Simpson v. Simpson, 2013 BCSC 419

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Simpson v. Simpson, 2013 BCSC 419 Date: 20130313 Docket: 06-2237 Registry: Victoria Between: James Howard Simpson Claimant And Debbie-Lynne Simpson Respondent Before: The Honourable Madam Justice H. Holmes Reasons for Judgment The Claimant, James Simpson: Appearing on his own behalf Counsel for the Respondent: J. Michael Hutchison, Q.C. Place and Date of Trial: Victoria, B.C. January 14-16, 2013 Place and Date of Judgment: Victoria, B.C.

March 13, 2013 INTRODUCTION [ 1 ] The parties’ son Calvin is now 17 years of age, and is a boarding student in Grade 12 at Brentwood College School, a private school in Mill Bay, B.C. [ 2 ] The trial concerned mainly whether the expenses of Calvin’s education at Brentwood are necessary and reasonable extraordinary expenses that Mr. Simpson should share under s. 7 of the Child Support Guidelines . Ms. Simpson has paid those expenses since Calvin entered Brentwood in grade 9. [ 3 ] The determination of that issue rests in part on whether Mr.

Simpson’s income for the purposes of the Guidelines should be adjusted to reflect the large deductions for employment-related travel expenses which reduce his income for tax purposes. BACKGROUND [ 4 ] The parties separated in July 1996, when Calvin was less than a year old. [ 5 ] By the spring of 1997, the parties had a written separation agreement, made with the assistance of counsel. [ 6 ] The agreement provides for joint guardianship of Calvin, sole custody with Ms. Simpson, and reasonable and generous access for Mr. Simpson. It provides for Mr.

Simpson to pay child support of USD $385 per month, subject to review and adjustment every six months in proportion to any increase in Mr. Simpson’s income. [ 7 ] The parties were divorced in 1998, and have since lived by the terms of the separation agreement except as follows. [ 8 ] Not long after the separation agreement -- neither party remembers the precise chronology -- Mr. Simpson of his own accord increased the amount of child support he paid to reflect increases in his income.

There is no real dispute that for some considerable time he has paid $852 per month, an amount which he understood -- correctly or not -- to be somewhat higher than the table amount the Child Support Guidelines require for Calvin’s basic support; Mr. Simpson intended the extra amount to cover a portion of Calvin’s special or extraordinary expenses. [ 9 ] Mr. Simpson lives in Kingston, in Washington State, U.S.A., and is employed as a Regional Sales Manager for WMA Inc., a company for which he has worked for more than twenty-three years.

His current salary is $85,300 per year, plus a fluctuating bonus based on sales performance and a car allowance (which he includes in his income for tax purposes) of $8,200 per year, bringing the total

income to $103,856 in 2011. Mr. Simpson typically deducts from his income for tax purposes employee travel-related expenses amounting to between $25,000 and $30,000 per year. [ 10 ] Ms. Simpson lives in Victoria, B.C. Since 2009, she has worked as a transit bus driver, currently earning about $45,485 per year. [ 11 ] Calvin began school in the public system. From an early age, he has been much stronger in some school subjects than in others. In or around grade 4, he was diagnosed as having ADHD. [ 12 ] For reasons I will discuss later, Ms. Simpson enrolled Calvin in Brentwood for grade 9.

In grades 9 through 11, Calvin had the assistance of the school’s Key Program for students with learning style differences, as well as tutoring assistance two or three times per week, each at costs additional to the fees of a boarding student. [ 13 ] Ms. Simpson paid and continues to pay Calvin’s Brentwood fees and additional educational expenses at the school from a substantial inheritance she received from her father shortly before Calvin left the public school system for Brentwood. THE POSITIONS OF THE PARTIES Ms. Simpson [ 14 ] Ms. Simpson now seeks orders requiring Mr.

Simpson to contribute to the expenses of Calvin’s education at Brentwood and to other past and future expenses, as special or extraordinary expenses under s. 7 of the Guidelines . [ 15 ] She also seeks an order for ongoing basic support based on Mr. Simpson’s Guidelines income, properly determined. She says that his income should include the very large amounts for motor vehicle expenses by which Mr. Simpson reduces his income for tax purposes. Mr. Simpson [ 16 ] Mr.

Simpson says that he cannot now, and never could, afford to contribute to the cost of Calvin’s education at Brentwood College, and that in all the circumstances the expenses are not necessary or reasonable s. 7 expenses. [ 17 ] Mr. Simpson agrees that he should contribute to various other s. 7 expenses for which Ms. Simpson claims, including school uniforms and trips. He does not agree that he should share in the cost of Calvin’s orthodontic treatment, which he says could have been done at much lower cost to the parties (through Mr.

Simpson’s dental insurance) during Calvin’s access time in Washington, U.S.A., where Mr. Simpson lives. [ 18 ] Mr. Simpson says that the motor vehicle expenses he deducts from his income for tax purposes reflect the actual cost of the extensive travel his job requires, and that those expenses are therefore properly deducted also in the determination of his Guidelines income. THE ISSUES [ 19 ] The evidence and the parties’ positions give rise to four issues for determination: 1. whether Mr.

