S.A.B. v. J.R.B., 2003 BCSC 490

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: S.A.B. v. J.R.B. 2003 BCSC 490 Date: 20030331 Docket: 34108 Registry: Prince George Between: S.A.B. Plaintiff And J.R.B. Defendant Before: The Honourable Mr. Justice Chamberlist Reasons for Judgment (In Chambers) Counsel for the plaintiff: D.B. McGaugheyCounsel for the defendant: D.W. LindsayDate and Place of Hearing: January 23, 2003 Prince George, B.C.

INTRODUCTION [1] In these proceedings both the plaintiff, S.A.B., and the defendant, J.R.B., have returned motions seeking, inter alia, childsupport, from each other, pursuant to the provisions of the Federal Child Support Guidelines. Ms. S.A.B.’s application was dated 10December 2002 and filed 13 January 2003, and Mr. J.R.B.’s motion was dated 20 December 2002 and filed 20 January 2003. [2] Ms.

S.A.B. filed her affidavit in response on 9 January 2003. [3] On a preliminary application made prior to the hearing of the motions, the defendant sought an order that certain provisions ofthe affidavit in response filed by Ms. S.A.B. be struck, pursuant to R. 51, as being inadmissible evidence on the application.

Theportions sought to be expunged and the relevant attachments deal with “without prejudice” negotiations and discussions between theparties. [4] The defence submits that while the material is clearly without prejudice communications, he had no choice in the matter and hadhis client refer to the without prejudice communications to meet the allegations of acquiescence and estoppel which Mr. J.R.B. alleged inhis defence of the plaintiff’s claim for retroactive support to 1 June 2001. [5] The plaintiff submits that on the authority of S.(L.) v.

P.(E.), 1999 BCCA 393 , 50 R.F.L. (4th) 302 (B.C.C.A.), he wasobliged to disclose the existence of the without prejudice discussions, refer to them specifically in the affidavit material and attach copies

of the clearly without prejudice discussions. In S.(L.) , the Court of Appeal, at p. 320, dealt with the factors governing the discretion to award retroactive maintenance. At paras. 66 and 67, the Court said: 66 A review of the case law reveals that there are a number of factors which have been regarded as significant in determining whether to order or not to order retroactive child maintenance.

Factors militating in favour of ordering retroactive maintenance include: (1) the need on the part of the child and a corresponding ability to pay on the part of the non-custodial parent; (2) some blameworthy conduct on the part of the non-custodial parent such as incomplete or misleading financial disclosure at the time of the original order; (3) necessity on the part of the custodial parent to encroach on his or her capital or incur debt to meet child rearing expenses; (4) an excuse for a delay in bringing the application where the delay is significant; and (5) notice to the non-custodial parent of an intention to pursue maintenance followed by negotiations to that end. 67 Factors which have militated against ordering retroactive maintenance include: (1) the order would cause an unreasonable or unfair burden to the non-custodial parent, especially to the extent that such a burden would interfere with ongoing support obligations; (2) the only purpose of the award would be to redistribute capital or award spousal support in the guise of child support, and (3) a significant, unexplained delay in bringing the application. [ 6 ] With respect to evidence of ongoing negotiations the Court, at para. 75, concluded: 75 . . . the court is entitled to award retroactive maintenance which predates the bringing of the application where there is evidence that the custodial parent manifested an intention to engage in sincere negotiations towards settlement or reconciliation.

However, as the court in MacNeal, supra, made clear, this claim will not be allowed in the absence of evidence from the applicant as to the existence of these efforts at negotiated settlements. [ 7 ] Before dealing with the application to expunge, under R. 51(10), I will give a brief chronology of this litigation. BACKGROUND [ 8 ] The parties married on 27 December 1985 and separated on 1 July 1996. The petition for divorce was filed 6 December 1996.

