M.S. v. N.M., 2015 BCSC 1120

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: M.S. v. N.M., 2015 BCSC 1120 Date: 20150629 Docket: E142768 Registry: Vancouver Between: M.S. Claimant And N.M. Respondent Before: Master Baker (In Chambers) Reasons for Judgment Counsel for Claimant: M. Galambos Counsel for Respondent: L.T. Murphy Place and Date of Hearing: Vancouver, B.C. June 9, 2015 Place and Date of Judgment: Vancouver B.C. June 29, 2015 ISSUES [ 1 ] These are family law proceedings in which financial matters are in dispute. The respondent’s (“M”) application seeks sale of the family home and child and spousal support.

M also sought: - a fine for failure by the claimant (“S”) to make financial disclosure as earlier ordered, - production of specific documents, - access to the family home to retrieve personal items and possessions, - possession of the parties’ child’s passport to permit travel on specific terms, and - costs. [ 2 ] Certain matters were resolved by consent at the hearing, and, Ms. Murphy having received, she thinks, most of the documents requested, I adjourned those aspects respecting the fine for non-disclosure and the production request.

I also ordered access to the home on specific terms, leaving the issues of support and the sale of the home for decision. This is that decision. It should also be noted that the matter is set for seven days’ trial commencing February 29, 2016. BACKGROUND [ 3 ] The parties began cohabiting in July 2009, married July 3, 2010, and separated in mid-September 2014. They have one child together, I, born November 29, 2011; she is therefore 3 l/2 years old. While her parenting was not an issue in this application, I enquired about the parenting regime and was told simply that she is in M’s care more than in S’s.

Both of the parties are 35 years old and, apparently, in good health. [ 4 ] When the parties separated, S remained in the family home, located in North Vancouver. M moved with I to her parents’ residence, also in North Vancouver. No spousal support has been paid and S began paying child support of $445 per month, by consent,

after the parties’ Judicial Case Conference on February 4, although he had been paying some of I’s expenses directly before that. [ 5 ] Both parties work in Burnaby; S on contract as an information technology consultant and M as a teacher. One of the most difficult aspects of this application is the respective incomes to be imputed to both parties. I will deal first with that, and secondly with the issues pertaining to the home.

INCOMES AND SUPPORT [ 6 ] S: While he considers himself an independent contractor and has filed income tax returns to that effect, I wonder if S’s circumstances would pass greater scrutiny by the Canada Revenue Agency (“ CRA ”). The CRA is relatively vigilant on the question as independent contractors have greater control over their tax reporting and are entitled, for example, to many deductions that employees cannot claim. In fact, that is the very gist of Ms. Murphy’s argument, at least in large measure: that S has used his status as independent contractor to falsely lower his income.

M’s evidence is simply that during their cohabitation S went to work every day like any other apparent employee [1] . There is little dispute as to gross income for S; the issue is what deductions might reasonably be allowed against that income. [ 7 ] M’s income is also problematic, but for a different reason. She is a teacher with the Burnaby School Board but, as with many other teachers, does not have permanent or full-time status. She is dependent on year-to-year contracts and sometimes (as with this current school year in fact) variations within any particular year’s contract.

As with most teachers, she will apparently have no income during the summer and it is hard to predict her employment status for the next school year. S clearly feels that M is underemployed and that there should be imputed to her more earned income than she has reported to date. [ 8 ] In her Form 8 financial statement, M reported 2014 income for child support purposes of $5,893 and $6,067 for spousal support purposes. Her teaching income for 2014 was further affected by the teacher’s strike.

I accept that those sums closely approximate her actual income for 2014 and that she did not have any other income save, perhaps, for the usual child tax credit. That financial statement was filed January 28, however, and she agrees that, at least for the first half of 2015, her circumstances did improve. In her affidavit no. 4 filed May 7 at para. 14 she explained her current employment situation: I continue to be a teacher on call for the Burnaby School District. I was doing .29 of FTE (full time equivalent) per day which was one block per day of 80 minutes.

