K.L.S. v. M.J.G.H. Date:, 2012 BCPC 560

Citation: K.L.S. v. M.J.G.H. Date: 20120625 2012 BCPC 0560 File No: 13264 Registry: Victoria IN THE PROVINCIAL COURT OF BRITISH COLUMBIA IN THE MATTER OF THE FAMILY RELATIONS ACT , R.S.B.C. 1996 c. 128 BETWEEN: K. L. S. APPLICANT AND: M. J. G. H. RESPONDENT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE A.E. ROUNTHWAITE Counsel for the Applicant: A. Duncan

Counsel for the Respondent: D. Williams Place of Hearing: Victoria , B.C. Dates of Hearing: April 17 and June 14, 2012 Date of Judgment: June 25, 2012 [ 1 ] KLS and MJGH are the parents of J, who is almost eight years old. They share joint custody and joint guardianship. J’s primary residence is with his mother and he spends Wednesday evenings and alternating weekends with his father. [ 2 ] On August 25, 2011, the mother, Ms.

KLS, applied to vary a January 31, 2006, order that required the father to pay child support at the rate of $294 a month based on a guideline income of $33,843, and $207 a month for special expenses, being childcare and medical insurance. On November 24, 2011, an interim consent order increased child support to $468 a month without prejudice to the mother’s right to claim a further increase. [ 3 ] The mother now seeks increased child support and special and extraordinary expenses, retroactive for three years. The father, Mr.

MJGH, agrees that child support should be increased, but only retroactive to the date the application was filed. The parents also disagree on whether on-going child support should be based on imputed income greater than the father’s income declared at Line 150 of his 2011 income tax return, and on the expenses to which the father should contribute. [ 4 ] I must ultimately determine how much the father should pay for both retroactive and on-going child support and special and extraordinary expenses, but in order to do that I must decide the following issues: 1.

For what period should retroactive child support and special and extraordinary expenses be paid? 2. Should additional income be imputed to the father for 2011? 3. To what special and extraordinary expenses should the father contribute? [ 5 ] When considering these issues, I bear in mind that the objectives of the Child Support Guidelines governing this case include ensuring that children benefit from the financial means of both their parents and that parents and children in similar circumstances are treated consistently. 1.

For what period should retroactive child support and special and extraordinary expenses be paid? [ 6 ] In D.B.S. v . S.R.G. et al [1] , the Supreme Court of Canada said judges deciding whether to make retroactive child support orders should balance the payor’s interest in certainty with fairness to the child, and consider the following factors: - the statutory scheme, in this case the B.C. Family Relations Act ; - the applicant’s reason for delay in applying to change child support; - the payor’s conduct; - the child’s circumstances; and - whether a retroactive award would cause hardship to the payor.

The Court said that when a retroactive order is appropriate, it should generally be limited to three years, although if the payor has engaged in blameworthy conduct retroactivity may extend for a longer period. Finally, the retroactive award must fit the circumstances of the case. [ 7 ] In this case, the father has made all maintenance and special expense payments under the 2006 order but has not increased child support or special expense contributions as his income has increased and J has grown.

J’s needs have been met, with his mother paying for his extracurricular activities and preschool, although she has not been able to afford the hockey he says he would like to play. [ 8 ] Unfortunately the parents’ relationship appears to be “high conflict” and they have limited communication with one another, apparently to avoid unpleasant interaction. As a consequence, it seems difficult for them to communicate agreement even on straightforward issues, and this causes mutual inconvenience and unnecessary expense. [ 9 ] The mother works as an analyst for the provincial government.

When the 2006 order was made, the father worked as a nurse’s aid or at related jobs in the healthcare industry. In 2007 he worked as a construction contractor until he joined the plumbers’ union as an apprentice. Laid off in 2008 due to scarcity of work, he completed the school portion of his apprenticeship in 2009 and received Employment Insurance. For much of 2010, he worked on a hospital construction project, rising to lead a heating crew, but was laid off in October. The reason for the lay off is not clear.

It occurred at a time when all but the most skilled workers were being laid off, but it was also shortly after the mother telephoned his employer, identified her interest, and asked whether the father was working full time. The employer’s response was sympathetic to the mother.