Simpson’s income for Guidelines purposes should include the amounts he deducts from his income for tax purposes as motor vehicle and other employment-related travel expenses 2. whether in the circumstances Calvin’s Brentwood fees are necessary and reasonable s. 7 expenses 3. if they are, whether Mr. Simpson should be required to contribute to them on a retroactive basis, and 4. whether the amounts Ms. Simpson paid for Calvin’s orthodontic work are necessary and reasonable s. 7 expenses given that the work could have been done more economically in Washington. [ 20 ] I will address these issues in turn. 1.

SHOULD MR. SIMPSON’S INCOME INCLUDE THE AMOUNTS HE DEDUCTS FOR MOTOR VEHICLE EXPENSES? [ 21 ] As I have noted, Ms. Simpson submits that Mr. Simpson’s Guidelines income should include the very substantial amounts he deducts from his income for tax purposes to reflect motor vehicle and some other travel expenses associated with his employment. [ 22 ] Mr. Simpson testified that his employment requires him to travel a great deal, often using his own car. It is for that reason that his employer pays him a car allowance of $8,200 per year. However, the car allowance is included in Mr. Simpson’s income for tax

purposes, so he deducts from his total income the allowable amounts for motor vehicle and other travel-related expenses from that total income. [ 23 ] Mr. Simpson files tax returns and pays income taxes in the U.S.A. Following the direction in s. 20 of the Guidelines , quoted below, he prepared his Form F8 Financial Statement as though he is a resident of Canada (except, he testified, that in fairness he used the lower mileage rate prescribed by the IRS for the deduction of motor vehicle expenses, on the basis that his travel was in the U.S.A. where gasoline is less expensive than in Canada).

Except for her challenge to his motor vehicle and other travel-related expense deductions, Ms. Simpson takes no issue with this approach, and acknowledges that the evidence discloses no basis for the application of s. 20(2).

Section 20 reads in full as follows: 20.

(1) Subject to subsection (2), where a spouse is a non-resident of Canada, the spouse’s annual income is determined as though the spouse were a resident of Canada.

(2) Where a spouse is a non-resident of Canada and resides in a country that has effective rates of income tax that are significantly higher than those applicable in the province in which the other spouse ordinarily resides, the spouse’s annual income is the amount that the court determines to be appropriate taking those rates into consideration. [ 24 ] Mr. Simpson submits that the substantial travel expenses required for his employment are properly deducted from his employment income in the determination of his Guidelines income. [ 25 ] Under the Guidelines , annual income is generally determined in accordance with ss. 16 through 20: see s.

Section 16 provides the starting-point, by which annual income is determined from a spouse’s “Total income” as indicated in the spouse’s income tax return at line 150, and is then adjusted in accordance with

Schedule III: 16. Subject to sections 17 to 20, a spouse’s annual income is determined using the sources of income set out under the heading “Total income” in the T1 General form issued by the Canada Revenue Agency and is adjusted in accordance with

Schedule III. [ 26 ] Mr. Simpson relies on s. 1 of

Schedule III to the Guidelines in deducting motor vehicle and other travel-related expenses from his line 150 income. The material portions of s. 1 of

Schedule III (“Adjustments to Income”) read as follows: 1. Where the spouse is an employee, the spouse’s applicable employment expenses described in the following provisions of the Income Tax Act are deducted: ... (f) paragraph 8(1)(

h) concerning travel expenses; (f.1) paragraph 8(1)(h.1) concerning motor vehicle travel expenses; [ 27 ] The referenced Income Tax Act provisions in turn read as follows: 8.

(1) In computing a taxpayer’s income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto ... (

h) where the taxpayer, in the year, (

i) was ordinarily required to carry on the duties of the office or employment away from the employer’s place of business or in different places, and (ii) was required under the contract of employment to pay the travel expenses incurred by the taxpayer in the performance of the duties of the office or employment, amounts expended by the taxpayer in the year (other than motor vehicle expenses) for travelling in the course of the office or employment, except where the taxpayer (iii) received an allowance for travel expenses that was, because of subparagraph 6(1)(b)(v), 6(1)(b)(vi) or 6(1)(b)(vii), not included in computing the taxpayer’s income for the year, or (iv) claims a deduction for the year under paragraph 8(1)(e), 8(1)(

f) or 8(1)(g); (h.1) where the taxpayer, in the year, (

i) was ordinarily required to carry on the duties of the office or employment away from the employer’s place of business or in different places, and (ii) was required under the contract of employment to pay motor vehicle expenses incurred in the performance of the duties of the office or employment, amounts expended by the taxpayer in the year in respect of motor vehicle expenses incurred for travelling in the course of the office or employment, except where the taxpayer (iii) received an allowance for motor vehicle expenses that was, because of paragraph 6(1)(b), not included in computing the taxpayer’s

income for the year, or (iv) claims a deduction for the year under paragraph 8(1)(f); [ 28 ] Paragraphs (

h) and (h.1) disallow deductions for travel or motor vehicle expenses where the taxpayer has received an allowance for those expenses and the allowance was not included in the taxpayer’s income because of the effect of s. 6(1)(

b) of the Income Tax Act . Section 6(1) requires various amounts to be included in income, but through paragraph (

b) specifically excludes reasonable allowances from an employer for travel and motor vehicle expenses for travelling for the purposes of the employment: 6.