However, I was recently upped to 3 blocks of 80 minutes per day at (deleted) School. This is .86 FTE. Both the old and the new contract that has replaced it are temporary contracts. The .86 contract expires at the end of June 2015. Currently I am teaching extra classes that have been put on due to demand; previously I have covered a stress leave contract. [ 9 ] What is lacking is any further information (or evidence, for that matter) as to what that exactly entails.

I have no current payslips for M (at least none, in approximately 3-4 inches of materials, that I was referred to), nor any confirmation of the particulars of the new .86 contract, i.e. what that means in monetary terms. Nor can I derive an hourly rate from the confirmation provided by M’s three T-4 slips for 2014, as I do not know the number of hours worked. The simple fact that she was issued three T-4 slips for the same year, however, implies considerable variability to her employment situation. [ 10 ] There is no evidence whatever that M is shirking or avoiding work as S seems to think.

Given, however, that she has very recently gone from .29 to .86 and given the vagaries of her employment situation, I conclude that it is reasonable to expect that, over the next teaching year, she will secure .50 employment. What that means in terms of income, however, is also problematic because I was given no evidence of M’s grade level or pay scale. [ 11 ] To avoid further applications by parties with, clearly, limited resources, I have searched the Burnaby School District’s online salary grid.

At the very lowest paygrade (Step 0, Category 4) the annual salary is $44,204; for a Category 6 teacher it is $52,141. Assuming M has a higher Step level, I consulted the Step 2 level: for Category 4 the annual salary is $48,480 and for Category 6, $58,198. Averaging all of those Steps and Categories indicates an annual salary of $50,755. With a contract for .50 FTE the individual could expect to earn $25,377; I round that to $25,400 and impute that as a reasonable income for M. [ 12 ] S’s income, as I have said, is also problematic.

He himself has reported his income in at least three significantly different sums. In his letter to Ms. Murphy of December 5, 2014, Mr. Galambous stated: My client acknowledges his obligation to pay child support and, based on his income of approximately $100,000.00 per year, he shall commence paying child support in the amount of $921.00 monthly now.

That letter was not indicated to be without prejudice and, notwithstanding my comments during the hearing regarding a negotiation context, its entry into evidence was not disputed. [ 13 ] In his affidavit no. 3, filed May 28, S reports: [2] …and the Respondent is correct in her belief that I receive gross earnings of approximately $4200 biweekly. This amount however, is inclusive of taxes and CPP payments, and further includes reimbursements for GST, gas, and other business expenses that are regularly incurred during the course of my duties. Biweekly payments of $4,200 would total $109,200 per year.

At paragraph 70 of that affidavit he references his 2014 tax assessment (attached to his amended financial statement filed May 8) as indicating a line 150 income of $56,784.34. Thus the three levels (gross and net, of course) of income. [ 14 ] There is yet another perspective on S’s income. For starters, in her affidavit no. 5, para. 21, M points out that bank records indicate occasional bi-weekly payments exceeding $4,200, some almost $5,000 which include, M says, expense reimbursements that

must be factored into S’s income. But more importantly she points out that during their marriage S split his income with M.; indeed, her 2013 tax assessment confirms this, and reports line 135 net business income for her of $30,315 all, she says, derived from S’s income. She reported a similar business income for 2012. No deductions seem to have been applied to M’s portion of S’s income. In 2013, S reported gross business income of $112,130 and, after deductions for PST/GST/HST and subcontract fees, a gross profit of $97,000 and attributed M’s share as .40 [3] .

He claimed various deductions (meals, vehicle, etc.) totalling $7,571 and then $5,455 for business use of the residence (of total house expenses of $27,277). His line 150 income for that year was $48,290. [ 15 ] Ms. Murphy argues that, at the very least, to that reported line 150 income of $48,290 must be added M’s portion (with no deductions claimed) of S’s income for 2013 of $30,135 indicating a minimal imputed income for S of $78,425. [ 16 ] I find S’s 2014 T1 return to be less helpful. It is anomalous in several ways. First, it claims a line 150 income of $56,784, an increase of roughly $8,000 over 2013.

