Kimmerly v Henschel, 2016 ABQB 540

Court of Queen’s Bench of Alberta Citation: Kimmerly v Henschel, 2016 ABQB 540 Date: 20160926 Docket: 4803 148550 Registry: Edmonton Between: Sherri Lynn Kimmerly Plaintiff - and - Timothy Curtis Henschel Defendant _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice J.M. Ross _______________________________________________________ [ 1 ] I heard the Plaintiff’s application for a variation of child support on June 22, 2016 and issued a written decision on July 7, 2016: Kimmerly v Henschel , 2016 ABQB 387 .

I ordered that the Plaintiff was entitled to a variation of child support retroactive to January 2014, and I made determinations regarding the parties’ guideline income for 2014 to 2016. I directed that revised child support under the Federal Child Support Guidelines be calculated, employing the set off approach in

section 9 (the parties share custody of their two children). However, the Order varying child support was stayed for 90 days to permit the Defendant to commence an undue hardship application. [ 2 ] The Defendant’s undue hardship application was heard on September 9, 2016. [ 3 ]

Section 10 of the Federal Child Support Guidelines provides: 10

(1) On either spouse’s application, a court may award an amount of child support that is different from the amount determined under any of sections 3 to 5, 8or 9 if the court finds that the spouse making the request, or a child in respect of whom the request is made, would otherwise suffer undue hardship.

(2) Circumstances that may cause a spouse or child to suffer undue hardship include the following: (

a) the spouse has responsibility for an unusually high level of debts reasonably incurred to support the spouses and their children prior to the separation or to earn a living; (

b) the spouse has unusually high expenses in relation to exercising access to a child; (

c) the spouse has a legal duty under a judgment, order or written separation agreement to support any person; (

d) the spouse has a legal duty to support a child, other than a child of the marriage, who is (

i) under the age of majority, or (ii) the age of majority or over but is unable, by reason of illness, disability or other cause, to obtain the necessaries of life; and (

e) the spouse has a legal duty to support any person who is unable to obtain the necessaries of life due to an illness or disability.

(3) Despite a determination of undue hardship under subsection (1), an application under that subsection must be denied by the court if it is of the opinion that the household of the spouse who claims undue hardship would, after determining the amount of child support under any of

section 3 to 5, 8 or 9, have a higher standard of living than the household of the other spouse.

(4) In comparing standards of living for the purpose of subsection (3), the court may use the comparison of household standards of living test set out in

Schedule II.

(5) Where the court awards a different amount of child support under subsection (1), it may specify, in the child support order, a reasonable time for the satisfaction of any obligation arising from circumstances that cause undue hardship and the amount payable at the end of that time.

(6) Where the court makes a child support order in a different amount under this section, it must record its reasons for doing so. [ 4 ]

Schedule II to the Guidelines contains a Comparison of Household Standards of Living Test. Undue Hardship under s 10 [ 5 ] The Alberta Court of Appeal set out a two-stage approach to determining undue hardship under s. 10 in Hanmore v Hanmore , 2000 ABCA 57 , at para 9 : The Child Support Guidelines provide a detailed road map for the Court to follow in deciding whether guideline amounts should be reduced because of undue hardship. The applicant who seeks a reduction on grounds of undue hardship must satisfy a two stage test.

The first stage requires the applicant party to prove specific facts establishing the undue hardship. S. 10(2) sets out a non-exhaustive list of circumstances that may give rise to such a claim. If undue hardship is established, the applicant must show that his or her household would enjoy a lower standard of living than the household of the other parent should child support not be reduced.

However, even where such a finding is made, the Court retains a discretion to refuse to reduce the guideline amount. [ 6 ] The Defendant alleges undue hardship as a result of circumstances in s 10(2)(d), that he is under an obligation to provide for children who are not children of the marriage. Since November 2014 he has been residing with his new wife and her two minor nephews. Ms. Turner became guardian of her nephews after the death of their mother. Neither of the boys have biological fathers either listed on their birth certificates or involved in their lives.

The Defendant and his wife have accepted full financial responsibility for the boys. They do not receive either private or public support payments for them. [ 7 ] I accept that the Defendant has a legal obligation towards these children. He is in a position of parent towards them. [ 8 ] I note that while the Defendant has additional obligations, his household income has also increased substantially, as his wife is employed outside of the home.

