D.R. v. L.M., 2021 BCPC 136

Citation: D.R. v. L.M. 2021 BCPC 136 Date: 20210504 File No: 129014 Registry: Kelowna IN THE PROVINCIAL COURT OF BRITISH COLUMBIA IN THE MATTER OF THE FAMILY LAW ACT , S.B.C. 2011 c. 25 BETWEEN: D.R. APPLICANT AND: L.M. RESPONDENT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE A. TAM

Counsel for the Applicant: G. R. LeClair Counsel for the Respondent: B. R. Montgomery Place of Hearing: Kelowna , B.C. Dates of Hearing: February 11 & April 14, 2021 Date of Judgment: May 4, 2021 Introduction [ 1 ] L.M. and D.R. were in a relationship for 23 months from the end of November 2018 to mid-October, 2020. During this time, they have one child together, L.R., who was born [omitted for publication]. Since the parties’ separation, L.R. resides primarily with L.M. She applies to this Court for child support as well as spousal support.

There is an interim child support order pursuant to which D.R. is obliged to pay $750 per month. The motion for interim spousal support was previously dismissed. D.R.’s income [ 2 ] In order to determine the appropriate amount of support, it is first necessary to determine D.R.’s income. He is a mason by trade and is the sole owner of his own company. He started his business in Alberta, but in recent years, has operated primarily through his BC company. [ 3 ] D.R. filed a financial statement in which he claims $74,500 of dividend income for 2020.

However, since he has ultimate control over the company through which he does business, it is appropriate to look at the financial picture of his company. This is because support ought to be premised upon the money available to D.R., and not only on the money which he actually withdrew from the company. Corporate Income [ 4 ] According to the financial statement of D.R.’s BC company, the pre-tax corporate income for 2020 was $143,805. In that same statement, it lists expenses totalling $160,155, broken up into different categories. [ 5 ] The parties are in agreement that s. 18(1)(

a) of the Federal Child Support Guidelines is applicable and that the Court should include at least some of the pre-tax corporate income. They disagree, however, whether only some or all of the pre-tax corporate income should be included.

Additionally, they disagree as to whether all of the expenses listed in the financial statement are reasonable and therefore ought to be excluded in the calculation of D.R.’s guideline income. [ 6 ] There is a legal presumption that all of the pre-tax corporate income will be assumed to be available to a payor, unless there is compelling evidence that re-investment is necessary to sustain the company as a viable enterprise. See Jeffery v. Motherwell , 2006 BCSC 140 at para. 13 , which was cited with approval in Hausmann v. Kluklas , 2009 BCCA 32 , at para. 51 . [ 7 ] In the case at bar, Mr.

LeClair, on behalf of D.R., asks that I deduct 60% of the pre-tax corporate income from the calculation. However, on the evidence presented, I am not persuaded that that that amount is “necessary to sustain the company as a viable enterprise”. D.R. gave evidence with respect to the equipment in which he intends to invest. There are clearly very compelling business reasons for doing so, which would render his company more profitable. But I am not satisfied that he has met the threshold to exclude these costs from guideline income calculation at this time.

D.R. has been running his business quite profitably up to now without this equipment. Without prejudging the issue, it may be that ultimately when these machines are purchased, it may then have an effect on the support payable at that time. However, for the purposes of this hearing, all of the pre-tax income ought to be included. That figure is $143,805. Expenses [ 8 ] Regarding the corporate expenses, Mr. LeClair agrees that some of them have a personal component and should be added back to D.R.’s income. Those are detailed in Mr. LeClair’s worksheet, based on D.R.’s evidence. Mr.

Montgomery submits that not all of these expenses were reasonable and suggests an alternative method of arriving at these figures. [ 9 ] Having heard D.R.’s evidence in chief and in cross-examination, the only item with which I have an issue is that of the “meals and entertainment” expense. In 2020, D.R.’s company spent $53,855. This represents approximately 1/6th of the company’s gross profit. It also amounts to approximately $1,000 every week. In my view, this figure is excessive and is not reasonable.

