S.H. v. J.W., 2022 BCPC 281

Citation: S.H. v. J.W. 2022 BCPC 281 Date: 20221129 File No: 122786 Registry: Kelowna IN THE PROVINCIAL COURT OF BRITISH COLUMBIA IN THE MATTER OF THE FAMILY LAW ACT , S.B.C. 2011 c. 25 BETWEEN: S.H. APPLICANT AND: J.W. RESPONDENT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE A. TAM Appearing on his own behalf: S.H. Counsel for the Respondent: B. Montgomery Place of Hearing: Kelowna , B.C. Dates of Hearing: October 11, 12, 13, 2022 Date of Judgment: November 29, 2022

INTRODUCTION [1] S.H. and J.W. have two children: L.H. born [omitted for publication] and J.H. born [omitted for publication]. During theirmarriage, S.H. and J.W. jointly ran a construction business. In 2016, the couple separated, which coincided with the business failing.Since that time, J.W. and S.H. shared their parental responsibilities and parenting time pursuant to a separation agreement, as amendedfrom time to time by agreement or court order. On a two-week rotating schedule, J.W. exercises parenting time nine days out of 14 andS.H., five days out of 14.

The separation agreement also obliged S.H. to pay child and spousal support. [2] At this hearing, S.H. says that there has been a substantial change in his financial circumstances due to his loss of employment inMay 2020. He seeks to retroactively reduce his child-support obligation and as well, that J.W. retroactively pay him child support for thissame period. He also seeks to be reimbursed for the spousal-support payments he did make during this time. He says that all s. 7expenses should be adjusted accordingly.

Moreover, S.H. says that he can no longer afford to put the children in after school day care andas such, asks that any day care expenditure require his express consent, and that he should take care of the children when J.W. is notavailable due to work commitments. [3] J.W. opposes all of the relief sought by S.H. She says that there should not be any retroactive reduction of child or spousalsupport and any ongoing child-support obligation should be commensurate with S.H.’s income or imputed income.

In addition, J.W.seeks to have sole decision-making authority for the children’s medical, dental, health, travel and day care issues. Any s. 7 expensesshould be based on an income appropriately imputed to S.H. S.H.’s financial circumstances [4] I will first deal with the financial aspects of this case. In order to do so, it is necessary to analyze carefully S.H.’s financialcircumstances over the last three or so years. [5] After the dissolution of his construction business in 2019, S.H. went on to be employed as a project director for ChandosConstruction (“Chandos”), an international construction company.

However, in May 2020, S.H. was terminated because of a number offactors, including that S.H. did not agree with the company on the direction it was going, as well as a disagreement about whether S.H.was entitled to a promotion. Additionally, because S.H. was not up to date with his support payments, the Family MaintenanceEnforcement Program (“FMEP”) suspended S.H.’s passport. His inability to travel internationally was a key factor in his terminationfrom the company in May of 2020. While employed at Chandos, his annual income was $180,000.

His line 150 income in his 2020 taxreturn was approximately $140,000. [6] After his termination from Chandos, S.H. was receiving Employment Insurance benefits for a period of time. He also says thathe was actively looking for work. In around June 2021, S.H. decided to start his own online business, being a health and fitness coach tohis clients. He incorporated his company in August 2021. By all accounts, S.H.’s business appears to be thriving.

He has increased hisclientele tremendously since the inception of this enterprise. [7] The operating court order that S.H. seeks to vary is that of my sister Judge Cartwright on November 26, 2019. At that time,Judge Cartwright found S.H. to have employment income of $124,653, but also that he failed to disclose rental income of $35,866.Accordingly, Judge Cartwright found S.H.’s total income to be $160,519. For the two children, S.H.’s monthly child-support obligationcomes to $2,283.

A threshold requirement for variation [8] In order for S.H. to succeed in his application to retroactively reduce his child-support obligation, he must first show that therehas been a material change in circumstances. Specifically, in a case where a payor of child support seeks to reduce his/her obligation onthe premise that there has been a reduction in income, the Supreme Court of Canada in Colucci v. Colucci, 2021 SCC 24, requires thefollowing: [61] Most commonly, the retroactive variation claim will be based on a material change in income.

