RNJ v NDJ, 2021 ABQB 85

Court of Queen’s Bench of Alberta Citation: RNJ v NDJ, 2021 ABQB 85 Date: 20210203 Docket: 4803 149756 Registry: Edmonton Between: RNJ Plaintiff - and - NDJ Defendant Corrected judgment: A corrigendum was issued on April 29, 2021; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Decision on

Section 7 Expenses of the Honourable Mr. Justice Robert A. Graesser _______________________________________________________ Introduction [ 1 ] This decision follows a family law special application where RNJ’s

Section 3 obligations were updated. The decision given orally in chambers will result in a fairly significant amount of arrears, as RNJ’s income has increased substantially since the previous order of December 1, 2014. [ 2 ] I reserved on retroactive

Section 7 issues. Disclosure [ 3 ] I note that the

section 3 update was based on RNJ’s disclosure, which included his income tax returns for the last four years together with the financial statements for the relevant years. These have been prepared by his accountant. NDJ complains that this disclosure does not comply with the requirements set out in and Cunningham v Seveny , 2017 ABCA 4 , relating to quantifying personal benefits received from a proprietorship or closely held corporation.

NDJ asks that the Court draw an adverse inference against RNJ for the lack of fulsome disclosure. [ 4 ] RNJ’s counsel submits “The business expense statements along with the further corporate disclosure provided by the Respondent do satisfy the requirements of Cunningham v Seveny ”. From the materials before me, counsel is incorrect. On the face of

the business expense statements themselves, for the corporation’s latest year end, RNJ’s corporation paid him $3,900 for rent in addition to his management wages. The corporation expensed $10,000 for amortization, and over $11,000 for “automotive”. Explanations are required for expense items that commonly provide some personal benefit to the shareholder. [ 5 ] NDJ says that RNJ refused to provide backup for the claimed expenses when he was cross-examined. [ 6 ] Compliance with what Cunningham v Seveny requires seems to be taking a long time to be take hold.

Just because an accountant expenses something for business purposes does not mean the shareholder has not received some personal benefit. Where Section 21(1)(

d) of the Child Support Guidelines applies, the payor is required to provide this information. It is a standard disclosure obligation and does not require a previous demand. Child support is based on what income is available to the payor, not just what the payor and their accountant declare for tax purposes. [ 7 ] Were it necessary in these circumstances, I would have drawn an adverse inference against RNJ for this failure to comply. Disclosure deficiencies and delays are among the most common problems judges face in chambers. I would observe that disclosure difficulties such as this do play a

part in the determination of “misconduct” for the purpose of retroactive awards under DBS . Background [ 8 ] The parties have five children, three of whom remain children of the marriage. The December 1, 2014, Consent Order has limited provisions regarding

Section 7 expenses (which was not unusual at the time of the order): 3.

a) RNJ shall pay to NDJ the sum of $233.00 per month for additional expenses for the child(ren), payable on the 1st day of each month, commencing December 1, 2014, allocated as follows: Child EJ Hockey, soccer and bus pass AJ Soccer and bus pass DJ Soccer, bus pass and Gym

b) Any further s. 7 expenses must be agreed upon between the parties before the expense is incurred. Parties’ Positions [ 9 ] In anticipation of these arrears, RNJ seeks retroactive

Section 7 expense contributions from NDJ and credit for payments made to NDJ for recreation expenses that were not actually incurred because of the Covid epidemic. [ 10 ] RNJ argues that since the children had to drop their extracurricular sporting activities in 2020 due to the Covid pandemic, he should not be responsible for the portion of the $233 he was ordered to pay relating to those activities and should be refunded to him. He says that the children have not taken the bus very often during the school year.

He believes NJD has received subsidies for sporting activities that were not disclosed to him. [ 11 ] He also argues that he contributed extra to the children’s sporting expenses including basketball and volleyball fees. RNJ also points to contributions he has made to EJ’s post-secondary education. RNJ calculates his credits from 2019 to November 2020 as $2,775.06. [ 12 ] NDJ attached a

schedule to her reply affidavit showing expenses incurred for various musical, sporting and educational activities (including EJ’s tuition and books for post-secondary education) totaling more than $7,000. She says that if all of those costs were pro-rated according to the parties’ incomes, RNJ would owe her more than $2,000 in arrears. [ 13 ] NDJ proposes that

Section 7 expenses should be revised effective January 1, 2021. Retroactive adjustments should not be made, and the parties should start with a “clean slate”. Analysis [ 14 ] Treatment of

Section 7 expenses is somewhat more discretionary than with basic

Section 3 child support. Clarity and detail in support orders is very important, and the Maintenance Enforcement Program has made it clear that they can and will only enforce orders in accordance with the terms of the orders. [ 15 ] Here, the Order says nothing about expenses other than specific sports and bus passes. The Child Support Guidelines respect the parties’ right to agree on

Section 7 expenses or apply for an order. Neither parent sought a variation in the specified amount or to add other expenses (such as medical, dental or educational). Until NDJ sought a variation of

Section 3 payments, RNJ appears to have been content to pay the agreed $233 per month. [ 16 ] When NDJ filed her variation application in November 2020, she sought an ongoing adjustment to

Section 7 expenses looking for a proportionate sharing of those expenses. [ 17 ] RNJ countered with a request for retroactive

Section 7 expenses. He seeks credit against

Section 7 arrears for amounts he paid for extraordinary expenses for the children beyond the 2014 Order. [ 18 ] It is to RNJ’s credit that he paid over and above the court-ordered amount. The 2014 Order provides that the parties could agree on other

Section 7 expenses, and they obviously did so.