(1) There shall be included in computing the income of a taxpayer for a taxation year as income from an office or employment such of the following amounts as are applicable ... (

b) all amounts received by the taxpayer in the year as an allowance for personal or living expenses or as an allowance for any other purpose, except ... (vii) reasonable allowances for travel expenses (other than allowances for the use of a motor vehicle) received by an employee (other than an employee employed in connection with the selling of property or the negotiating of contracts for the employer) from the employer for travelling away from (

A) the municipality where the employer’s establishment at which the employee ordinarily worked or to which the employee ordinarily reported was located, and (

B) the metropolitan area, if there is one, where that establishment was located, in the performance of the duties of the employee’s office or employment, (vii.1) reasonable allowances for the use of a motor vehicle received by an employee (other than an employee employed in connection with the selling of property or the negotiating of contracts for the employer) from the employer for travelling in the performance of the duties of the office or employment. [ 29 ] Through the combined effect of s. 8(1)(

h) and (h.1) and s. 6(1)(b)(vii) and (vii.1), a travel allowance which is reasonable is not included in the taxpayer’s income, but the taxpayer cannot deduct from income the travel-related or motor vehicle expenses to which the allowance relates. A travel allowance which is not reasonable is treated as income, but the taxpayer may deduct from income travel- related or motor vehicle expenses to the extent the Act allows. [ 30 ] One assumes that an allowance may fail to be “reasonable” either for being too high or for being too low. Mr.

Simpson’s position implicitly treats his car allowance as being not reasonable because too low in relation to his actual motor vehicle expenses. On this basis, the allowance is treated as income, in his tax return, but Mr. Simpson’s total income is then subject to deductions reflecting the actual expenses associated with motor vehicle travel for his employment. [ 31 ] Mr.

Simpson testified that while his employer reimburses him for some travel expenses, such as car rentals, it is the annual $8,200 car allowance which is the employer’s response to his costs of purchasing and maintaining a personal car for use during his employment. I note on this point that I did not take Mr. Simpson to acknowledge under cross-examination that his employer also reimbursed him for the mileage and other costs of using his car from time to time. He did agree with Mr.

Hutchison’s general proposition that he routinely sent the employer expense statements for travel costs and was reimbursed, but neither the question nor his answer referred specifically to car or to mileage expenses, and Mr. Simpson had distinguished those shortly before, in his evidence, from other travel expenses such as car rentals. [ 32 ] Ms. Simpson says that the amounts Mr. Simpson deducts from his income for motor vehicle and other travel-related expenses are not reasonable expenses, and that he should be imputed income equivalent to their amount. Section 19(1)(

g) of the Guidelines allows a court which concludes that an expense deduction is unreasonable to impute income accordingly: 19.

(1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following: ... (

g) the spouse unreasonably deducts expenses from income; [ 33 ] A deduction may be permitted and proper under the Income Tax Act , but nonetheless not a reasonable deduction in the determination of a spouse’s Guidelines income: see s. 19(2) of the Guidelines , which reads as follows:

(2) For the purpose of paragraph (1)(g), the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act . [ 34 ] The trial proceeded on the basis that if Mr. Simpson did not actually incur expenses in the amounts he deducts from his income for tax purposes, then those amounts do not reflect reasonable expenses for the purposes of

Schedule III adjustments to his Guidelines income. [ 35 ] Most of the travel-related expenses which Mr. Simpson treats as

Schedule III adjustments to his Guidelines income relate to the use of his personal vehicle in his employment. My remarks will address mainly those.

[ 36 ] Mr. Simpson testified that he used one of the two methods authorized by the IRS for deducting motor vehicle expenses from his total income. He opted for the simpler method of recording the total number of miles travelled in the car for business purposes, and applying a standard dollar mileage rate to the number of miles. Mr. Simpson’s tax return for 2010 indicates that the mileage rate was $0.50 per mile in that year. It has risen by a few cents per mile since. [ 37 ] I found Mr. Simpson to be an honest and forthright witness, as I found Ms. Simpson also to be.

I accept his evidence that he travelled the number of miles for his employment corresponding to the deductions he claimed in his tax returns. His tax return for the year 2010 includes a supplementary form detailing his vehicle expenses, which shows a total of 41,567 miles driven in his Vehicle 1, of which 37,654 miles (or 90.59%) were driven for business purposes. Mr. Simpson’s Vehicle 2 was driven very much less. The deductions are based on very large distances driven each year, but I find no reason not to accept Mr.

Simpson’s evidence that he drove his cars those distances for the purpose of his employment. [ 38 ] Ms. Simpson submits that the Court should draw an adverse inference from Mr. Simpson’s failure to produce certain “written evidence” documenting or detailing the miles he says he drove for employment purposes, but I do not agree. The reference to “written evidence” arises from the forms relating to motor vehicle expenses submitted with Mr. Simpson’s tax returns which, in pre-printed questions, ask, “Do you have evidence to support your deduction”, and “If ‘Yes’, is the evidence written”.

