Cove v. Cove, 2010 NSSC 407

IN THE SUPREME COURT OF NOVA SCOTIA (FAMILY DIVISION) Citation: Cove v. Cove, 2010 NSSC 407 Date: 2010 12 10 Docket: 1201-063292(SFHD-62705) Registry: Halifax Between: Robert Mitchell Cove Petitioner v. Sally Anne Joyce Cove Respondent LIBRARY HEADING Judge: The Honourable Justice Leslie J. Dellapinna Heard: October 22, 2010 in Halifax, Nova Scotia Subject: Divorce, division of assets and debts, calculation of payor’s income for child support purposes, child support, spousal support and costs.

Summary: The parties were married for approximately 22 ½ years. Together they had four children. They agreed that the three younger children aged 24, 20 and 19 were still “children of the marriage” as defined by the Divorce Act . They could not agree on the financial issues. Issues: See above. Result: The wife’s RRSPs were excluded pursuant to

section 13 of the Matrimonial Property Act from a division under

section 12 because they were acquired by the wife with funds she inherited from her father’s estate shortly before the parties separated. The husband’s interest in a rental property was excluded by section 4(1) (

a) of the Matrimonial Property Act because it was a “business asset”. An equal division of matrimonial assets was ordered.

Because the husband received the majority of his income in the form of dividends a higher level of income was imputed to him for support purposes. He was ordered to pay the table amount for the three children. No order was made pursuant to

section 7 of the Guidelines because the wife failed to provide particulars or even an estimate of

section 7 expenses that the Court could rely upon. Spousal support was ordered. The husband requested that the Court fix termination dates for child and spousal support. No termination dates were set. The parties were to bear their own costs. THIS INFORMATION SHEET DOES NOT FORM PART OF THE COURT'S DECISION. QUOTES MUST BE FROM THE DECISION, NOT THIS LIBRARY SHEET . IN THE SUPREME COURT OF NOVA SCOTIA (FAMILY DIVISION) Citation: Cove v. Cove, 2010 NSSC 407 Date: 2010 12 10 Docket: 1201-063292 (SFHD-62705) Registry: Halifax Between: Robert Mitchell Cove Petitioner v. Sally Anne Joyce Cove Respondent Judge: The Honourable Justice Leslie J. Dellapinna

Heard: October 22, 2010 in Halifax, Nova Scotia Last written submissions received: November 26, 2010 Counsel: Robert Mitchell Cove, Self-represented Peggy Power counsel for Sally Anne Joyce Cove By the Court: [ 1 ] Robert Cove (the Petitioner) and Sally Cove (the Respondent) were married in October 1980 and together have four children now age 27, 24, 20 and 19. [ 2 ] The parties separated in May 2003 after approximately 22 ½ years of marriage. Since their separation the Respondent and the children (when they were not away at university) continued to live in the matrimonial home in Amherst, Nova Scotia.

The Petitioner moved to Halifax. [ 3 ] The Petitioner is a self-employed accountant. The Respondent for the past twenty-eight years has not been employed outside of the home but for the most part devoted her energies to caring for the parties’ children. [ 4 ] Since the parties’ separation the Petitioner paid support to the Respondent on a voluntary basis. [ 5 ] Custody and access are no longer issues. In spite of the parties’ efforts they have been unable to agree on a division of assets or the quantum and duration of the payment of support.

THE DIVORCE [ 6 ] I am satisfied that there has been a breakdown of the marriage based on the period of time that the parties have been living separate and apart. There is no possibility of a reconciliation. A divorce order will be granted. ISSUES [ 7 ] This decision will address the following issues: 1. The division of assets and debts. 2. The calculation of the Petitioner’s income for support purposes. 3. Child support. 4. Spousal support. 5. Costs.

DIVISION OF ASSETS AND DEBTS [ 8 ] Through their negotiations the parties were able to reach some agreements. They agreed that a cottage property which was in the Respondent’s family for many years will belong solely to the Respondent and its value will not be taken into account in any way in the ultimate division of assets.

The parties also agreed that the motor vehicles and the household contents which they owned at the time of their separation have been divided between them to their mutual satisfaction and the value of those assets need not now be accounted for in the division of the remaining assets. [ 9 ] The assets and debts that are still in dispute are as follows: 1. The matrimonial home located in Amherst, Nova Scotia which is jointly owned by the parties. The parties agree that this asset is a “matrimonial home” as defined by the Matrimonial Property Act , R.S.N.S. 1989, c. 275.

The Respondent wants to retain the matrimonial home and the Petitioner is prepared to convey his interest in the property to her subject to an appropriate division of its equity. They have not been able to agree on its value. Neither party had the property professionally appraised. It is the Petitioner’s position that the Court should look to the municipal assessment figure as an indication of the property’s current market value.

He felt the property was worth $88,000.00 on the date of separation in 2003 which was the result of a “pro rata increase” between an appraisal which was conducted on the property in 1992 (which resulted in an estimated value of $78,000.00) and the 2009 municipal assessment figure of $94,000.00. The 2010 municipal assessment figure is $98,100.00. On behalf of the Respondent it was submitted that the property should be valued at $75,000.00 which the Respondent said was the selling price of a similar property across the street from the matrimonial home approximately two years ago.

She also presented to the Court a document entitled “Estimate of Value by Market Analysis” which was prepared by a real estate agent employed by Royal LePage whose qualifications she did now know. According to the document, which is not dated, a listing price of between $95,000.00 and $115,000.00 was suggested and indicated a “probable final sale price” of between $85,000.00 and $87,000.00. The evidence of the property’s value falls short of that which is desired by the Court.

