Empson v Findlay, 2012 ABQB 757

Court of Queen ’ s Bench of Alberta Citation: Empson v Findlay, 2012 ABQB 757 Date: 20121211 Docket: 4810 019135 Registry: Red Deer Between: Marie Simone Empson Plaintiff/Applicant - and - Edward John Findlay Defendant/Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Robert A. Graesser _______________________________________________________ Introduction [ 1 ] This is an application by Marie Simone Empson for: a. a declaration that her ex-husband, Edward John Findlay, is in contempt of previous disclosure orders being orders dated May 15, 2009 and November 30, 2011; b. fines for such contempt in the amount of $20,000.00;

c. an order imputing Mr. Findlay's income at $200,000.00 per year for child support purposes; d. setting arrears in child support retroactive to January 1, 2010; e. adjusting s. 7 payments and arrears from January 1, 2010; f. setting ongoing child support; g. correcting an error in the May 15, 2009 consent order; and h. solicitor and client costs. [ 2 ] Mr.

Findlay opposes the application and argues that: a. he has made all necessary disclosure; b. his guideline income should be set on the basis of his line 150 taxable income; c. calculations relating to arrears, s. 7 payments and ongoing child support should be based on his disclosed income; and d. the variation order relating to the May 15, 2009 order should not be granted. [ 3 ] Essentially, Mr. Findlay maintains that there are no arrears and a proper assessment of his child support obligations shows that he has overpaid Ms. Empson. He disputes the reasonableness and appropriateness of some of the s. 7 expenses.

Background [ 4 ] The parties were married in July, 1987 and separated in July, 2007. They were divorced in May, 2009. There are four children, aged 10, 12, 17 and 19. [ 5 ] Before the divorce judgment, which proceeded as a consent judgment and corollary relief order, the parties attended a binding JDR. The consent judgment followed the JDR. [ 6 ] The parties are generally agreed as to where the children have resided since the divorce judgment was granted on May 15, 2009. At that time, Ms. Empson had the primary residence of three of the children; Mr.

Findlay had the primary residence of one of them. [ 7 ] Annual incomes were attributed to both parties at $72,000.00. Mr. Findlay was ordered to make a net payment to Ms. Empson of $737.00 after setting off her obligation to him for the one child in his care.

[ 8 ] Mr. Findlay was to pay Ms. Empson $200.00 per month by way of s. 7 expenses. S. 7 expenses were to be incurred only with the prior consent of the other party, such consent not to be unreasonably withheld. [ 9 ] Mr. Findlay was to disclose his gross monthly income to Ms. Empson by the 15th of the following month, and if he failed to do so, Ms. Empson could bring a contempt application after three months from May 15, 2009. Ongoing disclosure was ordered, including financial statements for any private corporations in which he had an interest. [ 10 ] Enforcement was stayed conditional upon Mr.

Findlay providing the necessary disclosure, and paying at least 20 percent of his gross earnings until he is current in his obligations. [ 11 ] The child who was originally residing with Mr. Findlay went to live with Ms. Empson in July, 2009 so Ms. Empson then had the day-to-day care of all four children. A consent order was granted on September 9, 2009 reflecting this change, and ordering Mr. Findlay to pay Ms. Empson $1,636.00 per month, from July 16, 2009. That amount was based on the $72,000.00 income reflected in the May 14 order. [ 12 ] Ms. Empson has stable employment as a nurse. Mr.

Findlay works in the oil patch. In his affidavit of October 12, 2012, he swears that he was unemployed in July, 2007 when the parties separated, because of a slowdown in the oil and gas industry. He apparently worked sporadically until the summer of 2008, and was out of work again for much of 2009. He left Alberta in the fall of 2009 and worked as a grape-picker for some time.

He returned to Alberta in January, 2010, by his old employer and worked for the first half of the year for them. [ 13 ] Since then, he has worked through a company initially owned by a friend, but which has now been transferred into his ownership. Mr. Findlay's finances have been complicated by his bankruptcy on July 10, 2009. He was discharged on September 29, 2010. [ 14 ] Mr. Findlay does not dispute that he did not comply with the disclosure provisions in the May 15, 2009 judgment/order.

His excuse for not doing so is that he has "no recollection of the specific terms of the Order of May 15, 2009". [ 15 ] Once Ms. Empson began these proceedings against Mr. Findlay, disclosure was sought by her. On November 30, 2011, LoVecchio J. ordered that Mr. Findlay make detailed disclosure by January 30, 2012. He ordered costs of $500.00 against Mr. Findlay, and ordered that if the required disclosure was not made in time, costs would be increased to $1,500.00, and $200,000.00 per annum would be imputed to Mr. Findlay. [ 16 ] Much of the required disclosure was provided on January 27, 2012.