On the evidence presented, I am not persuaded that only 25% of this expense resulted in a personal benefit for D.R. It is more likely than not that D.R. would have participated in close to all, if not all, of these meals and entertainment events. Throughout the hearing, I heard about a lavish lifestyle including frequent restaurant meals, limousine services, shopping trips at a high-end department store, and a Vancouver Canucks game. D.R. has not established that 75% of this amount is a reasonable and legitimate business expense.

Acknowledging that meals and entertainment is very much part of our business culture, I am allowing D.R. to remove 50% of his meals expense from support calculation. I am otherwise prepared to accept the other calculations as spelled out in Mr. LeClair’s worksheet. [ 10 ] Accordingly, I am adding to D.R.’s guideline income as follows: 50% of the “meals and entertainment expense claimed = $26,926 20% of telephone expenses = $823 12% of vehicle expenses = $2,907 [ 11 ] The total of these expenses is $30,656.

Dividend [ 12 ] With respect to the $74,500 of dividend income that D.R. declared, in my view, it is inappropriate to add that to the balance. This is because the pre-tax corporate income does not take into account the dividend paid. It does not show up as a corporate expense and is not deducted from the company’s gross profit. When considering the total amount available to D.R. to pay child support, it would amount to double-counting if I simply added his dividend income to his corporate income.

Child support [ 13 ] For the foregoing reasons, I calculate D.R.’s income for support purposes to be $143,805 + $30,656 = $174,461. According to the federal guidelines, the child support payable is $1,547. Since D.R.’s income is in excess of $150,000, I need to turn my mind to s. 4 of the Federal Child Support Guidelines . In light of the disparity in income between the parties, the lavish lifestyle to which D.R. appears accustomed, and the fact that there are currently no s. 7 special or extraordinary expense, I conclude that the guideline amount remains appropriate as listed under s. 3.

This will be effective as of November 1, 2020. Spousal Support [ 14 ] Although their relationship lasted only 23 months, L.M. is a “spouse” within the definition of the FLA by virtue of having a child with D.R. As such, the Court needs to consider whether she is entitled to spousal support by considering the objectives set out in s. 161 as explained in the jurisprudence. There are two main bases to award spousal support: compensatory and non-compensatory.

In a compensatory claim, the court needs to assess what advantage and disadvantage accrued to each party as a result of the relationship and the subsequent breakup. [ 15 ] In my view, the evidence here does not support a compensatory claim. At the beginning of the relationship, L.M. was working 4 days a week for the [omitted for publication] as a licensed practical nurse. In April 2020, L.M. went on medical leave. In August 2020, that changed to maternity leave, and in November 2020, that changed to parental leave.

L.M. is expected to resume her position at the [omitted for publication] at the end of July 2021, but working 5 days a week. As such, L.M.’s career development did not appear to have suffered any as a result of this relatively short-term relationship. By August of 2021, she will, in all likelihood, return to her earning potential had she not been in a relationship with D.R.

In fact, she will be earning more than she was before by virtue of working one more day per week. [ 16 ] Conversely, while L.M. did give some assistance to D.R.’s business while they were together by doing some errands, I am satisfied that her involvement was modest and that it did not contribute materially to the growth of the business. I also disagree with Mr. Montgomery’s characterization that there was an intermingling of finances. It simply appeared that D.R. paid for virtually all of their collective expenses while they were together.

Notwithstanding the fact that L.M. did use D.R.’s credit card, she did send him several e- transfers to pay him back. This indicates to me some level of separation and independent finances. In any event, none of the above was sufficient to found a compensatory claim for spousal support. [ 17 ] With respect to a non-compensatory claim for spousal support, I have determined that there is a “need” as that term is understood in the jurisprudence. The relationship ended quite abruptly. In November of last year, L.M. was told that she had until the end of the month to move out of the home.