In his 2010 form, for example, Mr. Simpson answered each of those questions affirmatively. Challenged about the absence of any such “written evidence” from the evidence in this proceeding, Mr. Simpson testified that he did not understand the filing or document production requirements in this proceeding to require that level of detail. He testified that, had he at any stage been asked for the records supporting his mileage- based claims, he would happily have produced them. [ 39 ] The supporting written evidence was not required to be filed with Mr.

Simpson’s U.S. tax return, or to be produced in conjunction with his Form F8 Financial Statement in these proceedings. His tax returns on their face make clear that he claims each year large deductions based on motor vehicle expenses and some other travel expenses. Without evidence of specific inquiry about or challenge to those deductions in the process that led to the trial, I find no basis on which to infer that Mr.

Simpson failed to produce the supporting records because they do not exist or would not support his position that he drove the number of miles for employment purposes on which his income tax deductions are based. [ 40 ] I also find no basis on which to conclude either that Mr. Simpson deducted motor vehicle expenses for which his employer had reimbursed him, or that his deductions exceeded the amounts allowable for the distances he had actually driven during his employment. As I have said, I am satisfied that Mr.

Simpson drove the miles he said he drove, and appropriately claimed income tax deductions as a result. [ 41 ] But the next question is whether the mileage-based deductions from income authorized by the IRS reflect expenses Mr. Simpson actually incurred. [ 42 ] One infers that the IRS’s mileage rate, like that in Canada, is intended to reflect the actual costs to a typical or average taxpayer of using his or her vehicle for employment, those costs being for fuel, repairs, any increased insurance for business use, and depreciation of the vehicle itself. However, there is evidence to suggest that Mr.

Simpson’s actual costs (of using his vehicles for his employment) must have been lower than the amounts reached by applying the mileage rate to the distances he drove. [ 43 ] Mr. Simpson filed two Form F8 Financial Statements, in November 2011 and in August 2012. In broad terms, the monthly expenses he sets out are generally consistent in each.

Because the November 2011 financial statement has the advantage of being based on complete information for the year (and not projections about the future) and is accompanied by a filed tax return from which certain information in the financial statement is drawn, I will refer in this discussion to that financial statement and not to the more recent one. [ 44 ] For the year 2011, Mr. Simpson’s total annual expenses, not including the work-related expenses he deducted from his income in his tax return, amounted to $108,933.

If one adds to that amount the child support and special and extraordinary expenses he paid for Calvin, his expenses were approximately $124,000 for the year, not including the work-related expenses. [ 45 ] Those amounts are significantly greater than his income for tax purposes after the deduction of his work-related travel expenses. In the 2011 financial statement, Mr. Simpson relied on his income figures for the 2010 taxation year.

In that year, his employment income was $103,856, from which he deducted work-related travel expenses totalling $28,506 (as well as other amounts deductible in the U.S., such as personal exemptions and mortgage interest). In

Schedule III of his 2011 financial statement, Mr. Simpson adjusted his income by $29,644, to reduce it for work-related travel expenses. [ 46 ] As an aside, I note that the $1,138 difference between that figure and the amount shown for work-related expenses in his 2010 tax return appears to be attributable to the inclusion of $2,076 under

Schedule III adjustments for work-related expenses for meals while away from home. In his tax return, this amount is required to be halved, so that the deduction is only $1,038. The difference of $100 (between $1,138 and $1,038) seems to be an arithmetic error. [ 47 ] Mr. Simpson’s income and deductions for tax purposes in 2011 were broadly similar, as were his expenses as stated in his August 2012 financial statement. [ 48 ] Mr. Simpson’s two financial statements each treat in different ways the work-related expenses he deducts from income for tax purposes.

The November 2011 financial statement sets out four categories of work-related expenses, which total the $29,644 amount I discussed above. The August 2012 financial statement shows only a total amount ($31,605) without breaking it down into categories. However, the two financial statements are identical in (

a) not including those amounts in Mr. Simpson’s total expenses for the year in question, and (

b) not showing any expenses for non-recovered work-related expenses. [ 49 ] I make observation (

b) because for Mr. Simpson to deduct the work-related expenses from his income for tax purposes, as he does, reduces his income and therefore the tax he pays, but, obviously, does not reimburse him fully for those expenses. A $30,000 deduction is not a $30,000 reimbursement or tax credit, particularly as, Mr. Simpson’s tax returns make clear, his marginal tax rate was relatively low.

[ 50 ] The evidence does not allow me to conclude that the tax deductions for work-related expenses reflect actual costs, in those amounts, to Mr. Simpson. If they did, his income could not support the spending he sets out in his financial statements. And, rather than accruing debt from over-spending, Mr. Simpson seems to be gradually reducing his modest debt. [ 51 ] I take into account that motor vehicle expenses for the purposes of tax deductions take account of depreciation of the vehicle. There is no clear evidence about Mr.

Simpson’s vehicles or vehicle purchases, but one may fairly assume that, given the extent of his driving for employment purposes, he will need to purchase a new car every few years. But an upcoming outlay for a new vehicle would likely be insufficient to account for the discrepancy between Mr. Simpson’s income after deductions for work-related expenses and the spending he sets out in his financial statements. [ 52 ] In all the circumstances, I conclude that Mr.

