Storey v. Simmons, 2013 ABQB 168

Court of Queen ’ s Bench of Alberta Citation: Storey v. Simmons, 2013 ABQB 168 Date: 20130321 Docket: 4801 134738 Registry: Calgary Between: James Bernard Storey Plaintiff/respondent - and - April Rose Simmons Defendant/applicant _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice J.B. Veit _______________________________________________________

Summary [ 1 ] In this special chambers application, Ms. Simmons asks the court to include in Mr. Storey ’ s income for purposes of child support the money Mr. Storey receives as a Veterans Affairs Disability Pension. Invoking Manuge , Mr. Storey opposes that application on the grounds that the VA disability pension does not replace income and therefore should not be included as income under the Federal Child Support Guidelines. [ 2 ] Mr.

Storey ’ s position is, essentially, correct: the definition of “ income ” in the Federal Child Support Guidelines does not include property or assets or wealth, but is focussed instead on income as exemplified by Line 150 total income on the T1 General tax report. Mr. Storey ’ s disability pension is akin to an award for pain and suffering in a tort case; it includes no component for loss of past or future income or loss of capacity to earn income. Awards for pain and suffering are sources of funds which have not historically been

included in the calculation of income for child support cases because they are property, not income. However, one component of Mr.Storey’s pension relates directly to his obligation to maintain children; that portion of his pension is deemed to be income for thepurposes of calculation of his ongoing child support obligation. Because that portion of his income is, like the totality of his VAdisability pension, received tax-free, that portion of the pension will be grossed up for tax purposes before being added to the line 150income. [3] Ms.

Simmons also asks the court for retroactive support based on the Veterans’ Affairs benefit and for retroactivecontribution to s. 7 expenses. Mr. Storey’s obligation for retroactive support will be recalculated using his actual Line 150 incometogether with the additional pension he receives in relation to his two children. Ms. Simmons’ claim for s. 7 expenses is incomplete;therefore, it is adjourned to await the filing of the required information. Finally, Ms. Simmons must contribute to Mr. Storey’s highaccess costs.

In the result, this court makes no retroactive award as it would be unfair to deal only with baseline support without takinginto account both s. 7 expenses and the mother’s obligation to lower the father’s child support by contributing to his access travel costs. Cases and authority cited [4] By the Applicant, Ms. Simmons: Snelgrove v. Snelgrove, 2011 NSSC 77; Savery (Redding) v. Redding, 2007 NLTD178; Lush v. Andrews, 2012 Nfld 240. [5] By the Respondent, Mr. Storey: Manuge v. Canada, 2012 FC 499, 2012 CarswellNat 1207; Marbach v. Marbach, 2008ABQB 516, 2008 CarswellAlta 1996; M. (M.W.) v.

M. (H.L.), 2010 NBCA 86, 2010 CarswellNB 586; Nielsen v. Nielsen, 2007 BCCA604, 2007 CarswellBC 2913; K. (M.) v. S. (R.A.), 2004 BCSC 1798, 2004 CarswellBC 3377; Morrone v. Morrone, 2007 CarswellOnt7392; Ruel v. Ruel, 2006 ABCA 170, 2006 CarswellAlta 673; Pension Act R.S., 1985, c. P-6, s. 43; 1995, c. 18, s. 61. [6] By the court: Burry v Burry 2005 NLTD 184; Dalton v Craig (ON SCDC), [2002] O.J. No. 4686,reversing (ON SC), [2001] O.J. No. 5117; Dedosenco v Beauchamp 2005 BCSC 692. 1. Background [7] The parties, who are the parents of two children, married in 1999 and separated in 2007.

In July 2008, the parties consentedto an interim order which, amongst other matters, set out a parenting regime and ongoing child support of $687.00 per month, based onthe father’s then income of $48,850.00, until further order of the court. The only reference to s. 7 expenses in the order was thefollowing: For the month of July 2008, the parties shall each pay half of the full cost of day care. Beginning on August 1, 2008, the parties shallpay day care costs, net of subsidy and tax benefit, in proportion to their gross annual incomes.