[ 10 ] After a short job at a shipyard, the father was laid off again in December 2010 and received Employment Insurance for eight months as he was unable to obtain union work. He therefore started his own plumbing business in 2011 and did quite well. On November 24, 2011, the mother sent an email from her government email address to an employee of the father’s major client asking for the amount of his contract and his hourly rate and saying: “Mr. MJGH and I have a 7 year old son, J, and I am attempting to seek a more reasonable maintenance amount from him.

I would like to compare his recent financial disclosure in order to determine if there is truth to it. Unfortunately past experience has left me with little faith of ( sic ) Mr. MJGH’s credibility in this regard and I have less than two weeks before we return to Court to obtain supporting documentation which may refute his income”. [ 11 ] The employee forwarded the email to her employers who did not respond to the mother but forwarded the email to the father.

While there is no proof that the mother’s email affected the father’s business, this client who provided 80% of the father’s employment in 2011 has not contacted the father about work since the mother sent her email.

When the father’s lawyer sent a letter pointing out the likely effect of her action on his business, the mother drafted an apology letter, but since it did not completely retract her statement about the father’s credibility, she did not want it sent. [ 12 ] The father’s past Guideline incomes (the Line 150 amounts on his tax returns less union dues) have been as follows: $33,843 imputed for 2005 as basis for 2006 order $23,697 2006 $38,916 2007 $41,313 2008 $32,106 2009 $58,241 2010 [ 13 ] The mother said she delayed applying for an increase until August 2011 because when she requested increases in 2008 and 2010, the father did not provide financial disclosure and diverted her funds and energy to access and passport issues. [ 14 ] However, the 2008 correspondence and court documents filed as evidence contradict the mother’s testimony that the father failed to provide financial disclosure when requested, and that whenever she broached the subject of increasing child support he raised an access issue that diverted her.

In 2008 the father provided tax returns without being asked and provided the financial statement requested 2½ months after the request. It was the mother who did not provide her tax returns or the receipts requested. And in 2008, it was the mother who created an access issue by purporting to change unilaterally a

schedule the parents had agreed to. [ 15 ] On July 9, she sent the father an email telling him she was changing their agreed access

schedule and informing him that J would be attending pre-school and that his share of the cost would be $75 a month. She said if he would not pay voluntarily, she would go to court and seek an increase to child support as well, but if he agreed to pay the $75, he could keep paying the $294 plus special expenses for the time being. [ 16 ] In response, the father had his lawyer send the mother a letter on July 16 proposing mediation about access, agreeing to pay his share of pre-school costs, enclosing his 2005, 2006, and 2007 tax returns, and requesting her tax returns and daycare and preschool receipts.

The lawyer asserted that the father had overpaid child support and special expenses but indicated he would not seek a credit for overpayment if access could be resolved. [ 17 ] The mother did not reply to the lawyer’s letter or provide the financial disclosure requested. On August 15, after sending the mother a second letter, the father’s lawyer filed an application for specified access and an order that overpayment of child support and special expenses be credited against future payments.

The mother retained a lawyer who acknowledged receipt of the father’s tax returns and requested a financial statement from him in an August 29 letter. On September 2, the mother’s Reply was filed, stating she hoped they could work things out. She did not request increased child support and/or special expenses in her Reply. The matter was adjourned generally at the first court appearance on October 9; the mother’s lawyer wrote again on November 7 requesting the financial statement; and it was filed November 19.

Agreement was apparently reached on access and neither parent took further action on child support issues at that time. [ 18 ] The mother explained her failure to proceed with court action in 2008 on child support by saying that the parents become embroiled in an access issue, she obtained counseling for J, and then couldn’t afford to pursue the maintenance issue and pay for counseling.

The father said he did not voluntarily increase child support and pay for pre-school because he relied on his lawyer to tell him what to do: when he provided his financial information to his lawyer and heard nothing more, he assumed things were left at the status quo. [ 19 ] Usually, broaching the topic of increasing child support is all that is needed for effective notice. However I find that the mother’s conduct after broaching the topic in 2008 made it reasonable for the father to assume she was content with the status quo.

She did not provide the receipts to support her request for increased special expenses even though the father was agreeing to pay his share. There is no evidence she provided her tax returns although she believes she gave them to her lawyer. When the father filed an application including an assertion of overpayment, she disagreed that he had overpaid but did not apply to increase child support.

