Bradley v Bradley, 2023 ABKB 128

Court of King’s Bench of Alberta Citation: Bradley v Bradley, 2023 ABKB 128 Date: 20230306 Docket: 4801-182293 Registry: Calgary Between: Jared David Edwin Bradley Applicant - and - Rachael Dawn Bradley Respondent _______________________________________________________ Decision of Justice April Grosse _______________________________________________________ Introduction [ 1 ] Mr. Bradley and Ms. Tweedy (referred to as Rachael Bradley in the style of cause) were divorced by way of a desk Divorce Judgment and Corollary Relief Order dated April 17, 2020 (the “Divorce Judgment”).

The Divorce Judgment incorporated provisions of a Custody, Support and Property Agreement (the “Agreement”) dated May 13, 2019 entered following mediation/arbitration. [ 2 ] Mr. Bradley applies to vary child support effective November, 2021. In particular, he wants to reduce child support to reflect a decrease in his income following the sale of his interest in a physiotherapy business known as Panther. Ms. Tweedy did not file a cross-application. However, child support having been raised, she seeks an order for payment of child support for 2020 pursuant to the Divorce Judgment and some

section 7 expenses. She also argues that the capital gain resulting from Mr. Bradley’s sale of his interest in

Panther should be included in income for 2021 and 2022. [ 3 ] Mr. Bradley originally applied to vary spousal support as well, but the parties resolved that issue prior to the hearing of the Application on September 9, 2022. Counsel both took the position at the hearing that the remaining issues were suitable for a decision based on the written record and without viva voce evidence. [ 4 ] At the conclusion of the hearing, I understood that counsel were going to try to provide me with the Schedules to the Agreement. Having not heard from them, I followed up on December 2, 2022.

I received the Schedules on December 19, 2022. Issues [ 5 ] The positions of the parties give rise to the following preliminary and substantive issues: (

a) Is the expert evidence of Kurt Ropchan, tendered by Mr. Bradley, admissible? (

b) Is the expert evidence of Heather Drybrough, tendered by Ms. Tweedy, admissible? (

c) Is the Update Affidavit of Mr. Bradley sworn August 25, 2022 properly before the Court? (

d) Has there been a material change of circumstances? (

e) What is Mr. Bradley’s income for the purposes of child support for the year 2020? (

f) What is Mr. Bradley’s income for the purposes of child support for the year 2021? (

i) Should some or all of the capital gains Mr. Bradley incurred as a result of the sale of his interest in Panther in 2021 be deducted from income pursuant to

section 17 of the Federal Child Support Guidelines , SOR/97-175 (the “ Guidelines ”)? (ii) Should some or all of the pre-tax income of Mr. Bradley’s numbered company, 1306355 Alberta Ltd. (“the numbered company”), be included in income pursuant to

section 18 of the Guidelines ? (iii) Should deducted expenses in the numbered company be added back into income pursuant to section 19(1) (

g) of the Guidelines ? (

g) What is Mr. Bradley’s income for the purposes of child support for the year 2022? (

h) By reference to

section 4 of the Guidelines , is the amount of child support payable on Mr. Bradley’s income pursuant to the table inappropriate for any of the years in issue and if so, what amount of child support is appropriate? (

i) What is Ms. Tweedy’s obligation to pay child support in 2020, 2021 and 2022? (

j) Is it open to Ms. Tweedy to seek relief in respect of

section 7 expenses without filing a cross-application? (

k) Does Mr. Bradley owe Ms. Tweedy

section 7 expenses for 2021 and 2022? (

l) How should

section 7 expenses be shared going forward? (

m) Should the Court declare Ms. Tweedy to be in an adult interdependent relationship? Ropchan Expert Reports [ 6 ] Mr. Bradley tendered an Affidavit and Expert Report from Kurt Ropchan of Lockhart LLP dated March 3, 2022 and an unfiled follow-up report in the nature of a reply to the expert report tendered by Ms. Tweedy. In those reports, Mr. Ropchan gave his opinion on Mr. Bradley’s guideline income for 2020 and 2021. [ 7 ] Ms. Tweedy objected to Mr. Ropchan’s reports being used as expert evidence on the basis that Mr.

Ropchan did not possess the necessary qualifications and that his report did not have the necessary form or content to be an expert report. In particular, Ms. Tweedy argued that the report did not provide the information or assumptions on which the report was based as required by Form 25. It is not clear to me whether these objections were raised prior to the filing of concise letters. [ 8 ] I note first that the parties do not seem to have agreed in advance on a particular process in respect of expert evidence for this Application. Mr.