Any change in the daycare shall requirethat both children attend the same facility. [8] That order also included a term requiring the parties to exchange tax information before June 30th of each year. [9] Notably, however, that order contained a preambular comment that the parties had not reached agreement concerning theeffect of the father’s Department of Veterans Affairs Disability Pension on child support calculations. [10] In September 2009, the court made a further interim order, not by consent, allowing the mother to relocate to Ontario with thechildren of the marriage and establishing a detailed parenting

schedule which reflected “the minimum amount of access to be relied uponfor the father”. That order also provided, amongst other terms that the parties, shall both attempt to assist with ground transportation to and from the airport to facilitate the exchange of the children

but did not otherwise deal with the costs of access except for the last paragraph of the order which read: 21. THAT the Defendant (mother) is hereby awarded costs of the within Order in the amount of $2,000.00, such amount to be set off against the Plaintiff ’ s (father ’

s) costs of access with the children, and not payable forthwith or in the division of matrimonial property. [ 11 ] In May, 2011, Mr. Storey retired from full time work with the Department of National Defence and unilaterally changed his child support payment from $687.00 per month to $498.00 per month. [ 12 ] The father was discharged from the military on November 15, 2012, and since then has received long-term disability payments which he characterizes as an income replacement benefit; these payments are set at 75% of the employment income he had previously been earning from DND.

Those payments total $3,818.88 gross per month and commenced January 1, 2013. Mr. Storey acknowledges that this LTD pension constitutes income for the purposes of calculation of child support obligations. His line 150 income for the period since separation is: 2008 $56,355 2009 63,626 2010 34,463 2011 65,166 2012 45,900 [ 13 ] Mr. Storey also receives a Veterans Affairs Canada disability pension in the amount of $4,900.00 per month relating to injuries to his wrist, knees, back, right shoulder and post-traumatic stress; he is not taxed on that amount.

Of his total disability pension, $573.18 represents additional pension which Mr. Storey receives because he is the father of two children for whom he has maintenance obligations. [ 14 ] The mother, who is also employed by the Department of National Defence, earns gross annual income of approximately $48,000.00, i.e. roughly the same amount she was earning at the time of separation. 2. Is the VA disability pension income for purposes of child support calculation? [ 15 ] The Manuge decision is of critical importance in determining the main issue on this application, i.e. the characterization of Mr.

Storey ’ s disability pension. That lawsuit was a class action brought by Mr. Manuge on behalf of approximately 4,500 members and former members of the Canadian Forces. The issue in that case was the characterization of disability pension payments, and, in particular, whether those payments were “ income ” . That case makes it clear that the disability pension paid to veterans is not a form of income replacement: 27 What is clear from the Pension Act and the Minister's Table is that the monthly benefit payable to disabled members of the CF is not intended to be a form of income replacement .

Instead, it is designed to compensate for the loss of amenities of life and for the personal limitations and sacrifices that arise from disabling injuries. This is not entirely lost on the Defendant. According to a 2004 Reference Paper prepared by Veterans Affairs Canada, the purpose of Pension Act disability benefits is to "provide compensation for reductions in the quality, and sometimes the quantity, of life experienced by the disabled" and not, as is commonly believed, to provide a form of income replacement : Affidavit of Sergeant John G.

Bartlett (22 September 2011), Exhibit "B" at p 8 ("Reference Paper: The Origins and Evolution of Veterans Benefits in Canada, 1914-2004" (March 2004) at p 5, also available online: <http://www.veterans.gc.ca/eng/forces/nvc/reference>). [ 16 ] The Manuge decision was not appealed by the Government of Canada; therefore, the case stands as a reliable authority on the character of Veterans ’ Affairs Disability Pensions.

Nor is this result surprising: a society which relies on volunteers to serve the country in its military owes a duty to treat those volunteers honourably and not to stint on compensation when those volunteers are injured while serving their country.

[17] It is true, of course, that the Manuge decision was dealing with a very specific problem and that problem was not childsupport. Nevertheless, since the specific concern of Manuge was whether the payments were income, the analysis in the decision ofwhat is ordinarily meant by income is of great use to courts deciding child support income cases.

The Manuge decision is also importantbecause it demonstrates that a payment for loss of amenities of life which not paid out in a lump sum, but on an installment basis, as in astructured settlement, does not lose its character as property. [18] I have been advised that, at some time in the past although I was not told whether this occurred prior to, or after, the Manugedecision, the Veterans’ Affairs Disability benefit was changed from a pension, i.e. an amount that was paid on an installment basis, to alump-sum payment.