Simpson’s actual work-related travel expenses are less than the amounts he properly deducts for income tax purposes, and should be fixed, for the purposes of

Schedule III adjustments to his income for Guidelines purposes, at $15,000 per year, for each of the years in issue through to and including 2011. Expenses in excess of that amount which are properly deducted from Mr. Simpson’s income for tax purposes as employment-related expenses will be treated either as deductions which are not reasonable in the Guidelines context, or as imputed income; the effect is the same. [ 53 ] My conclusion on this point should not be taken as reflecting badly on Mr. Simpson’s credibility or his sincerity in setting out his financial position in these proceedings.

I simply conclude that for some reason which is not apparent from the evidence, he is able to drive his vehicle(

s) for work-related purposes at less cost than the IRS rules allow him to deduct from his income for tax purposes. [ 54 ] In future, beginning in the coming months in relation to the year 2012, the parties are to exchange tax returns and notices of assessment and assessment notices, if any, each year within 10 days of filing or receiving them, as the case may be. If, as Mr. Simpson testified, the IRS does not issue notices of assessment or assessment notices, he is to so advise Ms. Simpson, through her counsel, in writing within 10 days of filing his return, and is also to provide Ms.

Simpson with a copy of any written communication from the IRS within 10 days of receiving it. [ 55 ] In the current tax year and ongoing, Mr. Simpson is also to provide Ms. Simpson with the detailed record (or “written evidence”, as described in the IRS form) concerning any vehicle expense or other work-related deductions he claims, in the annual exchange of tax returns. [ 56 ] In any event, the

Schedule III adjustments to Mr. Simpson’s income are not to exceed a total of $15,000 for work-related travel expenses in any single year. [ 57 ] On the basis I have described, Mr. Simpson’s Guidelines income for the year 2011 is $88,856 ($103,856 - $15,000), and he will pay child support of $825 per month. Ms. Simpson’s income for 2011 was $32,791. Special and extraordinary expenses will therefore be shared on a 73/27% basis. [ 58 ] The parties may by agreement adjust the amount of child support payable by Mr.

Simpson and the proportional sharing of s. 7 expenses to accord with changes in their respective Guidelines incomes. 2. ARE CALVIN’S BRENTWOOD FEES NECESSARY AND REASONABLE s. 7 EXPENSES? [ 59 ]

Section 7 of the Guidelines provides for orders concerning special or extraordinary expenses. The order may relate to all or a portion of such expenses, and the expenses may be estimated. The court considering such an order will take into account: (

a) the necessity of the expense in relation to the child’s best interests, and (

b) the reasonableness of the expense in relation to the spouses’ and the child’s means and to the family’s spending pattern prior to the separation. The guiding principle in determining the amount of such an expense is that it is shared by the spouses in proportion to their respective incomes after deducting the child’s contribution, if any (s. 7(2)). [ 60 ] Section 7(1) and (1.1) together describe the expenses which may be special or extraordinary: 7.

(1) In a child support order the court may, on either spouse’s request, provide for an amount to cover all or any portion of the following expenses, which expenses may be estimated, taking into account the necessity of the expense in relation to the child’s best interests and the reasonableness of the expense in relation to the means of the spouses and those of the child and to the family’s spending pattern prior to the separation: (

a) child care expenses incurred as a result of the custodial parent’s employment, illness, disability or education or training for employment; (

b) that portion of the medical and dental insurance premiums attributable to the child; (

c) health-related expenses that exceed insurance reimbursement by at least $100 annually, including orthodontic treatment, professional counselling provided by a psychologist, social worker, psychiatrist or any other person, physiotherapy, occupational therapy, speech therapy and prescription drugs, hearing aids, glasses and contact lenses; (

d) extraordinary expenses for primary or secondary school education or for any other educational programs that meet the child’s particular needs; (

e) expenses for post-secondary education; and (

f) extraordinary expenses for extracurricular activities.

(1.1) For the purposes of paragraphs (1)(

d) and (f), the term “extraordinary expenses” means (

a) expenses that exceed those that the spouse requesting an amount for the extraordinary expenses can reasonably cover, taking intoaccount that spouse’s income and the amount that the spouse would receive under the applicable table or, where the court has determinedthat the table amount is inappropriate, the amount that the court has otherwise determined is appropriate; or (

b) where paragraph (

a) is not applicable, expenses that the court considers are extraordinary taking into account (

i) the amount of the expense in relation to the income of the spouse requesting the amount, including the amount that the spousewould receive under the applicable table or, where the court has determined that the table amount is inappropriate, the amount that thecourt has otherwise determined is appropriate, (ii) the nature and number of the educational programs and extracurricular activities, (iii) any special needs and talents of the child or children, (iv) the overall cost of the programs and activities, and (

v) any other similar factor that the court considers relevant. [61] In McLaughlin v. McLaughlin (1998), (BC CA), 57 B.C.L.R. (3d) 186 (C.A.), Prowse J.A., discussings. 7(1)(

