C.L.J. v. R.T.G. Date:, 2012 BCPC 154

Citation: C.L.J. v. R.T.G. Date: 20120223 2012 BCPC 0154 File No: 12187 Registry: Kamloops IN THE PROVINCIAL COURT OF BRITISH COLUMBIA IN THE MATTER OF THE FAMILY RELATIONS ACT , R.S.B.C. 1996 c. 128 BETWEEN: C.L.J. APPLICANT AND: R.T.G. RESPONDENT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE S.D. FRAME Counsel for the Applicant: Mr. D. Komori

Appearing on his own behalf: Mr. R. G. Place of Hearing: Kamloops , B.C. Date of Hearing: September 8, 2011 and January 5, 2012 Date of Judgment: February 23, 2012 [ 1 ] This is an application by Mr. G. to vary his child support order to be based year to year on his tax assessment to cancel the fines and interest charged by Family Maintenance Enforcement Program (FMEP). [ 2 ] There is an existing order for child support dated January 6, 2010. Mr. G.s’ application says that the change in circumstances is that his bike shop has lost business. Ms. J. and Mr.

G. were never married nor lived in a marriage-like relationship. The child of their union is L.J.J.G. born August 3, 2007. [ 3 ] It is necessary to review some of the history of these proceedings as it has significant bearing on the outcome of this application. [ 4 ] On April 14, 2008, Ms. J. filed an application for custody, maintenance and guardianship. [ 5 ] On May 20, 2008, Mr. G. filed a financial statement indicating that he is a self-employed father of three children, two who lived in [omitted for posting], the other being L.

At that time, he was pleading financial distress due to legal fees arising from a trial over the custody of his other two sons. He identified his source of income as his self-employment from [omitted for posting]. He identified his total income as $76,800.00. This was based on $60,000.00 net self-employment income. He identified $98,932.00 in annual expenses and $315,000.00 in assets including a house valued at $1,000,000.00 with a $758,000.00 mortgage.

His income tax documentation filed with that financial statement showed a steadily growing gross income for the [omitted for posting] proprietorship from 2004 to 2006. [ 6 ] On October 29, 2008, Ms. J. was granted sole custody and sole guardianship of L. with primary residence to Ms. J. While no annual income was set, Mr. G. was ordered to pay Ms. J. the sum of $325.00 per month for child support. He was further ordered to pay half of the costs of prescription drugs, day care services not covered by Ms.

J.’s subsidy, costs associated with a medic alert bracelet, infant activities and development programs, and unforeseen emergency expenses relating to the child’s care and welfare. These expenses were to be paid upon Ms. J. providing the receipts by e-mail, fax or regular mail. The payment was to be made by way of adding the amount to the child support payment in the following month. The Order was subject to review on June 1, 2009. Mr. G. was represented by counsel at that hearing. [ 7 ] On June 29, 2009, Mr.

G. filed a financial statement disclosing that he continued to be self-employed through [omitted for posting]. His total income disclosed in that statement was $37,607.00. His total expenses were $75,393.00. His assets were valued at $267,182.00. At that point, the market value of his real estate was $900,000.00 with a mortgage balance of $690,317.00. He had a list of debts totalling $222,164.00 including a debt to Revenue Canada of $34,415.00 over and above his current obligations to Revenue Canada. His GST obligations at that time exceeded $10,000.00.

There was a further obligation to Aaron Gordon Daykin Family Law in the sum of $100,000.00, a debt to Southern Motorcycle in the sum of $25,000.00 and a private, personal loan of $30,000.00 to an undisclosed recipient. The remainder were various lower debts. The income tax documentation attached to the financial statement showed a gross business income of $146,335.00 and a net income from self-employment of $37,318.38 for 2008. On May 26, 2009, Ms. J. filed an application for review of the child support payments. [ 8 ] On October 15, 2009, Ms.

J. filed her own financial statement indicating her income was $26,095.01. Her total expenses were $32,290.42. [ 9 ] On October 16, 2009, the court varied the existing Order granting access to Mr. G. in [omitted for posting]. Mr. G. was further ordered to provide financial documentation including general ledgers for [omitted for posting] from 2007 to that date. [ 10 ] On January 6, 2010, at a case conference, the court ordered Mr. G. to provide his income tax return and mortgage documents set out in the October 16, 2009 Order by June, 2010. The matter was to be set for review in July, 2010.

The Order also varied child support to $400.00 per month for combined child support and extraordinary expenses retroactive to January 1, 2010. On review of the Reasons for Judgment, I note that Mr. G. had not made full disclosure from his business due to his mother’s health. He was pleading a dramatic decline in sales as a result of the recession from 2008 to 2009. He was awarded a reduced child support obligation - despite his three year average income - in light of economic realities the court found at that time. The Order was an interim order. [ 11 ] On July 19, 2010, Ms. J. filed an application seeking Mr.