At the time there were two children of the marriage as defined by the Divorce Act - M.L.B., born […] 1983; and, A.H.J.B., born […] 1988. [ 9 ] On 10 November 2000 the parties entered into a consent order which provided, inter alia , as follows: 1. That the Plaintiff and the Defendant shall have joint custody and joint guardianship of the two children of the marriage, M.L.B. (“M.L.B.”) born […], 1983 and A.H.J.B. (“A.H.J.B.”) born […], 1988, with the primary residence of M.L.B. to be with the Defendant and the primary residence of A.H.J.B. to be with the Plaintiff; . . . 4.

That the Defendant shall pay to the Plaintiff child support for A.H.J.B. of $1,000.00 per month commencing November 1, 2000 and continuing for a period of six months, and the Plaintiff shall not apply for a variation with respect to the amount of child support until after the expiration of the six month period; 5.

That there shall be no child support payable by the Plaintiff to the Defendant for M.L.B. for a period of six months from November 1, 2000, with liberty to the Defendant to apply for child support for M.L.B. at the expiration of the six month period; . . . [ 10 ] The interim consent order also provided that the applications of both parties for retroactive child support relative to the children be dismissed. [ 11 ] Against this background, I therefore turn to the application to expunge the references in the affidavit and the attachments thereto.

[12] In Middelkamp v.

Fraser Valley Real Estate Board, (BC CA), 71 B.C.L.R. (2d) 276, 10 C.P.C. (3d) 109, 96 D.L.R. (4th) 227 (B.C.C.A.), Chief Justice McEachern had this to say at para. 17: Considering the enormous scope of production which is required by our almost slavish adherence to the Peruvian Guano principle, thequestionable relevance and value of documents prepared for the settlement of disputes, and the public interest, I find myself in agreementwith the House of Lords that the public interest in the settlement of disputes generally requires “without prejudice” documents orcommunications created for, or communicated in the course of, settlement negotiations to be privileged.

I would classify this as a “‘blanket’, prima facie, common law, or ‘class’” privilege because it arises from settlement negotiations and protects the class ofcommunications exchanged in the course of that worthwhile endeavour. [13] The assertions in the affidavit material and the attachments sought to be expunged are clearly without prejudice references. Thefact of settlement discussions regarding child support having taken place could have been referred to in the affidavit material in a generalstatement. Recourse to the actual documents and the actual contents of the discussions is really quite unforgivable.

More particularly, itwas, in my view, not necessary on the history of this case to have to establish any of the criteria described by the Court of Appeal in S.(L.) v. P.(E.) because the facts in this case are so totally different. I have already set out the applicable provisions of the consent order ofNovember 2000. [14] A divorce order was subsequently granted by Meiklem J. on 7 May 2001.

That order again made reference to the consent order of10 November 2000 when it provided: This Order is made on a without prejudice basis with respect to the application of any guideline amount which the Court may determineon an application by either the Plaintiff or the Defendant for a variation of child support contained in the Consent Order of November 10,2001 [sic]; [15] Thus, the facts are quite distinguishable from the facts in S.(L.) v. P.(E.).

In that case, the applicant sought retroactivity to 1984 inan action commenced in 1995. [16] In the case at bar, the action seeking child support for A.H.J.B. was filed in 1996 and a consent order was entered into inNovember 2000 which clearly contemplated the possibility of variation orders being sought by either party.

There simply can be noconsideration of acquiescence, laches, or estoppel that would, in my view, in any way interfere with a retroactive child support orderbeing appropriate and proper in the circumstances of this case. [17] Therefore, with respect to the application to expunge, I order that Exhibit “C” and Exhibit “D” of the affidavit of S.A.B., filedJanuary 9, 2003, be removed from the affidavit and that the following portions of paras. 7 and 8 be expunged by the plaintiff filing acopy of page 3 to be inserted in the aforesaid affidavit with the following portions being removed therefrom - 1.

Paragraph 7 - The last sentence commencing with “The amount of . . .”; 2. Paragraph 8 - The last sentence commencing with “In that letter . . .”. 3.

