Bidwell v. Bidwell, 2011 ABQB 261

Court of Queen ’ s Bench of Alberta Citation: Bidwell v. Bidwell, 2011 ABQB 261 Date: 20110414 Docket: 4803 133466 Registry: Edmonton Between: Steven Bidwell Plaintiff - and - Cynthia Diane Bidwell Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Brian R. Burrows _______________________________________________________ [ 1 ] Cynthia Bidwell applies for retroactive child support. The issues are:

a) Whether child support should be varied retroactively and if so as of what date the variation should be effective.

b) Whether the net pre-tax income of Mr. Bidwell’s corporations should be used to determine his annual income for child support purposes.

c) Whether Mr. Bidwell should be required to contribute to significant extraordinary expenses which Ms. Bidwell has incurred.

[ 2 ] The parties were married in August 1987. They separated in September 2003 and were divorced in December 2006. They have two children; a son, Colby, born January 1991 (now 20) and a daughter, Jace, born February 1993 (now 18). Both children are still children of the marriage, though the elder, who attends university, is living independently. [ 3 ] The parties executed minutes of settlement on March 3, 2004. The following terms of that agreement were relevant to child support: - Mr. Bidwell’s annual income at the date of the agreement was agreed to be $75,000. - Ms.

Bidwell’s annual income at the date of the agreement was agreed to be $15,000. - The primary residence of the children was to be with Ms. Bidwell. - On the basis of his agreed annual income, Mr. Bidwell would pay monthly child support of $1025.00 commencing March 1, 2004. - As to “extra expenses” the parties agreed as follows: 5.2 The Husband and Wife agree that the parties will share any extra expenses incurred on behalf of the children of the marriage on a pro-rata basis, which shall include, but not limited to, the following:

a) The cost of Jace’s hockey, including registration and equipment as well as hockey school;

b) The cost of Colby’s one extracurricular activity; and

c) The Husband will pay to the Wife the sum of $225.00 per month for his proportionate share of the current

Section 7 expenses incurred by the Wife. 5.3 Each party must give reasonable notice of any proposed extra expenses and obtain the other party’s agreement before incurring such expenses.

The Husband and Wife must not unreasonably withhold his/her agreement to share these expenses. - As to future variations, the parties agreed as follows: 5.4 The parties agree that in accordance with the provisions of the Divorce Act Canada, either party is at liberty to apply to the Court for an order varying the amount of support payable for the child of the marriage, based on a change in the condition, means, needs and circumstances of either party, or of any child of the marriage. [ 4 ] On April 26, 2006 the parties signed a further agreement entitled, “Amendments to the Minutes of Settlement dated March 3, 2004”.

The recitals indicate that one reason for the further agreement was to resolve disputes which had arisen concerning “section 7 expenses”. [ 5 ] The Amendment agreement provided: 2. The husband and wife agree that the husband would be responsible for 65% and the wife would be responsible for 35% of the

Section 7 expenses.

3. Both parties acknowledge and agree that as of the date of this agreement, there are no outstanding financial matters with respect to child support whether it be

Section 3 issues or

Section 7 issues and neither party will be permitted to revisit any questions of child support prior to the date of the within agreement. 4. Both parties agree that the following will be

Section 7 expenses for the two children of the marriage, Colby Dalton Bidwell, born January 4, 1991, and Jace Tayten Bidwell, born February 15, 1993: a. $2200.00 - hockey school for Jace. b. $1000.00 - hockey dues and team expenses for Jace. c. $750.00 - equipment costs for Jace. d. $300.00 - roller hockey for Jace. e. $300.00 - summer camp for Jace. f. $300.00 - summer camp for Jace. g. $1200.00 - unknown activities for Colby. h. $300.00 - summer camp for Colby. i. $300.00 - summer camp for Colby. 5.

The expenses listed above equal $6650.00 annually and both parties agree that the total shall not exceed this amount by more than 5%. It also agreed to by both parties ( sic) that each child shall receive no higher amount than is shown (by way of example, Jace should not incur an extra $1000.00 at the expense of Colby or vice versa). 6. The notification and consent provisions pertaining to

Section 7 expenses will remain as they are in the Minutes. 7. The parties agree that any expenses incurred by either party over the annual budget shall not be recoverable from the other if the other has not previously agreed to the expense in writing for any reason. . . . 11. The parties confirm the provisions provided for in the original Minutes that each party must provide notification of intended expenses and if they are to be extraordinary expenses provide approximate quotations at the time of notification. [ 6 ] Ms. Bidwell served Mr.

