Saindon v Demers, 2021 ABQB 972

Court of Queen’s Bench of Alberta Citation: Saindon v Demers, 2021 ABQB 972 Date: 20211214 Docket: 4801 150671 Registry: Calgary Between: Isabelle Marie Diane Saindon Plaintiff - and - Patrick Jean-Pierre Demers Defendant Corrected judgment: A corrigendum was issued on December 22, 2021; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice D.A. Labrenz _______________________________________________________ Introduction

[ 1 ] Mr. Demers and Ms. Saindon are the parents of three children, currently ages 22, 20, and 17. The parties separated in 2008 when the children were quite young and finalized their divorce in 2014. Pursuant to a Consent Corollary Relief Order filed in January 2014, they agreed to share parenting of the children. They also agreed that Mr. Demers would pay Ms. Saindon $755 per month in

section 9 child support based on the set-off between their respective child support obligations for their Guideline incomes of $62,000 and $20,000. The Consent Order required the parties to exchange income tax returns and notices of assessment and reassessment on or before June 30 each year as long as there was a child of the marriage. [ 2 ] Sometime around September 2016, the middle child elected to move in with her father on a full-time basis. Despite the change in parenting, neither party brought an application to vary child support.

The affidavit evidence filed at the time demonstrates that both parties knew that child support should change and proposed a plan to exchange financial disclosure so as to negotiate a new child support amount, but neither party provided disclosure, nor did either party apply to vary the Consent Order. Similarly, there was no change to the child support payments when the eldest child, and then the middle child, ceased to be children of the marriage. Mr.

Demers continued to pay $755 per month until it was reduced to $346 per month in December 2020 on an interim without prejudice basis. [ 3 ] Effective April 1, 2021, the parties entered into a further consent order suspending all child support payments until resolution of this application. Mr. Demers has no

section 9 arrears. He admits he owes Ms. Saindon $6,762.65 for

section 7 expenses; however, Ms. Saindon now argues he owes $12,331.96. [ 4 ] Mr. Demers brings this application for retroactive adjustment of what he says is an overpayment of

section 9 child support in the amount of $37,785, to be set off against the $6,762.65 he agrees he owes for

section 7 expenses. He argues that Ms. Saindon was aware of the change of parenting, and for this reason she had adequate notice that the amount of child support he was paying was too high. In support of this submission, he states that Ms. Saindon brought an application in 2016 related to the change of parenting in which she acknowledged that he sought a reduction in monthly child support payments due to the change in parenting. [ 5 ] Ms. Saindon submits Mr. Demers’ application should be dismissed because of inadequate and deceptive disclosure.

She acknowledges that neither party provided the other with income tax returns or other appropriate financial disclosure information. It was only after Mr. Demers served a Notice to Attend Docket Court in August 2020 that the parties exchanged Notices of Assessment. It took many months thereafter for either party to provide complete income tax information and business financial statements. Mr. Demers is sole director and shareholder of ALJ Exteriors Ltd., from which he is paid dividends and to which he owes a significant shareholder’s loan. Meanwhile, for many years, Ms.

Saindon was a sole proprietor of her own bookkeeping business. [ 6 ] Ms. Saindon alleges that Mr. Demers’ disclosure remains incomplete and she has made it clear that she does not trust the information he has presented.

She identifies discrepancies between his 2017 personal income tax return, which reports dividend income, and his corporate tax return, which failed to declare dividends; a further discrepancy between the 2019 income reported in his affidavit and the amount identified in his 2019 Notice of Reassessment; a claimed loss from self-employment in 2018 without any supporting documents for the business allegedly generating this loss; and significant unexplained shareholder loans from his corporation. Ms.

Saindon makes further objection to the lack of a 2020 personal income tax return and 2020 financial statements for ALJ Exteriors. [ 7 ] Ms. Saindon submits that granting Mr. Demers any relief would endorse untimely and inadequate disclosure, which has served to obfuscate a full and fair assessment of the resources available for child support. Ms. Saindon also points out that it would disrupt her own and the children’s certainty interest in the child support they have already received, all coming at a time when two of the three children are no longer children of the marriage.