f) before the enactment of s. 7(1.1), adopted the analysis of Madam Justice Bateman in Raftus v. Raftus (1998), 1998 NSCA 75, 159 D.L.R. (4th) 264 (N.S.C.A.), by which the court determines whether an expense is extraordinary by reference to theparties’ joint incomes, together with factors relating to the expense or expenses and the needs and talents of the children. Section 7(1.1)now takes a similar approach. This determination applies to the expenses in s. 7(1)(

d) and (f), which provide specifically for“extraordinary expenses”. [62] Where an expense is found to be extraordinary, the court must next determine whether it is necessary in relation to the child’sbest interests, and reasonable, having regard to the means of the spouses and those of the child, and to the family’s spending pattern priorto the separation. This analysis applies to all s. 7 expenses, whether extraordinary expenses under s. 7(1)(

d) and (f), or special expensesunder other provisions of s. 7. [63] There is no real dispute that Calvin’s Brentwood fees are extraordinary expenses, in the sense of expenses that are well outsidethe scope of the expenses Ms. Simpson should be required to fund from basic child support. The issue arises at the next stage of theanalysis, which asks whether the expenses are necessary and reasonable in the circumstances s. 7 delineates. [64] Ms. Simpson submits that the expenses are necessary, because education at Brentwood has been necessary in order for Calvinto succeed as he has.

It is clear from the evidence that Calvin has always been able in academic subjects based on verbal skills and insports, but finds mathematics extremely challenging. The diagnosis of ADHD in or around grade 4 was confirmed several years later byDr. Miranda, who Ms. Simpson engaged privately before Calvin entered Brentwood. Dr. Miranda also identified other learning styledifferences. [65] Ms.

Simpson testified that although the public school system created an Individual Education Plan for Calvin, in which itundertook to continue to support Calvin in his learning, the available support was not sufficient: she testified that the extra assistancethrough the school “was not helping”. She sought out other avenues of assistance, such as Kumon math tutoring and Sylvan tutoring,but, she testified, with little success. A tutor she hired to come to the home had more success with Calvin, but “not the results weneeded”. Ms. Simpson testified that she felt desperate for Calvin, and unsupported by Mr.

Simpson, who in her view minimized thechallenges Calvin faced and expressed the view that closer supervision by Ms. Simpson and more effort on Calvin’s part wouldovercome the problems. [66] Ms. Simpson testified that around the time when she received a small inheritance from her father, a friend suggested privateschool for Calvin. She testified that the suggestion came as a ray of light. She made inquiries about three private schools on VancouverIsland, including Brentwood, one of which is in Victoria.

She quickly realized that Brentwood best suited Calvin’s needs, being bothwelcome and accommodating and offering the Key Program specifically for students with learning style differences. She gave thoughtto whether Calvin might attend as a day student, to reduce the cost, but concluded that daily travel was not practicable, given thestudents’

schedule for classes, mandatory sports, and daily “prep”. [67] It is clear that after a period of adjustment, Calvin settled well into life at Brentwood and became a valued and successfulstudent. Extra help through the Key Program and tutoring enabled him to meet the requirements of Foundations of Mathematics 11 witha 50% final mark. In some of his other courses, he has excelled. Calvin plans, after graduating from grade 12, to go on to university inEastern Canada in a verbally-based field of study. As both parties recognize, there is every reason to believe that he will succeed. [68] Ms.

Simpson submits that the expenses of Calvin’s education at Brentwood were and are necessary in relation to his bestinterests, because Calvin would not have succeeded in the public school system. [69] I am not entirely convinced that the evidence supports this position. Brentwood has certainly served Calvin well, through itsdedicated staff and close supervision of Calvin’s time over his day and evening activities, approximately six days per week. However,that Ms.

Simpson undoubtedly felt desperate about Calvin’s future, in the period before she enrolled him at Brentwood, is not of itself acomplete or accurate measure of his likely success or otherwise had he remained in the public system with some supplementary support. On the evidence, it is difficult to determine to extent to which Ms.

Simpson’s different perception of Calvin’s success at Brentwoodarises in part from her reduced supervisory role, in relation to his studies, while he boards there. [70] However, the issue is unnecessary to resolve because, in my view -- and in no way impugning the quality of Calvin’s educationat Brentwood, quite the contrary -- even if education at Brentwood was a necessary expense, it was not a reasonable expense, given the

parties’ means. [ 71 ] Annual fees for boarding students at Brentwood are more than $35,000. Bursaries (of $9,000 and $5,000) reduced the fees in two of Calvin’s years at the school, because Ms. Simpson’s new spouse had periods of unemployment in those years. The Key Program and Calvin’s extra tutoring gave rise to additional fees. Net of the two bursaries, the amounts Ms. Simpson has paid for Calvin’s education alone (that is, not including expenses for sports, uniforms, school trips, etc., all of which Mr.