The municipal assessment may or may not reflect the property’s actual market value and the document presented by the Respondent is not an appraisal of the matrimonial home but rather was an estimate of what the property might sell for. The two year old sale price of a similar property on the opposite side of the street is also not a very reliable method of valuation. Photographs of the two properties show differences in their appearance and slight differences in design. Also, the Court has no way of knowing how the properties compare in terms of quality of workmanship, how they have been maintained and so on.

The Petitioner indicated that if it was up to him he would not accept $80,000.00 for the matrimonial home but would likely accept $90,000.00. He conceded, though, that because he’s been living in Halifax for a number of years he no longer has a sense of what the real estate market is like in Amherst. Considering the evidence that was presented by the parties I fix the gross value of the property for the purpose of this proceeding at $90,000.00.

From that I would deduct notional disposition costs of $5,900.00 representing real estate commission of 5% plus H.S.T. of 15% and legal fees, disbursements and related taxes of another $725.00. It was argued on behalf of the Respondent that I should reduce the value of the home by a further $10,985.00 being the amount of the mortgage that existed at the time of the parties’ separation and which was subsequently paid by the Respondent. She also wanted me to reduce the value to take into account expenses which she incurred for certain repairs to the matrimonial home since the date of separation. I decline to do so.

Other than money which she paid to replace the roof shingles, the only significant income available to the Respondent for debt payments and home maintenance costs was the support paid to her by the Petitioner. Also, she had the exclusive use of the matrimonial home and related property for over seven years without any compensation being given to the Petitioner. He, on the other hand, had to rent separate accommodations for himself in Halifax.

2. A property located at 31 Prince Arthur Street in Amherst, Nova Scotia. According to the Petitioner this property was purchased to house an accounting firm in which he was a partner. It was his evidence that at the time of its purchase chartered accountants could not incorporate their practice but instead practised as either proprietors or in a partnership. One of the liability planning techniques used by accountants at the time was to put assets such as real estate in their spouses’ names to protect the properties from the potential liability of the accounting firm.

Both parties agree that is what happened with the property at 31 Prince Arthur Street. It was put in the names of the Respondent and the Petitioner’s partner’s spouse. In or about 1993 the partnership dissolved and the property became part of the Petitioner’s settlement of his partnership interest. The property at that time was transferred by the spouses to a holding company owned by the Petitioner. Prior to the transfer of the title to the holding company a collateral mortgage was placed on the matrimonial home to secure a demand loan owing to the Canadian Imperial Bank of Commerce (CIBC) by the Petitioner.

He acknowledges that the loan was a business loan. The Respondent testified that in order to insure that the collateral mortgage was retired and she did not lose the matrimonial home as a result of a foreclosure she negotiated a contract with the holding company by which she would receive 50% of the net sale proceeds from the sale of 31 Prince Arthur Street, if and when it was sold. She said that it was her way of ensuring that funds were available to retire the mortgage on the matrimonial home.

The Petitioner said in his affidavit that the contract between the holding company and the Respondent was “signed under duress when [the Respondent] refused to sign the transfer of the property to [the holding company].” The property at 31 Prince Arthur Street was subsequently sold and some money was paid to the Respondent. It is her position that she was not paid the full amount owing to her under the contract. The Petitioner disputes her claim.

While the property was at one time held in the name of the Respondent (as well as the name of the spouse of the Petitioner’s partner) the Respondent did not invest any money in the property and it was never occupied by the Respondent or the parties’ children. The holding company has since sold the property.

It is my view that this property was never a matrimonial asset and the Respondent could not have successfully made a claim against the property by virtue of subsection 4 (4) of the Matrimonial Property Act which reads: “Where property owned by a corporation would, if it were owned by a spouse, be a matrimonial asset, then shares in the corporation owned by the spousal having a market value equal to the value of the benefit the spouse has in respect of that property are matrimonial assets.” Whatever entitlement the Respondent may have with respect to 31 Prince Arthur Street flows from the contract that she has with the Petitioner’s holding company.

It is not a dispute that will be resolved by way of these proceedings pursuant to the Matrimonial Property Act . The 31 Prince Arthur Street property is not an asset that is subject to division under the Act . Further, no claim has been made against the holding company which now apparently has no assets and is inactive. 3. There is a property located at 162-164 Church Street in Amherst, Nova Scotia in which the Petitioner has a 25% interest (as a tenant in common). The other owners are relatives of the Respondent. Although on paper he earns rental income from the property, he has received no actual money.

He acquired his interest in this property in the 1980's and said that it was intended as an investment from which he would some day make some money. The other co-owners of the property refuse to buy out his interest. He would like to transfer his interest in the property to the Respondent

in return for what he has calculated to be the net value of his share. The Respondent has no desire to own a part of this property but nevertheless is seeking one half of the value of the Petitioner’s interest. In her affidavit the Respondent stated “I have spent a lot of time maintaining that building both prior to and after separation”. During the course of her cross-examination by the Petitioner she said more or less the same thing. In neither her affidavit nor her testimony did she give any details of what she did to maintain the property.

I find that the Petitioner’s interest in this property, whatever its value, is not a matrimonial asset subject to division but rather is a business asset as defined by

section 2 (

a) of the Matrimonial Property Act which reads: “business assets” means real or personal property primarily used or held for or in connection with a commercial, business, investment or other income - producing or profit - purpose but does not include money in an account with a chartered bank, savings office, loan company, credit union, trust company or similar institution where the account is ordinarily used for shelter or transportation or for household, educational, recreational, social or aesthetic purposes.” Although it appears that the Respondent did not receive any actual income from the property, he acquired it for that purpose.

The property was never occupied by the Petitioner, the Respondent or any other member of their family.