She relies on Colucci v Colucci , 2021 SCC 24 in support of her position. [ 8 ] Mr. Demers argues that Colucci is inapplicable in these circumstances because the change of circumstances resulted from a change in parenting, rather than an increase or decrease in income, and because both parties were equally aware of the change. He submits that because Ms. Saindon knew of the change in circumstances at the time it happened, she had ample notice of the need to adjust child support. [ 9 ] Mr. Demers also seeks an order for ongoing child support for the youngest child who began living in his primary care after Ms.

Saindon relocated to Quebec. Ms. Saindon now earns $55,000 per year through her employment with PepsiCo. [ 10 ] Although Ms. Saindon did not file a cross application, she seeks reimbursement of

section 7 expenses in the amount of $12,331.96 and for a disclosure order to obtain more complete income information from Mr. Demers for the purpose of ascertaining the proper sharing of

section 7 expenses going forward. [ 11 ] The issues to be decided are:

a) Does the framework set out in Colucci apply in the circumstances of this case?

b) Is Mr. Demers entitled to a retroactive reduction in child support? If so, from what date and in what amount?

c) What does Mr. Demers owe in

section 7 support?

d) What is Ms. Saindon’s ongoing child support obligation? Does the framework set out in Colucci apply in the circumstances of this case? [ 12 ] In Colucci , the Supreme Court of Canada clarified the analysis to be applied where a payor applies under

section 17 of the Divorce Act to retroactively decrease child support. Mr. Demers submits that the Colucci analysis does not apply in this case because he seeks a variation arising from a change in parenting, rather than a change in income.

[ 13 ] I reject this submission. In Colucci , the threshold change in circumstances was the coming into force of the Guidelines , which had nothing to do with Mr. Colucci’s income and was something about which both parties were aware, just as the parenting arrangements here had nothing to do with Mr. Demers’ income and both parties knew of the change. [ 14 ] Colucci sets out the analysis for a variation application under

section 17 of the Divorce Act , regardless of the reason for the variation. Mr. Demers’ application for retroactive variation of child support is brought under this section, so the Colucci framework applies. The reason for the material change in circumstances that warrants a variation of child support is not material. Is Mr. Demers entitled to a retroactive reduction in child support? If so, from what date and in what amount? Material change in circumstances [ 15 ] Applying the Colucci framework, the payor first must establish a material change in circumstances.

It is common ground between the parties that their daughter’s decision to live with Mr. Demers amounted to a material change in circumstances. Similarly, another material change in circumstances arose when their eldest child, and later the same daughter, ceased to be children of the marriage.

Date of effective notice as presumptive start date for retroactivity [ 16 ] Once the payor establishes a material change in circumstances, there is a presumption in favour of retroactively decreasing child support to the date the payor gave the recipient effective notice, up to three years before formal notice of the application to vary.

What amounts to effective notice depends on whether the variation application is to reduce child support paid by a payor or an application by a recipient for an increase in child support. [ 17 ] In the decrease context, effective notice requires clear communication of the change in circumstances accompanied by the disclosure of any available documentation necessary to substantiate the change and allow the recipient parent to meaningfully assess the situation.

By contrast, when a recipient parent seeks an increase in child support, effective notice requires only that the recipient broach the subject of an increase with the payor. [ 18 ] Mr. Demers argues that he is the recipient parent in this case, as of September 2016 when the middle child came into his sole care. He submits that he gave effective notice to Ms. Saindon when he broached the subject of adjusting their respective child support obligations after their daughter moved in with him in 2016. [ 19 ] Ms.

Saindon argues that the standard of effective notice to be applied in these circumstances ought to be that required of the payor under the Colucci framework. I agree. [ 20 ] The essential point made by Colucci is that effective notice must not only communicate that there has been a change in circumstances, but it must also permit the responding party to meaningfully assess the situation. To this end, effective notice requires full and frank disclosure of income information if that party’s income is required to quantify the variation of child support. [ 21 ]

Section 21 of the Federal Child Support Guidelines makes it clear that an applicant seeking child support, or a variation of child support , must provide a long list of income-related documents if their income is required for the calculation of child support.

