J.R. v. S.Y., 2011 ABQB 745

Court of Queen ’ s Bench of Alberta Citation: J.R. v. S.Y., 2011 ABQB 745 Date: 20111206 Docket: FL04 0651 Registry: Grande Prairie Between: J. R. Applicant - and - S. Y. Respondent _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice C.L. Kenny _______________________________________________________ Introduction [ 1 ] This matter came before me as a special application. The mother seeks retroactive and ongoing child support. Issues [ 2 ] 1) How far back should the Court go in setting arrears of child support?

2) What is the father’s guideline income for those years? 3) What is to be the amount of ongoing child support? Background [ 3 ] The parties are not married and never lived together. They have one child born in 1999 who is currently 12 years of age. The father voluntarily paid support for the child after the birth in an amount he believed was reasonable. This started at $350 per month in 1999, increased to $400 per month and was at $500 per month in June of 2007. At that time, June 2007, the mother e-mailed the father to discuss reviewing the child support in light of the child support guidelines.

The father indicated he was earning $100,000 per year and offered to pay the guideline amount of $880 per month plus an additional $100 per month for

section 7 expenses without the need for any receipts. He did not provide any financial information. [ 4 ] In August of 2008, the mother requested financial disclosure for 2007. The father provided his Notice of Assessment which showed a line 150 income of $211,398, along with his T-4 slip and a pay stub for the end of the year showing a bonus of $89,000. The father indicated to the mother that he had looked at the guidelines and there was provision whereby an extraordinary one time payment may not be included in income.

She said she would look into it. [ 5 ] She contacted him in September of 2008 and asked that he pay a portion of the child’s after school care expenses. He agreed. Since she did not mention the bonus, he assumed all was fine with the payments he was making. [ 6 ] In October of 2008, the father decided that the long hours at work and the stress of the job were taking a toll on him and his family. He is married with two young children.

He left his position as branch manager with an energy company and went to work for a company incorporated in 2007 by his wife. [ 7 ] The father is an electrician by training who does maintenance work in the oilfields. He did contract work for an energy company for a number of years before he took the position of branch manger with them in 2006. Since leaving that position in 2008, he continues to contract himself out to that company as he did before 2006 albeit now through his wife’s new company.

He indicates that her company now invoices the energy company for his work and he is paid a salary from his wife’s company. It should be noted that the father had, for many years in the past, rented out his truck and equipment as well as his time to various companies including the energy company, for which he received income. He indicates that he does not do that anymore and that his wife now owns equipment that she rents out and so it is her income, not his.

His wife also operates a travel business from home. [ 8 ] When the father advised the mother that he was leaving his branch manager position and going to work for his wife’s company, he told her he expected to gross $3,350 per month ($40,200 per year) and he would pay her guideline support of $332 per month plus appropriate

section 7 expenses. He then reduced the support accordingly from the $880 per month he had been paying. [ 9 ] The mother retained legal counsel and these proceedings commenced. The father attempted to resolve the outstanding issues by putting forward offers to settle. These were not accepted by the mother.

The father indicates that his line 150 income for 2009 is $40,000 and that the average salary for an electrician in Alberta in 2009 was $65,000. [ 10 ] The mother says she did not pursue child support earlier for a number of reasons: 1) she was worried the father would try and seek custody; 2) she was a student from 2001 to 2007 earning both a bachelor’s degree and then a master’s degree in social work; 3) she had no income and had incurred significant student loans to finance her education; 4) she had no money to pay a lawyer a retainer; and 5) when she did raise the issue in 2007 and 2008 she says that the father subtly made comments about her not having her daughter anymore and that he thought the guideline support was too high. 1) How far back should the Court go in setting arrears? [ 11 ] In D.B.S. v.

S.R.G. , 2006 SCC 37 , [2006] 2 S.C.R. 231, the Supreme Court of Canada sets guidelines for retroactive awards. At paragraphs 118, 121, and 123-125, the Court says that retroactive awards, as a general rule, should commence on the date effective

notice was given to the payor spouse that child support needed to be revisited. Effective notice requires diligence on the part of the payee spouse. The payee spouse cannot give effective notice and then drop the matter and come back years later seeking retroactive support. In that case, the award would ordinarily be limited to three years prior to the formal notice, not the effective notice. In this case the effective notice was June of 2007.

The formal application for support was brought in late 2008. [ 12 ] The Supreme Court of Canada then went on to say that in some circumstances where there is blameworthy conduct, the court can go back beyond the date of effective notice to the time of a change in circumstances. Such conduct would include intimidation, lies about income, and failing to disclose a material change in circumstances such as income. [ 13 ] I am not satisfied that there is blameworthy conduct in this matter.

The father says he did not know about the guidelines until he looked them up after the mother broached the subject of a change in support in June of 2007. The mother says he should have known about them and probably did through family members and chose instead to ignore them and pay a lesser amount of support. It is clear, in hindsight, that the father was not paying the proper amount of support. It is also clear that he voluntarily paid support for 8 years in an amount he deemed reasonable and he increased this amount nominally over the years.

The mother took no steps to seek financial information from the father before June of 2007. This was despite the fact that she knew he appeared to be earning a good income. The father was operating under a regime which he believed was acceptable to the mother and it was only in 2007, that he was made aware that the amount he was paying was not satisfactory. [ 14 ] The effective date therefore for an award for retroactive support for the child shall be June 2007. 2) What is the father ’s guideline income? a) 2007 [ 15 ] In 2007, the father was employed at the energy company.

