A.L. v. R.L. Date:, 2015 BCPC 170

Citation: A.L. v. R.L. Date: 20150331 2015 BCPC 0170 File No: 15580 Registry: Abbotsford IN THE PROVINCIAL COURT OF BRITISH COLUMBIA IN THE MATTER OF THE FAMILY LAW ACT , S.B.C. 2011 c. 25 BETWEEN: A.L. APPLICANT AND: R.L. RESPONDENT ORDER OF THE HONOURABLE JUDGE G.J BROWN Appearing in person: A.L.

Appearing in person: R.L. Place of Hearing: Abbotsford , B.C. Date of Hearing: March 13, 2015 Date of Judgment: March 31, 2015 [ 1 ] THE COURT : These are my reasons for judgment in the matter of A.L. versus R.L., now known as R.E., under file number 15580. INTRODUCTION [ 2 ] A.L. and R.E. are the parents of four children, B., who is 18, A., who is 16 , C., who is 13 , and F., who is 12 . [ 3 ] They married on June 29th, 1996 and separated on August 10th, 2011. They entered into a separation agreement on June 21st, 2013. That agreement stipulates that they are both guardians and they share the parenting time equally. [ 4 ] Clause 7(

a) of the separation agreement provides that A.L. shall pay to R.E. $125 per month per child as child support, being a total of $500 per month. The parties presumed that at the time of the separation agreement, A.L. could earn in the neighbourhood of $83,000 per year and R.E. could earn about $60,000 per year. [ 5 ] The $500 per month represents the differential in child support using those incomes. A.L. had been a director for [omitted for publishing], but he was let go from that position. However, he also did counselling work, and he was hopeful he could continue to earn an income in the $80,000 range.

R.E. was then a pastor of a church, and she subsequently lost that position and is now a community services worker. [ 6 ] A.L. paid the $500 per month in child support until May of 2014, so he is now 11 months in arrears. He asserts that he has suffered a considerable downturn in income, and his income as a self-employed counsellor does not approach what he earned when he was the director of a non-profit society. It is his position that the child support arrears should be reduced to zero.

Further, he says the ongoing support should now be zero, as the parties earn similar incomes. [ 7 ] R.E. opposes any reduction of arrears and she maintains that A.L. has an ongoing obligation to pay child support. She believes A.L. is underemployed and his business expenses are unreasonable. She also points out that she now earns considerably less as a community support worker. [ 8 ] Each party has faced some unfortunate financial changes. Not only do they each now have lower incomes, but they also have had to address major financial debt. A.L. is in bankruptcy, and R.E. has entered into a consumer proposal.

The family home went into foreclosure. Notwithstanding these problems, both parents are intelligent and articulate people, looking to improve their economic positions. EVIDENCE OF A.L. [ 9 ] A.L. received a Master of Arts degree in 2000 in counselling and psychology from [omitted for publishing] in Winnipeg. He received a Masters of Business Administration in 2009, focusing on non-profit society management, from [omitted for publishing]. [ 10 ] From 2001 onwards, he worked as a counsellor at the [omitted for publishing], and from 2005 onwards, he was a counsellor and team leader with the [omitted for publishing].

In 2009, A.L. secured a position as the executive director for [omitted for publishing]. His income gradually increased such that he was earning some $74,000 in 2012. Unfortunately, in November of 2012, he was terminated without cause. He received 26 weeks of severance lasting until May 24th, 2013. [ 11 ] A.L. admitted that he was fully aware his severance was coming to an end when he signed the separation agreement in June of 2013, but he was optimistic he could earn $80,000. At the time, he was working on a community engagement project with the [omitted for publishing], but that wrapped up in July of 2013.

He continued to work as a counsellor in private practice. [ 12 ] In 2011, A.L. had $67,880 in employment income as an executive director, $900 in RSP income and net professional income of $14, 265.25. His gross professional income was $25,219.45. His Line 150 income for 2011 was $83,045.79. [ 13 ] In 2012, A.L. had $82,510 in employment income as executive director, another $900 in RSP income, and net professional income of $11,760.09, with the gross being $40,290.

His Line 150 income was $95,170.23. [ 14 ] In A.L.'s August 19th, 2014 financial statement, he attaches the business expenses and income for 2012 to 2014. I note that some expenses may be legitimate for tax deductions, but they may not be reasonable insofar as child support is concerned. This becomes more germane for 2014 onwards. He had a large motor vehicle expense in 2012. [ 15 ] In 2013, A.L. had $33,001 in employment severance, $11,281 in Employment Insurance, $2,194 in rental income, and $16,011 in net professional income, with the gross being $44,447.