To meet the threshold, a decrease inincome must be significant and have some degree of continuity, and it must be real and not one of choice (Willick, at pp. 687-88; Earle v.Earle, (B.C.S.C.), at para. 27; MacCarthy v. MacCarthy, 2015 BCCA 496, 380 B.C.A.C. 102, at para. 58,citing Earle; L.M.P. v. L.S., 2011 SCC 64, [2011] 3 S.C.R. 775, at para. 33; Gray, at para. 39; Brown v. Brown, 2010 NBCA 5, 353N.B.R. (2d) 323 (“Brown”), at para. 2; Templeton, at para. 35). Trivial or short-lived changes are insufficient to justify a variation(Templeton, at para. 35).

In this way, the threshold inquiry preserves some sense of certainty and predictability for the parties and thechild, while allowing some flexibility in response to changes in the payor’s income. [62] The payor must have disclosed sufficient reliable evidence for the court to determine when and how far their income fell, and toascertain whether the change was significant, long lasting, and not one of choice. A decision to retroactively decrease support can only bemade based on “reliable, accurate and complete information” (Earle, at para. 28).

The payor cannot ask the court to make findings onincome that are contrary to the recipient’s interests “while at the same time shielding information that is relevant to the determination oftheir income behind a protective wall” (Templeton, at para. 67; see also Tougher v.

Tougher, 1999 ABQB 552, atparas. 14-15 ; Terry, at para. 9). [9] In the case at bar, I am not satisfied on a balance of probabilities that a material change in circumstances has been made out.After the failure of his construction business in 2018, S.H. was very quickly able to find employment with Chandos Construction, wherehe earned an annual income of $180,000. His termination was based in part on his disagreement with his employer about the directionthe company was taking, as well as whether he was entitled to a promotion.

His loss of traveling privileges was based on his failure orrefusal to honour his child-support obligations. [10] After his termination in May 2020, the court did not hear much about S.H.’s efforts in finding employment, other than that he

had submitted numerous résumés. But by June 2021, S.H. had decided to launch his own business, which has flourished since. In the fiscal year of August 2021 to August 2022, his three bank accounts evidence gross revenue of $177,118.48. I will have more to say about this figure later in these reasons.

But even during the pandemic, S.H. was able to recover within a year to a level of income that is comparable to what Judge Cartwright found his income to be in 2019 and his reported income on his tax return in 2020. [ 11 ] Thus, while I accept that S.H. was terminated from Chandos, when I look at the overall picture of his income earning capacity, I do not find there to be a “material change in income” that was significant, long lasting, and not one of choice. To a meaningful degree, S.H. contributed to his own termination from Chandos.

But in any event, he was able to recover fairly quickly after the termination. S.H. strikes me as an intelligent, articulate and highly-motivated individual. I do not see any reason to conclude that his earning capacity has been reduced in any long lasting or meaningful way.

Indeed, the business he has started appears to have an upward trajectory and his financial picture on the horizon looks perhaps even brighter than his previous one. [ 12 ] Recalling that child support is based on a parent’s capacity to earn rather than what the parent actually earns and that a variation is justified only when the change is significant and long lasting, the facts in this case do not justify a retroactive reduction in child support.

S.H. has also failed to satisfy the court why, if given time to make up the deficit, he cannot do so in the future. [ 13 ] Further, at no time during the relevant period did S.H. care for the children 40% of the time or more; consequently, he had never been entitled to child support. For that reason, that aspect of his application is dismissed. S.H.’s position on his income [ 14 ] S.H. filed a 2021 tax return showing an income of negative $8,809.50. In addition, he filed a Form 4 Financial Statement showing a deficit of $35,801.08 for 2022.

Based on those figures, he claims that he has no positive income and should not have to pay any ongoing support and any past support obligation should be cancelled. [ 15 ] However, in going through S.H.’s bank statements, I find his method of accounting completely untenable. What S.H. does is he makes all of his expenditures through his company. He expenses virtually everything at 100% and subtracts them from his company’s revenue. For example, S.H. pays rent for his home at $2,500 a month. He says that since he produces online videos from his home, 100% of his rent should be deducted from his income.

