Columbia from Quebec. The plaintiff's family continues to reside in Quebec. [8] The plaintiff and her former husband came to British Columbia to take advantage of a franchise business opportunity. That business is incorporated, the shares of which are owned equally between the plaintiff and her former husband. Each draws an annual salary of $70,000.00. The plaintiff is responsible for sales, marketing and training for the business. [9] The plaintiff presently lives in rented accommodation in the Lower Mainland, where she and her daughter, Alyssa, and a nanny reside. [10] During six months of her pregnancy, the plaintiff lived in the defendant's condominium at his cost. A month before the birth of Alyssa, the plaintiff moved to her rental residence, where she continues to reside. [11] The defendant attended prenatal classes with the plaintiff. [12] The plaintiff took maternity leave, returning to work part-time in February of 2006 and full-time in April of 2006. The plaintiff has employed a

nanny to care for Alyssa. The nanny is paid $8.50 per hour from which is deducted statutory deductions and room and board. [13] The defendant, who has been married three times, is a businessman. No children were born as a result of the marriages. The defendant has a son, Dawson, who is aged 4. Dawson resides with his mother in Kelowna. The defendant, at present, has Dawson every two weeks for a two-week period, which includes staying with the defendant in his residence in Mexico. [14] For over twenty years, and while the defendant was married to his former wife, Ann, the defendant operated a company that "provided insurance, extended warranty and maintenance products for automobiles". (Defendant's affidavit #1, tab 13). [15] The defendant owned the shares of that company ("operating company") through a holding company. In 1998, the holding company sold a majority interest in the operating company to Ace U.S.A. Inc. ("Ace") for $1,080,000.00 (U.S.), plus annual amounts if the company was "reaching certain performance targets". (Affidavit #1 of the defendant). The defendant remained as an executive of the operating company for a period of five years at an annual salary of $200,000.00 (Can.) and later increased to $300,000.00 (Can.). [16] In May of 2002, the defendant and his former wife separated. By May of 2003, they concluded a property settlement between them. The defendant's

share of the asset division was $1,045,000.00. [17] In the fall of 2003, Ace sold the assets of the operating company to First Canadian Insurance Corporation. As part of that transaction, the defendant signed a non-competition agreement in consideration of the sum of $1,200,000.00. This agreement restrained the defendant from working in the insurance warranty business for a period of ten years. [18] The defendant swears to the following at paragraphs 27 and 28 of this affidavit #1: 27. By the Fall of 2003, I had assets but no income. My assets included my shares in Holdings, my house in Mexico, my share of the net proceeds of the sale of the Whistler property, and the funds that I received as a result of signing the Non-Competition Agreement.

28. Since the Fall of 2003, I have not held any traditional employment nor have I earned a traditional salary from any source. From my capital I: (a) invested in some businesses, which are described below, all of which have failed; and (b) invested in local real estate, described below, on which I have had some success. [19] The defendant's evidence is that he invested in businesses and real estate. The investments in real estate were successful; those investments in businesses, through his holding company, were unsuccessful. At paragraph 29 of the defendant's affidavit, the defendant outlines those losses. They total $1,872,000.00, with no amount attributed to the alleged losses in the Mexican real estate. By far the largest loss was the investment in SiVault Systems Inc. ("SiVault investment"), an investment of $1,600,000.00. Of that amount, $600,000.00 was borrowed money. This borrowed money was secured by mortgages against the defendant's Richard Street condominium. When this condimunium was sold, the defendant swears that he received nothing (page 90 of the examination for discovery of the defendant on August 22, 2006). [20] The defendant swears that he has recovered approximately $193,825.00 of his investment in SiVault. It is around the SiVault investment of which there is much controversy and confusion. [21] In May of 2006, for purposes of purchasing a condominium

located at 1616 Bayshore Drive (the "Bayshore condominium"), the defendant made application for and was granted a line of credit from the TD Canada Trust for $1,000,000.00, secured by a mortgage on the Bayshore condominium. In applying for the loan, the defendant declared annual income of $565,000.00 from SiVault. [22] In paragraph 30 of the defendant's affidavit #1, he lists a number of condominiums that the he lived in and sold between 2000 and 2006 inclusive. At the time this application was heard, the defendant was "primarily residing" in Mexico in a residence he owns and purchased in 2003. He has $1,500,000.00 (Can.) in an account in the Grand Cayman Islands from which he receives an income of approximately $53,575.00 annually.