The latter is, of course, the more familiar type of tort award of damages for pain and suffering, although suchawards are, occasionally, paid out as structured settlements. It is clear that income from a lump sum award to compensate for the loss ofamenities of life would be income for the purposes of calculating child support. If the information received about the format of thebenefit is correct, Mr. Storey is part of a relatively small, closed, class of parents. [19] Ms. Simmons argues that all the case law up to the Manuge decision held that these disability pensions were income.

Withrespect, this is not a convincing argument: I am not aware of any case dealing with child support which has had the benefit, as this courthas, of the reasoning in Manuge, which was only decided in May, 2012. Moreover, in comparison to Manuge, the previous case laweither made assumptions about the proper characterization of a veterans’ disability pension, or proceeded on a mistaken understanding ofthe nature of such pensions. As the court itself in Manuge observed, it was bringing a correction to what was “commonly believed”.

Forexample, our Court of Appeal’s decision in Dahlgren, which became the foundation for our Lee J.’s decision in Marbach, which becamethe most extensive support decision for the Nova Scotia decision in Snelgrove, did not deal with veterans’ disability pensions butfocussed instead on whether payments that were tax-free should be grossed-up for purposes of calculating child support. The conclusionthat they should be grossed up for purposes of calculating child support does not assist us in determining if the payments themselvesshould be classified as income or as property.

Similarly, the Williams decision which was an important source of guidance for theNewfoundland decision in Savery (Redding) specifically held that “Veterans disability pension benefits are intended to replace incomeon an on-going basis and they are just as relevant as earned income in cases of support. These are not matrimonial assets. See Burry . . .” Two comments arise. The first is, of course, that Manuge firmly establishes that the veterans disability pension benefits are not intendedto replace income and Savery (Redding) is based on a misunderstanding of the nature of the pension.

The second is that the Burrydecision itself supports the Manuge approach: Veteran's Disability Pension 32 As stated earlier, s. 18(

c) of the Family Law Act excludes a personal injury award, except that part representing compensation foreconomic loss, from being a matrimonial asset which is subject to division. The payment of a disability pension under the Veterans Actis compensation for a disability incurred by a war veteran in the service of their country.

As in other jurisdictions, such as Ontario where"damages or a right to damages for personal injuries ... or the part of a settlement that represents those damages" are excluded from beingdivisible property, the exclusion sections have generally been interpreted in this province in a manner that reflects the remedial nature ofthe property division statutes. In deciding what is a personal injury award, I would first of all agree with the comments of Aitken J. atpara. 47 in Hamilton v. Hamilton (ON SC), [2005] O.J.

No. 3050 where she stated: Although I would word this statement slightly differently to recognize that the Family Law Act does not call for the sharing of particularassets per se, but instead calls for the sharing of the value of certain assets owned at separation, after deduction of the value of certainassets owned at marriage, I would agree with Misener J. that the Act restricts the automatic sharing to the increase in value that occurredduring the marriage but only in regard to assets, the acquisition, retention or maintenance of which bears some relationship to thepartnership that the marriage is said to create. (my emphasis) There Aitken J. was referring to the decision of Misener J. in Pallister v.

Pallister (1990), (ON SC), 29 R.F.L. (3d)395 (Ont. Ct. J. Gen. Div.) where a disability benefit paid related to a disability incurred while serving in the Armed Forces prior tomarriage was held not to be property subject to division. In

summary, therefore, just as a VA disability pension, although available to support a family unit while the unit is together, cannot beclassified as marital property and divided when the couple separates, so that pension is property, not income, for child supportcalculations.

[ 20 ] In other words, the case law pyramid on which Ms.

Simmons builds her claim has a very fragile base either because the seminal cases do not deal with this particular type of disability payment or because there was no consideration, or only erroneous consideration, in the particular case of the actual nature of this particular veterans ’ disability pension. [ 21 ] Moreover, when the veterans affairs disability pension is correctly characterized as being property received in replacement of the loss of amenities of life rather than as income replacement, we see that it fits in to the law ’ s standard approach to the treatment of assets in relation to child support obligations.