Ropchan swore affidavits, as might be expected pursuant to Rule 6.11, since this was not a trial. However, he also provided a Form 25 as would be expected for trial. Ms. Drybrough’s report, tendered by Ms. Tweedy, included a Form 25 but there was no affidavit. Neither party used the notice procedure set out in Rule 5.39. Neither raised objections on any of these bases. Accordingly, subject to the specific concerns raised by the parties, I treat the expert reports or affidavits as properly before the Court. [ 9 ] I have no difficulty accepting that Mr. Ropchan has expertise as a Chartered Professional Accountant.

However, there is no evidence before the Court, whether through his CV or otherwise, that he is a Chartered Business Valuator or that he has any training or experience in analyzing guideline income in the context of child support. Accordingly, I approach his evidence with that limitation on his qualifications in mind. Further, regardless of qualification, it is difficult to assign any weight to conclusory statements such as “Capital gain...is a non-recurring item and should not be considered in Jared’s guideline income”.

[ 10 ] That said, as a CPA who has provided accounting services to Mr. Bradley and the numbered company, Mr. Ropchan has both first-hand knowledge and expertise in respect of the preparation and reading of the financial statements, how income was recorded for tax or accounting purposes and other such matters. He is analogous to a treating physician in many ways. I am prepared to accept Mr. Ropchan’s evidence in respect of matters such as the explanation of the components of Mr. Bradley’s income, how money flowed between the numbered company and Mr.

Bradley personally, how income was recorded or reported, to the extent that such evidence – whether fact or opinion – is otherwise relevant and admissible. This is actually the essence of almost all of Mr. Ropchan’s evidence. Drybrough Expert Report [ 11 ] Ms. Tweedy relies on an expert report from Heather Drybrough of Grant Thornton LLP. The report itself is dated July 22, 2022, and it was filed with the Form 25 on August 2, 2022. Mr. Bradley objects to the report on the basis that it does not include a CV or list of qualifications of the expert.

He says this is required by way of a combination of Rule 5.44 and Form 25. [ 12 ] Mr. Bradley is correct that the CV or other

summary of qualifications is an important part of expert evidence. The first step in admitting expert evidence is to qualify the expert. A statement of qualification allows the opposing party and the Court to consider whether the expert is qualified to give the proposed expert opinion and if qualified, to assess weight. [ 13 ] However, our court process also focuses on substance over form and allows for errors to be cured where there is no material prejudice to the opposing party. We also generally require objections to be made on a timely basis.

Here, the report was served on or about August 3, 2022 for a hearing scheduled for September 9, 2022. It does not appear that deadlines were specifically set for the filing of expert evidence and Mr. Bradley did not object based on the August 3 timing itself. [ 14 ] Based on the information counsel provided as friends of the Court, there was no objection by Mr. Bradley until August 24, 2022, and at that time, it was a general objection. Counsel for Ms. Tweedy responded the same day, asking for specifics of the objection so as to cure a deficiency if possible. On August 25, 2022, counsel for Mr.

Bradley advised that the issue was the lack of CV or statement of qualifications. By that time, concise letters were due, and the expert’s CV was included in Ms. Tweedy’s concise letter package served on or about August 26, 2022. I note that on the face of the Drybrough report and the Form 25, Ms. Drybrough is a CPA, CA and CBV and the report was prepared in accordance with the Practice Standards of the Canadian Institute of Chartered Business Valuators. [ 15 ] At the hearing, Mr. Bradley did not argue that Ms. Drybrough was not qualified.

Rather, he argued that the lack of CV had deprived him of the opportunity to cross-examine or otherwise assess qualifications. However, there is no suggestion that cross- examination was requested prior to the hearing. I dismissed a request to adjourn to cross-examine. I gave reasons on the record and will not repeat them here. [ 16 ] After the Drybrough report was received, and prior to the submission of his concise letter, Mr. Bradley obtained, in effect, a rebuttal report from Mr. Ropchan, which is included in Mr. Bradley’s concise letter. [ 17 ] In all of the circumstances, I do not accept the request of Mr.

Bradley to reject Ms. Drybrough’s report due to the lack of CV. On the face of the CV and without a substantive challenge to qualification, Ms. Drybrough has the education, qualifications, and experience to give an opinion on the components and calculation of guideline income, to the extent the Court requires assistance. While the CV ought to have been included with the report, the delay in articulating the objection or to taking any steps following receipt of the CV are such that the failure to provide the CV does not warrant exclusion of the report.