Section 18 of the Act reads as follows: 18. Where one spouse has contributed work, money or money’s worth in respect of the acquisition, management, maintenance, operation or improvement of a business asset of the other spouse, the contributing spouse may apply to the court and the court shall by order (

a) direct the other spouse to pay such an amount on such terms and conditions as the court orders to compensate the contributing spouse therefor; or (

b) award a share of the interest of the other spouse in the business asset to the contributing spouse in accordance with the contribution. And the court shall determine and assess the contribution without regard to the relationship of husband and wife or the fact that the acts constituting the contribution are those of a reasonable spouse of that sex in the circumstances. I decline to grant the Respondent any compensation pursuant to

section 18 or a share in the property located at 162-164 Church Street. It is not sufficient to simply state that she spent a lot of time maintaining the property or that she was in other ways involved in that property without giving further particulars. The onus is on her to establish that she is entitled to compensation or a share in the asset. She did not meet that onus. 4. Both parties have registered retirement savings plans. The Petitioner’s plan has a gross value of approximately $24,085.00.

In 2006 (after the parties separated) he deregistered another RRSP held at the Commercial Credit Union in Amherst which he said had a value of $2,050.00. It is unclear to me whether that was the gross value or the net after tax value at the time of its deregistration. I will assume it was the gross value. 5. The Respondent inherited funds in 2000 and 2001 which money was put into two RRSP accounts. Later a portion of the funds in her RRSP was deregistered and used to purchase term deposits now having a value of $10,000.00 plus some accumulated interest.

The Petitioner’s RRSP accounts were matrimonial assets on the date of separation. So too were the Respondent’s RRSP accounts and term deposits. However, because her’s were acquired using funds that the Petitioner inherited, there is an argument in favour of an

unequal division of those assets under section13 , which I will address later in this decision. 5. Over several years the Respondent accumulated funds in a registered educational saving plan for the children totalling approximately $54,070.00. While this asset technically may be a matrimonial asset both parties agree that these funds will be used to help finance the education of their children and therefore will not be divided pursuant to the Matrimonial Property Act . 6.

The only debt at this time is the demand loan to CIBC owed by the Petitioner and which is secured by way of a collateral mortgage on the matrimonial home. As I said earlier the Petitioner acknowledges that this is a business debt and his sole responsibility. He said he will arrange to have the collateral mortgage released by CIBC. [ 10 ] Therefore, the only matrimonial assets that are subject to division are the matrimonial home, the parties’ RRSPs and the Respondent’s term deposits. [ 11 ] While there is a presumption that the matrimonial assets will be divided equally under

section 12 of the Matrimonial Property Act ,

section 13 provides that “the court may make a division of matrimonial assets that is not equal or may make a division of property that is not a matrimonial asset, where the court is satisfied that the division of matrimonial assets in equal shares would be unfair or unconscionable” taking into account the factors listed in

section 13 . One of the factors is “the date and manner of acquisition of the assets”. Although the Respondent’s RRSPs and term deposits are, by definition, matrimonial assets, it is relevant to me that they were acquired by the Respondent using funds that were inherited from her father’s estate just three years prior to the parties’ separation and neither the original inherited funds nor the subsequently acquired RRSP’s and term deposits were used by the Petitioner or the parties’ children. Had the Respondent not used her inherited funds to acquire her RRSPs and term deposits those funds would have been excluded from a division by virtue of the exception contained in subsection 4 (1)(

a) of the Act which reads as follows: 4

(1) In this Act, "matrimonial assets" means the matrimonial home or homes and all other real and personal property acquired by either or both spouses before or during their marriage, with the exception of (

a) gifts, inheritances, trusts or settlements received by one spouse from a person other than the other spouse except to the extent to which they are used for the benefit of both spouses or their children; ... [ 12 ] By redirecting those funds to RRSP accounts, and later to term deposits, she was just investing the inherited funds more productively than would have been the case had she left them in her bank account.

The Petitioner should not gain a windfall by her having done so. [ 13 ] Considering when and how the Respondent acquired her RRSP accounts and term deposits I believe it would be unfair and unconscionable to divide those assets equally. The appropriate treatment of those assets, in my view, is to order that they be retained by the Respondent in their entirety without any portion of their value being taken into account in the division of the remaining assets. [ 14 ] The remaining matrimonial assets to be divided are currently distributed as follows: MATRIMONIAL ASSET Petitioner Respondent

Matrimonial home $90,000.00 Disposition costs (5,900.00) RRSP’s $16,988.00* $16,988.00 $84,100.00 * The gross value of the Petitioner’s RRSP is $26,135.00. To arrive at the net after tax value I have reduced the gross amount by 35%. [ 15 ] If the Respondent decides to retain the matrimonial home she will have to pay the Petitioner an equalization payment of $33,556.00. [ 16 ] Therefore, to summarize the division of assets I order as follows: 1. The Respondent will retain the cottage property. 2. The Petitioner will retain his 25% interest in 162-164 Church Street, Amherst. 3.

Both parties will retain their respective RRSP accounts. 4. The Respondent will retain her term deposits. 5. The RESP will be managed by the Respondent and will be used to help defray the educational expenses of the parties’ children and will be done in such a way as to ensure that the Petitioner does not incur any tax liability as a result of how those funds are disbursed. 6. The Petitioner will, without delay, arrange for the release of the collateral mortgage so that it is no longer an encumbrance on the title to the matrimonial home. 7.

The Respondent is to decide if she intends to buy out the Petitioner’s interest in the matrimonial home and will advise him, in writing, of her decision by December 31, 2010. If she decides to buy out the Petitioner’s interest in the matrimonial home, the Petitioner will convey to the Respondent his interest in the matrimonial home by way of a quit claim deed and in return the Respondent will pay to the Petitioner the sum of $33,556.00.

The Petitioner’s quit claim deed will be held in escrow until such time as the Respondent is in a position to pay the equalization payment and she will do so no later than January 31, 2011. 8. In the event that the Respondent does not want to buy out the Petitioner’s interest in the matrimonial home then the parties will list the matrimonial home for sale, as soon as it is practicable in January 2011, with a recognized real estate agent to be agreed upon by the parties at a price also to be agreed upon by the parties.