Simpson agrees to share as s. 7 expenses) are as follows: YEAR SCHOOL FEES KEY PROGRAM TUTOR TOTALS 2009 $36,500 $400 $1,280 $38,180 2010 $27,742 $1,000 $3,200 $31,942 2011 $37,530 $1,000 $3,200 $41,730 2012 $35,796 $600 $1,920 $38,316 TOTALS $137,568 $3,000 $9,600 $150,168 [ 72 ] Since 2008, the year before Calvin enrolled at Brentwood, the parties’ 2011 Guidelines incomes have been as follows (allowing for Mr. Simpson’s income to be adjusted for $15,000 in employment-related travel expenses). I note that the large increase in Ms.

Simpson’s income in 2010 represents unusual gains from the investments reflecting her inheritance. In most years the Brentwood fees and supplementary expenses, as shown in the chart above, would of themselves absorb about a third of the parties’ total combined incomes before taxes, as shown in the chart below: Year Mr. Simpson’s Net Income Ms.

Simpson’s Income Total Both Incomes/yr Percentage Split 2008 $90,983 $18,196 $109,179 83/17 2009 $75,701 $25,912 $101,613 74/26 2010 $88,856 $160,490 $249,346 36/64 2011 $87,779 $32,791 $120,570 73/27 [ 73 ] The reasonableness of extraordinary expenses is not measured only by reference to the parties’ Guidelines incomes. Spouses’ wider means, including their assets, also bear on whether the expenses are reasonable in their circumstances. [ 74 ] However, it is only Ms. Simpson who has significant financial assets, which she received through the inheritance from her father. Mr.

Simpson has no significant assets from which to fund the expenses. He has some retirement-related financial assets and an inheritance from his father, but those are not available to him until later in life. I do not find that Mr. Simpson is rich in personal property, despite Ms. Simpson’s suggestion otherwise. [ 75 ] That Ms. Simpson has the financial means, from her inheritance, to fund Calvin’s education at Brentwood does not make that expense a reasonable extraordinary expense under s. 7 for the parties to share. [ 76 ] Ms. Simpson submits that when Calvin first enrolled at Brentwood, Mr.

Simpson essentially agreed to Calvin doing so and to contributing to the cost, but I find differently. In the email exchange in late September 2008, after Ms. Simpson and Calvin first explored the possibility of Brentwood, Mr. Simpson expressed support for their enthusiasm for the school, but at that time had no idea what the fees would likely be. In later emails in or around December 2008, after Ms. Simpson advised him of the $34,000 fees, and in telephone conversations to similar effect, Mr.

Simpson was at most non-committal about whether he could support the decision for Calvin to attend, given those fees, by contributing financially. Ms. Simpson had announced her intention and ability to fund the expenses alone if necessary. In those circumstances, Mr. Simpson’s failure to explicitly refuse to share the expenses amounted neither to acquiescence in doing so, nor to agreement that the expenses were reasonable for the parties to bear. [ 77 ] On all the evidence, I find that only Ms. Simpson reached a firm decision to fund an education at Brentwood. While Ms. Simpson undoubtedly hoped that Mr.

Simpson would then or later decide to contribute as well, she was determined to send Calvin to Brentwood whether Mr. Simpson contributed or not. [ 78 ] The reasonableness or otherwise of an extraordinary expense is measured in part against the family’s spending pattern prior to the separation. The separation long preceded Calvin’s enrolment at Brentwood, and was at a time in the parties’ lives when Mr. Simpson earned approximately $30,000 per year. As Mr. Simpson testified, private school education for Calvin was not on the cards. [ 79 ] Since then, Mr. Simpson’s salary with his employer has steadily improved.

However, even viewed in combination with Mr. Simpson’s retirement and other assets, his income during Calvin’s Brentwood years has not been at a level to make boarding school education a reasonable expense. [ 80 ] The means which now enable Calvin to attend Brentwood are from the strong hand dealt to Ms. Simpson through the inheritance from her father since the separation. Those financial assets are exclusively Ms.

Simpson’s, and, in my view, do not engage the obligation on spouses, as expressed in s. 7, to share extraordinary expenses which are reasonable in relation to the means of them both. [ 81 ] The Brentwood fees are not reasonable extraordinary expenses, and Mr. Simpson will not be required to contribute to them. [ 82 ] However, as I have noted, Mr. Simpson agrees that he should contribute to various other expenses Ms. Simpson has paid on Calvin’s behalf during his years at Brentwood, which together amount to the following: 2009 $546

2010 $1,097 2011 $773 2012 $2,590 Mr. Simpson’s contribution will be proportional to his Guidelines income, relative to Ms. Simpson’s, for each of those years. He will not be required to contribute to the cost of Dr. Miranda’s report, which, I find, was prepared for the specific purpose of admission to Brentwood. Had Calvin remained in the public school system, a further assessment would have been done at no cost to the parties. [ 83 ] Mr. Simpson is also to contribute, proportionally to his Guidelines income, to the cost of Calvin’s extra assistance through the Key Program and tutoring at Brentwood.

Debbie Vogt, Calvin’s tutor at Brentwood, testified that he would not have been able to complete the grade 11 mathematics requirements without the tutoring he received. In my view of the evidence, had Calvin remained at public school, he likely would have needed private tutoring in mathematics in order to succeed as he has. There is no evidence that the extra help Calvin received at Brentwood through the Key Program and individual tutoring were, in combination, any more expensive than an equivalent level of tutoring would have been in the outside community. 3. SHOULD MR.