Update Affidavit [ 18 ] By way of Consent Order dated March 28, 2022, the parties modified the original

schedule for filing materials for this Application. They provided for a Reply Affidavit by Mr. Bradley on or before August 5, 2022 and Update Affidavits, if necessary, by August 26, 2022. Mr. Bradley filed both a Reply Affidavit (August 4, 2022) and an Update Affidavit (sworn August 25, 2022). Ms. Tweedy argues that the Update Affidavit incudes evidence that was available to Mr. Bradley at the time of his earlier Affidavits and that is not in the nature of an update. For the most part, she is correct.

However, most of the evidence in the Update Affidavit is in direct response to the Drybrough expert report served on or about August 3, 2022. For example, paragraphs 6-10 address points such as the need to keep retained earnings in the numbered company, and the estimate of pre-tax corporate income. Arguably, Mr. Bradley ought to have foreseen that those matters would be in issue, but they were not previously raised in such a direct way. Mr. Bradley’s Reply Affidavit was due two days after receipt of the Drybrough report, and it was actually sworn the next day on August 4.

I accept that it was not necessarily possible for him to address evidentiary matters arising out of the Drybrough report so quickly. Accordingly, in light of the fact that I have accepted the Drybrough report as evidence, and the timing, I am prepared to consider the Update Affidavit as evidence. Material Change of Circumstance [ 19 ] Pursuant to section 17(4) of the Divorce Act , RSC 1985, c 3 , before making an order varying child support, the Court must be satisfied that a change of circumstances as provided for in the applicable guidelines has occurred.

In this case, neither party argues that there has not been a material change. The Divorce Judgment itself contemplates a review of the method for calculating child support after September 2020, in keeping with the Agreement. In any event, the potential for imputing income to Ms. Tweedy after September 2020, contemplated in the Divorce Judgment, and Mr. Bradley’s sale of his interest in Panther, are material changes as contemplated in

section 14 of the Guidelines .

Mr. Bradley’s 2020 Income [ 20 ] Although Mr. Bradley’s initial Application only sought a variation effective November 2021, the issue of 2020 income and calculation of child support for 2020 under the Divorce Judgment quickly arose. Mr. Bradley acknowledged in his Reply Affidavit that he owed child support for 2020. The parties advised me at the hearing that they had essentially agreed on 2020 income and support and neither addressed it in oral argument. Accordingly, I have proceeded on the understanding that they do not require the Court’s analysis on that issue. Mr. Bradley’s 2021 Income Context relating to Mr. Bradley’s 2021 Income [ 21 ] The facts in this

section are not contested. [ 22 ] Mr. Bradley is a physiotherapist. At all material times prior to November 1, 2021, he and six other physiotherapists owned and operated a series of physiotherapy clinics under the name Panther Sports Medicine & Rehabilitation Services Inc. (“Panther). Mr. Bradley held 625 Class B voting shares in Panther personally, and he held 75 Class J non-voting shares through the numbered company. At all material times, he was the controlling shareholder and mind of 1306355. In the aggregate, Mr.

Bradley directly or indirectly held a 1/7 th interest in Panther. [ 23 ] Effective November 1, 2021, Mr. Bradley sold most of his interest in Panther to CBI Limited (“CBI”). CBI acquired 77.7% of Panther from Mr. Bradley and his co-owners. Mr. Bradley sold 469 of the 625 shares he held personally for total consideration of $1,266,300 (cash of $1,194,871.43 and a promissory note of $71,428.57). The numbered company sold all 75 of its shares for $629,700. At or about the same time, Mr. Bradley acquired another 26 Class B shares from one of the other physiotherapists for a nominal amount.

Accordingly, he now holds 182 Class B shares in Panther. [ 24 ] At the time of the sale, Mr. Bradley entered an agreement with CBI to continue performing physiotherapy and management services. He receives a monthly management fee of $2857.14 and a percentage of the physiotherapy fees generated by the remaining members of the group of physiotherapists who previously owned Panther. [ 25 ] Mr.

Bradley, as a shareholder, may continue to receive dividends from Panther, but he does not control the issuance of those dividends and given his lower ownership interest (now approximately 3.71%), the dividends would not be expected to be in the amounts received prior to the sale. [ 26 ] Mr. Bradley filed the Notice to Attend Family Docket Court that led to this Application on November 2, 2021. Therefore, even though the Application was not ultimately heard until September 2022, it has not been approached as a request for a retroactive variation.

Section 16 of the Guidelines [ 27 ] The starting point for child support is

section 16 of the Guidelines , which in effect looks to line 150 income, with the adjustments set out in

Schedule III. [ 28 ] Mr. Bradley’s line 150 income for 2021 was $791,835.72. As an aside, I note that in Mr. Bradley’s affidavit of March 3, 2022, at paragraph 9, he states that his line 150 income for 2021 was $250,000. In my respectful view, references to line 150 income in evidence should be references to the actual line 150 income as stated in the tax return unless expressly stated otherwise.