S.H. also expenses the entirety of his grocery bills, on the premise that since he has an online profile and that his physical appearance is key to success, it is essential that he consumes the appropriate amount and type of food and nutritional supplements. For a similar reason, he expensed some dental bills to repair a filling and for some dental veneers. He says that he has to drive to various gyms in order to work out and meet clients and so he expenses the entirety of the payments for his BMW and his Harley Davidson motorcycle, as well as insurance expenses.

S.H. justifies the purchase of his motorcycle because he rides it in the summer months and it is more fuel economical; however, when questioned about whether the fuel savings exceed the cost of his monthly motorcycle payments, he was not able to provide an answer. His reaction to the question left the court with the impression that he had never actually turned his mind to that calculation. [ 16 ] In addition, all of his clothing are fitness-type clothing which he has to wear to impress his online public. He got a new tattoo in order to look good.

He says that he finds golf an excellent way to promote his business and so he expenses entirely these golf games and golf trips that he takes with his girlfriend. Going out for dinners with clients has a similar business purpose. He expensed a trip to the spa with his girlfriend because the owner of the spa is a client of his. This list goes on and on. [ 17 ] Since S.H. is the sole owner/operator of his business, the court must consider the applicability of ss. 18 and 19 of the Federal Child Support Guidelines ( the “Guidelines”) . 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 . . . 19

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

g) the spouse unreasonably deducts expenses from income; . . . [ 18 ] With respect to deductions of business expenses, the Supreme Court of BC in D.N. v. M.R. , 2019 BCSC 537 , said this at para. 137: [137] Expenses must be reasonable and for legitimate business purposes, in all the circumstances. Where expenses are personal in nature (providing a personal benefit to the party) and/or constitute an ordinary living expense, it is not appropriate to deduct the expenses and the expenses should be added back into the party’s income: D.M.B. at para. 150 , citing Ursel v. Ursel, 2014 BCSC 1219 ; Kowalewich v.

Kowalewich , 2001 BCCA 450 . [ 19 ] Upon a careful review of S.H.’s claimed expenses, I find that many of these have a significant personal component to them.

Going out to dinner, playing golf, personal vehicles, rent, clothing and food are not exclusively business expenses. While I have no difficulty in concluding that there is some business purpose for these expenditures, it is undeniable that S.H. derives a personal benefit from them. Even if he did not have a business, he would have needed to pay rent, have a vehicle, eat food, have a cell phone, etc. S.H. has failed to satisfy the court that these business expenses are reasonable deductions from his revenue.

The court is highly doubtful that expensing 100% of golf games and dinners, as well as one’s rent, would be a legitimate tax treatment. But even if it were, s. 19(2) of the Guidelines specifically mandates that the Income Tax Act is not the final arbiter of whether an expense is reasonable for the purposes of calculating income and child-support obligations. As such, even if S.H.’s accounting would otherwise pass Canada Revenue Agency scrutiny, this Court finds the deductions he has claimed not to be reasonable. For that reason, his argument for a reduction in past child- support obligation fails.

Given that his company took in gross revenue in excess of $177,000 in its most recent fiscal year, I find that his earning capacity has not diminished in any significant or long lasting way. [ 20 ] On a prospective basis, the court needs to evaluate the appropriate amount of income on which to base an ongoing child-support order. Mr. Montgomery has gone over S.H.’s financial documents, including his bank account and credit-card statements, which list all of the deposits, withdrawals, expenditures and payments. Mr.

Mongtomery has made a submission as to how much ought to be added back to the available-income column for child-support calculation, using the financial documents S.H. provided for August 2021 to August 2022. I have reviewed Mr. Montgomery’s analysis. I find that it is fair-handed and compelling. For example, Mr. Montgomery conceded that the camera equipment S.H. bought is a legitimate business expense at 100%. He also acknowledged that at least a portion of his entertainment expense has a business component and aims to add back only a portion of those expenditures. [ 21 ] On the whole, I agree with Mr.

