Monday, July 16, 2012

Does Failing to Report Cash in An Antique Business Spell Reduced Support Obligations?

Three Ontario Superior Court of Justice cases reported over the past two years, confirm what I had suspected as a consequence of practicing family law for close to 20 years:

Those who earn money in the antique business and fail to report that income, or consistently show business losses, stand a fairly good chance of either avoiding paying full support to their former spouses, or unfairly receiving support.

Just over a year ago I reported the case of Hewitt v. Hewitt, about a husband who had been an auction assistant, a garage sale operator and a picker for antique stores and auctions. At trial his evidence was deliberately obtuse and he was evasive and deceptive. The judge found that he only sporadically, and then inaccurately, reported his income to the tax authorities. The court could not get an accurate handle on what Mr. Hewitt was actually earning. The judge imputed income to Mr. Hewitt for support calculation purposes, of only $20,000 a year, total income before deductions for tax and sundry reductions.

Mr. Hewitt’s wife was ordered to pay him spousal support of $900 per month. At that time I suggested that Mr. Hewitt was being rewarded for his lies, deception and failing to report income. Since then I have come across two other Ontario cases which further indicate to me that the courts are not prepared to delve too deeply into the income earning of people in the antique business, and simply assume that the profits cannot be all that great (i.e.” If he’s not declaring income, then how can he really be earning that much money?”)

In Fyfe v. Jouppien, the husband claimed entitlement to interim support from the wife, at least pending trial of the matrimonial proceeding. Motions for interim support are generally based on affidavit evidence, and only at trial do witnesses take the stand when the full picture emerges.

At the motion for interim support Ms. Fyfe wanted to prove that Mr. Jouppien was earning money from appraising antiques and historical buildings, which he was not reporting to Canada Revenue Agency. She attached evidence (exhibits) to her affidavit, including the following:
  • An article from the Welland Tribune website which indicated that Mr. Jouppien was appraising antiques 
  • A printout from the Welland Tribune website which indicated that he was providing expert appraisals at the Port Colborne Historical and Marine Museum and that he was a member of the Appraisers Guild of Ontario 
  • A printout from the website for Niagara This Week which indicated that he was appraising antiques at a museum in Thorold
Although Mr. Jouppien addressed other allegations against him regarding earning income, he did not reply to the allegations of making money carrying out appraisals of historical items. His lawyer told the court that any money earned from this type of undertaking would be so minor as to not be worthy of note.

The judge stated that although he may be earning more income than what had been declared (his disability benefits of $7,120 annually), “a motion is not the arena in which to make difficult decisions about credibility, and in any event there is insufficient evidence before the court upon which to impute income to him.” Generally speaking, motions are very important proceedings because most cases settle before trial, often based on something close to what motions court judges have decided.

In Elcich v. Olecka, Mr. Elcich wanted to terminate a support order made in 2002. The order provided that he could not apply to change support until after December 1, 2007. In 2008, Mr. Elcich retired from General Motors on a $40,000 per year pension. At the time of the hearing Mr. Elcich was 61. Ms. Olecka was 49 and employed as a cook, earning $34, 358 per year. At some point her income was reduced and she had supplementary income from employment insurance.

Mr. Elcich alleged that Ms. Olecka had income from an antique business. Ms. Olecka stated she had been losing money in the business for many years, and that her tax returns confirmed it. In fairness, she alleged extra income earned by Mr. Elcich as well. But the point is that the judge stated that total income from these additional sources (i.e. the antique business which supposedly was a losing proposition for several consecutive years … at least on paper), “in any, is negligible and as a result the court discounts such income entirely.” The judge ordered Mr. Elcich to continue paying unreduced spousal support for a further two years. Who keeps carrying on business, year after year, all along truly losing money?

The conclusions which can be drawn from these cases are:
  • In order to prove that your ex is earning a reasonable or any income from the antique business, you require extremely compelling evidence 
  • It’s doubtful that the evidence will come to light except at a trial Even after a trial, it’s unlikely that a judge will attribute or impute the true level of income earned from the antique business 
  • If your marriage is on the rocks, and you’re in the antique business, consider staying in it.
- Alvin Starkman, Oaxaca, Mexico
Alvin Starkman received his Masters in Social Anthropology in 1978. After teaching for a few years he attended Osgoode Hall Law School, thereafter embarking upon a successful career as a litigator until 2004. Alvin, a good-standing member of the Law Society of Upper Canada, now resides with his wife Arlene in Oaxaca, Mexico, where he writes, leads small group tours to the villages, markets, ruins and other sights, is a consultant to documentary film production companies, and operates Casa Machaya Oaxaca Bed & Breakfast.

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