The original page 3 of the affidavit, together with the original Exhibits “C” and “D” are to be placed in a sealed envelope in the filewith a notation “Not to be opened or removed from this file without the express written instructions of Chamberlist J.” [18] I now turn to the applications of the parties. [19] The presumptive rule set out in s. 3 of the Child Support Guidelines is that unless otherwise provided under the Guidelines theamount of child support ordered for children under the age of majority is the amount set out in the applicable table.

Section 4 of theChild Support Guidelines provides that where the payor spouse has income over $150,000, the amount payable is as determined under s.3 unless the court considers that amount to be inappropriate.

Section 15 of the Child Support Guidelines states that a spouse’s annualincome is determined in accordance with s. 16 to s. 20 of the Guidelines. [20]

Section 16 of the Guidelines provides that the payor spouse’s annual income is determined using the sources of income set outunder the heading “Total Income” in the T1 general form issued by Canada Customs and Revenue Agency. There is no disagreement onthe evidence that the income tax returns filed by the defendant father discloses line 150 income as follows - 1999 $ 569,571.002000 877,741.002001 586,894.00 [21] The defendant’s Guideline income, based upon an average of the defendant’s total income for the years 1999, 2000 and 2001, is$678,068.00. The amount payable by the defendant, based upon Guideline income of this average amount, is $4,458.00 per month

($678,068 - $150,000 x 0.64% + $1,079).

Based upon the defendant’s most recent income tax return, the amount payable by the defendant for child support, based upon Guideline income of $586,894.00 is $3,875.00 per month ($586,894 - $150,000 x 0.64% + $1,079). [ 22 ] The defendant’s child support fact sheet filed 26 April 2001 in support of the May 2001 divorce order, the defendant swore that his annual Guideline income was $114,000.00. [ 23 ] The defendant submits that he should only have to pay child support to the plaintiff for A.H.J.B. in accordance with his income as found by an application of s. 18 of the Guidelines .

He is opposed to retroactive child support. [ 24 ] The defendant submits that his income for the purpose of the Federal Child Support Guidelines should not be based on the line 150 box of the income tax return based on the application of s. 18 of the Guidelines . [ 25 ] With respect to the factual basis for the application of s. 18 of the Guidelines , he relies on the decision of Master Baker in S.A.B. v. J.R.B. 2001 BCSC 1724 , 23 R.F.L. (5 th ) 19. In that decision, Master Baker concluded that the proper approach to take when attributing income to Mr. H.B. (the defendant’s brother) was to apply s. 18(1)(

b) on the basis of valuing Mr. J.R.B.’s personal services to the companies rather than a straightforward application of the line 150 amount. The reliance on that case by the defendant in this case becomes clearer when one analyzes the facts as set out in para. 13, and following, of Mr. J.R.B.’s affidavit no. 11 filed 23 December 2002, where he states: 13. That the financial arrangements and structure between myself, A.[…] Ltd and C.[…] Ltd. remains as set out in a previous Affidavit.

In particular, I am well aware that the income reported on my personal income tax returns from at least 1994 is far in excess of the actual income I receive. The reason for this is to minimize taxes as much as possible, as paid by both myself and the companies, as well as my brother, H.B.. The structure that is in place, and has been in place since prior to the date of separation, is that my brother and I both receive a bonus equivalent to any corporate income over and above $200,000.00.

The first $200,000.00 in the company is eligible for the small business tax rate, which is significantly lower than the tax applied either to myself personally, or to sums taxed within the company in excess of $200,000.00. These amounts are paid both by way of a bonus and an employee profit sharing scheme. It is my understanding that the monies paid out to me in excess of $200,000.00, as well as to my brother, H.B., are taxed at a lower rate then [sic] they would be if they remain within the company. Therefore, the income as reported on my personal income tax returns represents these sums.

However, the taxes payable on the income reported in my personal income tax return are paid by C.[…] Ltd and A.[…] Ltd through my shareholder’s loan accounts. All amounts, either bonused out to me or payable to me by way of an employee profit sharing scheme, are immediately reinvested in the companies. The companies could not continue to operate if I actually received the monies set out in my personal income tax returns. 14. That attached hereto and marked as Exhibit “F” to this my Affidavit is a true copy of my shareholder loan account with C.[…] Ltd. and A.[…] Ltd. from 1995 through to September, 2002.