Montgomery’s treatment of the figures. Specifically, after allowing a certain percentage of each category of expense as a legitimate deduction, I am adding back to S.H.’s income the following amounts: Pre-tax Income ($205.42) Meals/Entertainment $5,138.12 Vehicle Expenses $18,252.78 Clothing $2,508.80 Telephone/Cellular $615.36 Groceries $10,657.22 Rent $20,670.22 Personal Expenses $24,089.04 Apple Subscription $300 Total $82,026.12 [ 22 ] In addition, S.H. has transferred $6,509.99 to a MOKA account which was acknowledged to be a personal account upon cross- examination.

Finally, S.H. made various transfers or cash withdrawals totalling $47,046.80 in the relevant period. He labelled these as “debts”. On this issue, I agree with Mr. Montgomery that S.H.’s evidence regarding his debts is vague and imprecise. I was told that he owed his parents a lot of money, but his repayments were haphazard and irregular. There was no payment schedule, nor evidence of the applicable interest, if any. There was also no documentation as to how much debt has been repaid and how much remains outstanding.

Most importantly, there is no compelling link between the items he marked as “debt” on his statements and the repayment to his parents of any particular debt owed. For these reasons, S.H. has failed to persuade the court that these deductions are reasonable and ought to be excluded from income calculation. I note that once one party has established that the other has deducted business expenses from business income, the onus is on the claiming party to justify why and how those expenses are reasonable. See D.N. v. M. R. , supra, at para. 135.

S.H. has failed to discharge that onus. [ 23 ] Accordingly, after the analysis prescribed by ss. 18 and 19 of the Federal Child Support Guidelines , I determine S.H.’s income to be $82,026.12 + $6,509.99 + $47,046.80, for a total of $135,583. Pursuant to the parties’ separation agreement, child support ought to be adjusted on July 1 of each year. As such, this Court orders that commencing July 1, 2022, S.H. shall pay child support in the amount of $1,980 per month for the two children. [ 24 ] In light of my findings with respect to S.H.’s income, his claim for retroactive spousal support necessarily fails.

That aspect of his application is dismissed. Per their separation agreement, spousal support has now terminated and there is no ongoing order sought by either party. Undue hardship [ 25 ] In his pleadings, S.H. claimed that he would suffer undue hardship should his child-support obligation remain unchanged subsequent to his termination from Chandos.

His main argument is that he incurred a substantial amount of debt upon the dissolution of his construction business and that he lost his job in May 2020. [ 26 ] Section 10(2) of the Guidelines sets out the circumstances under which the court may find undue hardship as to relieve a payor from the otherwise mandated table amount. However, subsection (3) stipulates as follows: Standards of living must be considered

(3) Despite a determination of undue hardship under subsection (1), an application under that subsection must be denied by the court if it

is of the opinion that the household of the spouse who claims undue hardship would, after determining the amount of child support under any of sections 3 to 5, 8 or 9, have a higher standard of living than the household of the other spouse. [ 27 ] At this hearing, I did not hear anything with respect to S.H.’s household. I have heard references to him having a partner, but I do not know if they live together. If they do, I do not know anything about that person’s financial circumstances. In any event, even if S.H. lived alone, I do not find his standard of living to be any lesser than J.W.’s.

As referenced above, S.H. has a BMW and a motorcycle. He goes golfing. He goes out to dinner. He goes to the spa. He got a tattoo. He took trips to Vancouver and Kamloops over the last year. He has his clothing and food paid for by his company. He lives in an 1,800 sq. ft. home which he rents for $2,500 per month. According to his own financial statement, his annual living expenses total $143,000. J.W., on the other hand, deposed that her annual living expenses total $76,000. On this latter point, there was effectively no cross-examination.

Consequently, on balance, I find that S.H. enjoys a much higher standard of living than does J.W. For that reason, his claim for hardship must be denied.

Section 7 expenses [ 28 ] J.W.’s income as a senior branch administrator at a financial firm is relatively straightforward. She gave evidence about the position that she just obtained and she also filed a financial statement. Her projected income for 2022 is $67,121. S.H. submitted that she is in fact earning $75,000 per year and is therefore not being truthful with her evidence. However, J.W. will not have the benefit of that salary for the entire year since she was only recently hired. As such, I have no difficulty in accepting her evidence that her 2022 income is likely to be $67,121.