The combined pre-tax income for himself and his wife for 2015 was $160,525 (comprised of the Defendant’s pre-tax income of $88,377 and his wife’s pre-tax income of $72,148). [ 9 ] As evidence of undue hardship, the Defendant provided a household budget, which he claims does not include “extras” such as savings, vacation, s. 7 expenses or other unforeseen expenses. I have reviewed the amounts which overall seem reasonable to me, but not stinting. Housing expenses are $2613 per month, including a mortgage payment of $2059.

Other household expenses are estimated at $1939, expenses for the Defendant and his wife at $587 and expenses for the children (including daycare) at $1598. [ 10 ] The total monthly budget amount, including taxes and other employment deductions including pension contributions (a form of savings) and legal fees ($500) is $13,409.

This is essentially equal to the Defendant’s household income ($160,525 combined annual income before taxes/12 provides a monthly income of $13,377). [ 11 ] The Alberta Court of Appeal emphasized in Hanmore v Hanmore at paras 10, 16-17 -that the term “undue hardship” must be given a narrow

interpretation: [10] The objectives of the Guidelines are set out in s. 1. The primary objectives are “to establish a fair standard of support for children that will ensure that they continue to benefit from the financial means of both spouses after separation”, and “to ensure consistent treatment of spouses and children who are in similar circumstances”. Such objectives will be defeated if the Courts adopt a broad definition of “undue hardship” or if such applications become the norm rather than applying to exceptional circumstances…

[16] The issue of second families giving rise to a claim of hardship also arose in Messier v Baines, (SK KB),[1997] S.J. No. 627 (U.F.C.). After setting out the objectives of the Guidelines, Wright J. stated at para. 10: These objectives will be defeated if courts too readily deviate from the presumptive rule set out in s. 3 of the Guidelines absentcompelling reasons for doing so. Second families, and the associated legal duty to support a child of that family, are not uncommon. Theassumption of such new obligations may by necessity create a certain degree of economic hardship.

That hardship is not howevernecessarily “undue”. Similarly, the mere fact that an applicant’s household standard of living is lower than that of the other spouse, duein part to the applicant’s legal duty to another child, does not automatically create circumstances of undue hardship. [17] It is evident from these authorities that the burden of establishing a claim of undue hardship is a heavy one. We agree with thecomment of Wright J. that the objectives of the Guidelines will be defeated if Courts deviate from the established guidelines withoutcompelling reasons.

The hardship must be more than awkward or inconvenient. It must be exceptional, excessive, or disproportionate inthe circumstances. Further, it is not sufficient that the payor spouse has obligations to a new family or has a lower household standard ofliving that the payee spouse. The applicant must specifically identify the hardship which is said to be undue. A general claim regardingan inability to pay or a generic reference to the overall expense of a new household will not suffice.

We adopt the words of Prowse, J.A. in Van Gool [Van Gool v Van Gool (1998), (BC CA), 166 DLR (4th) 528 (BCCA)]: [51] The onus is on the party applying under s 10 to establish undue hardship; it will not be presumed simply because the applicanthas the legal responsibility for another child or children and/or because the standard of living of the applicant’s household is lower thanthat of the other spouse. The applicant must lead cogent evidence to establish why the table amount would cause undue hardship. [12] The monthly support amount owing by the Defendant to the Plaintiff under s. 9 of the Guidelines is $702.

I am not satisfiedthat, out of a monthly budget of over $13,000, it would be an undue hardship for the Applicant to pay $702 in child support.

It wouldrequire an adjustment to the family budget that may be awkward or inconvenient, but there is nothing in the evidence to demonstrate thatit would be exceptional, excessive or disproportionate in the circumstances. [13] The Defendant submits that there has been an excessive impact on his household budget because he went from being arecipient of child support in the amount of $1356 per month to a payor in the amount of $702 per month, a “crippling reduction” inhousehold income of more than $2000 per month. However, the change to the Defendant’s household income has not happened all atonce.