We do not require parents to sell assets, such as their residences or their vehicles or their boats, to produce cash which is then considered to be income. Indeed, although the Federal Child Support Guidelines do not define the notion of “ income ” , it is clear from the structure of the guidelines that the basic concept is grounded in what is produced at line 150 of a tax return as income rather than in assets.

Although there is not very much case law on the distinction between assets and income in the context of child support obligations, we do note the decision of the Ontario Court of Appeal, Divisional Court, in Dalton : 1 In our view, the trial judge erred in concluding that there was no evidence that a portion of the settlement was attributable to income replacement. Ms. Ralph's letter makes it clear that some part of the total settlement was for past and future income loss. The parties are in agreement that the amount of $122,000, paid for statutory accident benefits, was for income loss.

Beyond that, there is disagreement. 2 It will be difficult and expensive to determine precisely what amount should be attributed to income. The parties have proposed a number of different options for addressing the issue. Each of those options makes assumptions that are contested by the other. 3 In the end, we consider that the interests of justice and the interests of the parties will be best served if this court determines what we consider to be a fair amount for retroactive child support.

In doing so, we have considered the circumstances of the parties and the amount that is clearly attributable to income. 4 In the result, we allow the appeal and direct that the respondent pay to the appellant $10,000 on account of retroactive child support with prejudgment interest at 2 percent per annum from May 1, 1998 to today.

We fix the costs of this appeal in the amount of $2,500. [ 22 ] Although this is an endorsement, and therefore somewhat lapidary in form, it is clear that the Ontario court is saying that only the portion of the settlement that represents past and future loss of income and loss of capacity to earn income should be taken into account as income for the purposes of calculating child support.

The decision appealed from states that the disability pension in dispute there was a CPP disability pension; I make no comment, of course, on the character of such a pension, although it is clear from the Court of Appeal ’ s decision that it was of the view that at least part of that pension was a replacement of income and that it was only that part that could be taken into account for child support calculations. [ 23 ] Another decision which makes a similar distinction between the portion of an award that represents loss of income and the portion of an award that represents solace for loss of amenities of life is K. (M.) .

That decision is also useful because it traces the existing case law, as of 2004, relating to the imputation of awards for loss of amenities of life as matrimonial property as well as income for the purposes of child or spousal support. In that decision, Wedge J. states: 32 Our tort system is based on the premise that the only means, however imperfect, of compensating an injured plaintiff for loss of amenities of life or the enjoyment of life is monetary damages.

We recognize that money can never fully compensate for loss of enjoyment of life, but our legal system does its best to find an equivalent in monetary terms. An award for non-pecuniary loss is thus intensely personal. It is not made in order to provide an income. It is designed to compensate for non-monetary losses. a conclusion with which I heartily agree. [ 24 ] Another decision that deals with CPP disability pensions, as well as WCB pensions and WCB care allowances, is Dedosenco .

The decision emphasized that the decision to impute income to a parent is discretionary, that such decisions are fact-driven, and are therefore rarely vulnerable to appeal. [ 25 ] The Dedosenco decision and others of that type, and indeed the reference in Manuge itself to the fact that it is not influenced in its decision about the character of the Veterans Affairs Disability Pension by the

interpretations that have been given by courts

examining child support issues, prompts me next to consider the Federal Child Support Guidelines which define “ income ” for child support calculations. Only the most internal definition of such income is given in s. 2(1) of the Guidelines, which states that “ income ” means the annual income as determined under sections 15 to 20 of the Guidelines.

Section 15 of the Guidelines repeats the same instruction. Tellingly, s. 16 of the Guidelines states that, unless the parents otherwise agree, income is line 150 total income on the T1 General form. I say tellingly because s. 16 gives us the best direction possible about the distinction to be made between income and wealth, income and property, income and assets.