[ 20 ] Running out of money to pay a lawyer is not an adequate explanation for the mother’s failure to provide receipts and follow through with the steps necessary to conclude an agreement on preschool expenses. The father knew his income had decreased in 2006, increased in 2007, and was increasing in 2008 although construction activity was decreasing. He was contributing to the support of another child, a factor that is not relevant in law unless the payor can establish undue hardship, although it was a consideration in the father’s mind.

In these particular circumstances, I find the father’s failure to voluntarily increase child support in 2008 was not blameworthy conduct. Nor was it unreasonable for the father to think the mother was accepting the financial status quo when she did not provide the necessary financial disclosure, did not request variation of the 2006 order in her Reply, and took no further action in 2008. He was entitled to organize his affairs accordingly, and it would now be an unfair hardship to order retroactive increases for 2008 and 2009. [ 21 ] The issue was broached again in 2010.

On April 8, the mother emailed the father requesting an increase in child support and special expenses. The father replied on April 19 that he would not engage with her personally and she should contact his lawyer. She then retained a new lawyer who requested the father’s 2008 and 2009 tax returns. His lawyer provided his recent paystubs and promised the tax returns. There is no documentary evidence that those tax returns were provided, but there is also no documentary evidence of a second request for them.

Again, the parties took no further action. [ 22 ] The mother explained her failure to pursue an increase at this time by saying the child support issue was displaced by an issue over the father’s refusal to sign a passport application for J when she planned a trip to Disneyland. She said all her lawyer’s efforts then focused on getting the passport signed, and then the father was laid off at the end of 2010.

The father said he twice asked the mother when her lawyer would be contacting his lawyer and the mother didn’t reply, so he assumed it was a non-issue. [ 23 ] The circumstances in 2010 were different from those in 2008. In 2010 the father’s income would be almost double the amount on which the 2006 order was based. He had effective notice in April that the mother sought an increase in child support as well as increased contribution to past and continuing special expenses.

The evidence does not establish whether he provided the tax returns requested, but the mother did not fail to comply with any requests and her financial information was not relevant to the Guideline amount of child support. There is no evidence that she caused the passport dispute that diverted her legal fees and energy. In 2010 there were no equivocal circumstances that would justify an assumption that the mother was satisfied with the status quo.

It would not be an unfair hardship to the father to order a retroactive increase in child support commencing May 1, 2010, the first payment due after the notice, and in special and extraordinary expense contributions to the beginning of that year since the notice included a request for past expenses. 2.

Should additional income be imputed to the father for 2011? [ 24 ] The mother submits that income greater than the $50,843 appearing at line 150 of his 2011 tax return should be imputed to the father for that year because he was self-employed and entitled to more deductions from taxable income than a wage earner, and because he was intentionally under-employed during this period and/or failed to report all his income.

The father argues that no additional income should be imputed. [ 25 ] The father is entitled as a self-employed person to deduct portions of his rent, cell phone, vehicle, travel and meal expenses from his taxable income, although wage earners cannot. His Guideline income should therefore be adjusted upward to reflect this tax saving and treat him and his son consistently with other parents and children. [ 26 ] It appears that approximately $11,750 was deducted from the father’s gross 2011 business income for rent, phone, travel, meals, and the truck he uses for both business and personal transportation.

His business office is a small portion of the basement suite where he lives. He has only one telephone: a cell phone used for personal and business calls. He has the dual-purpose truck as well as a van that is used only for business. The evidence does not establish the precise value of personal benefit the father derives from these business expenses, but I accept that it would be reasonable to add $4,000 to the father’s income from self employment to reflect this benefit. [ 27 ] However, the evidence does not establish that the father was intentionally under employed in 2011.

I find that the choice he made to leave the union to start a plumbing business was reasonable. His testimony that he could not obtain union work after 2010, except for the offer of two weeks work in July 2011, is uncontradicted. The fact that his 2011 gross business income was $97,867 proves the business viable. [ 28 ] I reject the mother’s calculation that the father only worked 12 or 14 paid hours a week in 2011.