For the year September, 2001, to September, 2002, the draws to myself total $81,471.00. 15. That my regular wage from A.[…] Ltd. continues at $4,000.00 per month, gross of deductions. 16. That neither I nor my brother, H.B., receive any wage from D.[…] Ltd, and have not for [sic] since approximately February, 2001. 17. That I regularly take draws against my shareholders loan account with C.[…] Ltd in the amount of $5,000.00 per month, payable in two $2,500.00 payments. 18. That I do not receive any wage from C.[…] Ltd. aside from the draws on my shareholder’s loan account. 19.

That I do not take, and have not ever taken, any draws from a shareholder’s loan account from A.[…] Ltd, aside from personal income taxes as set out in Exhibit “F”. This company is in a poor financial position and is currently unable to repay any portion of my shareholders loan account other than for income taxes. 20. That I realized that the draws to my shareholder’s loan account are done on a tax free basis. For the period October 1, 2002, through September 30, 2002, the draws payable to me from my shareholder’s loan account with C.[…] Ltd. total $81,471.00.

If this income were taxable, at the top rate of 43%, it would equate to pretax income of $142,932.00. 21. That I have a rental home at 1401 R.[…] Road. This home is rented out at $750.00 per month. There is no mortgage registered against the home, but the property taxes are approximately $1,000.00 per year, and, along with the maintenance and repairs that must be done on an ongoing basis, I anticipate that my monthly expenditure on this home is not less than $375.00 per month, leave [sic] me with

an income of approximately $375.00 per month. 22. Therefore, my personal income for the 12 months ending September 30, 2002, was as follows: (

a) A.[…] Ltd. $ 48,000.00 (

b) Shareholder loan draws $142,932.00 (

c) Rental Home $ 4,500.00 Total: $195,432.00 [ 26 ] Mr.

J.R.B. submits that allowing for a tax gross-up with the highest marginal rate of 43% and his rental home income of $375.00 per month, net, or $4,500.00 per month gross, would yield the following “real” incomes available to him - 1999 $242,850.00 2000 171,250.00 2001 237,300.00 2002 195,500.00 [ 27 ] A three year average of those amounts would yield an average income of $201,350.00, while a four year average would yield an average income of $211,725.00. [ 28 ] The defendant submits that he is content to live with an average of his income either over three or four years, or his income estimated for the year 2002 (the year end of the company is different).

He further submits that there should be no retroactivity to any order granted by me. [ 29 ] The plaintiff, in response, submits that s. 18 has never been used to reduce income for Guideline amounts but has only been used to add income to meet the requirements of the Guidelines to ensure that all monies available to the payor are taken into account in fixing an appropriate amount of child support.

ANALYSIS [ 30 ] Master Baker’s decision appears to be the only decision in Canada which deals with how s. 18 of the Guidelines is to be applied relative to income determination. [ 31 ] Given the close relationship between the B. brothers financial involvement, I start with the

interpretation given by Master Baker to the relationship of these two business people. [ 32 ] At para. 17 Master Baker stated: Mr. J.R.B. and his brother have agreed to use their corporate and personal tax situations, together, to minimize over-all tax. They do this by paying much of the companies’ profits to them as shareholders as personal, taxable, income so that the companies themselves can continue to reap the small business tax rates. The “excess” funds are then immediately re-invested into the companies, which pay the personal tax liabilities of the two shareholders.

Generally speaking, the surplus of these re-invested amounts, after paying the shareholders’ personal income tax, is credited to their respective shareholder loan accounts. . . . [ 33 ] For ease of reference, I will set out the relevant legislation: 2. Legislation Federal Child Support Guidelines Determination of annual income 15.

(1) Subject to subsection (2), a spouse's annual income is determined by the court in accordance with sections 16 to 20.