Bidwell with notices to disclose financial information on three occasions subsequent to the Amendment agreement, in 2007, 2008 and 2010. Mr. Bidwell provided the disclosure requested each time. Ms. Bidwell brought no application until the current application which was filed on January 7, 2010 and was originally returnable in January 2010. I gather that

it was adjourned to permit cross-examination of Ms. Bidwell on her affidavit and for the filing by Mr. Bidwell of a responding affidavit. The application was heard on March 29, 2011. Should child support be varied retroactively and if so to what date? [7] Mr. Bidwell submits that Ms.

Bidwell’s delay in seeking the variation she now seeks has been unreasonable, that he hadevery right to believe he could rely on the parties’ agreements, that the children will take no benefit from a retroactive award and that tonow be made to pay something other than what was agreed, when he has ordered his life and business according to the agreements,would be unjust. [8] In my view these submissions must be rejected. The agreements the parties entered did not relieve Mr. Bidwell of theobligation of ensuring that the contribution he made to the support of his children was that required by the guidelines.

There was nosuggestion in the agreements that his annual income for child support purposes would be forever frozen at $75,000. Indeed the originalagreement expressly contemplated variations should there be material changes. [9] The submission that the children will take no benefit from any retroactive increase in child support, if the circumstancesjustify an increase, is also without merit. Both of the children are legally adults, but both are still “children of the marriage”. Theyounger child is still living with Ms. Bidwell.

Both are still in need of financial support from their parents. [10] Nothing in the circumstances relieved Mr. Bidwell of the obligation common to all parents to increase his child supportpayments as his income increased, assuming that it did increase. Ms. Bidwell’s failure to seek variation until January 2010 did not relievehim of that obligation. [11] As to the date on which any justified retroactive variation should commence, I see no reason for extending the adjustmentlonger than three years before the date of the Notice of Motion. In D.B.S v.

S.R.G 2006 SCC 37 , [2006] 2 SCR 231 (at para.123) the majority held that it would usually be inappropriate to make a support award retroactive to a date more than three years beforeformal notice was given to the payor parent. If a retroactive adjustment is warranted, it will not go back further than January 1, 2007. Not going back to an earlier date is further justified by the fact that just nine months before that date, the parties addressed child supportin their amending agreement and confirmed the provisions of their original agreement which included the agreement as to Mr. Bidwell’sincome.

Should the net earnings of Mr. Bidwell’s corporations be used to determine his income? [12] The evidence establishes that Mr. Bidwell’s assessed personal income for the relevant years was: 2007 $ 77,500.00 2008 77,500.00 2009 78,684.00 [13] Mr. Bidwell earns his income through the operations of two companies. He is the sole shareholder of Allforms Printing &Business Systems Inc. which is, in turn, the sole shareholder of Nuttall’s Printing & Graphics Inc. The pre-tax earnings of Allforms inthe relevant years was: 2007 $117,318.00 2008 144,551.00 2009 143,350.00

In each of the relevant years, Nuttall’s Printing had negative net earnings as follows: 2007 ($ 1,447.00) 2008 ( 1,292.00) 2009 ( 1,325.00) [14] The financial statements for Allforms indicate that at the end of September 2008 it had retained earnings in the relevant yearsas follows: 2007 $ 238,031.00 2008 298,607.00 2009 357,541.00 [15] The evidence includes a memo relating to the companies’ policy concerning payment of dividends from Nuttall to Allforms. It indicates that Nuttall does not pay a dividend to Allforms in order to avoid Nuttall’s income being counted twice in any proceedingsrelating to Mr.

Bidwell’s support obligations arising from his divorce. Rather, Nuttall’s income is paid to Allforms pursuant to asubcontract. It is an expense to Nuttall and a receipt to Allforms. To add the income from both companies is not to count the sameincome twice. For the years in question therefore, the corporate net income was: 2007 $ 115,871.00 2008 143,259.00 2009 142,025.00 [16] Section 18(1)(

a) of the Federal Child Support Guidelines says:

(1) Where a spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of thespouse’s annual income as determined under

section 16 does not fairly reflect all the money available to the spouse for the payment ofchild support, the court may consider the situations described in

section 17 and determine the spouse’s annual income to include (

a) all of part of the pre-tax income of the corporation, and of any corporations that is related to that corporation, for the most recenttaxation year . . . [17] The Alberta Court of Appeal discussed the attribution of corporate income to a payor parent pursuant to this

section in Miller v. Joynt, (2007) 2007 ABCA 214 , 87 Alta L.R. 4th 227. The Court observed that it is pre-tax net corporate earnings and notretained earnings that should be used for this purpose. It held that the discretion which s. 18 creates must be exercised judicially - it mustbe based on evidence and not on speculation. It accepted that it is for the parent whose income is being determined to explain why it isnecessary to keep the income in the company. [18] Mr. Bidwell argued that in this case the onus was on Ms.

