J.M. v. T.I., 2019 BCPC 131

Citation: J.M. v. T.I. 2019 BCPC 131 Date: 20190521 File No: 119627 Registry: Kelowna IN THE PROVINCIAL COURT OF BRITISH COLUMBIA IN THE MATTER OF THE FAMILY LAW ACT , S.B.C. 2011 c. 25 BETWEEN: J.M. APPLICANT AND: T.I. RESPONDENT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE L. WYATT

Counsel for the Applicant: B. Coyne Counsel for the Respondent: J.G. Hardwick Place of Hearing: Kelowna , B.C. Date of Hearing: May 10, 2019 Date of Judgment: May 21, 2019 [ 1 ] This is J.M.’s application to replace a provision of the parties’ March 28, 2018 Separation Agreement. Although not framed as such in the Application filed by J.M., the relief sought is something which the Court can do under

section 148 of the Family Law Act ( FLA ). [ 2 ] That

section provides as follows: Agreements respecting child support 148

(1) An agreement respecting child support is binding only if the agreement is made (

a) after separation, or (

b) when the parties are about to separate, for the purpose of being effective on separation.

(2) A written agreement respecting child support that is filed in the court is enforceable under this Act and the Family Maintenance Enforcement Act as if it were an order of the court.

(3) On application by a party, the court may set aside or replace with an order made under this Division all or part of an agreement respecting child support if the court would make a different order on consideration of the matters set out in

section 150 [determining child support] . [ 3 ]

Section 150 of the FLA provides as follows: Determining child support 150

(1) If a court makes an order respecting child support, the amount of child support must be determined in accordance with the child support guidelines.

(2) Despite subsection (1), a court may order child support in an amount different from that required by the child support guidelines if (

a) the parties consent under

section 219 [persons may consent to order being made] or have an agreement respecting child support, and (

b) the court is satisfied that reasonable arrangements have been made for the support of the child.

(3) The court must consider the child support guidelines for the purposes of subsection (2), but must not consider arrangements made for the support of the child to be unreasonable only because the amount required under the child support guidelines differs from those arrangements.

(4) Despite subsection (1), a court may order child support in an amount different from that required by the child support guidelines if satisfied that: (

a) an agreement or order respecting the financial duties of the parents or guardians or the division or transfer of property, other than an agreement respecting child support, benefits the child directly or indirectly, or that special provisions have otherwise been made for the benefit of the child, and (

b) applying the child support guidelines would be inequitable on consideration of the agreement, order or special provisions.

(5) If a court makes an order respecting child support in an amount different from that required under the child support guidelines, it must give reasons for doing so. [ 4 ] The dispute, simply put, is whether the Respondent T.I.’s disability income should be included in determining her Guideline income for child support purposes. J.M. submits it should, and T.I. submits it should not. [ 5 ] There is no dispute that the parties entered into a separation agreement dated March 28, 2018 for reference.

Each party signed it in early April 2018. [ 6 ] The parties have 2 daughters, K.M. and A.M., who reside in Kelowna with J.M.. T.I. resides in the Lower Mainland with her new spouse. [ 7 ] In the recitals to the agreement, T.I., then T.M., is described as a teacher, currently on disability leave. J.M. is described as a welder, currently unemployed. [ 8 ] The relevant provisions of the agreement that related to child support are as follows: 4. Child Support 4.1 In this section:

(a) “Table” and “income” mean “Table” and “income” as those terms are defined in s. 2(1) of the Guidelines; (b) “special” or extraordinary expenses” means “special or extraordinary expenses” as this phrase is defined in s. 7(1) of the Guidelines; (c) “child support” refers to the monthly amount upon which the parties have agreed and may include both Table support and special or extraordinary expenses. 4.2 For purposes of determining table support for K.M. and A.M., for the period June 1, 2017 through May 31, 2018, T.I.’s annual income shall be deemed to be $85,000.00.

Effective June 1, 2018, table support shall be based on the annual income disclosed in T.I.’s T-1 Tax Return. 4.3 T.I. will pay table support to J.M. for K.M. and A.M. in accordance with the Child Support Guidelines. 4.4 Prior to May 31 st of each year, the parties shall exchange their T1 Tax Returns (and Notices of Assessment as soon as they are available.) Effective June 1 st each year, child support, both table and extraordinary amounts, payable for K.M. and A.M., shall be adjusted in accordance with the tax returns for the parties for the prior calendar year. 4.5 For the purpose of apportioning special or extraordinary expenses for K.M. and A.M., the following provisions shall apply; (

a) T.I.’s income shall be her actual income as declared in her T1 Tax Return for the preceding year or $65, 000, whichever is greater, (

b) J.M.’s income shall be his actual income as declared in his T1 Tax Return for the preceding year or $35,000, whichever is greater. (

c) Upon the occurrence of a material change in circumstances, either party may apply to vary the imputed amount set out in sub- paragraphs (

a) and (b). [ 9 ] Some discussion of the negotiations leading up to the execution of the agreement is helpful. [ 10 ] In early June 2017, the parties, who had been separated since January 2011, discussed via email the issue of what T.I.’s child support obligation should be moving forward. She told him that although her 2016 income was $101, 861.42, that some of this was due to extra work from over time, that she had been off work on disability since December 2016, and that she would not have income for July and August that year.