SIMPSON CONTRIBUTE TO THE BRENTWOOD FEES ON A RETROACTIVE BASIS? [ 84 ] Because I have concluded that the Brentwood fees are not necessary or reasonable extraordinary expenses, this issue is unnecessary to decide. [ 85 ] To the extent that the order for proportional sharing of other special or extraordinary expenses operates retroactively, the sharing is either unopposed or (in the case of Calvin’s orthodontic treatment, which I will discuss below) based on clear notice of Ms. Simpson’s claim given long ago. [ 86 ] On the basis of the principles discussed in D.B.S. v.

S.R.G. , 2006 SCC 37 , [2006] 2 S.C.R. 231, the order for retroactive sharing of Calvin’s tutoring costs should operate retroactively to cover his entire time at Brentwood. It was always clear to Mr. Simpson that Calvin needed extra help with mathematics. And, as I noted above, the cost of tutoring at Brentwood was reasonable for the parties, in relation to their means. 4. WERE THE COSTS FOR CALVIN’S ORTHODONTIC WORK REASONABLE AND NECESSARY S. 7 EXPENSES? [ 87 ] Calvin had orthodontic treatment in Victoria, B.C., between August 2010 and May 2012, at a total cost of $6,400.

Insurance coverage paid half of that amount, and Ms. Simpson paid the other half. Ms. Simpson submits that Mr. Simpson should pay a proportional share of the $3,200 she paid. [ 88 ] Mr. Simpson does not disagree that Calvin required orthodontic treatment. He submits, however, that treatment in Victoria at a total cost to the parties of $3,200 was not reasonable in the circumstances because treatment was available in Washington under Mr.

Simpson’s insurance coverage at a lower total cost to the parties of $1,500. [ 89 ] In my view, it was reasonable for the orthodontic treatment to have been done in Victoria, despite the greater cost to the parties. As Ms. Simpson explained in her evidence, Calvin has a very full week at Brentwood College, with only Sundays unscheduled for school activities. I am not convinced that it would have been practicable to have scheduled all the necessary appointments in Washington on school holidays.

Also, even were that possible, the arrangement would not have allowed for unexpected repairs or adjustments to the orthodontic work. [ 90 ] Mr. Simpson will pay a proportional share of the $3,200 Ms. Simpson paid for Calvin’s orthodontic expenses.

SUMMARY OF ORDERS [ 91 ] For the purposes of

Schedule III adjustments to his income, Mr. Simpson’s work-related travel expenses will be treated as $15,000 per year, for each of the years in issue through to and including 2011. [ 92 ] Mr. Simpson’s Guidelines income for the year 2011 is therefore $88,856 ($103,856 - $15,000), and he will pay child support of $825 per month, subject to adjustment to reflect changes in his income. [ 93 ] Ms. Simpson’s income for 2011 was $32,791.

Special and extraordinary expenses will be shared on a 73/27% basis, subject to adjustment to reflect changes in the parties’ incomes. [ 94 ] Beginning in relation to the tax year 2012, the parties are to exchange tax returns and notices of assessment and assessment notices, if any, each year within 10 days of filing or receiving them, as the case may be. If, as Mr. Simpson testified, the IRS does not issue notices of assessment or assessment notices, he is to so advise Ms. Simpson, through her counsel, in writing within ten days of filing his return, and is also to provide Ms.

Simpson with a copy of any written communication from the IRS within ten days of receiving it. [ 95 ] In the current tax year and ongoing, Mr. Simpson is also to provide Ms. Simpson with the detailed record (or “written

evidence”, as described in the IRS form) concerning any vehicle expense or other work-related deductions he claims, in the annual exchange of tax returns. [ 96 ] In any event, the

Schedule III adjustments to Mr. Simpson’s income are not to exceed a total of $15,000 for work-related travel expenses in any year. [ 97 ] The fees for Calvin’s education at Brentwood College are not necessary or reasonable extraordinary expenses, and Mr. Simpson is not required to contribute to them. [ 98 ] However, Mr. Simpson is to contribute, proportionally to his Guidelines income, to the cost of Calvin’s extra tutoring and the associated Key Program at Brentwood over the years he received it. [ 99 ] Also, and as Mr.

Simpson agrees, he will contribute proportionally to various other expenses, listed above, which Ms. Simpson has paid on Calvin’s behalf during his years at Brentwood. [ 100 ] Mr. Simpson is not required to contribute to the cost of Dr. Miranda’s report. [ 101 ] Mr. Simpson will pay a proportional share of the $3,200 Ms. Simpson paid for Calvin’s orthodontic expenses. [ 102 ] The parties each sought costs. On my preliminary view, success in the litigation is divided, and I would order that each party bear his or her own costs.

However, if one or both parties wishes to make further submissions concerning the matter, they should within 14 days of these reasons make arrangements through the court registry to

schedule a hearing at the parties’ and the Court’s earliest mutual convenience. If after 14 days no such arrangements are in place, then the order will provide that each party bears his or her own costs. “H. Holmes, J.” The Honourable Madam Justice H. Holmes