McLachlan v Deluca (McLachlan), 2012 ABQB 148

Court of Queen ’ s Bench of Alberta Citation: McLachlan v Deluca (McLachlan), 2012 ABQB 148 Date: 20120301 Docket: 4803 150697 Registry: Edmonton Between: Brian William McLachlan Respondent/Plaintiff - and - Barbara Deluca, Also Known As Barbara McLachlan Applicant/Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr.

Justice Donald Lee _______________________________________________________ [ 1 ] Just prior to a scheduled Special Family Law Chambers Hearing on the matter of imputing income to the husband, counsel for the wife seeks to have the Court Order certain Answers to Undertakings disclosing the husband ’ s mutual funds and RRSPs statements, that the husband refuses to answer or provide.

The husband takes the position that questions with respect to his mutual funds and RRSPs do not have to answered as they are not relevant to his Line 150 total taxable income amounts. [ 2 ] The wife submits that she is entitled to this information because the pending Special Chambers Hearing in a few days will be asked by her to determine whether the amount of the mutual funds and RRSPs should be taken into account when she seeks to impute income to the husband.

[ 3 ] The husband was a manager at a major grocery chain since 2008 for several years and where he earned approximately $45,000 a year. His current 2011/2012 income in China teaching English is about $12,000 Canadian, although his tax return apparently shows over $2,000 in additional of investment income. [ 4 ] In support of the wife ’ s application, her counsel argues that he must have the husband ’ s three mutual fund statements and one RRSP statement to determine the earning capacity of those assets.

Without knowing the size and scope of the assets, he cannot determine whether the $2,000 investment income is an appropriate return on an annual basis from those assets. [ 5 ] The wife is seeking to impute income to the husband pursuant to

Section 19 of the Guidelines which reads as follows: – 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: (

a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse; (

b) the spouse is exempt from paying federal or provincial income tax; (

c) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada; (

d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines; (

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; (

g) the spouse unreasonably deducts expenses from income; (

h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and (

i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust. [ 6 ] The husband ’ s counsel replies that, at least in Alberta, the attribution of income for salaried and non-salary related items is governed by the majority decision in Hunt v Smolis-Hunt , 2001 ABCA 229 . There our Court of Appeal decided that income cannot be attributed to the non-paying spouse unless the specific purpose for his/her under employment was to avoid child support obligations. Even in the rest of Canada, it is submitted that the whole issue of the mutual fund and RRSPs statements would also be irrelevant. Conclusion

[ 7 ] I agree with counsel for the wife who relies on the following case summaries to advance his argument to requiring disclosure of three mutual fund statements and the RRSP statement: – C(J.P.) v. K(D.I.) (1998), 1998 CarswellOnt 4096 , 76 O.T.C. 286 (Gen. Div.) , additional reasons at (1998), 1998 CarswellOnt 4469 (Ont. Gen. Div.) In this case neither party had any significant income flow but they did have capital assets.

In referencing the SCC decision in Willick , the court stated (at paragraph 12) that the financial resources of the parties to be considered in determining their ability to pay child support must include all assets of the parties. This concept requires that there be an income stream imputed to each of the parties based on their respective capital assets capable of generating income.

The fact that any particular assets is in a form or transferred into a form which is tax sheltered and thus not producing taxable income is not determinative of the value to be placed on the capital assets of each of the parties; it is merely one factor to be taken into account. Googoo v. Googoo , 2010 CarswellNS 84 , 2010 NSSC 49 The Court imputed income to the father based on underutilization of his assets. The father claimed that he earned no income after the sale of his business; however the Court determined that the father had $850,000 in his investment account.

A conservative rate of return on this account would have been 5 percent which would produce an income of $42,500 per year. McCaffrey v. Dalla-Longa , 2008 CarswellAlta 408 , 2008 ABQB 1832 , 441 AR. 122 , 67 R.F.L (6th) 12 (QB) The father chose to use his RRSP ’ s to house his shares in a company as well as the latest gains made on these shares, choosing this over other income earning alternatives and in the same year, claiming an overall loss of income. The court imputed income to the father based on the gains made from the sale of his shares held in his RRSP based on a rate of 5 percent.

The Court found that 5. 19(1)(

e) is available where the spouse ’ s capital assets, including an RRSP, are not being adequately used. The court made reference to C(J.P.) v. K (D.I. ) (1998); 1998 CarswellOnt. 4096 (cited previously) . Lessard v.

Mahoney , 2007, CarswellRC. 880, 2007 I3CSC 562 (Master) The Court determined the amount of the father ’ s income taking into account among other things the values he placed on his Mexican residence and money he held on deposit in the Grand Cayman Islands. [ 8 ] I now understand that the husband will be voluntarily disclosing the three mutual fund statements, and the one RRSP statement when they are available. I order that these statements will be provided in any event before the March 5, 2012 Special Chambers Hearing in this matter. Heard on the 28 th day of February, 2012.

Dated at the City of Edmonton, Alberta this 1 st day of March, 2012.

Donald Lee J.C.Q.B.A. Appearances: Christopher Skrobot Jomha Skrobot for the Applicant/Defendant Oana Jurgea Merchant Law Group LLP for the Respondent/Plaintiff