Agreement

(2) Where both spouses agree in writing on the annual income of a spouse, the court may consider that amount to be the spouse's income for the purposes of these Guidelines if the court thinks that the amount is reasonable having regard to the income information provided under

section 21. Calculation of annual income 16. Subject to sections 17 to 20, a spouse's annual income is determined using the sources of income set out under the heading "Total income" in the T1 General form issued by the Canada Customs and Revenue Agency and is adjusted in accordance with

Schedule III. SOR/2000-337, s. 3 Pattern of income 17.

(1) If the court is of the opinion that the determination of a spouse's annual income under

section 16 would not be the fairest determination of that income, the court may have regard to the spouse's income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years. SOR/2000-337, s. 4 Non-recurring losses

(2) Where a spouse has incurred a non-recurring capital or business investment loss, the court may, if it is of the opinion that the determination of the spouse's annual income under

section 16 would not provide the fairest determination of the annual income, choose not to apply sections 6 and 7 of

Schedule III, and adjust the amount of the loss, including related expenses and carrying charges and interest expenses, to arrive at such amount as the court considers appropriate. 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 (

b) an amount commensurate with the services that the spouse provides to the corporation, provided that the amount does not exceed the corporation's pre-tax income. Adjustment to corporation's pre-tax income

(2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm's length must be added to the pre-tax income, unless the spouse establishes that the payments were reasonable in the circumstances. [ 34 ] As can be seen, nothing contained within these provisions of the Guidelines indicates that s. 18 cannot be used to reduce the “line

150” amount. It is possible to read the phrase “does not fairly reflect all the money available to the spouse” in s. 18(1) to mean that that

section will only apply when more income is available to the payor spouse than was reported in line 150. However, this

interpretation probably lends too much significance to the wording, especially since s. 18(1) imports s. 17 into it. [ 35 ]

Section 17 defines broad parameters for varying T1 amounts when it “would not be the fairest determination” of income. I conclude from this

interpretation that the purpose of s. 18 is to assist courts in making the fairest determination possible and as a result the narrow reading and the narrow

interpretation that it can only be used to increase the line 150 amount would unfairly restrict this application. [ 36 ] In Francis v. Baker , [1993] 3 S.C.R. 250 , the Supreme Court of Canada considered the proper

interpretation of s. 4 of the Guidelines . That

section empowers the court to set an amount for child support that it deems “appropriate” when the payor spouse’s income is in excess of $150,000.00 and the court considers the Guideline table amount to be “inappropriate”. Bastarache J. held that s. 4 could be used to vary the support by either increasing or reducing the table amount. He explained, at para. 40, that the

section must be interpreted in light of the stated objectives of the Guidelines : A proper construction of s. 4 requires that the objectives of predictability, consistency and efficiency on the one hand, be balanced with those of fairness, flexibility and recognition of the actual "condition, means, needs and other circumstances of the children" on the other. Furthermore, this balancing must take into account the ordinary meaning of the word "inappropriate", as well as its use elsewhere in the statute. In my opinion, the plain language of s. 4 is consistent with such an

interpretation. Accordingly, the word "inappropriate" in this

section must be broadly defined to mean "unsuitable" rather than merely "inadequate". Courts thus have the discretion to both increase and reduce the amount of child support prescribed by the strict application of the Guidelines in cases where the paying parent has an annual income exceeding $150,000. [ 37 ] It is noteworthy that Francis deals with a provision of the Guidelines which utilizes the word “inappropriate”, and as such, these comments are of limited assistance. It is apparent, however, from Francis that an

interpretation of s. 18 of the Guidelines should give effect to the objectives of flexibility and fairness, although s. 18 makes no reference or mention of “appropriateness”. [ 38 ] A question arises therefore; whether s. 18 is open to such a broad