Section 16 tells us that income for child support purposes is, generally, income for income tax purposes. [ 26 ] The Guidelines do, however, allow judges to impute income from sources other than Line 150 income. In particular reference to matters discussed in these proceedings, s. 19(1)(

b) of the Guidelines allow a judge to impute income to a parent where the parent is exempt from paying federal or provincial income tax, hence the grossing up decisions in certain cases. Perhaps most pertinently for the real issue in this case, s. 19(1) (

e) allows a court to impute income where “ the spouse ’ s property is not reasonably utilized to generate income ” . Here again, there is a clear recognition of the difference between property (or assets or wealth) and income. Moreover, the sub-paragraph emphasizes that it is not the property itself which becomes income, but the financial use to which this property is put or not put which may become income. [ 27 ] The potential use of the court ’ s power to impute income arises in Mr. Storey ’ s case because part of the pension benefit that Mr. Storey receives is provided to him because he has children.

Specifically, the amount of additional benefit that a veteran in Mr. Storey ’ s situation receives because he has children is calculated in accordance with Scheule 1 of the Pension Act . The two child amount is fixed at 22.5% of the basic pension. Weighing one ’ s children as an aggravating aspect of loss of amenities of life is a concept with which this court is not familiar; Canadian case law does not suggest that a person who suffered injuries in a motor vehicle accident is entitled to a higher award because they have children.

Nor is it clear to me why the Canadian government would have taken this approach to compensation for injuries suffered as a result of military service. Nonetheless, I agree with Mr. Storey ’ s contention that, “ Just as the basic pension is not calculated with reference to lost income, the child amount is not calculated with reference to either lost income or the cost of caring for children ” . Mr. Storey has very fairly noted that s. 43 of the Pension Act provides the following: 43.

Additional pension for disability shall not be paid to a member of the forces in respect of a spouse or a dependent child unless the person in respect of whom additional pension is payable lives with the pensioner or maintains, or is maintained by, the pensioner to an extent that, in the opinion of the Minister, is at least equal to the amount of the additional pension. [ 28 ] Mr. Storey provides an amount in child support that is roughly equal to the amount of the additional pension. Therefore, he appears to be entitled to the additional pension amount. [ 29 ] However, Mr.

Storey only receives an additional monthly disability pension of $573.18 because he has children whom he is maintaining. I have therefore concluded that the portion of the pension which Mr. Storey receives because he is the parent of two children whom he is maintaining should be deemed to be income for the purpose of child support calculations. Because the “ children ’ s ” portion of the pension is, like the remainder of the pension, awarded tax-free, that portion shall be grossed up in relation to tax before it is added to his line 150 income. [ 30 ] In

summary, on an ongoing basis, beginning in the month when Ms. Simmons brought this application, Mr. Storey ’ s child support obligation will be based on his line 150 income plus the grossed up portion of his VA disability pension that represents additional pension because of his two children. 3. Retroactive obligations [ 31 ] Three separate retroactive assessments must be undertaken, one relating to baseline support, one relating to s. 7 expenses and one relating to travel expenses. A total retroactive award, either in favour of Mr. Storey or in favour of Ms.

Simmons, can only be determined once baseline calculations, s. 7 expense calculations and travel cost contributions have been determined. Finally, if the total amount of retroactive award is more than $1,000.00, the court must determine whether it is appropriate to have a staged repayment of arrears. For the reasons set out below, it is not possible in this decision to come to a final determination about the amount of the retroactive award in this case, or to determine in whose favour that award will be. Nor is it possible to determine if payment of a retroactive award should be spaced out over time.

The parties will have to return once they are in a position to make final arguments on these issues.

a) Retroactive baseline support [ 32 ] The first issue which must be addressed is Ms. Simmons ’ entitlement to retroactive support for a period longer than three years. In the circumstances here, it is clear that, right from the interim consent order in July 2008, the issue of the proper characterization of Mr. Storey ’ s disability pension was a source of contention between the parties. For that reason, even though there has been no wrongdoing by Mr. Storey, the court orders that a retroactive recalculation shall be undertaken back to May 1, 2008.

The fact that the issue of the pension was not mentioned again when the parties divorced in 2010 is not relevant: the divorce judgment did not deal with collateral issues. [ 33 ] For the reasons set out in the first part of this decision, Mr. Storey ’ s income for purposes of the calculation of retroactive support will be his line 150 income together with the portion of his pension which relates to the maintenance of his children, such portion being grossed up for tax purposes.

b) Retroactive s. 7 expenses [ 34 ] Because no previous court order comprehensively considered s. 7 expenses, if there is a dispute between the parents about what is a proper s. 7 expense and which of such expenses remain unpaid, the court will have to make a proper analysis of s. 7 issues.