Deficiencies in the disclosure were noted by Ms. Empson's counsel by way of a letter to Mr. Findlay's counsel dated February 1, 2012. No further disclosure was provided by Mr. Findlay. Analysis a. Contempt [ 17 ] There is no doubt that Mr. Findlay is in contempt of the May 15, 2009 order. That order has not been varied. It requires Mr. Findlay to provide monthly information as to his gross earnings. If that was ever done, it was not until January 27, 2012 and nothing has been provided since then.

[ 18 ] Justice LoVecchio's November 30, 2011 order is very clear. Ms. Empson's supplemental affidavit sworn October 4, 2012 details the deficiencies in disclosure from that order. Significantly, from the disclosure which was made, there are a number of missing invoices. No confidence can be obtained from the disclosure to date that Mr. Findlay is disclosing all of his revenues, whether they be personal or through corporations he controls or in which he has an interest. [ 19 ] I have no hesitation in finding Mr. Findlay in contempt of both orders. b.

Remedy for Contempt [ 20 ] The Court has a broad discretion as to what to do about litigants who are in contempt of court. These range from imprisonment to an admonishment. Here, Ms. Empson seeks an order that Mr. Findlay pay fines totalling $20,000.00, she seeks an order imputing $200,000.00 per year income to him, and she asks for solicitor and client costs. Fines and costs are in the spectrum of possible remedies.

I do not think that attributing income for child support purposes fits within the range of remedies or punishments for contempt. [ 21 ] Any fine would be payable to the Court, and that may be attractive in some cases, particularly when the contempt has resulted in a waste of public resources such as court time, court administration and related services like Maintenance Enforcement. This case would appear to have occupied a modest amount of court and related administrative time, thus I do not see this option to be appropriate in the circumstances here.

There are circumstances where fines may be ordered payable to the Court, but this is not one of them. [ 22 ] The Child Support Guidelines, as they have been interpreted in Alberta, do not provide for the imputation of income as a broad, general remedy in child support matters. Hunt v. Smolis-Hunt , 2001 ABCA 229 , limits imputation of income to situations where the Court finds as a fact that the payor is deliberately unemployed or underemployed with the intent of avoiding or lessening his or her child support obligations.

Punishing a payor who has not provided proper and timely disclosure is not within this framework. [ 23 ] Imputing income is a remedy where the evidence before the Court indicates that the payor is under-reporting or failing to disclose income. In those circumstances, the Court has to do the best it can to reconstruct history, and make a finding as to the payor's likely income for the period in question. But on an ongoing basis, imputing future income is at best an exercise in cash flow management.

If the actual income proves less than the imputed income, the payor will in most circumstances be entitled to an adjustment based on reality. It is in those circumstances that the Court may determine that the actual earned income is less than it should have been because of the payor's bad intent, and impute a larger income. [ 24 ] That leaves Ms. Empson's claim for solicitor and client costs. I will deal with that at the end of this decision. [ 25 ] Neither party has sought to vary the May 15, 2009 order relating to the monthly financial information. The reality here is that Mr.

Findlay continues to be in contempt of those provisions. I will also address ongoing disclosure later in this decision, as my intent is to try to find a way to accomplish meaningful, ongoing disclosure. c. Guideline Incomes [ 26 ] Following the order of May 15, 2009, Mr. Findlay had the obligation, and opportunity, to demonstrate on a monthly basis his lack of income. That order was consented to, following a JDR. Mr.

Findlay's affidavit claims that his guideline income has been as follows: 2009 - $6,106.00, 2010 - $72,485.00 (including pre-tax income from his company), 2011 - $68,630.00 (including a pre-tax loss of $1,370 in his company).

[ 27 ] There are no financial statements for his company, which Mr. Findlay explains by being unwilling to bear the cost of preparing financial statements.