Adjusted for the spousal support received as well as Universal Child Care Benefit (on which there was no cross- examination), J.W.’s income for the purposes of calculating child support is $54,330. [ 29 ] Commencing July 1, 2022, S.H. shall pay 67% of s. 7 expenses and J.W. shall pay 33%. On August 31, 2021, the matter came before my sister Judge Burdett who held the following to be s. 7 expenses: day care, healthcare, soccer, baseball and parkour. Other than the issue of day care, it is not argued before me that this list should change.

As such, I will adopt Judge Burdett’s list as s. 7 expenses and for the reasons that I will express momentarily, I will include day care as a part of that list. Parental responsibilities [ 30 ] One specific point of contention is whether the children should be placed in after school day care. J.W. works the “normal” business hours from Monday to Friday. S.H. is self-employed and dictates his own schedule. His workday consists of going to the gym to work out and going on outings, such as hiking to create online video content. He is also at home working online to build his business.

S.H. says he works between 10 to 12 hours per day but can very much control his own schedule. [ 31 ] As a result of J.W.’s hours of work, the children are placed in day care after school. S.H. previously agreed to this arrangement, but he now says that he can no longer afford it. Instead, he offers to care for the children whenever J.W. is not available.

In light of my previous conclusions regarding S.H.’s financial circumstances, I find that it is within S.H.’s means to pay for his share of the day care expenses. [ 32 ] Additionally, there is a significant benefit to the children for them to continue in day care. At the outset of this hearing, J.W. had sought the continuation of a protection order previously ordered by my brother Judge Burnett on June 14, 2022 and by myself on May 18, 2021. This latter aspect was resolved by consent by way of a conduct order.

Nevertheless, there had been a previous history of family violence, in that S.H. assaulted J.W. by choking her during their relationship, resulting in bruising around her neck, as well as some hair being pulled out. Post-separation, the relationship continued to be tumultuous and extremely high conflict. On December 13, 2021, S.H. drove down the cul-de-sac J.W.’s residence is on, at a time when a protection order was in place. On March 22, 2022, S.H. pushed J.W. on the chest when she attended at his residence to pick up one of the children.

In May 2022, while J.W. and the children were in Osoyoos on a trip, S.H. sent emails to J.W. insinuating that he was following them. He said in those emails “See you in Osoyoos” and “1 hotel left”, implying that he was going from hotel to hotel in Osoyoos in search for her. A protection order was also in effect at the time. [ 33 ] I found J.W.’s evidence to be compelling on these issues. They are supported by affidavit and photographic evidence. Moreover, her evidence was not at all undermined during cross-examination. But what is even more evident is the palpable tension between the parties.

It cannot be denied that J.W. remains extremely fearful of S.H. and S.H. remains extremely resentful of J.W. for, in his mind, having ruined his life financially. All of this is exacerbated by the fact that J.W. now has a new partner with whom she recently built a new home and appears financially stable. [ 34 ] Given the dynamics between the parties, it would be wise for the children to continue in after school day care. This will serve as a buffer between the parties to reduce any contact that would necessarily follow from S.H. providing after school care himself.

In other words, the court finds it NOT to be in the children’s best interest to be exposed to the tension that is so readily appreciable during this hearing. For that reason, day care will continue to be a legitimate s. 7 expense and given S.H.’s previous withholding of consent, I will permit J.W. to enrol the children in day care with or without S.H.’s consent.

Likewise, I will permit J.W. to enrol the children in the activities identified by Judge Burdett in her order with or without S.H.’s consent. [ 35 ] Beyond that, J.W. seeks an order that she may make unilateral decisions for the children on issues such as medical, dental, health and travel. Her request in this regard is not without foundation. The evidence revealed that in the past, S.H. has used his consent as a bargaining chip in exchange for his own advantage.

For example, S.H. refused to consent to the children getting a passport so that they may go to Disneyland unless J.W. agreed to cancel the protection order. Ultimately, when J.W. filed an application and was prepared to go to court, S.H. finally consented. Similarly, regarding an assessment for autism which J.W. had arranged for L.H., S.H. withheld his consent, presumably to leverage for the dropping of the protection order, or to be relieved of child-support obligations. Again, he ultimately consented when the matter was about to be heard in court.