POSITIONS [23] It is agreed that maintenance should be retroactive to November of 2005, and the expense for the nanny be retroactive to April 1, 2006. It is further agreed that the nanny expense is $15,000.00 per year after taking into consideration the plaintiff's tax saving/credit relating to child care expenses. Counsel for the defendant accepts the plaintiff's stated income of $73,000.00 per year as declared in her income tax return of 2005. Counsel for the defendant stated that the plaintiff's income could be imputed as high as $168,000.00 per annum considering the profits of the company. This determination he states is for the trial of this action. [24] Between January and March of 2006, the defendant paid the plaintiff $1,658.05. In September of 2006, and on a without prejudice basis, the defendant paid the plaintiff $10,000.00 for a total of $11,658.05. [25] The defendant says that his income is $75,000.00 for purposes of determining Guideline income, as per the Federal Child Support Guidelines (the "Guidelines") based on his 2005 personal income tax return. [26] Counsel for the defendant acknowledges that the defendant has not explained the representations made by the defendant in the loan application to the TD Canada Trust. This, counsel for the defendant argues, should be left to the trial judge, including any retroactive payments as they may be different at trial

than those sought in this order based on an income of $75,000.00 per year. [27] The defendant seeks joints guardianship and joint custody of Alyssa, coupled with "generous access" (defendant's outline) in Vancouver two periods per month for four days each, plus any additional time as agreed between the plaintiff and the defendant. Those specific times are the times that Dawson is being returned to his mother or travelling to Mexico to stay with his father. [28] The plaintiff seeks interim custody and guardianship of Alyssa. She opposes sharing joint custody with the defendant, as she argues that she has cared for Alyssa since birth almost entirely on her own, with little assistance or interest on the part of the defendant. She alleges that there is "extreme distrust" (plaintiff's written submissions) between her and the defendant. The plaintiff claims that she has been subjected to personal attacks from the defendant, making communication "virtually non-existent" (plaintiff's written submissions). [29] The plaintiff argues, the defendant has failed "to make full, frank and honest disclosure pursuant to the Rules of Court and as required by the Guidelines" (plaintiff's submissions). The plaintiff alleges there has not been full disclosure of the SiVault investment, not only as to what has been realized from this investment, but also the income earned by the defendant as an executive and director of that company. As a result, the court should draw an adverse interest against the defendant as well as imputing to the defendant for purposes of the Guidelines.

DISCUSSION Custody, Access and Guardianship [30] The plaintiff would like to have the option of residing outside the Lower Mainland of British Columbia with Alyssa. Her father has offered her a position in his import/export business. The plaintiff has not formulated any plans to leave British Columbia. [31] The plaintiff has kept a diary of Alyssa's visits with her father, together with the defendant's comments and other events which are detailed from her perspective. From an early age, Alyssa has been away from her mother and with her father for periods of approximately three to five hours per visit before returning to her mother. Some of these visits are when the defendant has Dawson in his care. Alyssa has been only overnight with her father on one occasion; this occurred in January of 2007. [32] There are periods of time when there are no visits with Alyssa by her father when the defendant is in Mexico or away on business. There are times the defendant arranges to have Alyssa then cancels. According to the plaintiff's diary, the plaintiff has changed her plans to accommodate the defendant's time with Alyssa. [33] Based on the diary entries, the plaintiff promotes the relationship between Alyssa and her father. The diary and calendar reflect no discernible pattern when the defendant has Alyssa. The plaintiff, who works full-time, requires a schedule, not only to meet

Alyssa's needs, which are paramount, but also the plaintiff's and those of the nanny. The plaintiff views the defendant as self-centred and available only to Alyssa when he is not travelling and not meeting his social and recreational activities. [34] At the same time, the defendant has become, by choice, primarily resident in Mexico and he is available for Alyssa two four-day periods twice a month in Vancouver. This is agreeable to the plaintiff. [35] It appears that the defendant has been quite satisfied with the decisions the plaintiff has made on behalf of Alyssa, such as the choice of nanny. The defendant makes no complaints as to the day to day care of Alyssa as provided by the plaintiff. [36] At the same time, there are no complaints from the plaintiff as to the care of that the defendant provides to Alyssa while she is in his care. The real complaint of the plaintiff is that she sees Alyssa as not being a priority to the defendant. [37] I find it troubling, as it relates to Alyssa's care and support, the contents of an email sent October 18, 2006 to the plaintiff by the defendant, which states among other matters, the following: I had to sell everything and move out of the country to show that I have nothing, well now you know and yes I wanted you to find out the way you did because of everything you have put me through with court so far. [38] This schedule of four days