He has not received child support from the Plaintiff since 2015 because of agreed stays. Thus, he has had an opportunity to adjusthis spending. [14] In my view, the Defendant has not met the s. 10 standard of “undue hardship”. I reach this conclusion even though theevidence is that there is a higher standard of living in the Plaintiff’s household, as I will detail below.

Comparison of Household Standards of Living [15] An undue hardship application “must be denied by the court if it is of the opinion that the household of the spouse whoclaims undue hardship would, after determining the amount of child support under any of

section 3 to 5, 8 or 9, have a higher standard ofliving than the household of the other spouse”: Guidelines s. 10(3). “In comparing standards of living for the purpose of subsection (3),the court may use the comparison of household standards of living test set out in

Schedule II” (emphasis added). [16] The Defendant attempted to perform the calculations contemplated by the Comparison of Household Standards of Living Testin

Schedule II. He has utilized income tax returns provided by the parties and their spouses. Although the Plaintiff’s spouse’s line 150income on his 2014 and 2015 tax returns are $294,740 and $384,493 respectively, the Defendant’s calculations include only employmentincome in the amount of $136,800 each year. RRSP withdrawals and proceeds from sale of a vacation home are not included.

Further,income of the adult son of the Plaintiff’s spouse is not included, although he lives with them. [17] The Plaintiff has not provided alternative calculations of the Comparison of Household Standards of Living Test. [18] The Defendant’s calculation indicates that his and his spouse’s combined income for 2014 was $134,301. This is afterdeduction of taxes, as stipulated in Step 1 of the

Schedule II Test. The Plaintiff’s household income after deducting taxes was $169,329. [19] For 2015/2016, the Defendant calculates his household income, after taxes, to be $124,413. The Plaintiff’s household income,after taxes, is $132,213. [20] The Plaintiff notes that the Defendant has not included child tax benefits. However, these are not referred to in the

Schedule IITest. I also note that the Defendant has not deducted from his income the child support he would have to pay, if the pleading of unduehardship is not successful. This adjustment to income is provided in Step 2 of the

Schedule II Test. He has also not added to thePlaintiff’s income the amount of child support she would receive. Without these adjustments, the

Schedule II calculations are notcomplete. [21] Although the

Schedule II test has not been properly calculated, it is nonetheless clear that the standard of living in thePlaintiff’s household is higher than in the Defendant’s household. The household income for the Plaintiff is higher and the number ofpersons in her household is less. But, as can be seen from the figures set out above, there is not a gross difference in standards of living,particularly since 2015. In any event, as confirmed by the Alberta Court of Appeal in Hanmore v Hanmore, a higher standard of livingdoes not equate to undue hardship under s. 10.

Undue Hardship and s. 9 of the Guidelines [22] The parties have shared custody of their two children for a number of years. In the period while the Plaintiff’s income was

higher than the Defendant’s, the Plaintiff’s child support obligation was calculated by using a straight set off approach . Following the last application, I directed that child support should be calculated following this approach, as this had been the previous practice between the parties.

The Defendant now submits that a set off approach should not be employed. [ 23 ] The Supreme Court of Canada in Contino v Leonelli-Contino , 2005 SCC 63 , [2005] 3 SCR 217 noted that there is no presumption under s. 9 of the Guidelines in favour of awarding at least the Guidelines amount, nor of reducing a parent’s child support obligation downward from the Guidelines amount. Rather, the court should consider all of the factors in s. 9: (

a) the amounts set out in the applicable tables for each of the spouses; (

b) the increased costs of shared custody arrangements; and (

c) the conditions, means, needs and other circumstances of each spouse and of any child for whom support is sought. [ 24 ] As to factor (b), to the extent that there are increased costs of the parties’ shared custody arrangement, I infer that these costs are equally borne by both parties. There was no evidence to suggest otherwise, and the parties have shared custody of their daughters for a number of years now. [ 25 ] Regarding factor (c), the financial circumstances of both parties, as discussed above, are not notably different at this time.