In shared parenting situations, both party’s income information is necessary, since each party is both a payor and recipient parent. [ 22 ] In the case at bar, upon the daughter’s change in primary residence, the parties’ respective child support obligations should have been calculated by considering the primary parenting by the father of one child and the shared parenting of the other two children. If the parties had applied the set off in

section 9(a), it would have been calculated by assessing Ms. Saindon’s child support obligation for three children set off against Mr. Demers’ child support obligation for two children. Both parties’ income information would have been necessary for determining the amount of child support. As such, Mr. Demers had an obligation under

section 21 to disclose his income information upon bringing an application to vary support. Colucci simply extends this

section 21 disclosure requirement and makes it an aspect of giving effective notice. [ 23 ] Mr. Demers also argues that he is seeking to enforce an obligation that should have been met by Ms. Saindon already – her obligation to pay child support for the daughter after she moved in full-time with Mr. Demers. The trouble with this argument is that it ignores

section 9 of the Guidelines in which each party is a payor and a recipient. As Justice Verhoeven stated in SKR v KSD , 2021 BCSC 1250 at 102, an application to reduce support and compel the other parent to pay child support “are effectively two sides of the same coin” and require, at a minimum, income information from both parties. [ 24 ] Mr. Demers’ position also ignores the fulsome analysis mandated by

section 9, which requires the court to consider not only the amounts set out in the tables for each spouse, but also the increased costs of shared parenting arrangements and the conditions, means, needs and other circumstances of each spouse and of the children for whom support is sought: Contino v Leonelli-Contino, 2005 SCC 63 . On a variation application, the Court would necessarily have required the evidence necessary to assess the impact of the daughter’s change of residence on the parties’ overall circumstances. In the absence of disclosure and the proper evidence required for the

section 9 analysis, it is impossible to know by how much Mr. Demers’ child support obligation would have been reduced. This is especially because Mr. Demers acknowledged that his income had increased from the original order by the time of the change in parenting and the

section 9 considerations may not have resulted in a substantial, or any change, in total child support. [ 25 ] Despite Mr. Demers’ desire to revisit child support and the awareness of both parties that there had been a change in parenting that could warrant a change in child support, his failure to provide disclosure at the same time means that he did not provide effective

notice in September 2016. A child support order can only be varied on provision of income information and a material change without the corresponding appropriate financial disclosure does not provide effective notice of an intention to vary the previous court order. Parties simply cannot wait many years to apply for an adjustment of their respective child support obligations with any expectation that the court will turn back the clock and provide the relief they seek, particularly in the absence of full and complete disclosure. Mr.

Demers made no effort to vary the previous order or address the question of the parties’ Guideline incomes until August 2020, when he filed a Notice to Attend Family Docket Court. Date of formal notice where effective notice not provided [ 26 ] Where the parent has failed to give effective notice, child support should generally be varied back only to the date of formal notice: Colucci at para 113 . Mr. Demers initially served Ms. Saindon with a Notice to Attend Family Docket Court in August 2020.

Eventually, he filed a formal application in June 2021, after the parties tried to resolve the matter through two Dispute Resolution hearings. [ 27 ] Ms. Saindon accepts that the Notice to Attend Family Docket Court amounted to formal notice. Because all family matters at this Court now proceed through Family Docket Court for triage before being directed to a formal application and hearing, if such hearing is deemed necessary, the Notice to Attend is the first formal step in the application process.

As such, I agree that the August 2020 Notice to Attend Family Docket is the date of formal notice and the presumptive date of retroactivity. [ 28 ] However, if the payor delays making complete disclosure in the course of the proceedings, the date of retroactivity may be later than the date of formal notice: Colucci at para 113 .