In 2013, A.L. also cashed in $13,093 in RSPs and $22,527.58 in municipal pension. His Line 150 income was $98,107.92. However, I note that the RSP and pension amounts are non-recurring sums requiring adjustment. See s. 17 of the Child Support Guidelines . Child support for 2013 is not in dispute so I will not belabour the calculations, except to say that the approximate $98,000 income is inflated by at least $35,000. [ 16 ] For 2014, A.L. provided as Exhibit 1 a detailed profit and loss statement for "T.L.C.". His gross income totalled $51,749.39. I understand this included some work at O.C. and S.H.C.

His business expenses were $31,062.45. His net income was said to be

$20,686.94. In addition to his self-employment income in 2014, A.L. also received $4,945 in Employment Insurance (confirmed by a T4E), $13,506.18 as an employee with K.H. (confirmed by a T4), and $235.55 with B.T.L. As well, he received $7,700 in rental income. The total income from self-employment and employment is $47,073.67, according to the exhibit. [ 17 ] A.L. conceded to a degree that he was underemployed in July of 2014, so he returned to full-time private practice as a counsellor in August. His income from August onwards is between $5,000 and $6500 per month, except for November.

In November 2014, he earned $8,612, partly due to a community engagement project which netted him $3,500. [ 18 ] A.L. feels that going forward, he could have a gross counselling income of $60,000 per year, less expenses. He assumes his Line 150 income could be $45,000 to $50,000 per year. [ 19 ] A.L. explained the debt situation. From the date of separation in August of 2011 until July of 2013, R.E. lived in the family home. It was contemplated in the separation agreement that she would pay half the family debt, but she filed a consumer proposal on July 2, 2013, ending any ability to pay a full half of the debt.

A.L. says that he paid some $8,000 towards her portion of family debt. He began living in the family home in July of 2013 and, like R.E., he used rent to offset the mortgage payment. [ 20 ] A.L. ultimately went bankrupt on July 23rd, 2014. He still pays $1700 per month in rent to have a household suitable for four children. The family home went into foreclosure in 2014 and there will be a deficiency. A.L. did admit that if his income exceeds a certain level, his bankruptcy could be of 21 months duration, rather than nine months duration. [ 21 ] A.L. filed a very detailed employment search record as Exhibit 2.

He also testified that he averages 37 hours now, per week, in counselling work. He makes himself available for 48 hours. He points out that a Masters-level therapist earns between $49,000 to $58,000 per year, looking at general averages. Insofar as executive directorships are concerned, he alleges that those jobs are few and far between.

An executive director can earn between $45,000 to $75,000 per year, depending on the budget of a non-profit organization. [ 22 ] A.L. believes that R.E. can earn, in 2015, about $45,000, including $32,000 as a community services worker, some $7300 in piano lessons, and he also included the $7,000 education bursary. [ 23 ] In cross-examination, A.L. agreed he was fully aware his severance was coming to an end when he signed the separation agreement in June of 2013. He also said that his transportation costs are apportioned to 80 percent business and 20 percent personal.

He claims half the rent is a business expense. He further explained that he has a locked-in pension plan which he cannot draw upon until he is 65 years of age. EVIDENCE OF R.E. [ 24 ] R.E. has a Bachelor of Sacred Music degree from [omitted for publishing]. She had been a pastor of a church from April 2007 to September of 2014, with the last four years being full time. She recently earned over $60,000 per year as a pastor, but she lost that employment as church membership was dwindling. [ 25 ] R.E. has been a community support worker since January 14th, 2014.

This employment starts at about $14 per hour, progressing to $16 per hour after certain courses are taken. R.E. is also a piano teacher with nine students currently. She charges between $33 and $38 per hour. [ 26 ] In 2013, R.E. had a Line 150 income of $61,572 without including piano lessons income. She was at that time a full-time pastor. The piano income was a gross of $3,184, and a net of $2,384. [ 27 ] In 2014, R.E. earned the same, $61,572 pastor income, because although she was laid off in September of 2014, she received severance until January 14th, 2015.

She also had a gross piano lesson income of $3,994.68 and a net income of $2,854.68. [ 28 ] In addition, she received $6,966 as a grant towards her tuition for studies to get a Masters of Divinity degree in order to become an ordained minister. Her hope is to obtain that degree in the spring of 2017. She studies online and attends [omitted for publishing] weekly. [ 29 ] In 2015, R.E. expects to earn about $32,000 as a community support worker, and $7,000 net as a piano teacher.

Her financial statement projects a future income of $38,200. [ 30 ] As far as the debt situation is concerned, R.E. explained that she will be paying $18,000 of family debt with her consumer proposal.

A.L. will only be contributing some $3500 towards the family debt, assuming a nine-month bankruptcy. [ 31 ] R.E. also testified that the separation agreement is enrolled with FMEP and the arrears stand at $5,500 plus interest, plus default fees. [ 32 ] In cross-examination, R.E. indicated that a Masters degree would give her a slightly higher salary than that of a pastor, but more importantly, she would be eligible for a pension. [ 33 ] Her Exhibit 9 outlined her job-search efforts. R.E. also conceded that she did not declare rental income in 2013, but that went towards the mortgage payment.