twice a month, proposed by the defendant for purposes of having Alyssa, is likely to change as Dawson will be attending school in the fall. [39] The defendant, in the same email, states: Yes I will be buying another home in Vancouver or Kelowna as soon as I have enough money to put together to do so so [sic] in the meantime Alyssa should be able to travel to Mexico with us especially now as the air fare is zero. Other than that I will tell you the dates I am in Vancouver and hopefully we can work out a visiting schedule as well as Mexico. [40] It would appear the defendant's plans are uncertain. He has not articulated or demonstrated how the joint guardianship and custody is in the best interests of Alyssa. In the interim, the defendant is available to Alyssa eight days a month. The abruptness of his departure from Vancouver, without notice to the plaintiff, was on purpose. Having the plaintiff drop Alyssa off at an apartment building in which he no longer owned an apartment, displays a lack of consideration and increases the distrust the plaintiff already has of the defendant. [41] I order that the plaintiff have interim custody of Alyssa. I order that the defendant have access to Alyssa for two periods a month, each consisting of four days, such access to be exercised in the lower mainland. The access may be overnight as determined by the plaintiff and in consultation with

the defendant. Alyssa is still very young and she has only been overnight with her father on one occasion. The defendant must give the plaintiff ten days notice of the times that he will be in Vancouver each month. While in Vancouver, and while the defendant has Alyssa in his care, he must advise the plaintiff of the address of the residence as to where he is staying with Alyssa as well as the telephone number for that residence. [42] The plaintiff will sign an authorization giving the defendant the right to inquire as to any doctor who treats Alyssa, or to a doctor to whom Alyssa is referred. [43] Alyssa is not to be removed from the Lower Mainland of British Columbia for purposes of her residence without the consent of the defendant or an order of the court. [44] I have purposely not dealt with guardianship; I will leave that to the trial judge when he or she has the parties and their witnesses before the court. At trial, the judge is in a better position to deal with whether joint or sole custody is in the best interest of Alyssa.

CHILD SUPPORT [45] At issue is the amount of the defendant's income for purposes of determining the amount pursuant to the Guidelines payable by the defendant to the plaintiff for Alyssa's interim support, as well as his proportionate share of the nanny's wages. [46] The defendant has filed three financial statements (Form 89) sworn April 10, 2006 ("April"), June 21, 2006 ("June") and February 8, 2007 ("February"). [47] The defendant borrowed $1,000,000.00 from the TD Canada Trust bank for the purchase of the Bayshore condominium. The defendant completed an application for that purpose in May of 2006 ("loan application"). Plaintiff's counsel repeatedly sought copies of the loan application and was reassured by defence counsel that the defendant would provide the documents. The documents were not forthcoming. The plaintiff sought and obtained on January 19, 2007 an order to obtain true copies of the loan application. Certified copies of the documents were provided as a result of that order one week before the hearing of these applications. The defendant represented to TD Canada Trust his annual income from SiVault was $565,000.00. This income is supported by a letter dated March 31, 2006 and purportedly signed by Wayne Taylor, CFO, SiVault Systems, Inc: Subject: Mr. John A. Mahoney To whom it may concern: This letter is to confirm that Mr. Mahoney is the Chief Executive Officer

(CEO) of SiVault Systems, Inc. His annual compensation, including salary, bonus and director's fees is $565,000. The amount does not include the value of any options and warrants he will be granted. [48] The defendant, in his examination for discovery, denied verifying or declaring his income in his TD Canada Trust loan application. The defendant has not explained the contents of the loan application. This, counsel for the defendant argues, the trial judge can deal with at the trial of these proceedings. Counsel for the plaintiff rejects this, stating that courts make interim orders in British Columbia every day. [49] The following is a summary of the defendant's sworn financial statements and his loan application as it relates to his income, assets, liabilities and the amount of child support paid by the defendant for his son, Dawson. Income: Expenses: Assets: Liabilities: Maintenance for Dawson: April 10/06 0 $212,580.00 $5,261,500.00 $1,994,000.00 $1,500.00 Loan application May/06 $565,000.00 $8,628,201.00 $1,901,419.00 June 21/06 0 $193,380.00 $5,609,800.00 $1,884,000.00 $1,600.00 Feb. 8/07 $53,575.00 $81,780.00 $3,694,200.00 $205,000.00 $1,200.00 [50] The defendant, in his February financial statement, the only one that declares income, has no expense for income tax or any other compulsory deductions. I conclude that the defendant pays no tax in either Canada or any other