Schedule 125 to his company's tax returns shows the following gross incomes: 2010 - $105,130.00 2011 - $219,677.00 [ 28 ] No information for 2012 has been provided. [ 29 ] For 2010, expenses of $106,500.00 were claimed. These include salaries of $47,849. I cannot reconcile Mr. Findlay's affidavit evidence with the amounts in the body of his affidavit, although the $47,849 would appear to be his income. Why he reported less on his tax return is unclear, although some of that may be explained as company- paid benefits that were not required to be shown as a taxable benefit. It seems, however, that his affidavit incorrectly shows pre-tax profits. The number from

Schedule 125 is a loss of $1,370. There are a number of missing invoices from his company for the latter part of 2010, and while the difficulties in disclosure give me no real confidence that

Schedule 125 is accurate, there is no other information before me. Having regard to

Schedule 125 for 2010, I set Mr. Findlay's guideline income at $47,849. The amount over what was shown in Mr. Findlay's personal tax return is likely benefits received from his company for 2010. I will not deduct the company's pre-tax loss, as I consider that Mr. Findlay will have received additional personal benefits from the company in at least that amount over that year. [ 30 ] There is no evidence that Mr. Findlay was deliberately underemployed in 2010. It appears from the evidence before me that he was then taking reasonable steps to re-establish a productive working life.

His gross income of $105,000.00 shows some reasonable effort on his part, having regard to his efforts of the previous year. Starting a new company and re-establishing himself undoubtedly took time and significant expense. I am satisfied on the evidence that $47,849.00 reflects Mr. Findlay's guideline income for 2010. [ 31 ] For 2011,

Schedule 125 shows expenses of $187,192. These expenses include salaries of $73,319, management salaries of $41,807 and net pre-tax income of $32,485. The body of Mr. Findlay's affidavit incorrectly shows a $1,370.00 loss instead of a substantial profit. I conclude that the $73,319.00 salary figure from

Schedule 125 is to be preferred to the amount shown in Mr. Findlay's personal tax return. [ 32 ] There is no evidence that there were any other employees than Mr. Findlay, no other management and no other shareholders. This is a personal service corporation where all of the income is generated by Mr. Findlay's activities. Even without attributing some of the heavy amortization, vehicle and telecommunication costs to personal use (as would be common with many personal service corporations), Mr. Findlay generated at least $146,611 in pre-tax earnings or profits.

I therefore set his 2011 at $146,611.00 which is, in my view, a favourable determination to Mr. Findlay as a percentage of the claimed expenses could very likely have been added back as personal benefits from his company. Having regard to the amount of his income, I do not consider that it is necessary to do so. [ 33 ] I infer from Mr. Findlay's affidavit evidence that he became bitter and upset with Ms. Empson following their separation. He remains unhappy with the matrimonial property settlement and, apparently, the life Ms. Empson has had since their separation.

None of that explains why an experienced oilfield consultant would become unemployed and find work as a grape-picker in the Okanagan. [ 34 ] I do not accept Mr. Findlay's bald assertion that the period from July, 2007 to January, 2010 was one where someone with his abilities could not find skill-related, gainful employment. The evidence before me satisfies me that Mr. Findlay's under-employment, or lack of employment, had more to do with his dissatisfaction about his matrimonial situation and ongoing support obligations than it did with the state of the economy. [ 35 ] There is no evidence that Mr.

Findlay suffered any health problems, and while I might infer that he was depressed, there is no evidence of that and in any event there is no evidence that he sought any treatment. Thus, I am satisfied that it is appropriate for the $72,000.00 income set by agreement in May, 2009 to continue for the balance of 2009, notwithstanding any shortfall in Mr. Findlay actually achieving that income. I find any shortfall to be the result of an intention to avoid his financial obligations to Ms. Empson and his children.

[ 36 ] Mr. Findlay refers to "declining health" in his affidavit, but he gives no details and no supporting medical evidence. In argument his counsel indicated that the reference to declining health was intended to reflect Mr. Findlay's age, and the likelihood that he will not be able to work at the same level for much longer. That may be the case, but that is a future occurrence which might at some stage justify a lower level of effort on Mr. Findlay's part. The evidence does not support a determination that Mr. Findlay is presently unable to work full time, at his current level of employment. d.

Setting Retroactive Arrears in Child Support [ 37 ] There is no controversy over Ms. Empson's guideline incomes. For Mr. Findlay, his are set as follows: 2009 - $72,000.00 2010 - $47,849.00 2011 - $146,611.00 [ 38 ] I trust that the parties through counsel will be able to make the necessary calculations on these guideline incomes so that their respective payments will be adjusted according to when the children were with each parent (referencing para. 22 in Ms. Empson's October 4, 2012 affidavit). Mr.

Findlay's October 12, 2012 affidavit in para. 31 sets out his calculations of support obligations, and his analysis of where the children were at the various times. I have not compared the two positions on where the children were. They appear to be similar, if not the same. To the extent that there is a difference, Ms. Empson's version, as the parent who has provided the greatest level of residential care to the children since the date of the divorce, should be preferred. That will allow the determination of any overpayments and arrears in s. 3 payments. [ 39 ] Ms.