Failing an agreement the Court will retain jurisdiction to address any issues arising from the listing and sale of the matrimonial home. The parties will then make all reasonable efforts to sell the matrimonial home as soon as is reasonably possible. Upon its sale the net sale proceeds, after the pay out of all encumbrances, real estate commissions, legal fees and other disbursements associated with the sale, will be divided in such a way as to arrive at an overall equal division of the proceeds of sale and the Petitioner’s RRSP’s (valued at $16,988.00).

In effect the Respondent will receive $16,988.00 more from the sale proceeds than will the Petitioner. 9. Both parties will retain all other assets now in their possession free of any further claims by the other. 10. As of January 1, 2011 the Respondent will be solely responsible for the costs associated with the matrimonial home regardless of whether she decides to buy out the Petitioner’s interest or sell the home.

[ 17 ] The Petitioner has incorporated his accounting/consulting practice and also has established a family trust. The Respondent at no time made a claim against the Petitioner’s incorporated company (R.M.C.) or the family trust and therefore, to be clear, the Respondent has no interest in either. CALCULATION OF THE PETITIONER’S INCOME FOR SUPPORT PURPOSES [ 18 ] Both parties agree that the Petitioner should pay to the Respondent child and spousal support. They disagree on how much.

One of the issues that stood in the way of an agreement was the calculation of the Petitioner’s income. [ 19 ] The Petitioner is a self-employed chartered accountant. He has incorporated his practice. He receives the majority of his income in the form of dividends from R.M.C.. His income over the past few years has fluctuated both up and down but in the past three years has been fairly consistent.

He estimates that his 2010 income will be slightly lower than it was in 2009 but anticipates that his 2011 income will be equal to or greater than his 2009 income. [ 20 ] His 2009 income tax return shows that he received employment income of $10,000.00, actual dividends from R.M.C. of $60,000.00 (grossed up to $75,000.00 for tax purposes) and net rental income of $2,079.00 for a total of $87,079.00. [ 21 ] In determining his income for support purposes the Petitioner replaced the taxable dividends reported on line 120 of his return ($75,000.00) with the actual amount of dividends that he received from R.M.C. ($60,000.00) thereby reducing his total income to $72,079.00.

From that he deducted carrying charges (being interest of $1,965.00 paid on the demand loan owed to CIBC) thus further reducing his income figure to $70,114.00. Both of those changes are legitimate adjustments allowed by

Schedule III of the Federal Child Support Guidelines . The Petitioner then reduced his income figure by $2,079.00 being the rental income reported on his tax return but which he did not actually receive. The Petitioner proposes that the resulting figure of $68,035.00 be considered as his annual income for child and spousal support purposes. [ 22 ] The Respondent argued that the Petitioner’s income figure is not representative of what he could actually pay himself.

She believes that his company is paying personal expenses for him which should be added back into his income to arrive at a fairer determination of his income. [ 23 ] The Federal Child Support Guidelines provide as follows: Determination of annual income 15.

(1) Subject to subsection (2), a spouse's annual income is determined by the court in accordance with sections 16 to 20. Agreement

(2) Where both spouses agree in writing on the annual income of a spouse, the court may consider that amount to be the spouse's income for the purposes of these Guidelines if the court thinks that the amount is reasonable having regard to the income information provided

under

section 21. Calculation of annual income 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 Customs and Revenue Agency and is adjusted in accordance with

Schedule III. Pattern of income 17.

(1) If the court is of the opinion that the determination of a spouse's annual income under

section 16 would not be the fairest determination of that income, the court may have regard to the spouse's income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non recurring amount during those years. Non-recurring losses

(2) Where a spouse has incurred a non-recurring capital or business investment loss, the court may, if it is of the opinion that the determination of the spouse's annual income under

section 16 would not provide the fairest determination of the annual income, choose not to apply sections 6 and 7 of

Schedule III, and adjust the amount of the loss, including related expenses and carrying charges and interest expenses, to arrive at such amount as the court considers appropriate. Shareholder, director or officer 18.

(1) Where a spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the spouse's annual income as determined under

section 16 does not fairly reflect all the money available to the spouse for the payment of child support, the court may consider the situations described in

section 17 and determine the spouse's annual income to include (

a) all or part of the pre tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or (

b) an amount commensurate with the services that the spouse provides to the corporation, provided that the amount does not exceed the corporation's pre-tax income. Adjustment to corporation's pre tax income

(2) In determining the pre tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm's length must be added to the pre-tax income, unless the spouse establishes that the payments were reasonable in the circumstances. Imputing income 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:

(

a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse; (

b) the spouse is exempt from paying federal or provincial income tax; (​) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada; (

d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines; (

e) the spouse's property is not reasonably utilized to generate income; (

f) the spouse has failed to provide income information when under a legal obligation to do so; (

g) the spouse unreasonably deducts expenses from income; (

h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and (

I) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust. Reasonableness of expenses

(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 . [ 24 ] I’ve reviewed the evidence and the Respondent’s submissions regarding the expenses incurred by the Petitioner’s corporation and I am not convinced that he unreasonably deducted expenses from his company’s income or that R.M.C. paid any of his personal expenses such that those expenses should be added back into his personal income. Also, I am satisfied that his company has paid him all that it could reasonably afford to pay him.