G.s’ income tax return documentation from 2009 to date and to provide ongoing T1 general income tax returns each year, an updated financial statement indicating income assets, debts and expenses and a review of the January 6, 2010 Order. In support of that motion, Ms. J.’s counsel provided an affidavit setting the documentation received from Mr. G. in June, 2010. His property had a tax assessed value at that point of $1,124,000.00 with approximately $10,500.00 in taxes and arrears of taxes. The balance of the mortgage at that point was $576,895.70.

While he provided a notice of assessment for 2009 indicating an income of $30,971.00, he did not produce the documentation which would show the [omitted for posting] gross income before deductions. A request was made for this T1 general income tax return in order to determine those amounts. [ 12 ] On August 11, 2010, the court again ordered Mr. G. to provide the financial documentation by August 16, 2010. [ 13 ] On September 8, 2011, this application came on for hearing. The hearing commenced but Mr. G. required a further adjournment because he had not yet provided the proper documentation.

A further Order was made to that effect.

[14] On September 8, 2011, Mr. G. filed an updated financial statement indicating a net total income of $46,581.00; total expensesof $67,048.00; and assets totalling $495,157.00. Those assets included real property with a market value of $1,133,000.00 and amortgage balance of $692,843.00. He also disclosed assets of $26,000.00 including a horse and furniture, and assets of $29,000.00,including vehicles which I assume are his motorcycles.

On a review of the assets and liabilities, the primary debtors were income taxnow of $6,069.00; the Houston and Seth lawyer bill of $108,000.00; Becker Law Firm of $9,000.00; personal loans of $89,000.00;outstanding GST of $3,469.00; outstanding property taxes of $6,282.00. It also disclosed that the first mortgage on the property was$542,843.00 and the second mortgage was $150,000.00. [15] During cross examination, Mr. G. admitted that he is a full patch member of the Hells Angels Motorcycle Club.

He deniedthat [omitted for posting] was a Hells Angels business and maintained that he was the sole proprietor of that operation. There was noevidence surrounding whether Mr. G.s’ status with the Hells Angels entitled him to any proceeds to businesses that are owned by theHells Angels. [16] On January 5, 2012, Ms. J. filed a financial statement disclosing her income of $24,000.00 and expenses of $38,596.00.

THE LAW: [17] Section 10 (1) of the Federal Child Support Guidelines provides that: On either spouse’s application, a court may award an amount of child support that is different from the amount determined under any ofSections 3 to 5, 8 or 9 if the court finds that the spouse making the request, or a child in respect of whom the request is made, wouldotherwise suffer undue hardship. [18] Section 96(2) provides: If an application is made to reduce or cancel arrears under a maintenance order, the court may reduce or cancel the arrears but only if it issatisfied that it would be grossly unfair not to do so. [19] The considerations the court may take into account are set out in Section 96(3): (

a) The efforts the applicant has made to comply with the maintenance order, (

b) The applicant’s explanation for any delay in applying for variation of the maintenance order, and (

c) Any special circumstances that the court considers relevant. [20] Earle v. Earle, (BC SC), [1999] BCJ No. 383, is a 1998 BC Supreme Court decision which has been citedthrough time because it clearly sets out the principles to apply before reducing child support or reducing or cancelling arrears. In thatcase, the court found Mr. Earle’s efforts to find employment left much to be desired.

I am setting out the principles outlined in Earle v.Earle because they guide me in my determination of this application: CHILD SUPPORT - BASIC PRINCIPLES [15] Three fundamental principles apply to all child support applications, including the first decision about what payments should bemade, applications to vary or change that amount, and applications to cancel or reduce arrears. a. Joint Legal Obligation [16] Parents have a joint and ongoing legal obligation to support their children.

It is considered such an important obligation that adivorce cannot be granted until parents make satisfactory arrangements for the care of their children. b.Right of the Child [17] It is the child, not the parent with custody, who has the right to maintenance. This has long been the case and has been confirmedin the Federal Child Support Guidelines. The first objective of the Guidelines is to establish a fair standard of support for children thatensures that they continue to benefit from the financial means of both spouses after separation. c.

Ability to Pay [18] The payment of maintenance is based on ability to pay. That means that it is based not only on what the parent does earn, but alsowhat the parent can earn. The result is that parents have a legal obligation to earn as much as they are capable of earning to meet theirobligation to support their children. 2. VARIATION - BASIC PRINCIPLES [19] Before a judge can change a maintenance order that has already been made, there has to be a material change of circumstancessince the original order was made. That is, the change must be of the kind that, if known by the judge when the last order was made,

would have resulted in a different order. The change must be significant and long lasting. Otherwise, there will be uncertainty, which is not in the best interests of children. 3. ARREARS - BASIC PRINCIPLES [21] The cancellation or reduction of arrears of maintenance is a form of variation. There are two points that have to do with arrears that should be kept in mind. a.

Significant Change [22] Because cancellation or reduction of arrears is a form of variation, there is a substantial onus (a heavy duty) on the person asking for a reduction or a cancellation of arrears to show that there has been a significant and long lasting change in circumstances. [23] The courts are generally reluctant to reduce or to cancel arrears. Under the Family Relations Act arrears will not be reduced or cancelled unless it is grossly unfair not to do so. This principle is similar to the one applied to the Divorce Act , which requires a material and long lasting change. b.