interpretation as was found by the Supreme Court of Canada in Francis , supra , to apply to s. 4. [ 39 ] In Francis , the court was dealing with varying the Guideline table amount under s. 4 and not the line 150 income amount. [ 40 ] A review of the provisions of the Guidelines , however, demonstrates that they are generally designed to allow courts to arrive at an amount of child support that would be appropriate in all the circumstances. In Francis , the Supreme Court of Canada obviously favoured a broad

interpretation of the legislation when it considered the application of s. 4. This objective perception of the Guidelines was recently commented on by Wedge J. in Bucholtz v. Smith , 2001 BCSC 1176 , where at para. 161 she stated: The Guidelines are designed to establish a fair standard of support for children regardless of a spouse’s intent: . . . [ 41 ] It would follow therefore that if the purpose of the Guidelines is ultimately to arrive at an income that is fair and accurate in all the circumstances, a narrow

interpretation restricting the application of s. 18 only in limited circumstances where more income can be imputed to the payor spouse than appears on line 150 would be inconsistent with the legislative scheme. “Fair” must mean that the amount available for child support is fair as between the payor parent and the recipient child.

If the amount of income declared in the tax return at line 150 truly does not reflect the amount of income available to the payor spouse for the payment of child support, the court should be able to consider how much income is actually available so that it might order a reward that is both fair and realistic. [ 42 ] I therefore find that s. 18 could apply to reduce Mr. J.R.B.’s line 150 income as did Master Baker in the brother’s litigation. The question then turns to whether or not it is both fair and realistic to make that reduction. IMPUTING TO MR. J.R.B. THE INCOME AVAILABLE FOR CHILD SUPPORT 1.

The Separate Corporate Identity [ 43 ] Courts generally are reluctant to question the legitimate business decisions of a corporation. Because s. 18 of the Guidelines creates an exception to the rule that a company is a separate legal entity from the individuals who own and direct it, there must be a compelling reason to “lift the corporate veil” and scrutinize the inner workings of the spouse’s business. [ 44 ] In Volken v. Volken , 2001 BCSC 970 , at para. 25 , Macaulay J. commented: . . . It is apparent from those reasons [ L.S. v.

E.P.] [1] that the court was reluctant to invoke s. 18 to interfere with reasonable operational decisions by a business respecting the investment and re-investment of capital as opposed to its distribution to principals. [ 45 ] At para. 31, Macaulay J. went on to say that an analysis under s. 18:

. . . should not lead to overturning reasonable and prudent business decisions, but will ensure that the court is able to conduct a fairaccounting of the money available for the payment of child support without being bound by how the payor chooses to characterize theremuneration from the company. [46] In Kowalewich v. Kowalewich, 2001 BCCA 450, a similar conclusion was reached when the court said, at para. 44: A court’s effort to ensure fairness does not require a court to second-guess business decisions . . .

What it does require is that a spouse’sallocation of pre-tax corporate income between business and family purposes be assessed for fairness by an impartial tribunal whenparents cannot reach agreement on priorities as they would in an intact family and may upon separation under s. 15(2). [47] In the case at bar we have two brothers who have agreed, as directors of a legal entity, that it is in the best interests of thecompanies they control to maintain the corporations’ small business income criteria.

It seems to me that this is a corporate decision to which the court should be loathe to interfere with given that the decision is made primarily in order toobtain a tax benefit for the corporation. The legitimate needs of the businesses should not easily be interfered with. It is important tonote that, at para. 13 of his affidavit previously set out, Mr.

J.R.B. said: The companies could not continue to operate if I actually received the monies set out in my personal income tax returns. [48] It is to be noted that the Guidelines allow courts to consider the company’s income for the purposes of s. 18 because thatconsideration will often be in the interests of the children to do so. As Martinson J. commented in Baum v. Baum (1999), (BC SC), 182 D.L.R. (4th) 715 at para. 128: Valid corporate objectives may differ from valid child support objectives.

The purpose of s. 18 is to allow the court to “lift the corporateveil” to ensure that the money received as income by the paying parent fairly reflects all of the money available for the payment of childsupport. This is particularly important in the case of a sole shareholder as that shareholder has the ability to control the income of thecorporation. 2. Legitimate Business Needs and Income Available for Child Support [49] What Mr.