The company had no excess income that was not distributed to the Petitioner. In fact, in each of the last four fiscal years of the company the retained earnings of R.M.C. decreased such that as of January 31, 2010 the retained earnings were a deficit of $46,678.00. I am therefore not prepared to impute additional income to the Petitioner because of any expenses that may have been deducted by R.M.C. in arriving at the company’s pre-tax income. [ 25 ] It was also argued on behalf of the Respondent that additional income should be imputed to the Petitioner by virtue of section 19(1)(

h) of the Guidelines because the Petitioner receives the majority of his income in the form of dividends. [ 26 ] Dividend income receives more favourable tax treatment than does the same income received in the form of employment income. [ 27 ] For example, if the Petitioner’s dividend income of $60,000.00 was his only income, his income tax payable in 2010 would be $5,239.00 (after deducting only the credit that he receives for his basic personal amount and the dividend tax credit) leaving a net after- tax income figure of $54,761.00 ($60,000.00 - $5,239.00). [ 28 ] An individual who earns $60,000.00 in employment income would have a tax payable figure of $14,363.00 leaving a net after- tax income of $45,637.00 (after deducting the credits that the taxpayer can claim for the basic personal amount, the federal employment credit and E.I. and C.P.P. payments).

The net after-tax figure does not take into account the actual E.I. and C.P.P. payments paid by the

tax payer but rather just the credits received for their payment. The difference in the net after-tax income of the individual who receives dividends as compared to that of the employee is $9,124.00 per year. [ 29 ] I believe I can take judicial notice of the fact that at this level of income the marginal rate on dividends (in Nova Scotia) in 2010 is 17.26% and the marginal tax rate on employment income of $60,000.00 is 38.67%.

Therefore, to determine what an employee would have to earn in order to have the same net after-tax income as a taxpayer whose income is comprised of actual dividends of $60,000.00, the $9,124.00 difference has to be grossed up and added to the employment figure of $60,000.00. Knowing that the marginal tax rate on employment income is 38.67% $9,124.00 should be grossed up (by dividing that figure by the reciprocal of 38.67%) to $14,876.90 ($9,124.00 x 1/(100-38.67)%). The resulting figure of $14,876.90 should then be added to the employment income figure of $60,000.00 resulting in a figure of $74,876.90.

The tax payable on that level of employment income in 2010 is $20,116.00 per year (using only the same credits as before) leaving a net after-tax income of $54,761.00 which is precisely the same net after-tax income as is produced by $60,000.00 in eligible dividends. [ 30 ] It may not be coincidental that the “grossed-up” figure of $74,876.90 is similar to the dividend figure that the Petitioner had to report on line 120 of his T1 General tax return. [ 31 ] Assuming the income that the Petitioner earned in 2009 is representative of what he can earn in 2010 and 2011 he would have employment income of $10,000.00 and actual dividends of $60,000.00.

I’ve not included the small amount of rental income that he reported in 2009 because he did not actually receive it. After deducting the credits for his basic personal amount, the federal employment credit and his C.P.P. and his E.I. contributions and the dividend tax credit, his 2010 tax payable figure would be $8,952.00 (using 2010 rates known at the date of this decision) and his net income after tax would be $61,048.00.

That is substantially more than he would receive if all of his income came from employment income. [ 32 ] If I was to adjust his income figures so that instead of employment income of $10,000.00 and dividend actual dividend income of $60,000.00 all of his income was employment income of $84,876.00 (being the employment income that he already receives plus a further $74,876.90 in employment income as calculated in paragraph 29 above) he would have a tax payable figure of approximately $24,100.00 which would leave him with a net after-tax income of approximately $61,000.00 which is what he would have had before I made this “adjustment”. [ 33 ] Had I not taken any other factors into account I would have been inclined to impute to the Petitioner an income figure of $84,877.00.

Before doing so, I directed my mind to whether it’s appropriate for me to rely on such calculations without having heard any expert evidence on the subject. I believe that I can. See R. v. Spence 2005 SCC 71 (CanLII) , 2005 S.C.C. 71 , [2005] 3 S.C.R. 458 (S.C.C.) and in particular paragraphs 48 to 69. However, because these figures were not discussed during the course of the trial I gave them to the parties prior to the release of this decision and they were offered the opportunity to respond to them and, if they wished, to present further evidence.

In response the Petitioner provided me with written submissions. [ 34 ] The Petitioner argued that this was not an appropriate case to impute additional income for various reasons including the fact that in order to pay the support that he has paid the Respondent over the years, the retained earnings of R.M.C. have been seriously reduced. For example, in the fiscal year ending January 31, 2006 R.M.C. had retained earnings of $3,539.00.

By January 31, 2010 the retained earnings had been wiped out and R.M.C. had a deficit of $46,678.00. [ 35 ] The Petitioner’s argument would carry more weight if I was inclined to order support on a retroactive basis. That is not the case. The Petitioner’s own figures - which were attached to his affidavit sworn October 15, 2010 - show that for the year ending January 31, 2011, R.M.C. projects a distribution of dividends to the Petitioner of $60,000.00 and at the same time a reduction in the company’s deficit by approximately $,4,600.00.

In his testimony the Petitioner said that while he anticipated the possibility of a decline in the company’s income in the year ending January 31, 2011 he expected the company’s income over the next year to actually increase over what was experienced in the year ending January 31, 2010. So, although R.M.C.’s retained earnings may have declined over the past four years it appears the Petitioner can reasonably expect to receive a similar income this year as he did last year.

[ 36 ] The Petitioner also submitted that if a higher income is imputed to him, resulting in higher support payments, the likelihood of R.M.C. reducing its deficit is greatly diminished. For that reason it is his position that the court should not impute additional income to him. [ 37 ] The Petitioner’s ongoing support payments will depend on the income that he actually receives and how his reported income might be adjusted in accordance with the Guidelines . This Court cannot predict with certainty what the Petitioner’s income will be three or four years from now.