country. [51] On August 22, 2006, in an examination for discovery of the defendant, the defendant acknowledged that he had purchased condominiums, lived in each one of them for approximately a year as his principal residence, then sold and moved into the next one he purchased (page 89 of the defendant's examination for discovery). Upon the sale of the last condominium and the Whistler condominium, the defendant took the proceeds of those sales and placed the money in the Royal Bank of Canada in the Grand Cayman Islands and moved to Mexico, residing in the residence he owns (defendant's affidavit #1, paragraph 30(e)). The defendant values his Mexican residence at $2,000,000.00 in his loan application to the bank and $1,380,000.00 in his three financial statements. [52] The defendant's Line 150 income tax return declares his income for the following years: 2003: $136,299.96 2004: $6,767.67 2005: $75,000.00 The income for 2005 includes rental income of approximately $16,560.00 gross for a condominium located at 503 -1033 Marinaside Crescent, Vancouver, a condominium that the defendant sold. [53] Counsel for the plaintiff points out that the defendant has failed to disclose in his June financial statement the following: 1. U.S. bank account with the Royal Bank of Canada; 2. $5,000.00 bank account in the Grand Cayman Islands; 3. the expense of maintaining two golf memberships and

the fifty percent ownership of another and a yacht club membership; 4. the sale of Mexican lots; and 5. the ownership of a motorcycle. [54] As it relates to SiVault, the defendant's examination for discovery and his affidavit #1 are in conflict. [55] There are conflicting stories regarding the defendant's relationship with SiVault not only to the amount of money he has received from the company, but also his position with the company. The defendant in his examination for discovery stated that he had been requested by other shareholders of SiVault to straighten out the affairs of SiVault. He travelled to New York for that purpose. He swears his expenses were covered while he stayed in New York for approximately five months. In his examination for discovery, he stated that he received shares in SiVault as remuneration for his work for SiVault during the period of time he was in New York. He stated that he sold the shares receiving approximately $110,000.00. In his affidavit #1, the defendant swears to the following at paragraph 29(b): 29. I made investments in the following business ventures: (b) in the Fall of 2004, I invested approximately $1,000,000 in a company called SiVault Systems Inc. I also borrowed $600,000 and lent it to SiVault. I was the acting CEO of SiVault for a brief period of time, while the company sought new management. SiVault did reimburse me for certain

business expenses that I had incurred on behalf of the company during the Spring of 2006. I was able to transfer 3,276,508 shares in SiVault to Celina Creations Inc. at $0.05 per share, for proceeds of $193,825, in December, 2005, resulting in a loss on the sale of those shares. In my examination for discovery, I inaccurately described that sale as a form of remuneration. It was not. It was simply a partial recovery of a bad investment. I continue to hold approximately 600,000 shares in SiVault, personally and through Holdings, but these shares are now virtually worthless. The shares trade on the "pink sheets" at about $0.07 per share in a very thin trading: [56] If the defendant received shares as remuneration for his efforts, then it is income. Before me, and as it relates to the defendant's income, are several figures; $110,000.00 remuneration from SiVault as a result of the sale of SiVault shares; $53,575.00 interest from the bank account in the Grand Cayman Islands; $565,000.00 represented by the defendant in a loan application; and $75,000.00 that the defendant argues that I should find as the defendant's Guideline income. The figure of $193,825.00 referred to in the defendant's affidavit #1 is in substitution of the $110,000.00 figure for the sale of SiVault shares which the defendant states is not remuneration, but rather the realization of his investment in SiVault.