J.R.B. does not say in his affidavit material is just how much money is required to be re-invested to allow the companiesto continue to operate so that their legitimate capital requirements could be considered. In Kowalewich, the Court of Appeal outlined thegeneral approach the court should take to imputing income under s. 18.

Huddart J.A., speaking to the importance of promoting theviability of the payor spouse’s business, said, at para. 58: It seems to me regard should also be had to the nature of the company’s business and any evidence of legitimate calls on its corporateincome for the purposes of that business. Justice Drake cautioned about not killing the goose who lays the golden eggs. Monies neededto maintain the value of the business as a viable going concern will not be available for support purposes. In my view they should not beincluded in determining annual income. [Emphasis added] [50] In Manchur v.

Manchur, 2001 BCSC 1607, Quijano J., following Kowalewich, determined that the proper way to proceed todetermine the husband’s income for the purposes of the Guidelines was first “to have regard to the pre-tax corporate income and then toconsider the legitimate business needs of the company”.

[51] I am of the view that these cases reveal an emerging presumption that the corporation’s pre-tax income will be assumed to beavailable to the shareholder payor for the payment of child support unless compelling evidence is led by the payor spouse to support theconclusion that re-investment is necessary to sustain the company as a viable enterprise. Cases from outside of this jurisdiction also tendto be leaning in that direction. [52] In Kendry v. Cathcart, (ON SC), [2001] O.J. No. 277 (Ont.

S.C.J.), McLaren J. canvassed the case law on s.18 nationwide and concluded that “it seems that pre-tax corporate income is likely to be attributed to the payor, if it can be taken withoutseriously undermining the finances of the corporation and if it is available to the payor or could be made available”. [53] Similarly, in Goldberg v. Goldberg, (MB KB), [1998] M.J. No. 536 (Man.

Q.B.), Allen J., at para. 32 of thatdecision, indicated that payment of child support is generally more important than re-investing in the business, unless strong evidence isled with respect to the company’s need to retain income: Here however the court has not been provided with any realistic evidence of legitimate economic needs of the corporation, save for anincreased salary expense and a vague and almost completely unsupported allegation of a business in decline.

Surely, to label businessconcerns a greater priority than the support of one’s children, there must be more evidence than this to convince a court that a re-investment in the business is more important than a distribution of capital to the principal of the business for the purpose of calculatingchild support. [54] As indicated, all that I have before me on this application is the simple statement by Mr. J.R.B. that the companies could notcontinue to operate if he actually received the monies set out in his personal income tax returns.

Those monies are substantial and, aspreviously indicated, the real question as to what monies are required for the continued operation of the companies has not beensatisfactorily answered. [55] While Mr. J.R.B.’s tax planning should be encouraged because it increases the overall wealth of the companies, benefiting bothMr.

J.R.B. and his children, he cannot utilize this tax plan to prevent a fair and realistic income being attributed to him especially if thelower income he seeks to have imputed to him does not actually reflect the increase in his personal wealth resulting from his companies’preferred tax treatment. [56] I am satisfied with the concession made by Mr. J.R.B. with respect to the tax gross-up of the monies received by him from thecorporations as an interim measure.

However, there is not sufficient evidence before me to make a finding that the other monies repaidback to the companies should be treated as being unavailable for child support. [57] In Volken, supra, Macaulay J. took into account the husband’s shareholder loan account in assessing the overall amount that wasavailable for child support under the Guidelines. In that case, the court found that the principal reason for the increase in theshareholder’s loan account was so that the husband could tax plan and fund personal and family expenses.

On this finding, Macaulay J.held that this was “a powerful indicator that these monies were fairly available for payment of child support”. The analysis in Volkenwould dictate that monies re-invested by Mr. J.R.B. in his companies may be money that is available for child support within themeaning of s. 18, depending on Mr. J.R.B.’s use of those funds, if there is not compelling evidence provided by Mr.

