Thorpe v. Thorpe, 2012 ABQB 124

Court of Queen ’ s Bench of Alberta Citation: Thorpe v. Thorpe, 2012 ABQB 124 Date: 20120224 Docket: 4803 153988 Registry: Edmonton Between: Jane Emma Thorpe Plaintiff - and - Lloyd Anthony Thorpe Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Donald Lee _______________________________________________________ [ 1 ] These parties lived in a commonlaw relationship beginning in 2001 and were married in January 2007. They separated in April 2010. There are five children of the marriage, ages 18 ½ , 16 ½ , 14, 10 and 7.

The three eldest children are not biological children of the husband, although the husband acknowledges that he stands in loco parentis to the children. The husband submits however that his wife receives approximately $750 per month in child support from the biological father of the three eldest children, and that any child support payable to the wife should be reduced by that amount. The oldest child no longer lives with the wife as he is attending a post- secondary institution in British Columbia.

The husband pays that child ’ s tuition, books, living expenses and believes that for purposes of determining child support, the oldest child should be listed as living with the wife. [ 2 ] The husband is self-employed as a computer tester and computer consultant. Although his income in 2010 was $250,500, he

[ 2 ] The husband is self-employed as a computer tester and computer consultant. Although his income in 2010 was $250,500, he now says that due to circumstances beyond his control and due to government austerity at the provincial level, he has lost a number of contracts and his income in 2011 dropped to $115,000. [ 3 ] There is an Interim Order pronounced in this Court as of June 29, 2011, in which the parties agreed that based on the husband ’ s 2010 guideline income of $250,500 that he would pay child support for the four children in the sum of $5,249 per month commencing retroactively from May 1, 2010.

The parties also agreed in the Order that the husband would pay the wife spousal support in the sum of $5,775, being the net after tax amount of $4,000 a month commencing July 1, 2011 until further order of this Court. [ 4 ] The husband now submits that he can no longer afford to pay child and spousal support as directed in the Interim Order granted on June 29, 2011, and he seeks to have both child and spousal support retroactively adjusted to reflect his significantly reduced 2011 income. [ 5 ] The husband also seeks to have the matrimonial home listed for sale since the wife is unable to pay all of her house related expenses after the retroactively adjusted child and spousal support has been determined.

The husband further seeks to have $25,000 of annual income attributed to the wife. [ 6 ] The wife takes the position that the husband should be found in contempt for his breach of the Interim Order granted on June 29, 2011, in this Court. Given the husband ’ s lack of payments pursuant to that Order, the wife seeks as a further remedy the stay of the husband ’ s application to review child and spousal support until the husband purges his contempt.

The husband is alleged to have only paid proper support on one occasion, and that he has made little effort to make any payments on the arrears of child or spousal support. His support arrears as of December 1, 2011, are over $37,000. Analysis [ 7 ] The wife in this case has been a stay at home mother, and did not work outside the home during the nine plus years that these parties resided together.

The wife was always the primary caregiver to the children since birth, and the two youngest children are still being home schooled. [ 8 ] Although the husband acknowledges that he is not up to date in his payments, that is because he can no longer afford to make those payments given his significantly reduced 2011 income.

The husband notes that he has been trying to reduce those child and support payments for a considerable period of time now, and furthermore that the Order was an Interim Without Prejudice Order to either parties ’ right to have support reviewed without having to prove that there has been a change in circumstance.

Furthermore, that the parties had the right to have child support retroactively adjusted including an adjustment to take into consideration any funds that the wife received from the biological father of the eldest three children; and the Order was subject to further and full financial disclosure by the parties. [ 9 ] It is very difficult to determine the husband ’ s annual guideline income currently because he is self-employed and controls his own computer consulting company.

We do know that his net income for tax purposes steadily rose from his March 31, 2005 corporate year end through to his March 31, 2010 year end as follows: 2005 $92,400 2006 $125,486 2007 $167,723 2008 $184,115 2009 $214,933 2010 $250,500

[ 10 ] I also note that in 2010 the amount of the husband ’ s $250,500 dividend grossed up by five fourths leads to a figure of $313,125 on the husband ’ s T5 for 2010. [ 11 ] In seeking to reduce his support obligations significantly, the husband relies entirely on his lost contracts that are due to Alberta Government fiscal restraint, although he does not necessarily establish that the Government is actually in a fiscal restraint mode, nor does he establish any direct affect of that alleged government restraint on his own reduced contracts, other than generally.

The husband then relies on his accountant to establish the proposed $115,000 annual 2011 guideline income. [ 12 ] The accountant in his letter dated August 24, 2011, provides a rather complex analysis of how he arrives at the $115,000 annual figure, but I conclude that at best it is somewhat deductive. The accountant makes a number of assumptions with respect to revenue and expenses that may not necessarily be accurate, or proven in the evidence.