Bidwell to establish that it was not necessary to leave the income inthe company because the parties had agreed in 2004 and 2006 that Mr. Bidwell’s income for child support purposes would be $75,000. Ireject this submission. No authority was cited for it. Further, nothing in the circumstances leads logically to its acceptance. There was noagreement that Mr. Bidwell’s income would forever be pegged at $75,000 for child support purposes. As well there is no evidence as tohow $75,000 related to the pre-tax net earnings of the corporation in the year his income was set at that level.

I can see nothing aboutthe parties’ agreement which justifies the conclusion that the onus should be on Ms. Bidwell to establish the negative of a point which ispeculiarly within Mr. Bidwell’s knowledge.

[ 19 ] The evidence which Mr. Bidwell provides on the point is as follows: I have had to leave money in the company as the printing industry is undergoing tremendous technological changes and we will in the near future have to spend a significant amount on capital expenditures. We are still completing this budget but we could be looking at spending as much as $500,000.00 for new equipment that accommodates the productivity requirements that we have to meet and allows for direct imaging and/or digital capabilities.

In order for the companies to gain present and future financing we have to meet the bank’s expectations in regard to debt servicing, profit margins and showing that the owner has long term commitments to the business by not draining retained earnings and/or issuing excessive dividends. Since the crash in 2008 many banking practices have changed and financing is more difficult than ever. This is the reason that my income has stayed relatively stable. It is not a desire to understate income or mislead in any way.

Part of running a business is the ability to live within budgets and adopt reasonable living standards without being excessive. If I stripped the company of every cent, I would be bankrupt within a very short time frame and would likely have already gone bankrupt. Even if I stripped the company now of every cent, I could not foot the bills based on her lifestyle and spending. [ 20 ] I do not find this evidence compelling. It does not, in my view, establish that it is necessary for sound business reasons to leave the funds which would have to be paid out of the company to Mr.

Bidwell to fund his child support obligation if the amount of that obligation is calculated on the basis of the pre-tax corporate net income. [ 21 ] That the company suffered significantly as a result of the 2008 recession is not borne out by the financial statements. 2008 net income before taxes was 23% greater than 2007 net income before taxes. 2009 net income before taxes was about 0.8% lower than 2008 net income before taxes. [ 22 ] Mr. Bidwell indicates in his evidence that he anticipates a need for $500,000 capital.

He talks about needing to satisfy a bank that his company would be a good candidate for a loan of that amount. It does not therefore appear that he expects to fund the capital requirement out of retained earnings. [ 23 ] Mr. Bidwell speaks of the need not to strip the company of “every cent”. Of course there is no suggestion that every cent should be stripped from the company. The proposition is that Mr. Bidwell’s child support obligation should be determined on the basis that his company income is his true income. As the following table shows, assuming, as I understand to be the case, that Mr.

Bidwell has paid support in accordance with the 2004 and 2006 agreements, the total further support he would have to pay if the corporations’ net pre-tax income was used as his income, for the three years preceding the Notice of Motion, would be $31,515.32. The retained earnings would be reduced by that sum to $326,025.68. It is difficult to conceive that this would make the company a bad candidate for a bank loan if it was a good candidate before the payment.

Year Income Support* Income Support 2007 75,000.00 12,300.00 115,871.00 19,866.83 2008 75,000.00 12,300.00 143,259.00 24,353.28 2009 75,000.00 12,300.00 142,025.00 24,195.22 Total 36,900.00 68,415.32 To pay 31,515.32 [* This is using the support payment required in the agreement, $1025 per month. The guideline amount for $75,000 per annum is actually $1082 per month.]

[ 24 ] In my view Mr. Bidwell’s annual income as determined under s. 16 does not fairly reflect all the money available to him for the payment of child support. Pursuant to s. 18, his income for child support purposes should be the total net pre-tax income of his two companies. Should Mr. Bidwell be required to contribute to significant extraordinary expenses which Ms. Bidwell has incurred? [ 25 ] The issue in the context of non-medical extraordinary expenses is whether the terms of the agreements the parties entered in 2004 and 2006 should govern.

By those agreements extraordinary expenses were not to exceed $6982.50 ($6650 + 5%). That was the maximum. [ 26 ] Further, the items of permissible extraordinary expense were agreed and were not subject to substitution. There were five items for the parties’ daughter and three items for the parties’ son. The amount permitted for each item was agreed. No additional items were recoverable unless previously agreed in writing. Consent could not be unreasonably withheld. [ 27 ] Ms.