This derives from (line 162) a gross business income of $103,424. Despite the parties’ separation, S attributed the same .40 income to M., despite her receiving none of that. He reports “his” portion (“Part 1 – Business Income”) as $72,720 after deductions for PST/GST/HST and against that claims a subcontract cost of $5,800 and expenses for meals, vehicle, capital cost allowance, computer, and internet of $6,467.

He further reduced his income by $3,642 for business use of his home. [ 17 ] For gross business income, then, we have three amounts: - $103,424 as apparently reported in 2014 - $109,200 as calculated from his bi-weekly payments (para. 14, above) - $112,130 as reported in 2013 And, of course, we have his acknowledgement, through counsel, of an income of approximately $100,000 (para. 13, above). Given these varying amounts but most compellingly given

a) the sum of the parties’ business income while together (para. 15, above) and given the doubts respecting some, at least, of his business deductions (e.g. para. 6, above);

b) the possibility of an overly optimistic admission of income (i.e. the $100,000 reference); and

c) some expenses and deductions are proper. [4] I impute income of $90,000 to S. [ 18 ] Given an imputed income to M of $25,400 and to S of $90,000, the appropriate child support payable by S is $836 and the mid- range of spousal support is $1134. M has been seeking support from S for some time; M’s counterclaim, filed December 18, 2014, seeks both child and spousal support, so support will commence January 1, 2014. At the Judicial Case Conference held February 4, S agreed to without prejudice child support of $445 per month; S will be credited with any payments, of course, made since the JCC.

SALE OF THE HOME [ 19 ] As I said, the family home is located in North Vancouver and has been occupied by S since separation. It has not been appraised but has been assessed for tax purposes at $900,000. As with most things in this case, the parties cannot even agree to the value of encumbrances on the home; S says they are approximately $800,000 and M says they total $718,000. Briefly put, M says that whatever the value of the home, it will be extremely difficult for S to purchase her interest in it and she is desperate to redeem her share of the equity so that she can begin to re-establish herself with I.

She is skeptical of S’s intent to purchase her interest, having seen no concrete plans or steps taken in that direction. [ 20 ] M claims that a portion of the home’s equity is excluded property to her benefit under s. 85 of the Family Law Act [5] as, she says, she contributed 25% of the purchase price from her own, pre-marital resources, namely the proceeds of sale of her Beach Avenue, Vancouver, apartment. [ 21 ] S also claims a portion of the equity as excluded in his favour.

He says that in November 2013, when he sold an apartment that he had owned before the parties' cohabitation, there was $58,000 remaining, and that that sum was paid to M’s father in reduction of a loan the father had made of $300,000 to the parties so they could buy the North Vancouver home.

That loan was repaid, he says, with $200,000 from M’s Beach Avenue apartment, $58,000 from the sale of his apartment, and the balance from a line of credit secured by the home. [ 22 ] S argues that sale of the home should not be ordered before the February 2016, trial for three reasons: 1. the parties’ claims to excluded assets, above, are complex and require more careful analysis to resolve the parties’ respective shares in the equity; 2. he intends to purchase M’s interest once that share is resolved; 3. flooding in North Vancouver in November, 2014, has seriously affected the property, necessitating repairs before any sale. [ 23 ] This last point needs some explanation and discussion, as the parties have significantly different perspectives on the issue.

S says that even before the floods, he (with little help from

M) was renovating the home. He had torn down a backyard deck but the effects of the floods, he says, have prevented rebuilding the deck. The access door to the non-existent deck has been boarded off for safety reasons. Thames Creek runs through the property and, S says, three feet of the creek bank were eroded by the floods and that the bank

continues to erode. He and affected neighbours are in discussion with the District of North Vancouver respecting the remediation, which he says will cost $40,000 for the parties’ property. Shoring up the creek bank and repairing a retaining wall affected by the floods will cost, he says, $30,350. The house itself has flooded at least four times over the past winter leaving residual damage to the basement (e.g. replacement of damaged carpets). Finally, much of the basement renovations remain unfinished with, he says, exposed plumbing, electrical conduits, and HVAC ducts.