My calculation of his income is for the immediate future. Based on the Petitioner’s own figures, it appears likely that R.M.C. will be able to continue to produce for him a similar level of dividends as was the case last year and still reduce its deficit. [ 38 ] The Petitioner also submitted that my calculations for determining the appropriate imputed income were flawed as they did not take into account the tax paid by R.M.C. and also because my resulting imputed income figure was greater than R.M.C.’s pre-tax income.

Finally, he submitted that if his income is to be imputed, there should be an adjustment to allow R.M.C. to reduce its accumulated deficit. [ 39 ] My calculations take into account only the income that was delivered to the Petitioner by R.M.C.. The Petitioner, as the sole director of R.M.C., determines how much salary or dividends the company can afford to give to him. My focus is on his income, not the income of R.M.C.. I therefore see no reason to temper the amount that I impute to the Petitioner because of R.M.C.’s tax payable. [ 40 ] Section 18(1)(

a) of the Guidelines allows the Court to impute all or part of the corporation’s pre-tax income. It does not, in my view, limit the Court’s ability to impute income to that level. The Child Support Guideline tables are intended to reflect the amount of child support that a payor can afford based on employment income at certain levels.

My calculations are intended to determine the Petitioner’s ability to pay child support by replacing his dividend income figure with an imputed employment income figure. $84,877.00 is not intended to reflect what R.M.C. is to pay to the Petitioner but rather is my calculation of an equivalent employment income for the money that was given to the Petitioner last year and which I anticipate R.M.C. will be able to give to the Petitioner next year and probably the year after that. [ 41 ] I do however accept the Petitioner’s argument that R.M.C. must be allowed to reduce its deficit and the sooner that is done, the better.

I should point out that R.M.C. is not in any immediate danger. It is a service oriented company with few assets of value. It does however have a of deficit $46,678.00. That figure is not alarming though because it includes a $10,000.00 bonus payable to the Petitioner and a $2,580.00 shareholder loan also owed to the Petitioner. Nevertheless, rather than impute $84,877.00 to the Petitioner I order that the child support be based on an imputed figure of $80,000.00. That will allow him further room to reduce R.M.C.’s deficit.

That figure also recognizes that the Petitioner does not receive any actual rental income from 162-164 Church Street. CHILD SUPPORT [ 42 ] As stated previously the parties agreed that their three younger children are still children of the marriage for child support purposes. Their son, J.M.C., is 24 years of age. He is in his third year of a Bachelor of Arts program at Mount Allison University. In addition to money that he receives from his parents he funds his education by maximizing his student loans. He also has a scholarship and during the summer he works. [ 43 ] Their younger son, B.W.C., is 20 years of age.

He has completed his second year of a Bachelor of Arts program. He too has funded his education costs with student loans and summer employment. At the present time he is not attending school but plans to return to school in January 2011. [ 44 ] The parties’ youngest child, V.L.C., is19. She is in her first year at Queen’s University in Kingston, Ontario. She funds her education by way of scholarships, student loans, summer earnings and funds from her parents. [ 45 ] A “child of the marriage” is defined in the Divorce Act R.S.C. 1985, c.5 (2 nd Supp.) as follows:

“child of the marriage means a child of two spouses or former spouses who, at the material time, (

a) is under the age of majority and who has not withdrawn from their charge, or (

b) is the age of majority or over and under their charge but unable, by reason of illness, disability or other cause, to withdraw from their charge or to obtain the necessaries of life.” [ 46 ] Sub-

section 15.1 (3) of the Divorce Act says: A court making an order under subsection (1) or an interim order under subsection (2) shall do so in accordance with the applicable guidelines. [ 47 ] The Federal Child Support Guidelines provide: 3.

(1) Unless otherwise provided under these Guidelines, the amount of a child support order for children under the age of majority is (

a) the amount set out in the applicable table, according to the number of children under the age of majority to whom the order relates and the income of the spouse against whom the order is sought; and (

b) the amount, if any, determined under

section 7.

(2) Unless otherwise provided under these Guidelines, where a child to whom a child support order relates is the age of majority or over, the amount of the child support order is (

a) the amount determined by applying these Guidelines as if the child were under the age of majority; or (

b) if the court considers that approach to be inappropriate, the amount that it considers appropriate, having regard to the condition, means, needs and other circumstances of the child and the financial ability of each spouse to contribute to the support of the child. ... 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; (​) 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. ... Sharing of expense

(2) The guiding principle in determining the amount of an expense referred to in subsection (1) is that the expense is shared by the spouses in proportion to their respective incomes after deducting from the expense, the contribution, if any, from the child. Subsidies, tax deductions, etc .

(3) In determining the amount of an expense referred to in subsection (1), the court must take into account any subsidies, benefits or income tax deductions or credits relating to the expense, and any eligibility to claim a subsidy, benefit or income tax deduction or credit relating to the expense. [ 48 ] The Respondent is seeking “the table amount” for the three children as well as a proportionate sharing of the children’s university expenses after deducting any contribution the children are able to make from their scholarships, bursaries, savings and student loans.

She also seeks a contribution from the Petitioner to a list of expenses that she said she incurred in the past which she considers to be a list of legitimate expenses contemplated by

section 7 of the Guidelines . Those expenses appear to include costs incurred for recreational activities, dental appointments for the children, eye glasses, wisdom teeth removal and braces for J.M.C.. [ 49 ] The parties seem to agree that although the children live away from home when they attend university any child support that is paid is to be made payable to the Respondent. [ 50 ] All of the children are over the age of majority. The Court was told that they all are, or will soon be, attending university or some other educational facility. Each will have costs associated with their ongoing education.

Unfortunately the evidence presented by the parties contained very little information about the children’s expenses or their scholarships, earnings, savings or loan information. [ 51 ] Subsection 3(2) of the Guidelines gives the court a certain amount of discretion.