Postponement of Payment or Payment over Time [24] The second important point is that just because the arrears are not cancelled does not mean that they have to be paid right away. The court has the right to postpone payment for a reasonable period of time or make reasonable terms for payment, if it seems appropriate, taking into account all the circumstances of a case, including the present financial circumstances of the person required to pay. This would only be done when there has been a complete disclosure of the financial situation of the person asking for a postponement of payment or to pay over time.

CONCLUSION: [ 21 ] With respect to reducing or cancelling arrears, I am not satisfied that it would be grossly unfair not to do so. Mr. G. has sufficient assets to meet all of this outstanding liability as well as liability into the future. The most significant asset is a home with a great deal of equity. His latest assessment suggests the equity is about $1,000,000.00 but he has not had a formal appraisal done. He has also previously received a significant personal injury settlement in the sum of $130,000.00 which permitted him to pay off some personal debts.

He did not have any of the settlement documents so the court is unable to determine whether any part of that settlement was for income loss. [ 22 ] If the settlement was entirely non-pecuniary damages, then it does not constitute income for the purposes of determining child support. However, I can still consider that settlement to determine whether Mr. G. is under undue hardship and whether it would be grossly unfair not to cancel his arrears.

I find that his income, the assets at his disposal and assets which he has disposed of, his income earning ability and his personal injury settlement all soundly refute the proposition that it would be grossly unfair not to cancel the arrears; and also soundly refute that he is under any undue hardship with respect to the child support he is required to pay. [ 23 ] Mr. G. alternatively asked that his ongoing child support be based upon his tax returns from year to year. He said this is because he is unable to work again.

His disability payments of $1,300.00 per month would amount to $15,600.00 per annum and would result in a child support obligation for this child of $108.00 per month. [ 24 ] However, there was also a dearth of medical opinion before the court. What little there was refutes his understanding of his diagnosis. There is no question that Mr. G. did suffer from a medical problem during much of last year. He told the court that he was unable to work because of a blood clot in his lung. No blood clot has been found. A mild airway disease was noted. He said that his doctor has told him he cannot work.

In fact, his doctor has said he may not be able to return to full time work at this time. Further medical investigation was recommended. This does not preclude part time work now or full time work down the road. [ 25 ] Mr. G. has brought no evidence before the court of his attempts to find alternative employment, to retrain or to otherwise earn an income in order to support his three children, including L. He has simply stated that he intends to sell the house, live off the equity from that sale and draw on his disability payment. If Mr.

G. had no children to support, this would be a choice he could make entirely of his own. However, he does have children to support and he is obligated to make himself employable in order to continue supporting him. His illness and change of occupation are but temporary changes in his life. [ 26 ] Mr. Komori suggested I should defer to the average income of a motorcycle technician. However, Mr. G.s’ evidence is that he is not certified as a motorcycle technician and has only learned by trial and error. Furthermore, Mr.

G. says he cannot work in the environment he used to work in because of this as yet undiagnosed respiratory illness. It is likely his retraining will have to be found in a new field. Consequently, it would be inappropriate for me to impute income to him based on the income of a motorcycle technician. [ 27 ] The original Order and its variations were made reviewable. Therefore, Mr. G. does not have to show there was a material change in circumstances since the last variation to the Order was made.

However, he has failed to provide to me sufficient evidence of all of his sources of income or any evidence of attempts to obtain alternative employment. His medical investigation is incomplete and does not appear to be permanent. It would be inappropriate to base his future child support payments on his expected C.P.P. disability payments or T4s arising from such payments. The courts expect people in these circumstances to exhaust opportunities to find gainful employment to support their children.

If that person fails to provide that evidence, the court must then impute income that is reasonable on the facts that are before the court. [ 28 ] It is reasonable in the circumstances for me to base Mr. G.s’ imputed income on his historical income from his self-employed earnings as a self-taught motorcycle technician. While he can no longer perform as a motorcycle technician, he has displayed the ability to self-train and earn a modest income from self employment. That income has ranged from $37,300.00 in 2008, to $37,600.00 in 2009,

to $38,300.00 in 2010. I have disregarded the income from his R.R.S.P. and note that he claimed to have no income in 2011 due to the health problems. His only income that year was from his R.R.S.P. and therefore it does not accurately reflect his income earning ability. [ 29 ] On that basis, I am satisfied that Mr. G.s’ income earning ability is properly imputed at $37,500.00 per annum. His child support for L. is $342.00 per month. That adjustment from $400.00 per month commences January 1, 2012.

It does not include the special and extraordinary expenses which must be paid in accordance with the original order. [ 30 ] With respect to extraordinary expenses, Ms. J.’s income is $24,000.00 per annum. Their respective proportions for extraordinary expenses are 64% to Mr. G. and 36% to Ms. J. [ 31 ] Mr. Komori shall draw the order. ___________________________ S.D. Frame Provincial Court Judge