Time will permit him to sort out the flood repairs and to complete the renovations. [ 24 ] M contends that S has seriously exaggerated the flood problems. Some of the photographic evidence S produced, she said, is false; it reflects yard work and tree removal done before the parties even separated. Since the floods occurred after she left the residence she contacted municipal staff and reviewed District documents to assess the damage.

She talked to Louise Simkin, a District employee, who, she says, told her “…don’t worry, anything that was a hazard or any kind of danger was attended to”. [6] She also talked to Mr. Ng, the parties’ insurance agent, who said that he had discussed the flood damage to the interior of the home with S, and told S that the insurance policy had a deductible of $1,000 for the damage, whereupon S elected not to make a claim.

This, M argues, implies that the damage is less than $1,000. [ 25 ] M also produced a memorandum dated December 22, 2014, from Gavin Joyce, General Manager of Engineering, Parks, and Facilities for the District, to Stephen Bridger,

Section Manager for Engineering Planning and Design for the District. The memo concerns flood damage from the November floods. It specifically references properties that were either damaged sufficiently to concern District authorities, or that presented risk of further damage (erosion, slumping, or the like). Those properties have all been redacted from the memo, but M points out that there is only one reference to the parties’ residence: Thames Creek traverses the property, the memo notes, and the property is one of four where “There are channel and bank stabilisation works required…” on the property.

M pointed out that despite this, no work has been done on the property, suggesting it is relatively minor. S responds that he is awaiting full summer when the creek flow is expected to be lowest so that the work can be done. [ 26 ] I am inclined to agree with M that S has exaggerated the devaluation of or repairs necessitated to the home by the floods. I also agree that S, as with the stalled renovations, is probably not motivated to bring the property, overall, into good repair and to prepare it for marketing.

Having said that, I have little doubt that remedial work would increase the marketability, if not the value, of the property. [ 27 ] Taking S’s other two reasons for delaying the sale: I do not accept that the parties’ respective contributions to the home (and thus their excluded equity, paras. 20 and 21 above) is so complex that a trial will be necessary to resolve the issue. If anything, it is more than likely the issue could be resolved by a Rule 9-7

summary trial, much of the evidence, I suspect, being available in documentary form. [ 28 ] Finally, S’s intent to purchase M’s interest is simply the vaguest of hopes. He has offered no objective evidence of preparations to do it, nor any indication that funding is possible, or plans to make those funds available. His assurance: family will help.

It seems to me that any reliable and acceptable plan to purchase M’s interest would include not only ascertaining her proper interest and funding to purchase that interest, but also confirmation that the transaction would release M from any obligation to third parties, e.g. the current mortgagees. [ 29 ] The law respecting sale of a family home by interlocutory application is well and long established. Bodo v. Bodo [7] established the basic principles by which that issue will be decided; the considerations include: 1.

Children's need for stability and easy access to their school and friends, particularly in the period immediately following the separation of their parents; 2. The availability (including affordability) of alternative accommodation for each spouse and his or her dependents; 3. The emotional condition of the spouses, especially the parenting spouse; 4. External economic factors (e.g. a declining market); 5. Wasting of the asset; and 6. The capacity of the parties to maintain the asset.

Huddart J. decided, however, that any doubts about the justness of an order for sale should be resolved in favour of the status quo and await resolution at trial. To these principles Reilly v. Reilly [8] added (at para. 37 ) that a sale would be favoured if it was likely to encourage settlement, provided the sale would be advantageous to both parties. Finally, neither Bodo nor Reilly purported to limit the reasons for or against a sale. How do these factors apply to the case at hand? I will review each in turn. [ 30 ] The child’s needs. I is now 3 l/2 years old.