A payor will not benefit from a decrease in child support for the period between the date of formal notice and the time of disclosure, since “slipshod or misleading disclosure deprives the parties of an opportunity to negotiate between the date of formal notice and the hearing”: Colucci at para 95 . Departure from the presumptive date [ 29 ] The Court retains discretion to depart from the presumptive dates of retroactivity where the result would otherwise be unfair.

The factors to consider include whether there is an understandable reason for the delay in seeking the decrease, the parent’s conduct, the children’s circumstances, and any hardship to the payor if support is not decreased (viewed in the context of hardship to the child and recipient if support is decreased). In this case, Mr. Demers provided little explanation for the delay in bringing his variation application other than a bald statement that he was having some financial difficulties and trouble communicating with his former counsel.

Despite these difficulties, however, he continued to pay his Court ordered child support, which is commendable. [ 30 ] Mr. Demers did not provide any evidence of hardship arising from having paid the previous court-ordered amount. By contrast, there is almost always some hardship upon the recipient and children when a payor seeks to decrease support retroactively, since such a reduction general results in a repayment of funds that have already been spent supporting the children. [ 31 ] With respect to conduct, I find that even though Mr.

Demers gave formal notice of his intention to retroactively adjust child support in August 2020, and the parties subsequently began negotiating based on the income declared in their Notices of Assessment, it was not until June 2021 that the parties provided one another and the Court with income tax returns and corporate financial statements that would be necessary to properly determine their respective Guideline incomes. [ 32 ] Section 2(3) of the Guidelines requires the Court to use the most current information available when determining an amount of child support.

The difficulty here is that neither party’s 2020 income information can be said to be complete. [ 33 ] Mr. Demers swore an affidavit on June 30, 2021 stating that his 2019 income was $31,999, yet he filed a disclosure statement on July 21, 2021 including the following information related to his 2019 income: the first page of a condensed 2019 income tax return that does not provide any income information; a T5 statement from ALJ Exteriors that demonstrates that a taxable dividend of $57,500 was declared; and, a Notice of Reassessment for 2019, dated January 11, 2021, that demonstrates a line 150 income of $57,500.

The exhibited documents reveal a significantly different income from that to which Mr. Demers swore to in his affidavit and, in particular, the Notice of Reassessment that was dated six months prior to his sworn affidavit. [ 34 ] The disclosure statement included the December 31, 2019 financial statements for ALJ Exteriors Ltd., in which the Statement of Income and Deficit shows sales of $276,294, expenses of $206,434, including $138,901 in subcontractors’ fees, for a net income of $69,860. The Balance Sheet shows a loan due from him as shareholder of $104,548 and retained earnings of $65,369. Mr.

Demers has not provided any explanation for which expenses, if any, have a personal component, or why he owes such a significant shareholder loan to his business, along with other information that would be relevant to an assessment of his Guideline income under sections 18 and 19 of the Guidelines . [ 35 ] A parent who owns a corporation or who operates a sole proprietor bears the burden of providing the relevant information concerning the business: Cunningham v Seveny , 2017 ABCA 4 .

This standard disclosure obligation does not require a previous demand: RNJ v NDJ , 2021 ABQB 85 at para 6 . [ 36 ] Justice Yungwirth in Sweezey v Sweezey , 2016 ABQB 131 at para 48 detailed the information that shareholders must supply to properly satisfy their disclosure obligations: As a general rule, the shareholder should provide at least the following: 1. a brief explanation concerning each payment category, including: a. the nature of the payment/expense;

b. how it was calculated; c. why it was a reasonable corporate expenditure; d. whether any amounts paid or owing in relation to that category provided or resulted in a personal benefit to the shareholder or other non-arm’s length person (common examples of such expense categories in closely held corporations are vehicle, travel, promotion, phone, and insurance).