While it is unlikely that all the supplies purchased for $25,362 were billed to customers as materials, if I deduct that entire amount and the $6,239 paid as salaries from the gross business income of $97,867, it yields income of $66,266 attributable to hours worked by the father. Dividing that by an hourly rate of $72 (reflecting that hours were billed most often at $75/hour but sometimes at $65/hr) indicates 920 paid hours of work, or 18.4 hours a week in a 50 week year, and this is likely a low estimate.

Given the unpaid hours needed to start a business, promote it, make estimates, and do administrative work when one is a sole proprietor without support staff, I do not consider this to be an unreasonable number of paid work hours. Moreover, the father has recently incorporated a company to operate a second business providing 24 hour full service restaurant restoration.

He appears to be energetically pursuing avenues to increase his income. [ 29 ] I also note that the father’s personal income cannot be calculated as a multiple of the $75 an hour he often bills for his services, because business expenses must be paid from those earnings, so I reject the mother’s submissions employing that calculation. [ 30 ] The evidence does not establish that the business is an uneconomic enterprise. It appears to have had reasonable success in its first year.

I therefore find the father has not been intentionally under employed. [ 31 ] Nor does the evidence establish that the father failed to report income in 2011. I accept his evidence that he wants to maximize his declared income rather than minimize it, in order to establish the financial viability of his business when he seeks loans or investment for expansion. His incorporation of a company is consistent with his stated intent of expanding his business and increasing earnings. [ 32 ] Moreover, the mother’s reasons for suspecting that the father earned more than he has declared were not proven valid. There is

no evidence the father gave up other work when he spent two weeks helping his family renovate his sister’s bathroom in Ontario last summer, and I reject the argument that income should be attributed to him for this period. The mother said there were days when the father cancelled access because of work, but she could not find corresponding invoices. She therefore believed the father did not report his income on such days.

However, the father had estimating appointments for which he was not paid; the invoices do not always specify the days they cover; and the mother was unable to support this allegation by pointing to any specific day. This allegation was therefore not proved. [ 33 ] I conclude that income of $54,843 should be imputed to the father for 2011 in order to reflect his self employment tax deductions with personal benefits. 3. To what special and extraordinary expenses for childcare and extra curricular activities should the father contribute and in what proportion?

Father’s proportionate share [ 34 ] The parents have now agreed to an order that they exchange financial disclosure for the previous year by July 15 th each year, and adjust child support and special and extraordinary expense proportions commencing August 1 st . In order to be consistent, I will calculate retroactive variation on the same basis. Thus, from January 2010 through July 2010, the father should pay special and extraordinary expenses based on the parties’ 2008 Guideline incomes. Commencing August 1, 2010, the proportion would be based on their 2009 incomes.

The Guideline incomes below are the parents’ Line 150 amounts less union dues (except for the father’s 2011 income, determined above).

Based on those incomes, I have calculated the proportions as follows: Father’s 2008 Guideline income $41,313 Mother’s 2008 Guideline income $44,249 Father’s share of special and extraordinary expenses from January through July 2010 = 48% Father’s 2009 Guideline income $32,106 Mother’s 2009 Guideline income $46,559 Father’s share of special and extraordinary expenses from August 2010 through July 2011 = 41% Father’s 2010 Guideline income $58,241 Mother’s 2010 Guideline income $46,034 Father’s share of special and extraordinary expenses from August 2011 through July 2012 = 56% Father’s 2011 Guideline income $54,843 Mother’s 2011 Guideline income $50,757

Father’s share of special and extraordinary expenses from August 2012 through July 2013 = 52% Childcare [ 35 ] Subsections 7(1)(

a) and (2) of the Child Support Guidelines provide that a judge may order a parent to contribute to employment-related childcare expenses in an amount proportional to their respective incomes. The father agrees to contribute his share of childcare expenses, but not summer day camps offered by J’s after school care provider.

I will deal first with after school childcare and then with the day camps. [ 36 ] Although the father testified that he could provide after school care himself two days a week, I do not consider this a serious offer as there is no evidence he ever suggested it to the mother, and he has not looked into whether the after school care provider would agree to take J for a partial rather than a full week. The father should therefore pay a proportionate share of J’s childcare expenses from May 1, 2010, on. [ 37 ] I consider that the summer day camps are a type of childcare, reasonably priced at $175 a week.