She also agreed that she has remarried and her new spouse has employment, with a medical plan. DETERMINATION OF INCOMES [ 34 ] I must determine the Child Support Guideline income for each party for 2014, because of the arrears issue for that year. I also must estimate the 2015 income for the parties so as to address the ongoing maintenance issue. Further to these income determinations, I must decide if an imputation of income is warranted. 2014

[ 35 ] For 2014, A.L. had Employment Insurance, K.H. employment and B.T.L. employment, totalling $18,686.73. There is also rental income of $7,700, but that appears to be more than offset by $8,682 in mortgage payments. [ 36 ] The T.L.C. income for 2014 is more open to adjustment. Section 19(2) of the Child Support Guidelines set out that the reasonableness of an expense is not solely governed by whether the deduction is permitted under the Income Tax Act .

Certain of A.L.'s expenses may be legitimate tax deductions, but are nevertheless unreasonable expenses for child support purposes. [ 37 ] The office expenses of $3,446.90 are high for a home-based business, although some of the expense relates to software products. I am reducing that expense by $1500. [ 38 ] The office rent of $8,075 is high, as it represents about one-half of the actual rent, yet the counselling work does not require one-half of the household, and often the work is done elsewhere.

I am reducing the rent by $4,000. [ 39 ] The business portion of automobile expense is high at $12,111.01, considering that the personal benefit is likely greater than 20 percent. The car lease and car insurance must be paid in any event to have use of the vehicle. For child support purposes, I will reduce the automobile expense to $7,600, which represents a 50-percent write-off. This means that the business auto expense should be reduced by about $4500. [ 40 ] If I take into account these adjusted business expenses, the net consulting income for 2014 increases by some $10,000 to $30,686.94.

Using a gross income of $51,749.39, the net profit is about 60 percent of the gross, which is not unreasonable. The total 2014 income is $49,373.67, without including rental income. [ 41 ] I should add that I was just provided with Exhibit 10 this morning. That exhibit consists of two tax returns for 2014. The first return is pre-bankruptcy and includes the employment income, Employment Insurance and some of the net business income. The Line 150 income is $24,611.19. The second return is mainly business income, with a Line 150 income of $16,468.49.

The total Line 150 income for 2014 is $41,079.68. [ 42 ] I am of the view that the $49,373.67 income referred to above is more realistic for child support purposes, due to the reduction in the business expenses. [ 43 ] However, R.E. also submits that I should impute a higher income to A.L. for 2014, and for 2015, for that matter. Section 19(1) (

a) of the Child Support Guidelines does allow me to impute an income where a spouse is intentionally underemployed. Essentially, the case law suggests that a parent must earn what a parent is capable of earning. One should look at that parent's education and experience, as well as the job opportunities that are realistically available. [ 44 ] It is true that in 2012 and 2013 A.L. earned Line 150 incomes of $95,170.23 and $98,107.92 respectively; however, he had his job as executive director in 2012, and 2013 contained non-recurring sums relating to an RSP and pension.

Without the executive director work, A.L. is left with Masters-level therapy work, which is often between $49,000 to $58,000 per year. [ 45 ] I do take into account two circumstances. First, A.L. went bankrupt in 2014, and there is some disincentive for him to earn an income at a level which would prolong his discharge. Secondly, he even conceded his first seven months of 2014 were not optimal in the counselling field. [ 46 ] Taking into account all these factors, I am prepared to impute his 2014 Line 150 income at $58,000.

I will also say that I do not now have R.E.’s 2014 income tax return, but my calculations here are really based on an imputation of income in terms of A.L. [ 47 ] It is clear to me that R.E. earned $61,572 in 2014 in pastor income or severance. She also earned a net piano income of $2,854.68, so her total income in 2014 was $64,426.68. 2015 [ 48 ] For this year, A.L. continues to be self-employed as a consultant counsellor. He has looked for work in the non-profit sector as an executive director, but those jobs are few and far between.

I appreciate he has two Masters degrees, but that is not a guarantee of income. A.L. assumes he could have a Line 150 income of $45,000 to $50,000 per year going forward. This is based on my questions of him. I note that Master therapists earn as much as $58,000 per year. I also take into account that in the latter part of 2014, A.L. grossed between $5,000 and $6500 per month, excluding a very high November. This suggests a $5,750 per month average of gross earnings per month, which is $69,000 per year gross. A 60-percent profit rate means his net income on $69,000 could be some $41,400.