[19] The difficulty with RNJ’s position is that he is using only his side of the extra expenses. Were he to actively pursue hisretroactive claim, NDJ should be able to pursue a retroactive claim of her own. The results (at least using the information in NDJ’s replyaffidavit) may be that RNJ would find himself further in arrears if a proportionate sharing of all “usual”

Section 7 expenses for 2019 and2020 was ordered. [20] NDJ’s position is a reasonable one: start fresh with 2021. That is practical, but it is also in accordance with the 2014 Orderand the law on retroactive support claims. DBS v SRG, 2006 SCC 37, governs this area. Presumptively, arrears are to be calculated fromthe time of the application for variation. Beyond that, the Court has a fairly broad discretion. Frequently, the date of “effective notice” ofa party’s wish to seek a variation is used. A three-year retroactive limitation period is generally applied in any event of the demand date,based on misconduct on the part of the payor. [21] As for

Section 3 expenses, failure to notify the recipient spouse of a significant increase in income is frequently considered tobe misconduct, permitting a lengthy retroactive adjustment. [22] For

Section 7 expenses, there are no hard and fast rules. Unlike

Section 3 expenses, which generally only considers theincome of the payor,

Section 7 expenses look at the incomes of both the payor and the recipient, as well as the reasonableness of theextraordinary expense. Variations frequently occur where there are no significant changes in the parties’ incomes. A change incircumstances, such as a child’s health and dental needs, educational needs and recreational activities, warrants an application to varySection 7 expenses. [23] Here, it would appear that the “effective notice” date and the application date are roughly the same. There is no evidence thatRNJ sought any variation of his obligations before NDJ commenced this application. There is no sound reason why there should be anyretroactive variation of

Section 7. [24] Indeed, the Order speaks expressly to the need for the parties’ consent to incurring a

Section 7 expense other than thespecified ones. That does not bar a parent from paying for extraordinary expenses, or enrolling a child in an activity, but it does prevent aparent from seeking the other parent’s contribution to that expense. [25] In this case, I find NDJ’s approach to be the correct approach: look for a prospective change, rather than a retroactiveadjustment. [26] On the basis of the evidence before me, this decision is likely more favourable to RNJ than to NDJ. It also has the effect ofholding the parties to their 2014 agreement, which NDJ respected by applying for a prospective order. [27] I recognize that NDJ has not accounted for the monies she received as

Section 7 expenses by producing receipts for bus passesand basketball expenses, but RNJ appears to accept the agreed $233 per month as “reasonable” and he did not require any accounting. [28] On a go-forward basis, the parties should begin to proportionately share

Section 7 expenses effective January 1, 2021. Thoseshould include medical, dental, health care and secondary school expenses (as set out in Section 7(1)). I leave it to the parties to agree onextracurricular activity costs (which should be generically described in the Order for the sake of clarity). If they cannot agree, I reservejurisdiction to determine such expenses. [29] If the parties are unable to resolve ongoing

Section 7 expenses, I require information as to the children’s current activities, theestimated costs of such activities, information on any extraordinary health or dental costs, and any extraordinary education costs. [30] With respect to post-secondary expenses, I discussed various approaches with the parties at the special application anddirected them to consider the “Farden factors” (Farden v Farden , (BC SC), [1993] B.C.J. No. 1315 (BCSC)). EJlives with his mother and works part time.

I encourage the parties to agree on what their respective contributions to their son’s educationshould be (including what they expect him to contribute himself).

If they cannot agree, I reserve jurisdiction to determine such expenses. [31] If the parties require my assistance, I will need information as to the nature of the program of study, anticipated costs oftuition and books, scholarships, bursaries, and student loans, as well as details on EJ’s earnings (perhaps 2019 tax return, 2020 earnings),before I can make any meaningful assessment of what contribution EJ should be expected to make towards his education. [32] I also encourage the parties to attempt to agree on a repayment

schedule or program for the arrears that will result from mydecisions in this matter. Again, if they cannot agree, they may refer that issue to me. Costs [33] NDJ has been successful on this application. She is entitled to costs on the usual basis. If the parties cannot agree on the costs,they may write to me for a determination. Heard on the 16th day of December, 2020. Dated at the City of Edmonton, Alberta this 3rd day of February, 2021.

Robert A. Graesser J.C.Q.B.A. Appearances: Belal Najmeddine, Edmonton Law Office for NDJ Paula J. Kinoshita, Quantz Law for RNJ _______________________________________________________ Corrigendum of the Decision of The Honourable Mr. Justice Robert A. Graesser _______________________________________________________ The heard date of this decision has been changed to the correct year, 2020.