If J were not attending a day camp, other childcare would be necessary when he is not in school and his parents are working. The mother emailed the father before registering J in day camps. Obtaining no response for seven days and finding there were only two spots available, she registered J for five weeks of camp. The father must therefore contribute a proportional share of the summer childcare expense, being day camps. Extracurricular activities [ 38 ] Section 7(1)(

f) of the Child Support Guidelines requires that extracurricular activities for which proportional contribution is sought must be “extraordinary”. When deciding whether extracurricular activities amount to “extraordinary” expenses, a judge must use a subjective analysis of factors including: - the necessity of the expense in relation to the child’s best interest; - the reasonableness of the expense in relation to the parents’ means; - whether the expense exceeds what the mother can reasonably cover considering her income and child support; - the nature and number of activities; and - the overall cost.

The father agrees to pay his share of swimming, baseball and soccer expenses, as he was consulted about these sports and has been involved in them. However, he was not consulted about J’s other activities and believes he is involved in too many activities. [ 39 ] In this case, it is difficult to reconcile the father’s joint custody and guardianship rights to participate in decisions about J’s activities with his obligation to contribute to extraordinary expenses, given the parent’s inability to communicate and to agree.

The mother discussed soccer, baseball and swimming with the father, but not hip hop, pedalheads and karate. In some cases, a payor’s contribution to extra curricular expenses is confined to activities agreed between the parents. However, since the parents seem unlikely to be able to agree on J’s activities, limiting the father’s contributions to agreed activities would likely penalize J.

Assuming the mother will continue to make most decisions about J’s activities, I accept that the best way to ensure the father is not required to pay large sums for activities he does not support is to impose a cap on the activity expenses. [ 40 ] J’s activities are in his best interest and reasonable in relation to the parents’ incomes. Their cost in 2011 totaled $1,251 [2] . Considering her income and support payments, the mother can reasonably pay some of J’s activities expenses once the father’s child support is increased in accordance with the Guidelines.

I therefore accept that it would be fair and reasonable for the father to contribute his proportional share of J’s activity expenses provided that the total cost of those expenses before they are shared between the parents does not exceed $1,000 a year, unless the parties agree to share additional expenses. I will apply this cap to the retroactive activity expenses as well as to those in the future. Conclusions [ 41 ] The parties have agreed to make annual adjustments on August 1 st , based on their incomes for the previous year.

For simplicity’s sake, I will include the month of July 2012 in retroactive calculations, and start on-going orders effective August 1, 2012. My calculations are therefore based on my assumption that the father’s payments under the interim order of $486 for child support and $207 for special expenses will be made on July 1. On-going child support [ 42 ] I vary the order of January 31, 2006, to provide the following:

I find that MJGH has an imputed Guideline income of $54,843 for 2011. I order that MJGH pay to KLS child support for J as follows: - in the amount of $505 a month commencing August 1, 2012, and continuing on the first of each month until and including July 1, 2013, based on a Guideline income of $54,843; and - in the Guideline amount on the first of each month thereafter, adjusted annually on August 1 st on the basis of his Guideline income for the preceding year, for as long as J is entitled to child support under the Family Relations Act or Family Law Act .

On-going special and extraordinary expenses [ 43 ] I order that commencing August 1, 2012, MJGH pay to KLS a proportional share, being 52% for the period from August 1, 2012 through July 31, 2013, of the cost of the following special and extraordinary expenses: childcare, extracurricular activities, and uninsured medical and dental expenses, provided that:

a) his share shall be adjusted every August 1 st , based on the parties’ Guideline incomes for the preceding year;

b) KLS shall give MJGH receipts for such expenses within 30 days of incurring the expense;

c) MJGH shall pay his share of the expense to KLS within 30 days of receiving a receipt for a special or extraordinary expense;

d) KLS shall give MJGH notice of the activities in which she intends to register J before registering him; and

e) the total cost of J’s activities to be shared between the parties shall not exceed $1,000 per year unless the parties agree otherwise.