These discrepancies cannot be reconciled. [57] The defendant, in his April financial statement, swears his annual expenses are $212,580.00; his June financial statement he swears his annual expenses are $193,380.00; and by February 2007, the defendant swears in his financial statement that his annual expenses are now reduced to $81,780.00. In each of his financial statements, the defendant swears that he pays child support for Dawson in different amounts. Those amounts are $1,500.00 per month, $1,600.00 per month, and the last financial statement $1,200.00 per month. The defendant has Dawson fifty percent of the time. [58] It is difficult to determine, not only the defendant's income, but what amount, if any, should be imputed to the defendant. Pursuant to s. 19 (e) and (f) of the Guidelines, the court is entitled to impute income to the defendant: 19. (1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following: (e) the spouse's property is not reasonably utilized to generate income; (f) the spouse has failed to provide income information when under a legal obligation to do so; [59] In assessing interim support for Alyssa, I must determine for Guideline purposes the amount of the defendant's annual income. I take into consideration the personal expenses that the defendant incurs in his

various financial statements that he has filed, the amount he pays for Dawson's support, the amount that he represented as his income with SiVault for purposes of his loan application, the values he has placed on his Mexican residence and the money he has on deposit in the Grand Cayman Islands. I also take into consideration that the defendant has not been forthright about his relationship with SiVault. I find, for Guideline purposes, the defendant has annual income of $250,000.00. This amount may appear to be arbitrary, but that is the risk the defendant assumes when income is imputed in these circumstances. Commencing November of 2005 up to and including April 1, 2006, an interim maintenance payment based on $250,000.00 a year for one child in accordance with the Guidelines is $1,719.00 per month. Commencing May 1, 2006, the amount is $2,082.00 per month. [60] This would require the defendant to pay to the plaintiff for Alyssa's support $30,942.00 for the period commencing November 1, 2005 to and including April 1, 2006, and for the period from May 2006 up to and including April 1, 2007, $24,984.00. The plaintiff and defendant agreed as to the annual amount of the nanny expenses, which are $15,000.00 or $1,250.00 per month. Given their respective incomes, which I find the plaintiff's at $73,000.00 a year and the defendant's at $250,000.00 a year, the plaintiff must pay 26.6%

of those expenses which is $282.50 per month, and the defendant pays 77.4% of those expenses at $967.50 per month. [61] For purposes of this interim maintenance order, I order that the defendant pay to the plaintiff, commencing November 1, 2006, the sum of $2,082.00 per month payable on the 1st day of each and every month for the interim support of Alyssa. Commencing November 1, 2006, the defendant will pay to the plaintiff his proportionate share of the nanny expenses of $967.50 payable on the 1st day of each and every month thereafter. [62] I will leave it to the trial judge as to how he or she wishes to deal with the $11,658.05 that the plaintiff has already paid to the defendant. The trial judge, after he or she hears all of the evidence, may conclude that the plaintiff and defendant's income for Guideline purposes is different than my findings. At trial, the trial judge can determine the amount of retroactive child support the defendant owes the plaintiff prior to November 1, 2006, and at that time consider the credit of $11,658.05 due to the defendant

COSTS [63] The plaintiff will have her costs of these applications at Scale B.

SUMMARY [64] My interim orders are: 1. Custody of Alyssa to the plaintiff; 2. The defendant's access to Alyssa is for two four-day periods twice in each month; 3. The defendant is to give the plaintiff ten day's notice of these access periods; 4. The defendant is to exercise his access to Alyssa in the Lower Mainland, giving the plaintiff the address and telephone number of the residence in which he will have Alyssa; 5. Access may be overnight as determined by the plaintiff with consultation with the defendant; 6. Alyssa's residence shall not be changed from the Lower Mainland of British Columbia except with the consent of the defendant or order of the court; 7. Commencing November 1, 2006, the defendant will pay the plaintiff the sum of $2,082.00 per month payable on the 1st day of each month for the support of Alyssa; 8. Commencing November 1, 2006, the defendant will pay to the plaintiff his proportionate share of the nanny expenses being $967.50 payable on the 1st day of each and every month thereafter; 9. The plaintiff's annual income for Guideline purposes is fixed at $73,000.00; 10. The defendant's annual income for Guideline purposes is fixed at $250,000.00; 11. Support for Alyssa and nanny expenses prior to November 1, 2006 shall be determined by the trial judge, as well as credit of $11,658.05 due to the defendant; 12. The plaintiff will sign authorizations for obtaining any medical information regarding Alyssa; and 13. The plaintiff will have her costs. "Master H. Hyslop"