Bidwell’s income in the three years in question was: 2007 $66,757.00 2008 $25,608.00 2009 0.00 [ 28 ] Assuming that expenditures were made in the agreed categories in each of the three years in question, the parties’ respective shares of the maximum extraordinary expenses as contemplated in the agreement were as follows: Year S. 7 Expense Father In. Father S. 7's Mother In. Mother S. 7's 2007 6,982.50 115,871.00 4,430.15 66,757.00 2,552.35 2008 6,982.50 143,259.00 5,923.63 25,608.00 1,058.87 2009 6,982.50 142,025.00 6,982.50 0.00 0.00 [ 29 ] Ms. Bidwell’s claim for s. 7's very substantially exceeds these figures.

The manner in which the evidence has been presented does not permit me to determine to what extent the items on which expenditures were made were in the “agreed list”. It is clear that expenditures were made on items not on the agreed list. There is no evidence that Mr. Bidwell’s consent was ever obtained to these unlisted expenditures. In my view the agreement continues to bind in respect of extraordinary expenditures. The maximum to which Ms. Bidwell is entitled is the amount indicated under “Father S. 7's” in the preceding table. And Mr.

Bidwell’s obligation will be reduced from the numbers in the table if the expenditures were not in respect of agreed listed non-medical extraordinary expenditures. [ 30 ] Ms. Bidwell has claimed as well for substantial expenditure which she characterises as “medical expenses” (see exhibit J to her first affidavit). The total for the three years in question is $9157.25. It is not clear from Mr. Bidwell’s affidavit that he disputes the legitimacy of these expenditures. I assume he does not. He should pay his proportionate share. Sanctions for filing too many affidavits

[ 31 ] Mr. Bidwell submitted that I should impose a sanction on Ms. Bidwell for filing more than one affidavit and one response affidavit on this application. She filed four affidavits: one with the Notice of Motion on January 6, 2010; the second on July 27, 2010; the third, a response affidavit, on March 18, 2011; and the fourth, an affidavit of a relative, also on March 19, 2011. [ 32 ] The first and third affidavits are permitted by the Practice Note. [ 33 ] The fourth affidavit dealt with matters that had no bearing on the issues which actually required decision.

I ignored it. [ 34 ] The second affidavit simply provided documentation which had not been available at the time of the first affidavit. It was filed weeks before Ms. Bidwell was cross-examined and eight months before Mr. Bidwell filed a responding affidavit. That it was filed did not offend the purpose for which the “one affidavit direction” in Family Law Practice Note 3 was issued. Mr. Bidwell suffered absolutely no prejudice. [ 35 ] There will therefore be no sanction. Order [ 36 ] In

summary I find that Ms. Bidwell is entitled to a retroactive variation of child support from January 1, 2007. I find that Mr. Bidwell’s corporations’ pre-tax net income for the years 2007, 2008 and 2009, the amounts set out in paragraph 15 above, should be used as his income for child support purposes. I find that as a result he underpaid s. 3 child support in those years by $31,515.32. [ 37 ] For the purposes of s. 7 child support I find Ms. Bidwell’s income to be as set out in paragraph 27 above.

I find that the terms of the parties’ agreements of 2004 and 2006 govern non-medical extraordinary expenses and that the maximum of Mr. Bidwell’s obligation in that regard for the years in question is as set out in the table in paragraph 28 above. It will be for Ms. Bidwell to show that expenditures made in those years were within the agreed list and otherwise within the limitations of the agreements. If there is a dispute in that regard, she may make further application. As to medical s. 7 expenditures, I find that Mr.

Bidwell’s obligation for the years in question is his proportionate share of the figures in Exhibit J to Ms. Bidwell’s affidavit of January 6, 2010. [ 38 ] As to Mr. Bidwell’s ongoing obligation, that should be determined in accordance with his corporations’ pre-tax net income for 2010 which, since the corporate year end is September 30, should be available by now. If it is not, the 2009 figure should be used until it is. I understand that Mr. Bidwell has been making a payment directly to the parties’ son, the elder child of the marriage, who is no longer living with Ms. Bidwell. Prospectively, the amount Mr.

Bidwell pays directly to the son should be deducted from his ongoing child support obligation to Ms. Bidwell. The amount of his payment directly to his son should not exceed one half of the monthly s. 3 child support payment. [ 39 ] Ms. Bidwell is entitled to costs of this application. Heard on the 29 th day of March 2011. Dated at the City of Edmonton, Alberta this 14 th day of April 2011.

Brian R. Burrows J.C.Q.B.A. Appearances: Michele J. Reeves for the Plaintiff Wendy A. Young for the Defendant