Retroactive child support calculation [ 44 ] I find that the total retroactive child support payable by the father to the mother is $1,904, calculated as follows: - $382 a month for the period from May 1, 2010, to July 31, 2010, based on a Guideline income of $41,313; - $300 a month for the period from August 1, 2010, to July 31, 2011, based on a Guideline income of $32,106; - $543 a month for the period from August 1, 2011, to December 1, 2011, based on a Guideline income of $58,241; and - $539 a month for the period from January 1, 2012, to July 31, 2012, based on a Guideline income of $58,241 [3] . [ 45 ] Deducting the child support actually paid by the father from those amounts, I calculate retroactive child support owing as follows: 2010 3 months at $382 = $1,146 5 months at $300 = $1,500 Total required $2,646 Total paid $2,352 Balance owing $294 2011 7 months at $300 = $2,100 5 months at $543 = $2,715 Total required $4,815

Total paid $3,702 Balance owing $1,113 2012 7 months at $539 = $3,773 Total required $3,773 Total paid $3,276 Balance owing $497 Total balance owing for retroactive child support: $1,904.

Retroactive special and extraordinary expenses calculation [ 46 ] I find that the father`s share of retroactive special and extraordinary expenses for J’s childcare, softball, soccer, swimming, pedalheads, hip hop, sailing and karate is $7,316, calculated as follows: 48% of $583 activity expenses and $3,395 childcare expense for the period of January through July 2010, being $1,909; 41% of $1,000 activity expenses and $5,135 childcare expense for the period from August 2010 through July 2011, being $2,515; and 56% of $1,000 activity expenses and $4,164 [4] childcare expense for the period from August 2011 through July 2012, being $2,892. [ 47 ] Retroactive special and extraordinary expenses total $7,316.

Deducting from this figure the $6,417 the father has paid for special expenses in the 31 months from January 2010 through July 2012, leaves a balance owing of $899. Order for payment of retroactive child support and special and extraordinary expenses [ 48 ] In determining a monthly amount for payment of the retroactive support and expenses, I have considered the father’s means and the total of on-going support and expenses he will be paying, as well as the fact that his businesses are in the early stages, likely to require investment of time and money, and with somewhat unpredictable returns.

I have also borne in mind that the mother has borne more than her share of financial responsibility for J’s support for several years.

I conclude that a monthly payment of $150 is the best way to balance these factors. [ 49 ] I order that MJGH pay to KLS the total sum owing for retroactive child support and retroactive special and extraordinary expenses, being $2,803, at the rate of $150 a month commencing August 15, 2012, and continuing on the 15 th day of each month thereafter until the sum of $2,803 is paid in full. (If the father prefers to make this payment on the first of each month he may do so as it will then have been paid by the fifteenth.) The Honourable Judge A.E.

Rounthwaite Provincial Court of British Columbia Note : These comments do not form part of my Reasons but are offered in case they may be of assistance. I suggested that counsel consider including in the consent order for annual financial disclosure by July 15 th and adjustment on August 1 st provisions to assist the parents to make their annual adjustments with as little cause for disagreement as possible.

If they have not agreed on the wording of the order, the parents might wish to consider a formula something like the following: “For the purposes of the annual adjustment of child support and special and extraordinary expenses, the following provisions apply:

a) the mother’s Guideline Income shall be her total income from Line 150 of her previous year’s Notice of Assessment less union dues;

b) the father’s Guideline Income shall be his total income from Line 150 of his previous year’s Notice of Assessment plus $____ (a sum to reflect tax deductions with personal benefit);

c) commencing August 1 each year and continuing until and including July 1 the next year, the father’s monthly child support payment shall be the Guideline amount for his Guideline Income, determined as stated in sub-paragraph (b);

d) the father’s proportional contribution to special and extraordinary expenses shall be determined annually in July by calculating his Guideline Income for the previous year as a percentage of the parents’ combined Guideline Incomes for the previous year; and

e) adjustment of the father’s share of special and extraordinary expenses for the period from August 1 one year through July 31 the next year shall take effect on August 1 each year.” [1] D.B.S. v. S.R.G. et al, 2006 SCC 37 [2] Exhibit 1, Tab 4, spreadsheet: marathon fees of $17.70 are not an extraordinary expense [3] the Guidelines were revised as of December 31, 2011 [4] Childcare expenses calculated as $1929 for August 1 through December 31, 2011 + $1885 for January 1 through June 30, 2012 + $350 for 2 weeks day camp in July 2012.