Again, he is somewhat constrained by the bankruptcy, but in my view, $50,000 is a reasonable imputed income for A.L. for 2015. There is no indication that he would have the Employment Insurance income at the same level as he did in 2014. His income could improve if he were to secure another executive director position. [ 49 ] For 2015, R.E. expects to earn $32,000 as a community support worker, plus $7,000 as a piano teacher, which totals $39,000. In my view, any education grant is offset by tuition. Her situation could improve if she receives her Masters degree and secures work as a pastor.

She may also be receiving incremental raises as a community support worker. [ 50 ] I now turn to the two further issues in this case. CHILD SUPPORT ARREARS IN 2014 [ 51 ] Pursuant to s. 174(1) of the Family Law Act , A.L. must satisfy me that it is would be grossly unfair not to reduce or cancel the $5,500 in arrears. I note the following: 1. A.L. immediately applied in May 2014 to vary the agreement when he realized his downturn in income was an ongoing concern;

2. He complied with the agreement until May of 2014, notwithstanding his loss of employment as an executive director in November of 2012. His severance stopped in May of 2013. He was hopeful of securing a similar position, but that has not occurred; 3. A.L. has made sincere and sustained efforts to secure employment and the best he has been able to do is to return to the self- employed counselling work; 4. In 2014, even if I used the imputed income for A.L., he earned less than R.E. His actual income is in the $49,000 range and his imputed income is $58,000.

R.E. still had pastor severance income and earned $64,426.68 in total that year. [ 52 ] Based on the above considerations, I find it would be grossly unfair not to reduce the arrears. These arrears accumulated from May of 2014 until now when A.L. no longer had his severance pay. The loss of severance pay without an adequate replacement income is a material and long-lasting change. His counselling work is not equivalent to his executive director work. [ 53 ] That all being said, A.L. is not entitled to a complete cancellation of arrears.

While the parties did earn similar incomes and a shared parenting regime, A.L. agreed to pay $500 a month when he knew he was losing employment as an executive director. He was unable to fully replace that income and a bankruptcy has intervened, but he had agreed to pay $500 per month, notwithstanding his awareness of the loss of employment. He obviously assessed that he had a greater earning potential than that of R.E. [ 54 ] Looking at all of these unique circumstances, it is my view that the arrears should be reduced from $5,500 to $1,800, which represents about a two-thirds discount.

All interest and default fees will be cancelled. ONGOING SUPPORT [ 55 ] As discussed above, there is no doubt that A.L. has suffered a material downward change in income and this continues into 2015. I have imputed his income for 2015 at $50,000. R.E. will likely earn $39,000 in 2015, and she too suffered a downturn. [ 56 ] These parties are governed by s. 9 of the Child Support Guidelines because of the shared parenting regime. The applicable table amount for A.L. is $1,194 for four children. The table amount for R.E. is $950 per month.

I see no reason not to use a setoff as contemplated in s. 9(1) of the Child Support Guidelines . The ongoing support from A.L. to R.E. for the four children shall be $244 per month. ORDERS [ 57 ] I am now to encapsulate this decision in a series of recitals and orders. First of all, A.L. is found to be a resident of B.C. and is imputed to have a gross annual income of $50,000, and R.E. is found to be a resident of B.C. and is found to have a gross annual income of $39,000. [ 58 ] I will also add into the recitals that the parties have a shared parenting arrangement under s. 9 of the Child Support Guidelines .

My orders are as follows: [ 59 ] The separation agreement filed July 5th, 2013 is varied so that A.L. will pay to R.E. the sum of $244 per month for the support of the four children commencing April 1st, 2015 and continuing on the first day of each month thereafter for so long as the four children are eligible for support under the Family Law Act or until further order. [ 60 ] The Child Support arrears owing from A.L. to R.E. as of March 31st, 2015 are reduced to $1,800, and any interest and default fees are cancelled. [ 61 ] For so long as the children are eligible to receive child support, the parties will exchange

a) copies of their respective income tax returns for the previous year, including all attachments, not later than June 15th each year, and

b) copies of any Notice of Assessment or Reassessment provided to them by Canada Revenue Agency immediately upon receipt. [ 62 ] The final order will be, taking that order into account, in the event the parties cannot agree on child support following disclosure of their income tax returns, they are at liberty to apply before Judge Brown for any application to vary this order. [ 63 ] Now, those are my reasons for judgment, but I will say to both of you I think you have both behaved reasonably in this matter, certainly compared to many of our litigants.

I am going to order a transcript of my decision so that you can get a copy of it if you wish, but the actual order will be mailed out to you, and the order will be drafted by the registry. I assume your addresses are on file. [ 64 ] I would say this, as just a matter of advice. You know what the incomes are for '014, but when the '015 tax returns come around, if you need to make an adjustment, I would hope you could work that out on your own. But if not, you can bring your application before me. You may also wish to tell FMEP now that the arrears are not $5500. [ 65 ] That is my ruling. G.J.

BROWN Provincial Court Judge