Empson seeks, on an ongoing basis, an order increasing Mr. Findlay's guideline income by an automatic 10 percent per year. Absent agreement of the parties, I doubt that I have jurisdiction to do so. Support is to be based on actual incomes, or imputed incomes only in limited circumstances. There is no guarantee that either party's income will increase by any percent next year. Mr. Findlay's employment and income is to some extent governed by the economy and what happens in the oil and gas industry. Ms. Empson's income is determined through collective bargaining.

There is no evidentiary basis for me to make such an order, even if I had jurisdiction to do so. e. Adjusting s. 7 Payments and Arrears [ 40 ] From the above findings, it is clear that the s. 7 split between the parties is 50-50 for 2009, and will then be calculated on the parties' guideline incomes as determined above. [ 41 ] I disagree with Mr. Findlay that hockey expenses for four boys in rural Alberta are either unreasonable or part of s. 3 expenses. Neither are swimming lessons, or skiing lessons. All of these activities are healthy and appropriate activities.

Apart from 2009, these parties have had combined incomes of well over $100,000.00. Extracurricular activities for four children totalling less than 5 percent of the parents' combined incomes do not seem unreasonable. Mr. Findlay should happily pay his fair share of these worthwhile expenses. I assume that Ms. Empson has provided or is able to provide receipts for the expenses claimed, and that the receipts are for significant expenditures, not $5.00 skate sharpenings or $3.00 skate laces. Smaller items would be expected to be covered in s. 3 payments. f.

Setting Ongoing Child Support [ 42 ] It is clear from the evidence that Mr. Findlay has the capability of earning a large income. He did so before the parties separated, and has done so again in 2011. There is no indication that he will earn less in 2012 than he did for 2011. Ms. Empson suggests that he may earn or be earning as much as $300,000.00. If he is, presumably that will show up in his 2012 personal and corporate filings. And if he is, his children should benefit from the greater income, just as they would have benefited if the parties were still together.

[ 43 ] I provisionally set Mr. Findlay's guideline income for 2012 at $146,611.00. Ms. Empson's guideline income for 2012 is provisionally set at $92,430.00 as set out in her affidavit of October 4, 2012. [ 44 ] S. 7 expenses shall be borne proportionate to the parties' respective earnings. There is nothing in the projected expenses for 2012 set out in para. 32 of Ms. Empson's affidavit that appears unreasonable, subject to Ms. Empson providing appropriate documentation to Mr. Findlay, if requested. [ 45 ] In the May 15, 2009 order, Mr. Findlay was to pay $200.00 per month on account of s. 7 expenses.

Because of the magnitude of the expected s. 7 expenses, and the fact that Ms. Empson has the children on her health plan, Mr. Findlay should be paying $300.00 on account of s. 7 expenses, starting January 1, 2013 and continuing until there are no children of the marriage, or further court order. [ 46 ] S. 7 expenses should be adjusted annually, after financial information has been exchanged by the parties for the previous year. g. Correcting an Error in the May 15, 2009 Consent Order [ 47 ] Ms Empson points out that paragraph 14 of the May 15, 2009 consent order provides that Mr.

Findlay was to be responsible for all matrimonial debt in his name. The order did not include a provision that Mr. Findlay was to be responsible for all corporate debt of his corporation, 407254 Alberta Ltd. That was the corporation through which Mr. Findlay provided services in the oil patch. Before the divorce, Ms. Empson was a director and shareholder. By the time of the divorce, she had resigned as a director and transferred her shares to Mr. Findlay. She relies on Rule 9.16 as my authority to correct this error in the order.

She argues that I have the jurisdiction to grant this relief, even though I was not the judge who granted the order. [ 48 ] In support of her position that the order can be varied even after it was entered, she cites Fas Gas Oil Ltd. v. J.H. Automotive Ltd. , 2004 ABCA 120 . [ 49 ] According to Ms. Empson's counsel, the intent of the parties at the JDR was for Ms. Empson to leave the marriage with no debt and that Mr. Findlay was to assume all debt, including corporate debt. That was because Mr. Findlay had, according to Ms. Empson, dissipated matrimonial assets through gambling.

The provision regarding corporate debt did not make its way into the divorce judgment. [ 50 ] Mr. Findlay does not agree with Ms. Empson's contention that matrimonial property was dissipated by him. He disputes the Court's authority to correct the order under Rule 9.12. [ 51 ] The "slip" alleged by Ms. Empson did not result out of a brief application. Rather, it came out of a JDR. In my view, while I may have the jurisdiction to make the order sought, it is a discretionary jurisdiction.