If the court considers the amount determined by applying the Guidelines as if the child was under the age of majority to be inappropriate then the court can order that amount which it considers to be appropriate “having regard to the condition, means, needs and other circumstances of the child and the financial ability of each spouse to contribute to the support of the child.” [ 52 ] Although the court was invited by the parties to consider being creative in its distribution between spousal and child support in order to maximize tax savings for the family, I was not given any reason to believe that it would be inappropriate to determine the amount of child support by applying the Guidelines as if the children were all under the age of majority. [ 53 ] With respect to the possible sharing of expenses under

section 7, because of the insufficiency of the evidence it is impossible for me to ascertain or even estimate what expenses each child will have that would qualify under

section 7.

[ 54 ] Therefore I order the Petitioner to pay to the Respondent the “table amount” of child support in the sum of $1,443.00 per month commencing the 1 st day of January 2011 and continuing on the first day of each and every month thereafter until otherwise ordered. [ 55 ] My order will contain no provision for

section 7 expenses and I will not require the Petitioner to contribute anything to the Respondent’s list of expenses to which she refers in her affidavit as I have not been given sufficient evidence of what those expenses were or how much the parties each contributed to those expenses. [ 56 ] The Petitioner sought an order that would specify the length of time over which he would have to pay child support.

He proposed that child support cease for each child at the earlier of the each child’s completion of the first post-secondary course of study or upon the child attaining the age of 23. [ 57 ] While the desire for certainty is understandable it is often not possible to predict when a child will cease to be a “child of the marriage”.

A child who is of the age of majority or over may continue to be a “child of the marriage” if he or she is still dependent on his or her parents because of an inability to withdraw from his or her parents’ support or to obtain the necessaries of life by reason of illness, disability or other cause. “Other cause” has been held to include continuing education.

That is the reason the parties’ three younger children are still dependent upon them for support. [ 58 ] There is no hard and fast rule for how long a child may continue to go to school and still be eligible for child support and the court must refer to previous cases for guidelines. The Manitoba Court of Appeal in Newman v.

Thompson, 1997 CarswellMAN 385 said, beginning at paragraph 14: “Although the definition [“child of the marriage”] does not refer expressly to a child’s inability to withdraw from his or her parents’ charge by reason of continuing education, the courts have consistently held that a child who is undertaking a course of education remains one who may be entitled to some support. This possible entitlement is not limited to a particular level of education or to a pre-set age limit. The child does not even have to live at home with one of the parents. The line to be drawn is flexible.

In what may be the best- known statement on the subject, and certainly the most authoritative, Ritchie J. for the Supreme Court of Canada said in Jackson v.

Jackson (1972), 1972 CanLII 141 (SCC) , [1973] S.C.R. 205 (S.C.C.) (at p. 218): [T]he line is to be drawn at such point as the Court granting a decree nisi of divorce thinks it just and fit to draw it in all the circumstances of the particular case at issue, having due “regard to the conduct of the parties and the condition, means and other circumstances of each of them.” ... 17 When dealing with an issue such as this, it should not be forgotten that the primary focus of the Divorce Act, 1985 is on the rights and duties of the parents between themselves.

An order of child support for an emancipated child can only be justified as a means of requiring one parent to share the responsibility of educating a child who, but for the divorce, would have continued to receive the support of both parents. 18 It is in that context that the remarks of Hoyt C.J.N.B. in McGregor v. McGregor (1994), 1994 CanLII 5242 (NB CA) , 3 R.F.L. (4 th ) 343 (N.B. C.A.) must be read. He said (at p. 352): The conclusion that a parent may be obliged to support a child who is seriously pursuing education does not mean that the parent is obliged to fund all of either its annual or entire cost.

The extent of the obligation depends on many factors, including the child’s needs, the non-custodial parent’s ability to pay, and the relative incomes of the parents. ... It is my opinion that a child of any age may, depending on the circumstances, be a “child of the marriage” while seriously pursuing his or her education. There is no arbitrary age at which a child creases to be a “child of the marriage” under the Divorce Act . Such a determination, which often will be self-evident, must be made in each instance.

19 These are the very considerations which parents living together would take into account in deciding whether to support a child through higher education.

All the Court is doing in circumstances like these is making for the estranged parents the decision they would have made if they were still together. [ 59 ] None of the parties’ three younger children have yet to complete their first undergraduate degree program and, assuming they continue to go to university on a full-time basis, it would seem reasonable to expect child support to be paid at least until they have secured their first undergraduate degree and perhaps for a short period of time thereafter to give them an opportunity to secure employment should they decide not to pursue post-graduate studies.

Should any of the children decide to go on to post graduate studies and if the parties can’t agree, it would be up to the Court at that time to determine whether child support would continue to be payable taking into account all the then existing circumstances but in particular the “condition, means, needs and other circumstances of the child and the financial ability of each spouse to contribute to the support of the child”.

While I would like to give the parties more predictability and eliminate the need for further litigation in the future, I cannot be more precise as to when the children will become ineligible for support. My order therefore will not contain a termination date with respect to child support. [ 60 ] The Corollary Relief Order will include a provision that will require the Respondent to advise the Petitioner in writing immediately in the event that any of the children should cease attending university on a full-time basis for any reason.

Should B.W.C. not return to school in January 2011 the Respondent is to immediately advise the Petitioner in writing of that fact in which case the child support for Brent will come to an end - subject to the Respondent having the right to apply to the court to vary this order - and in that event the Petitioner would then pay to the Respondent child support for the then two remaining children of the marriage in the sum of $1,107.00 per month. SPOUSAL SUPPORT [ 61 ] Regarding spousal support the relevant provisions of the Divorce Act are as follows: 15.2

(1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse.

(2) Where an application is made under subsection (1), the court may, on application by either or both spouses, make an interim order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support of the other spouse, pending the determination of the application under subsection (1).