Moreover, the status of s. 7 expenses in relation to retroactivity is not necessarily the same as is the claim for retroactive baseline support: in relation to the latter, there was a clear claim to the latter in the 2008 order but there is no such formal recognition of a demand for s. 7 expenses in any previous court order. [ 35 ] Although Ms.

Simmons makes a claim for s. 7 expenses, she acknowledges that she has not put before the court the evidence necessary to determine whether there are, in fact, any outstanding retroactive s. 7 expenses, (i.e. whether there are unpaid claimed expenses which come within the definition of s. 7 expenses under the Guidelines because they are, for example, extraordinary extracurricular activities) and whether she has claimed those expenses, at least direct from Mr. Storey if not in a court application, in a timely way. Her claim for these expenses will therefore be adjourned sine die .

c) Access costs [ 36 ] It is clear from the decision of the judge who allowed Ms. Simmons to move to Ontario with the parties ’ children that Ms. Simmons was to contribute to access costs. In my view, Hawco J. ’ s decision on that issue represents the exercise of his discretion to make contribution to access travel costs a condition of allowing the mother to relocate rather than as a hardship factor under the Guidelines: Morrone .

In coming to the conclusion that it was a mobility decision rather than a hardship decision, I note that Hawco J. ’ s order focusses on the specifics of the relocation, including the minimum access time that the father should have with his children. Moreover, and importantly, when Ms. Simmons asked for permission to relocate, she made the following representation to the court: I would submit my client remains in agreement with this portion of the proposed Consent Order and I would suggest that it is quite generous in that it provides for an equal sharing of the costs of access.

Alternatively this matter can be dealt with on the issue of child support. In other words, when she applied to leave Alberta for Ontario with the two young children of the marriage, the mother offered to pay half of the father ’ s access costs, even though she knew, in 2009 when she appeared before Hawco J. that although the parties ’ line 150 income was more or less equal at that time that the father also received a tax-free disability pension.

The father may not have exercised the amount of access that he did if he had not been under the impression that the mother would keep the promise she made relative to the contribution she would make to access. [ 37 ] Ms. Simmons now says that the father ’ s access costs are very high, and may be higher than the amount of child support he has to pay. While that may be true, it is also true that the mother ’ s decision to relocate half way across the country deprived the father of the kind of close relationship that he had with his children prior to the relocation.

[ 38 ] In any event, I agree with the approach taken in Morrone : the court can only begin its analysis of what is fair in the circumstances here once it has received an accounting from the father of what he has actually spent in access costs rather than the presumed amount of access costs if he had exercised all of the access which he had been granted under Hawco J. ’ s order. [ 39 ] Once that information has been received, the court will have to consider Ms. Simmons ’ proper contribution to those costs, having in mind that Mr. Storey takes the position on this application that he only asks Ms.

Simmons to contribute to half of his costs if the whole of his pension is considered to be income. Since the court has concluded that not the whole of his pension is not to be considered income, but only the portion of additional pension he receives because he is maintaining children - which portion is to be grossed up for tax purposes - Mr. Storey will have to advise what his resulting position is relative to contribution to travel expenses. Parenthetically, I add that, on an ongoing basis, Ms.

Simmons ’ contribution to travel expenses will also have to be considered once the parties have had the opportunity of weighing the effect of the court ’ s decision on Mr. Storey ’ s income for purposes of child support. [ 40 ] In

summary, both Ms. Simmons ’ claim for retroactive s. 7 expenses and Mr. Storey ’ s claim for retroactive contribution to access travel costs are adjourned sine die . No final determination of the total retroactive award can be made, of course, until those issues can be dealt with. Therefore, the determination of the total retroactive award is also adjourned sine die . 5. Costs [ 41 ] If the parties are not agreed on costs, I may be spoken to within 30 days of the issuance of this decision. Heard on the 20 th and 27 th days of February and the 1 st day of March, 2013.

Dated at the City of Calgary, Alberta this 15 th day of March, 2013. J.B. Veit J.C.Q.B.A. Appearances: Aaron M. Vanin, Foster LLP for the Applicant, Ms. Simmons Michael A. Ghert, Daunais McKay Harms & Jones for the Respondent, Mr. Storey