While I recognize that it may be somewhat costly, inconvenient and time-consuming to make the application before Marceau J., who presided at the JDR, it is more appropriate that he make the determination as to the intention of the parties when the settlement was reached, or the terms were set by him. Marceau J. will have to determine on the evidence before him whether this variation is a slip, permitting the change pursuant to the Court of Appeal's directions in Fas Gas . [ 52 ] In the face of a conflict between the parties, I cannot, without more evidence on the subject, make such a determination.

It is likely that Justice Marceau will have a recollection of the matter, and he is in a much better position than I am to rule on this subject. [ 53 ] Because of potential income tax consequences arising out of the requested order, notice of the application should be given to the Canada Revenue Agency. [ 54 ] I point out that costs of such an application may be substantial, and will be in Marceau J.'s discretion.

h. Solicitor and Client Costs [55] Ms. Empson has been put to the expense of making an application for disclosure before LoVecchio J. He has already dealtwith costs of that application. His order was not complied with, so Ms. Empson is entitled to the ordered costs of $1,500.00. She hassucceeded in the main on this application, although she has recovered less than she sought, and Mr. Findlay's guideline income for 2010has been reduced. The substantial increase for 2011 and (provisionally) for 2012 will offset any reduction for 2010, and Mr. Findlay isalso responsible for significant s. 7 expenses. Ms.

Empson is entitled to her costs of the application. [56] There is certainly a discretion to order solicitor-client costs or

Schedule C costs, or for that matter, costs on any other basis Idetermine to be appropriate. [57] Mr. Findlay's continued contempt is a consideration here, and the difficulties he has put Ms. Empson through and hiscontempt of court weigh in favour of a heavy measure of costs against him. Jackson v. Trimac Industries Ltd., (ABKB), 1993 CarswellAlta 310 (Q.B.) and cases following it are ample authority for that discretion. [58] Ms. Empson's counsel seeks $20,000.00 in solicitor-client costs, which she says represents Ms. Empson's costs of thisapplication since it began in 2011. [59] Costs on Column 3 of

Schedule C, according to Ms. Empson, are approximately $5,300.00. [60] Legal costs of $20,000.00 for a child support variation application may be reasonable or not. That will depend on a carefulanalysis of each thing done in the litigation and the cost of doing so. That process can, especially where the parties have a history ofdisagreement, take on a life of its own. However, I do not want to turn a dispute over costs into another costly and lengthy battle andperpetuate the discord between these parties through continued court battles. [61] In this matter, I consider it appropriate to award costs to Ms.

Empson of two times Column 3. The application beforeLoVecchio J. is to be included at $1,500.00 and not two times Column 3. Paralegal time is not a disbursement but subsumed within thefee portion of the bill of costs. [62] Doubling the amount of a "usual" cost award appropriately reflects the additional time and effort Ms. Empson and hercounsel have had to put into this matter, as well as reflecting the Court's strong disapproval of Mr. Findlay's actions and contempts ofcourt. I. Further Disclosure [63] At this stage, I see little point continuing Mr.

Findlay's monthly disclosure obligations under the May 15, 2009 order. He hasprovided the majority of the important records ordered to be disclosed by LoVecchio J. in November, 2011. I see little point continuingthat order and requiring further production of old records as they relate to 2009 to 2011. [64] As a result, para. 20 of the May 15 order should be varied to read: 20. Annual disclosure by the Defendant shall include copies of the tax returns for any corporation the Defendant has an interest in,directly or indirectly, for the corporation's most recent year end.

Disclosure shall include financial statements (if any) prepared for thecorporation's year end. Disclosure shall also include copies of all invoices submitted to customers or clients of the Defendant or suchcorporation, and other supporting corporate records as may be reasonably requested by the Plaintiff to verify the Defendant's income.

[ 65 ] Paragraph 21 should be deleted. [ 66 ] Subject to the application to vary the order, which is to be heard by Marceau J. if not previously consented to, the remainder of the May 15, 2009 order is otherwise confirmed in full force and effect. Heard on October 23, 2012 at Red Deer, Alberta Dated this 11 th day of December, 2012 at Edmonton, Alberta. Robert A. Graesser J.C.Q.B.A. Appearances: Sharon J. Crooks Rowanoak Law Offices LLP for the Applicant Buddy G. Melnyk Gerig Hamilton Neeland LLP for the Respondent