To the extent that there is a somewhat higher standard of living in the Plaintiff’s household, this is in my view offset by the large business debts owed by the Plaintiff and her husband as a result of the business failure discussed in Kimmerly v Henschel , 2016 ABQB 387 . [ 26 ] In my view this is an appropriate case to apply factor (

a) and employ a set off approach to determine child support. The fairness of this approach in this case is supported by the past practice of the parties. Undue Hardship in relation to Retroactive Support [ 27 ] The Defendant alleges that he would suffer undue hardship as a result of the retroactive Order. The question of retroactivity was argued at the last hearing and I determined that retroactive relief should not be granted for 2012 or 2013, but should be granted for 2014 and forward.

The Plaintiff’s application to vary child support was commenced in September 2014, in the context of a larger application including parenting issues. The issue of 2014 and ongoing child support was adjourned in January 2015, by agreement, to exchange information. It was adjourned again in June 2015, by agreement, to permit the parties to engage in negotiations. Payment of child support was stayed during the adjournment periods, again by agreement. I determined that retroactive relief to January 2014 was appropriate in view of the timing of the application and the terms of the agreed adjournments.

However, I did not consider the Defendant’s claim that paying arrears of child support would cause undue hardship. I reserved questions relating to undue hardship to the present application. [ 28 ] A retroactive award of child support is discretionary. The impact of hardship on a retroactive award is not limited by s. 10 of the Guidelines. Regarding the hardship factor in relation to retroactive awards, Bastarache J. stated in DBS v SRG , 2006 SCC 37 , [2006] 2 SCR 231, at para 115 : There are various reasons why retroactive awards could lead to hardship in circumstances where a prospective award would not.

For instance, the quantum of retroactive awards is usually based on past income rather than present income; in other words, unlike prospective awards, the calculation of retroactive awards is not intrinsically linked to what the payor parent can currently afford. As well, payor parents may have new families, along with new family obligations to meet.

On this point, courts should recognize hardship considerations in this context are not limited to the payor parent: it is difficult to justify a retroactive award on the basis of a “children first” policy where it would cause hardship for the payor parent’s other children. In short, retroactive awards disrupt payor parents’ management of their financial affairs in ways that prospective awards do not.

Courts should be attentive to this fact. [ 29 ] The Defendant submits that paying the accrued amount of arrears, $27,138, in addition to ongoing child support, will cause hardship to him and his family. [ 30 ] While the accrued arrears amount is large, the entire amount is not “retroactive” in the usual sense of the term. The Plaintiff’s application for child support was commenced on September 26, 2014. Courts routinely make child support orders effective from the commencement of an application, not the date that the order was made.

The practice in this court, in my experience, is to commence the order from the month in which the application was brought. [ 31 ] There was a very significant delay in the disposition of this application, but that was with the agreement of both parties. From September 2014 on, the Defendant was on notice that the Plaintiff’s income had decreased substantially, and that it was her view that he should be paying child support to her. [ 32 ] Thus the only “retroactive” portion of the arrears is the Plaintiff’s overpayment to the Defendant from January to August, 2014.

This overpayment was in the amount of $1081 per month, or $8648. The remaining arrears of $18,490 accumulated since September 2014. [ 33 ] I do accept that payment of the arrears, retroactive or otherwise, will cause a hardship to the Defendant, especially when combined with his ongoing child support obligations. The parties are mutually responsible for the delay in the hearing of the application; it would be unfair that the Defendant alone should bear the resulting hardship.

For this reason, I have determined that it is appropriate to reduce the arrears owing by the retroactive portion of the arrears ($8648), exercising the court’s discretionary power in relation to retroactive awards. However, the remaining arrears amount ($18,490) remains payable, as the Defendant has not established undue hardship under s. 10. [ 34 ] In further recognition of the hardship caused by the arrears, I direct that, provided the Defendant pays ongoing child support plus $200 per month towards the arrears, enforcement of the arrears amount under the Maintenance Enforcement Act , RSA 2000, c.

M-1 is stayed. The

stay of enforcement does not affect enforcement proceedings respecting the payment of maintenance carried out in relation to a federal enactment. [ 35 ] As success has been divided, the parties will bear their own costs. Heard on the 9 th day of September, 2016. Dated at the City of Edmonton, Alberta this 26 th day of September, 2016. J.M. Ross J.C.Q.B.A. Appearances: Mark H. Demas TC Family Law Group for the Plaintiff Anthony D. Richard, Q.C. McGee Richard LLP For the Defendant