This would include an explanation for: i. what portion of the total expense formed the personal or non-arm’s length benefit; ii. how this was calculated; iii. a description of any services performed for the corporation by a non-arm’s length person (such as a new partner/spouse of the shareholder), and information regarding whether the salary s/he was paid for the services was commensurate with the market value of the services; and 2. documentation to support all of the above explanations, such as invoices and receipts regarding non-arm’s length payments. [ 37 ] The information referred to by Yungwirth J should be presented in an organized and orderly fashion so that the other party and the Court may meaningfully understand it. [ 38 ] Mr.

Demers has provided none of this required information for ALJ Exteriors. Furthermore, despite the hearing having been originally scheduled for August 2021, and then adjourned to October 2021, Mr. Demers did not provide the Court with a 2020 personal income tax return or 2020 financial statements for ALJ Exteriors. [ 39 ] As for Ms.

Saindon, she provided her 2020 income tax return, which shows a line 150 income of $28,507.66 comprised of $21,366.32 in employment income, $10,131 in employment insurance and other benefits, $2,500 in other income, and $5,489.66 in net business losses. [ 40 ] The Statement of Business Activities attached to Ms. Saindon’s income tax return indicates that her business had a gross profit of $24,137.81, but with expenses of $29,627.47. The business claimed a net loss of $5,489.66, which reduced her line 150 income.

These expenses were said to include $5,116.43 in utility costs, $2,012.07 in meal and entertainment expenses, $11,723.51 in motor vehicle expenses, based on 22,000 km driven for business purposes out of an annual total of 26,000 km, and $1,367.78 in travel expenses, among other significant expenses. [ 41 ] Under sections 19(1)(

g) of the Guidelines , the Court may impute income where a spouse unreasonably deducts expenses from income and section 19(2) provides that the reasonableness of an expense deduction is not governed solely by whether it is a permissible deduction under the Income Tax Act . [ 42 ] It is not possible to properly assess Ms. Saindon’s 2020 Guideline income in the absence of further evidence about whether her seemingly large business expenses have a personal component. Ms. Saindon has the same obligation as Mr. Demers did, which is to properly explain her business expenses.

The principles that I have just described for closely held corporations apply equally to the disclosure obligations for a self-employed spouse: Sweezey at para 49 . Just as for a shareholding spouse, the required financial information is part of the standard disclosure obligation: Guidelines , s 21(1)(d). [ 43 ] As the Supreme Court of Canada stated in Colucci , disclosure is the “linchpin on which these applications for fair child support depend”: at para 48. In the absence of complete disclosure, I find that there can be no retroactive adjustment of child support.

Quantification [ 44 ] The final step in the Colucci framework is to quantify the proper amount of support since the date of retroactivity, which is to be done in accordance with the Guidelines . As stated above, the Guidelines require a determination of guideline income under sections 16 through 19 using the most current information available. Unfortunately, the most current information available in this case is insufficient to clearly determine guideline income and the lack of adequate disclosure is fatal to Mr. Demers application to retroactively vary support. [ 45 ] Mr. Demers gave Ms.

Saindon formal notice in August 2020. At that time, Mr. Demers should have had his 2019 personal income tax and corporate financial statements available to him. It seems the parties began negotiating based on the incomes outlined in their Notices of Assessment. Since then, however, Mr. Demers still has not provided his 2020 personal income tax return, nor his 2020 corporate financial statements to Ms. Saindon or the Court. Likewise, Ms.

Saindon’s disclosure has failed to explain the business expenses that resulted in a net business loss on her tax return. [ 46 ] When considering an application for prospective child support, the Court may make an adverse inference and impute income in the event of incomplete disclosure: Guidelines , s 23. In the case of an application for retroactive reduction, however, inadequate disclosure simply will result in a refusal to grant the application. Conclusion [ 47 ] In all the circumstances, Mr.

Demers’ application to retroactively reduce child support is dismissed because his ongoing failure to provide up-to-date disclosure means the presumptive date of retroactivity, in this case the date of formal notice, cannot apply. The evidence required to vary support starting in August 2020 is not before the Court.