She proposed, therefore, that a “fair” 2016 income to use for her would be $85,000. [ 11 ] J.M. agreed with this suggestion. In those email exchanges, T.I. did not tell J.M. that she was already receiving disability income. During his testimony, J.M. advised the court that he did not know what T.I.’s disability income was until these proceedings were underway. T.I. cannot recall if she gave him that information.

I note that in the financial statement she filed on November 7, 2018 in response to J.M.’s application, she did not disclose her disability income, even though that form calls for disclosure of all amounts received in the benefits section. I accept J.M.’s evidence that this information was not disclosed until sometime after these proceedings were underway. [ 12 ] T.I. went off work in December 2016. She had problems with her back, resulting in two operations and two surgical procedures in 2017. She had some additional health issues arise in 2018. She continues to be on medical leave from her employment.

She received short term disability income from January to September 2017, and then has been on long term disability benefits since then. Currently she receives $4,161.52 per month tax free from her disability insurer. She also receives rental income from a property she owns in Kelowna, B.C. Further details of her income will be set out later in these reasons. [ 13 ] The negotiation of the agreement was protracted. T.I. was represented by counsel throughout.

J.M. consulted counsel on at least two occasions, but represented himself when the agreement was finalized and signed. [ 14 ] At the time the agreement was signed in 2018, T.I. was paying J.M. table child support for the two children based on an agreed upon income of $85,000. The agreement did not specify whether this figure was based on her 2016 annual income or her 2017 annual income. It says that this figure will be used to determine child support for the period of June 1, 2017 to May 31, 2018.

The agreement says in paragraph 4.2 that “effective June 1, 2018, table support shall be based on the annual income disclosed in T.I.’s T-1 Tax Return.” In paragraph 4.3, it says she will pay table child support in accordance with the child support guidelines. [ 15 ] In early June 2018, T.I. sent J.M. a copy of her 2017 tax return

summary and said her annual income was $17, 431.45 and that her child support would be reduced to $264.07 per month. [ 16 ] He replied that her disability income was to be included and asked for her to send him that information. She did not do so. He asked for it again two weeks later, but she did not provide it. He sent her excerpts from Wikibooks and from the Justice Canada website, which he received from the Courthouse library, showing her that her disability income must be included. He tried to set up mediation to discuss the issue.

None of his efforts resulted in her reconsideration of her child support obligations. He then commenced these proceedings. [ 17 ] Although some of the evidence in this trial focussed on the nature of the negotiations between counsel for T.I. and J.M. himself, there is no application to set aside or replace the agreement based on duress, undue influence, or unconscionability. The only issue for the court to determine is whether the child support provisions in the agreement ought to be replaced, and whether T.I’s guideline income ought to include her non-taxable disability income.

PARTIES’ POSITIONS [ 18 ] J.M. asks the court to replace the child support provision of the agreement with an order under s. 148(3). He argues that the court ought to impute income to T.I. pursuant to s. 19(1) of the child support guidelines, which allows the court to consider non-taxable

income. [19] He argues that the order ought to be retro-active to June 1, 2018, the date when T.I. unilaterally reduced her child support fromalmost $1,300 per month to $264 per month. [20] T.I. argues that the court ought not to replace the child support provisions of the agreement with an order. She argues that thedefault provision to determine guideline income is s. 16 of the child support guidelines, which requires the court to consider total incomein the payor’s T1 General. She asks the court not to include her $50,000 per year in non-taxable disability income.

She argues that if thecourt is inclined to impute income to her as a result of this non-taxable income, that the court cannot do so retroactively under s. 148(3).She refers to the decision of the Supreme Court of British Columbia in Chutter v. Chutter 2016 BCSC 2407 as authority for this. LEGAL ANALYSIS [21] In the Chutter case, supra, Justice Weatherill considered Ms. Chutter’s application to vary a separation agreement, and forretroactive child support and arrears of s. 7 expenses. [22] He first dealt with the application for retroactive child support.