S.H. has needlessly consumed much of J.W.’s time and money, as well as judicial resources. S.H. himself told me that the parties had been to court 18 times over the last two years. As I said, the basis for her request to be the sole decision maker for the children is well founded. [ 36 ] All that being said, the court is hopeful that with the pronouncement of the final financial orders and the resolution of the protection issue, there is nothing further for S.H. to bargain.

As such, while it was concerning that he used his children as leverage, there will no longer be any reason for S.H. to withhold his consent on something that is clearly in the best interest of the children.

[ 37 ] Fundamentally, I have no reason to think that S.H. is not a good father or that he does not love his children and it is the court’s view that removing S.H.’s involvement from major decisions involving the children is not a good idea. To be clear, I say this not because S.H. has any particular right to make these decisions, but rather, the children benefit from input from their father. Involving S.H. will also foster a better and closer relationship between him and the children.

That, in the court’s view, is clearly in the children’s interest. [ 38 ] However, given the history of the difficulties J.W. has experienced, I am going to give her the authority to make any decision in the event the parties do not agree. S.H. may apply to the court to have the decision reviewed, but he will first need leave of the court, with accompanying affidavit outlining the basis of the objection. For clarity, this latter aspect of my order stems from my power under s. 221(2)(

b) of the Family Law Act , having found that S.H. conducted the proceedings in a way that is a misuse of the court process.

SUMMARY AND CONCLUSION [ 39 ] For the reasons expressed above, this Court orders as follows: 1. This is a final order. 2. S.H.’s application for retroactive reduction of his child-support obligation is dismissed. 3. S.H.’s application for retroactive spousal support is dismissed. 4. S.H.’s application for retroactive child support is dismissed. 5. This Court imputes an annual income to S.H. for 2022 at $135,583. Commencing July 1, 2022, S.H. shall pay J.W. for the support of L.H. and J.H. in the amount of $1,980 per month.

Child support is due on the first of each month and shall continue for so long as the child remains eligible for child support under the Family Law Act , or until further order of the court. 6. The court finds J.W.’s 2022 income to be $54,330 for the purposes of calculating child support. 7. Until further order of the court, S.H. and J.W. shall share s. 7 special and extraordinary expenses in the following proportion: S.H. shall pay 67% and J.W. shall pay 33%. 8. The following are found to be s. 7 expenses: day care, healthcare, soccer, baseball and parkour. 9.

J.W. may enrol the children in day care, baseball, soccer, or parkour without S.H.’s consent. 10. J.W. shall furnish proof of payment of these s. 7 expenses to the Family Maintenance Enforcement Program. S.H. shall pay his proportionate share of those expenses forthwith upon receipt of said proof from FMEP. 11. The parties have an obligation to advise each other of any matters of a significant nature affecting the children. 12.

The parties have the obligation to discuss with each other any significant decisions that have to be made concerning the children, including significant decisions about their health (except emergency decisions), education, religious instruction and general welfare. 13. The parties have the obligation to discuss significant decisions with each other and the obligation to try to reach agreement on those decisions. 14.

In the event the parties cannot reach agreement on a significant decision despite their best efforts, J.W. will be entitled to make those decisions and S.H. will have the right to apply for direction on any decision considered to be contrary to the best interests of the children, under s. 49 of the Family Law Act . 15. Before S.H. is permitted to file any application in accordance with the above paragraph, he must first obtain leave of the court by filing an Application for a Case Management Order Without Notice or Attendance.

He must identify in writing the decision he is challenging and setting out in an affidavit the basis of his objection. 16.

By May 31 of each year in which child support continues, the parties will provide each other the following: • A copy of their personal and corporate income tax return with all tax information slips and schedules for the preceding year; • A copy of the unaudited financial statement for the preceding year of any company in which the party has any interest; • Details of child tax benefits or other similar benefits received in the preceding year and anticipated in the coming year; and • The most recent annual statement of earnings, including overtime and bonuses. 17.

Parties shall exchange any personal and corporate notice of assessment or reassessment within 14 days of their receipt. 18. S.H.’s signature on the order is dispensed with. _____________________________ The Honourable Judge A. Tam

Provincial Court of British Columbia