J.R.B. with respectto the companies’ needs to retain the income he re-invests. [58] So, applying Kowalewich to the facts of this case, I have one question that remains to be dealt with and this is whether the moneyMr. J.R.B. re-invests annually is needed to maintain the value of the businesses as a viable going concern. It may take some time forthat evidence to be put before me or at a trial of the issue. [59] In the meantime, I see no problem with making an interim order with respect to Mr. J.R.B.’s obligations to pay Guideline amountsfor the support of his son A.H.J.B..

The amount may be unadjusted after further evidence is made available as to the necessity of themonies re-invested by Mr. J.R.B. on an annual basis. In that case, there would be no change to the interim order. However, if evidenceis developed that establishes that not all the money need be re-invested to have the companies continue to be viable, then an adjustmentwill be made at that time. [60] On this basis I am going to make an interim order, based on the four year average of Mr. J.R.B.’s income, which I found to be$211,725.00.

Applying the Guidelines to that amount for one child in British Columbia results in a monthly Guideline payment of$1,474.00. For the reasons given earlier in this decision relating to the issue to expunge, that amount will be retroactive to June 1, 2001 and will continue on each and every month commencing the 1st day of March 2003 and continuing thereafter monthly pending furthercourt order. The arrears that have accumulated to date shall be paid within thirty days of the date of this order. [61] That leaves only the issue of the child support sought by Mr. J.R.B. for M.L.B.. [62] M.L.B. is presently aged 19.

She will be 20 years of age on […] 2003. By the terms of the consent order of 10 November 2000,the plaintiff was under no obligation to pay child support for M.L.B. until, possibly, 1 May 2001. At that time M.L.B. would have beenaged 17 years, 7 months. [63] M.L.B.’s circumstances are that she graduated from grade 12 in or about June 2001. On or about graduation she relocated toKelowna where she resided with her boyfriend in rental accommodations and was gainfully employed. In October 2001, M.L.B. and herboyfriend moved back to Prince George and resided with Mr. J.R.B. in his residence.

Thereafter M.L.B. and her boyfriend lived andworked at P.[…], north of Prince George, for approximately four days out of every week, spending the remaining three days at Mr.J.R.B.’s residence. M.L.B. was not making a lot of money at this time, but Mr. J.R.B. would provide her with money on a periodicbasis.

[ 64 ] Following the winter ski season, M.L.B. and her boyfriend moved, in March or April, to Edmonton. In December of 2002, M.L.B. moved back to Prince George and has obtained employment at P.[…] where, at the date of swearing affidavit no. 11, she had expectations of earning some $1,100.00 per month gross.

M.L.B., at just over 19 years of age, has “mentioned the possibility of returning to school to upgrade her education”. [ 65 ] I find that M.L.B., at the present time, is not a child of the marriage as defined by the Divorce Act . [ 66 ] Given that at the date of application for child support M.L.B. was over the age of majority, it is incumbent on Mr. J.R.B. to establish that she, by reason of illness, disability or other cause, is unable to withdraw from his charge or obtain the necessaries of life. [ 67 ] Moral obligation does not equate with legal obligation.

M.L.B. has been on her own, with her boyfriend, residing from time-to- time at places in and out of the Province of British Columbia. At the time of Mr. J.R.B.’s application, she was employed and seeking other employment. Her circumstances may change in the future, but for the present time I cannot say that she is a child of the marriage. The application for child support from Ms. S.A.B. is therefore dismissed. [ 68 ] I am going to reserve my decision with respect to the issue of costs.

The order I have put in place for child support for A.H.J.B. is less than what the plaintiff sought but she has succeeded on the retroactivity issue. The amount I have awarded is an amount conceded at the hearing by the defendant but the defendant has not succeeded on his retroactivity argument. The issue of costs should be determined after I have heard further evidence on the necessity of re-investing monies in the companies to the extent done by Mr. J.R.B.. “E.G. Chamberlist, J.” The Honourable Mr. Justice E.G. Chamberlist