At that point, L.M. was caring for L.R. who was 3 months old at the time. She had a dog which she had to rehome. D.R. took back the vehicle that L.M. was using. All of this resulted in a lot of financial pressure, compounded by the time constraint within which L.M. had to get herself organized. Under the circumstances, L.M. ended up renting an apartment which costs more than what she ordinarily would be prepared to pay. There is, of course, the inherent cost of setting up a new home. She also had to purchase a vehicle in very short order.

In order to make all of this work, she had to collapse some RRSP’s that she had. She also borrowed $17,000 from her mother. [ 18 ] In coming to my conclusion, I am mindful that “needs” goes beyond basic necessities of life and varies according to the circumstances of the parties ( Chutter v. Chutter , 2008 BCCA 507 at para. 55 ). With that in mind, L.M. has demonstrated that the suddenness of the breakup in the relationship and the requirement for her to get set up in her new life left her in the state of need. L.M.’s Income [ 19 ] The calculation of L.M.’s income is relatively straight forward.

From November 1, 2020 to August 1, 2021, her income is $32,000 per year as stated on her financial statement. Commencing September 1, 2021, her income is expected to be $60,000 per year. Quantum and Duration [ 20 ] In determining the quantum and duration, I need to bear in mind the objectives that underlie a spousal support award as enumerated by s. 161 of the FLA .

To that end, I have considered the relatively short duration of the relationship; the fact that L.M. will be returning to full time work in late July of this year; that it was her who moved out of the home they were sharing, requiring her to find a new place to live and finding a new vehicle to drive; and that she is now caring for an infant child. Taking all of those factors into account, I have concluded that spousal support should be paid at the low figure of the Spousal Support Advisory Guideline , for a period of two years, retroactive to November 1, 2020.

For the period commencing November 1, 2020 and ending on July 31, 2021, that amount is $2,510 per month. For the period commencing August 1, 2021, and ending in October 31, 2022, that amount is $1,407 per month.

Summary and orders: [ 21 ] To summarize, I find and Order as follows: 1. D.R. and L.M. are residents of British Columbia. 2. I impute income to D.R. for 2021 at $174,461 per year. I find L.M.’s current income to be $32,000 per year. Commencing August 1, 2021, I find L.M.’s annual income to be $60,000.

3. Retroactive to November 1, 2020, D.R. shall pay child support to L.M. for L.R., born [omitted for publication], in the amount of $1,547 per month. Child support is due on the first of each month and shall continue for as long as L.R. is eligible for child support under the FLA or until further order of the court. 4. From November 1, 2020 to July 31, 2021, D.R. shall pay spousal support to L.M. in the amount of $2,510 per month. From August 1, 2021 to October 31, 2022, D.R. shall pay spousal support in the amount of $1,407 per month. Spousal support is due on the first of each month for that month.

Spousal support shall cease on November 1, 2022. s. 7 Expenses [ 22 ] In light of the above findings, the parties shall share any s. 7 special or extraordinarily expenses as follows: 1. For the period between November 1, 2020 to July 31, 2021, D.R. shall pay 70%, and L.M. shall pay 30%. 2. Commencing August 1, 2021 and until further order of the Court, D.R. shall pay 67%, and L.M. shall pay 33%. Ongoing Financial Disclosure [ 23 ] To assist the parties moving forward, I order that financial disclosure continue on a yearly basis.

For as long as L.R. remains eligible for child support under the FLA , or until further order of the court, the parties shall exchange: a. Copies of their respective income tax returns for the previous year, including all attachments, not later than June 30 of each year; and b. Copies of any Notice of Assessment or Reassessment provided to them by Canada Revenue Agency, immediately upon receipt. [ 24 ] In addition, D.R. shall provide to L.M.: a.

Financial statements and tax returns of any corporation in which D.R. is a shareholder, director, or officer for the previous year, not later than June 30 of each year; and b. Any notice of assessment or reassessment of any corporation in which D.R. is a shareholder, director, or officer, immediately upon receipt. _______________________ The Honourable A. Tam Provincial Court Judge