For example, the accountant in the August 24, 2011, letter assumes a hourly rate of $85 an hour and that the husband works an average of 40 chargeable hours per week using a 50 week year to arrive at the company ’ s gross income of about $170,000. This may or may not be realistic, and certainly is much lower than what the husband has earned in the past. For expenses the accountant uses $40,000, which is higher than any of the expenses referenced in prior years by the accountant ’ s own acknowledgement (2006 - $18,000; 2007 - $25,000; 2008 - $33,000; 2009 - $28,000).

Eventually the accountant uses an expense figure of $35,000, off setting the gross revenues of $170,000, leaving the company with a net income of $135,000. Then the accountant further reduces this amount by another $20,000 for corporate taxes, leaving $115,000 available for the husband. [ 13 ] On a cash flow basis, the husband, according to the accountant ’ s letter, requires approximately $7,200 a month or $86,400 a year for his own personal lifestyle costs and expenses, leaving approximately $10,000 for maintenance payments.

The accountant then had pared this figure down to about $6,000 a month, meaning that the available monies available for child and spousal support would be approximately $2,000 a month or $24,500 a year, as opposed to the $10,781 a month or $129,373 a year that the Court has currently ordered. At this level of Court ordered support, the accountant opined that the husband would be absolutely destitute and that neither the husband nor his company would have the funds to pay his tax obligations let alone any personal living costs.

In order to meet the Court ordered payments presently, the husband would have to generate according to the accountant ’ s letter, an additional $110,000 of net income after taxes, which would require an additional $500,000 of gross revenue. Conclusion [ 14 ] While the accountant ’ s detailed analysis as to the husband ’ s annual 2011 guideline income is of some assistance, it makes a number of assumptions which are not necessarily proven in the evidence before me.

For example it assumes an $85 an hour 40 billable hour weeks for 50 weeks, and it somewhat arbitrarily comes up with between $35,000 and $40,000 of direct expenses. Without actual company Financial Statements for the year ending March 31, 2011 and March 31, 2012, the Court has a very difficult task of simply accepting the accountant ’ s assumptions without reservation.

I conclude that without these most recent Financial Statements showing actual revenues and expenses, the accountant ’ s assumptions are just that, assumptions based on information received from the husband that have not been tested by the actual records of revenue and expenses received and expended. [ 15 ] As such the Court must take into account the general trend in the self-employed husband ’ s income over a number of years, and while it can reduce his annual guideline income for 2011 somewhat, I am not prepared to reduce it from over $250,000 to $115,000.

I conclude that the husband ’ s 2011 guideline income should be set at $175,000 based on all of the information presently before me, or the lack thereof of financial information. [ 16 ] To the extent that the wife actually receives child support from the biological father, these actual amounts received, as opposed to the amounts ordered to be paid but not necessarily paid by the biological father, will reduce the wife ’ s child support payments received, or the husband ’ s accumulated arrears. [ 17 ] While the Court ’ s Order of June 29, 2011, was interim, and without prejudice, any review of that Order still has to be based on some further financial disclosure even if a material change does not have to be shown.

In this case the updated financial records now provided are very limited, and there has been little if any further disclosure with respect to financial matters since the June 29, 2011, Order.

[ 18 ] I am also prepared to impute minimum wage earnings on the wife notwithstanding that she continues to care for four children at home, two of whom are being home schooled. I set the wife ’ s annual guideline income at $17,500 a year. Based on the revised guideline income for the parties, I reduce the husband ’ s interim spousal support obligations to $3,000 a month from $5,541 a month.

All of these reductions in interim child and spousal support payments will be retroactive to January 1, 2011, in the case of child support; and May 1, 2011, in the case of spousal support. [ 19 ] Given that these revised and lower support payments may result in the wife not being able to financially pay all expenses related to the rather large $750,000 matrimonial home that these parties currently own, if the wife is not able to qualify for a mortgage in order to buy out the husband ’ s equitable interest in the property within a reasonable period of time, the wife will have to list the matrimonial property for sale. [ 20 ] I also dismiss the wife ’ s contempt application against the husband given that the husband ’ s financial circumstances did appear to deteriorate somewhat rather quickly from the June 29, 2011 Order.

I have further decided that each party will bear their own costs for this application. Heard on the 22 nd day of February, 2012. Dated at the City of Edmonton, Alberta this 24 th day of February, 2012. Donald Lee J.C.Q.B.A. Appearances: Jerry Kiriak Jerry D. Kiriak Professional Corporation For the Plaintiff Joanne Tymafichuk Attia Reeves Tensfeldt Snow For the Defendant