If she hasn’t already begun pre-school, she will very shortly. She will begin entering the community, having friends and activities, and reliable daycare arrangements will need to be made. At present she and M are residing with M’s parents. That is not M’s preference and she (quite reasonably in my view) wishes to establish her own residence. It is a financial impossibility for her to do that in her current circumstances. She needs her portion of the equity in the home to re-establish herself and I on a more long term basis. [ 31 ] The availability of alternative housing.

M’s intention is to find rental accommodations and there is no indication that such accommodations are not available on the North Shore. S intends, as I said, to stay in the family home. He has not addressed any alternative, but if he intends ownership over renting I doubt that, without family help, his equity in the family home would be sufficient as a down payment, or to secure financing but, again, no evidence being offered, I do not know that for a fact. Certainly, as with M, he could rent. [ 32 ] The emotional condition of the spouses.

This does not seem to be significant factor in the decision other than to observe that a sale would likely assist both parties; M could make long term housing commitments, eliminating a preoccupation and worry, and S would also be free of the ongoing preoccupation (according to him) of repairs and renovations to the home.

[ 33 ] External economic factors. This is an interesting factor; on the one hand the market is certainly not declining and it is arguable that the home may even sell for more after trial rather than sooner. On the other hand (again, without any evidence cited) the media are rife with Cassandra-like warnings of housing bubbles in the Vancouver market. I seriously doubt that the bubble will pop before the trial, but the active market does suggest that a sale, if ordered, would likely proceed quickly even allowing for the problems I have discussed (paras. 23-26 above). [ 34 ] Wasting of the asset.

Another interesting factor; S’s argument is exactly counter to any wasting argument i.e. that he wants and intends to repair or improve the current state of the home. I accept that he has that general intention but, again, I doubt his motivation. Many people in his situation would eschew investment or hands-on work on family property for the simple reason that, in their minds at least, they are working for the other spouse’s benefit. [ 35 ] Capacity of the parties to maintain the asset. In this case the party is S, of course.

I expect that if he wished to re-engage in the process he could, in fact, arrange for the repairs and improvements. There is no evidence to the contrary, but, again, I doubt his commitment to this until and unless the home is his alone. [ 36 ] Encouragement to settle. I am sure there has never been a case in which the parties could agree on this point. Certainly, S has been clear that sale of the home before trial should not proceed, as (in addition to repairs etc.) the parties’ respective contributions, and therefore excluded property, cannot be established. I do not accept that.

No one referred me to significant evidentiary questions that need to be resolved. Both parties, it seemed, owned property before their marriage. Both sold after the marriage. The evidence in each case will be easily established. M’s father lent the parties funds to purchase the North Shore residence and he was repaid, either from the sale of the parties’ properties or from the line of credit secured by the home.

None of this seems much in dispute or difficult to establish. [ 37 ] It is hard to predict negotiating positions when one does not know the current market value of the home (other than the tax- assessed value, para. 19 above). The higher the value and the greater the equity the greater the difficulty, of course, in S purchasing M’s share. The more likely, then, that a sale is the only likely avenue to resolution. [ 38 ] If S is serious about purchasing M’s interest, he should be allowed a limited opportunity to do that.

I say “limited” because further delay simply means S continuing to enjoy the use of the home, to M’s exclusion, and M’s continued deprivation her share of the equity. [ 39 ] The home will therefore be listed for sale with joint conduct effective one month after the date of these reasons. If, before that, S can establish the reasonable market value of the home and arrange financing sufficient to purchase M’s interest on terms that would satisfy her, he should have that opportunity.

I assume that in addition to receiving her share of the equity she would expect release from third party obligations (i.e. mortgages, para. 28 above), but that is for the parties to resolve. If agreement has not been reached within a month the home will proceed to sale with joint conduct. “Master H. MacNaughton” for Master D. Baker