He went through the analysis prescribed by the Supreme Courtof Canada in D.B.S. v. S.R.G, 2006 SCC 37 and declined to order retroactive child support. [23] The separation agreement in issue in the Chutter case provided that Mr. Chutter pay $1,000 per month child support to Ms.Chutter for three children, which sum was to include expenses for extra-curricular activities. [24] Ms. Chutter sought arrears of

section 7 expenses. The court dealt with this part of the application as an application to “overridethe agreement” and to make a new order respecting child support. The court commented that if it upheld the agreement, then theapplication must fail. It then went through a review of sections 148 (3) and 150. Justice Weatherill referred to the M.(R.) v. M. (N.), 2014BCSC 1755 and said the following about that case at paragraph 94: “Subject to my comments below regarding s. 7 expenses, I agree with these reasons and accordingly give the agreement considerableweight.” [25] He then found that Ms.

Chutter had paid more than her proportionate share of the extra-curricular expenses, so he decided tovary the agreement “slightly” in relation to s. 7 expenses and awarded Ms. Chutter $10,000 for arrears of those expenses. Given that thecourt varied the agreement, even if only “slightly”, and awarded arrears of s. 7 expenses, this was, in my respectful view, a case of thecourt applying s. 148 (3) of the FLA retroactively. [26] The M.(R.) v. M. (N.) case, supra, is a 2014 BCSC decision. In that case the court said it could not vary a child supportagreement retroactively under s. 148 of the FLA.

Subsequently, however, the BC Supreme Court in Isacson v. Isacson 2014 BCSC 2351,retroactively varied child support payable under an agreement. In the Provincial Court decision of T.L. v. R. M. 2015 BCPC 151, thecourt concluded that because the judge in M. (R.) v. M. (N.) found that the claimant had not met the burden of justifying a variation unders. 148(3), the court’s conclusion that the

section could not act retroactively was obiter dicta. [27] The BC Supreme Court in the 2017 decision of L (G.J.) v. L (M.J.) 2017 BCSC 688 agreed with the court in T.L. v. R.M., supra.The judge in L (G.J.) said at paragraph 136 that even if he was incorrect, “there is sufficient divergence of opinion in this Court on theissue that, notwithstanding the usual principles of judicial comity, it is open to me to depart from R (

M) and award retroactive childsupport pursuant to s. 148.” [28] Based on the authorities, I conclude that I do have the authority to retroactively vary the agreement under s. 148 (3) of the FLA. [29] Section 150(1) of the FLA requires a court to determine the amount of child support in accordance with the child supportguidelines. [30]

Section 19 of the child support guidelines allows the court to impute income to a parent in various circumstances, including incircumstances where that parent has non-taxable income. This is clearly in line with the policy objectives of the guidelines as set out in s.1. [31] The objective of the guidelines include the establishment of a fair standard of support for children that ensures that theycontinue to benefit from the financial means of both spouses after separation, and to ensure consistent treatment of spouses and childrenwho are in similar circumstances.

DECISION [32] I have considered the child support guidelines, specifically sections 16 and 19, in determining T.I.’s guideline income. Herguideline income is to include all taxable income and her non-taxable disability income. The majority of T.I.’s income is from non-taxable disability benefits, and under s. 19(1)(

h) that income shall be imputed to her. Fairness, the best interests of the children, and aconsideration of the objectives of the child support guidelines all must be considered.

I also wish to comment on the fact that theagreement itself suggests that T.I. had some awareness of the fact that her income for child support purposes was rightfully higher thanher taxable income of $17,000 per year, as she agreed to use an imputed income of $65,000 as her minimum income for s. 7 calculations. [33] The second sentence of Paragraph 4.2 of the agreement is replaced with the following order: Effective June 1, 2018, table child support shall be based on T.I.s’ total income from all sources for 2017, including all taxable and non-taxable income. Her non-taxable income shall be grossed up.

If the parties are unable to agree upon a gross up formula, they have libertyto apply to court to set that figure.

[ 34 ] Further, the following order shall replace paragraph 4.4 of the agreement: Prior to May 31st of each year, the parties shall exchange their T1 tax returns (and Notices of Assessment as soon as they are available). They shall also exchange proof of any non-taxable income received for the prior calendar year.

Effective June 1st each year, child support, both table and extra-ordinary amounts, payable for K.M. and A.M., shall be adjusted in accordance with the parties’ taxable and non-taxable grossed up incomes for the prior calendar year. [ 35 ] The result of this decision is that T.I. will owe arrears of table child support to J.M. for the months of June 2018 to May 2019. Since the parties offset s. 7 expenses from monthly child support, based on who incurs the expense and their respective proportionate share of that expense, I will not fix arrears.

Rather, I will direct that if the parties are unable to determine the amount of the arrears, that they have liberty to have the matter set before me for determination. ______________________ The Honourable L. Wyatt Provincial Court Judge