What does Mr. Demers owe in retroactive

section 7 support? [ 48 ] Mr. Demers acknowledged that he had an obligation to pay $6,762.65 for past

section 7 expenses; however, this concession was made in the context of expecting the recalculation of

section 9 and

section 7 child support, such that the amount he owed for

section 7 expenses would be set off against his overpayment of

section 9 child support. [ 49 ] At the hearing, Ms. Saindon argued that Mr. Demers in fact owes $12,331.96 for

section 7 expenses incurred between 2016 and 2020 and presented evidence in support of her claim. She submits that the lower figure of $6,762.65 was based on a reassessment of their proportionate shares, based on Mr. Demers’ incomplete disclosure information, while the $12,331.96 figure applies the 65:35 proportionate sharing set out in the Consent Order. [ 50 ] The Consent Order stated that the parties would share “agreed upon and reasonable special and extraordinary expenses” on a 65:35 basis. It also stipulated that neither party would be responsible for the payment of amounts unless they had first been consulted about and consented to the expense. Therefore, to obtain a refund for

section 7 expenses, each party had to provide the other with information concerning the agreed upon expense and seek reimbursement. [ 51 ] Ms. Saindon’s claim seeking

section 7 expenses amounts to a cross-application for retroactive

section 7 chid support; yet, she has not filed the necessary application. While there is no direct evidence explaining why she did not pursue reimbursement of these expenses since 2016, one might reasonably infer that she did not want to bring an application for fear of disrupting the existing

section 9 Consent Order. [ 52 ] Given the conflict as to the amount said to be owing, the fact that Mr. Demers’ acknowledgement of an amount owing was made in the context of recalculating

section 9 and

section 7 child support, and in the absence of a formal application by Ms. Saindon, I decline to award any sum for

section 7 expenses. What is Ms. Saindon’s ongoing child support obligation? [ 53 ] Ms. Saindon moved to Quebec in early 2021, at which time the parties’ youngest son moved in full-time with Mr. Demers. The parties’ affidavit evidence conflicts as to the exact date of the change. Ms. Saindon’s evidence is that she relocated by the end of April 2021, thus child support is payable starting May 1, 2021, while Mr. Demers suggests that their son moved in with him in March 2021. In the absence of any better way to resolve this conflict, I find Ms.

Saindon responsible for child support for the youngest child commencing April 1, 2021. [ 54 ] Ms. Saindon’s income is $55,000 per year. As a resident of Quebec, her child support payments are based on the Table amounts in the Guidelines set out for payors in that province: s 3(3). Ms. Saindon will be responsible to pay Mr.

Demers a monthly amount of $497 in child support, effective April 1, 2021, until such time as the child is no longer a child of the marriage. [ 55 ] The parties will continue to be subject to the annual disclosure obligations, including providing all the information that I have earlier described - if they continue to hold shares in a privately held corporation or operate a sole proprietorship. I strongly encourage each of them to provide the other with full and complete disclosure in a timely manner each year to minimize the potential for future conflict. Conclusion [ 56 ] Mr.

Demers’ application for a retroactive adjustment of

section 9 child support is denied. [ 57 ] Ms. Saindon shall pay Mr. Demers $497 per month in child support effective April 1, 2021 for the remaining child of the marriage. [ 58 ] The parties shall provide one another with full and complete annual disclosure as discussed above for the purposes of adjusting

section 3 support annually and calculating their proportionate share of

section 7 expenses. Costs [ 59 ] It is appropriate in these circumstances that each party should be responsible for their own costs. Heard on the 25 th day of October, 2021. Dated at the City of Calgary, Alberta this 14 th day of December, 2021.

D.A. Labrenz J.C.Q.B.A. Appearances: Courtney Thompson for the Plaintiff, Ms. Saindon Anne Marie Harrison for the Defendant, Mr. Demers _______________________________________________________ Corrigendum of the Reasons for Judgment of The Honourable Mr. Justice D.A. Labrenz _______________________________________________________ [1] Correction to paragraph [50] above to now read “ Therefore, to obtain a refund for

section 7 expenses... ”.