(3) The court may make an order under subsection (1) or an interim order under subsection (2) for a definite or indefinite period or until a specified event occurs, and may impose terms, conditions or restrictions in connection with the order as it thinks fit and just.

(4) In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including (

a) the length of time the spouses cohabited; (

b) the functions performed by each spouse during cohabitation; and (​) any order, agreement or arrangement relating to support of either spouse.

(5) In making an order under subsection (1) or an interim order under subsection (2), the court shall not take into consideration any misconduct of a spouse in relation to the marriage.

(6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should (

a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown; (

b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage; (​) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and (

d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time. [ 62 ] The Petitioner acknowledged the Respondent’s entitlement to spousal support but the parties disagreed on the quantum including how long the Petitioner will have to pay. The Petitioner proposed in his first affidavit that spousal support continue until the Respondent attained the age of 65 presumably because she would then be entitled to C.P.P. and Old Age Security. He also felt that the Respondent was not doing enough to support herself.

Although the parties have lived separate and apart for over seven years and the youngest of their children is now 19 years of age, she has not sought any retraining nor has she made any job applications whatsoever. The Respondent says that she has a full-time job and that is as a mother. [ 63 ] The parties were married for approximately 22 ½ years when they separated in May of 2003. The Respondent is now 55 years of age. She has a Bachelor of Commerce degree and a secretarial certificate.

She once worked as an auditor in the New Brunswick Auditor General’s office and for a period of time as the General Manager of a Credit Union. However she has not worked outside of the home for 28 years and any skills that she may have had are likely to be stale. [ 64 ] Throughout their marriage the Respondent was primarily responsible for maintaining the parties’ home and caring for the children. The parties’ relationship was traditional in nature. [ 65 ] Since the parties separated the Petitioner has been paying the Respondent support without any tax relief.

He has asked the Court to give him that tax relief by ordering the Respondent to acknowledge the support that he has paid in prior years. He also asked the Court to order the Respondent to compensate him for the tax relief that he can no longer obtain as a result of the Respondent’s refusal to provide a written acknowledgement. [ 66 ] The Respondent is prepared to acknowledge the support that was paid in 2009 and 2010. The Petitioner cannot now get tax relief for any spousal support paid before January 1, 2009.

My order will include a provision acknowledging the spousal support paid in 2009 and 2010 up to and including December 2010. I am not prepared to order the Respondent to compensate the Petitioner for any lost tax savings before 2009. [ 67 ] The Respondent has been disadvantaged economically as a result of the marriage relationship.

Because of the parties’ decision that she remain home to care for the children for as long as she did, once she returns to the workforce she is likely to experience great difficulty achieving a level of income that would result in self-sufficiency let alone an income comparable to that of the Petitioner. Her length of time out of the workforce, her lack of current employment skills and her age all present challenges to her. Nevertheless, she has abilities. It was evident to me from her presentation in Court that she is an intelligent woman.

She has a positive obligation to do all she reasonably can to secure employment with the goal of one day being independent of the Petitioner. Her failure to try might be seen as a change in circumstance that would warrant a variation of the spousal support in the future.

[ 68 ] As for the monthly amount of spousal support to be paid by the Petitioner, I have considered all of the provisions of

section 15.2. I have considered too the income that I have imputed to the Petitioner for child support purposes as well as his actual income and the form in which he receives it, the child support that I have ordered, the tax consequences to both parties at various levels of spousal support, the statements of expenses presented by both parties and what I estimate to be their reasonable needs. I have also considered the Spousal Support Advisory Guidelines .

Taking all those considerations into account I order that the Petitioner pay to the Respondent spousal support in the sum of $1,100.00 per month commencing January 1, 2011 and continuing on the first day of each month thereafter. [ 69 ] The Petitioner asked the Court to fix a definite period of time over which the spousal support would be paid after which it would come to an end. While it is within the Court’s jurisdiction to fix a termination date, in my view it would not be appropriate to do so in the circumstances of this case.

Considering among other things the length of the marriage and the period of time the Respondent has been out of the workforce, it is impossible to predict when, if ever, she might achieve self-sufficiency. No termination date will therefore be fixed. Both parties will have the ability to apply for a variation of the spousal support order in the future in the event that circumstances change as contemplated by

section 17 of the Divorce Act . [ 70 ] It was agreed and it will be ordered that the Petitioner will maintain his current medical and dental insurance coverage for the benefit of the Respondent and the three remaining children of the marriage for so long as the Respondent and the children remain eligible for coverage under the terms of his plan.

The Petitioner will not discontinue their coverage under the terms of his plans without first giving to the Respondent advance written notice of at least 60 days. [ 71 ] In addition, it was agreed and it will be ordered that the Petitioner will maintain his existing life insurance through Manulife in the minimum face amount of $305,000.00 naming the Respondent as the beneficiary thereof for so long as spousal support or child support continues to be payable under the terms of the Corollary Relief Order.

These latter two provisions regarding medical/dental coverage and the Petitioner’s life insurance policy will be considered as terms of the spousal and child support orders and as such subject to variation pursuant to

section 17 of the Divorce Act . [ 72 ] The Corollary Relief Order will also contain the usual provision requiring the parties to exchange income tax returns and notices of assessment each year. I direct that exchange take place no later than June 1 of each year beginning with their 2010 tax returns and notices of assessment to be exchanged by June 1, 2011. The Petitioner will also provide the Respondent with copies of his corporate financial statements and tax returns. COSTS [ 73 ] The Respondent requested costs in these proceedings. The Petitioner took the position that no costs should be awarded.

Comparing the parties’ positions to the final outcome I am of the view that success has been divided and for that reason believe that it is appropriate for both parties to each bear responsibility for their own costs. [ 74 ] Whereas the Petitioner is self-represented I direct counsel for the Respondent to prepare the Divorce Order and the Corollary Relief Order. J.