He earned income from his employment as well as business income from renting out equipment. His Line 150 income was $211,398. He will pay support for the child based on that income from July 1, 2007 through to and including December 1, 2007 less any payments made by him during this period. b) 2008 [ 16 ] In 2008, the father was employed by the energy company for most of the year until he left in October to go and work for his wife’s company. He claimed no income from the wife’s company for that year.

His tax return shows a Line 150 income of $91,011 which was his employment income from the energy company. [ 17 ] The material provided on disclosure shows that the father billed out $29,444 for the use of his truck and his man hours in October through December of 2008. This should be added to the income he received from the energy company that year less reasonable expenses. [ 18 ] Determining reasonable expenses is always difficult and more so in this situation because we only have half of the picture. We do not know what the wife does with the income and expenses in her company.

Clearly she is in complete control of that and can divide expenses as she chooses. What we do know is that the father has worked for this same energy company for over 10 years, it is owned by his brother, he has worked there both in a contracting position and as a branch manager and he continues to work for them to this day. He is paid for the use of his truck as well as his man hours.

He would certainly have the expense of the upkeep of the truck as well as tools necessary for his business but it is hard to figure out exactly what those should be. [ 19 ] The mother suggests attributing 8.5 % of the income to expenses and deducting that from revenue earned. She comes to that figure by adding back into income, expenses she believes were inappropriately deducted by the wife from the father’s earnings in the company. While admittedly arbitrary, I will attribute 20% of $29,400 as expenses.

I can do no better given the very poor breakdown of expenses in the financial statements but acknowledge that the father would have expenses for his truck and tools. This would leave approximately $23,000 in net income to be added to employment income in 2008 for a total income of 114,000 for purposes of child support.

c) 2009 and 2010 [ 20 ] I make the following observations: 1) The revenue of the wife’s company went from $14,000 to $160,000 between 2008 and 2009. It then increased again to $193,000 in 2010. 2) There is virtually no equipment listed in the 2009 statements although the father says his wife was earning income renting out equipment. 3) I do not accept as the father says, that the rental of equipment is only the wife’s business. The father has always rented out his equipment in addition to his work as an electrician.

He did so while he was contracting to the energy company years ago, he did so again when he was employed with them and he does again now. The time sheets invoiced to the energy company show billing for both man hours which would be the fathers work as well as truck hours which is the truck used by the father. 4) The history of income earned by the father is as follows ( Line 150 income): 2004 - $194,000 2005 - $97,212 2006 - $218,041 2007 - $211,398 2008 - $91,011 2009 - $40,657 2010 - $40,615 [ 21 ] In 2009 and 2010, the father shows an income of $40,000.

These are reflected in T-4 slips he received from his wife’s company for the work done through that company. That is all that shows on his tax return. [ 22 ] His wife’s company increased it’s revenues between 2008 and 2009 from $14,000 to $160,549. The expenses (less $57,630 in salaries) total $82 ,662 or roughly 50% of revenue.

The large expenses included in that number are $32,996 for travel, $11,714 for vehicles and $12,004 for equipment rentals. [ 23 ] The father provided a breakdown given to him by his wife showing that the father generated $111,816 in revenue for his labour and the use of his truck between January and the end of July 2009 which was billed to the energy company. This works out to about $16,000 per month gross revenue or $191,000 per year. I would reduce that by one month as clearly the father is not paid when he does not work and is entitled to holiday time.

That would put the gross revenue that he generates to the company at about $175,000 for 2009. (It is to be noted that the income I have imputed for the father and the revenue to the wife’s company do not relate to each other as they have different year ends). Applying a 20% expense ratio, this would reduce his income for child support purposes to $140,000 leaving him with $35,000 for expenses which in a review of the financial statements for his wife’s company is more than reasonable for the work which he does. [ 24 ] In the 2010 financial statements, the gross revenue of the wife’s company was $193,054.

This is an increase in revenue from the 2009 financial statements of 20%. There is no breakdown of the billings for that period of time but it is reasonable to assume that the

increase relates at least partially to the father’s billings to the energy company without any evidence to the contrary. I would increase his gross revenue to the company then from $175,000 in 2009 to $191,500 for 2010 representing 50% of the increase in revenue to the company. I would reduce that revenue by 20% for expenses leaving him with an income in 2010 for child support purposes of $153,200. [ 25 ] Given the respective incomes of the parties, I do not find there are any

section 7 expenses other than child care, camps, and the usual health and dental expenses set out in the guidelines.

Summary [ 26 ] Commencing July 1 st , 2007, the father shall pay child support based on the incomes that follow: 2007 - $211,400 (July - December) 2008 - $114,000 2009 - $140,000 2010 - $153,200 2011 - $153,200 [ 27 ] All payments made towards child support during those periods shall be set off against outstanding arrears. The father may pay the arrears over a short period of time.

If the parties cannot agree on these payments, I will set them. 3) What is to be the amount of ongoing child support? [ 28 ] Ongoing support shall be set based on an income of $153,200 until such time as further financial information has been provided. I am hopeful that the parties can use this decision as a template to calculate future guideline income without the need to return to court. What is required is information with respect to the billings of the father’s time and use of his truck. The 20% expense ratio would then be used unless better evidence becomes available.

Costs [ 29 ] Costs may be spoken to if necessary. Heard on the 9th day of November, 2011. Dated at the City of Grande Prairie, Alberta this 1 day of December, 2011. C.L. Kenny J.C.Q.B.A.

Appearances: Mr. Glenn Taylor for the Applicant Ms. Jennifer Villebrun for the Respondent