Arguments about whether that number should be used or adjusted for the purposes of setting income for support should not be confused with evidence as to the line 150 number itself. [ 29 ] The $791,835.72 was comprised of $3500 in employment income from the numbered company, $190,900 in dividends ($127,650 eligible and $63,250 ineligible) and $597,435.72 in taxable capital gains. I do not understand there to be a dispute about the straight calculations pursuant to

Schedule III as set out in the Drybrough report. The result is that Mr. Bradley’s starting income for 2021 pursuant to

section 16 of the Guidelines and after application of

Schedule III, is $1,345,872 ($791,836 plus $554,036 in adjustments). I note that this figure does not include the $99,000 loan from the numbered company that was included in 2021 income by Mr. Ropchan. [ 30 ] The material difference between the parties’ positions on income relates to whether the capital gain and pre-tax income from the numbered company should be included.

Section 17 - Capital Gain [ 31 ]

Section 17 of the Guidelines states: 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. [ 32 ] Mr. Bradley argues that a calculation of income that includes the non-recurring capital gain he received as a result of the sale of his interest in Panther is not the fairest determination of income and that the entire amount of the capital gain should be excluded from income.

[ 33 ] In Ewing v Ewing , 2009 ABCA 227 , the Court emphasized that determination of income must be fair and based on the particular facts of the case: para 31. A list of non-exhaustive factors that a Court may consider when determining where a non-recurring gain fits in setting income is set out at para 36 of Ewing . [ 34 ] In this case, the nature of the non-recurring gain is the sale of an ownership interest in an income-producing business. It is not akin to income for the past year, nor is Mr. Bradley in the business of buying and selling assets.

These factors weigh against including the gain in income, but they are not determinative. It is also possible to see this type of sale as the parent, in effect, being paid now for the value of a future income stream. Under this reasoning, the children would have been entitled to support based on the income stream as it was received in the future, and accordingly, they should receive support when the value is taken up front. The Court applied similar reasoning in Block v Block , 2020 BCSC 1694 at paras 102-103 , relied upon by Mr.

Bradley. [ 35 ] One of the situations in which it may be unfair to require that support be paid on non-recurring income is where the non- recurring amount will be invested, thereby producing future income on which support will be paid. In this case, Mr. Bradley’s evidence does not reflect any intention to invest the sales proceeds in a new business or any other income-generating asset. He intends to continue working as a physiotherapist, but without a significant ownership interest and the dividends that go with it. Mr. Bradley averred to having used some of the sales proceeds to pay off debt.

The reasonable inference based on disclosure is that the remainder was available to him in his bank account for use. [ 36 ] According to the Childview calculations submitted by Mr. Bradley, in February 2022, he was 40 years old. There is no suggestion in the evidence that he sold his ownership interest in the Panther business to create a retirement fund. His evidence is that he sold because of group dynamics, and he intends to continue working as a physiotherapist. This factor is a neutral in this case. [ 37 ] A Ewing factor weighing in favour of including at least some of the non-recurring capital gain in Mr.

Bradley’s 2021 income for child support purposes is that Mr. Bradley actually received the sales proceeds. This was not a paper transaction. That said, the evidence supports a finding on a balance of probabilities that Mr. Bradley used at least some of the sales proceeds to pay off a loan or loans that he had taken in order to settle the family property distribution. In other words, not all of the cash was actually available to Mr.

Bradley for his personal use or for the support of the children. [ 38 ] Another important consideration pursuant to Ewing is whether the inclusion of the non-recurring amount is necessary to provide proper child support in all of the circumstances. Unfortunately, the affidavits of both parties are rife with the parties’ views on how to interpret the Agreement, what evidence is relevant to the Application and who is responsible for their conflict, but they include very little evidence on the needs of the children.

Both parties argue that the children live a “lavish” lifestyle in the other’s home by reference to things like toys and vacations. I can infer from the

section 7 evidence that the children have been involved in sports such as soccer, hockey, and volleyball, and that they have a dentist and a psychologist. I know from the Agreement that there are already RESPs in place for the children and a regime for ongoing contributions. However, neither party has provided the Court with any specific information about the children’s circumstances, needs or expenses. [ 39 ] The information I have about the lifestyle the children enjoyed prior to separation comes from the Agreement. The family apparently had a boat and a Sea-Doo. They had relatively new vehicles.

They had at least some interest in, or access to, a lakefront cabin in British Columbia. They had bank accounts with healthy balances. The children had bikes, a Powerwheels truck, a water table, scooters, and ski equipment. [ 40 ] I note that a number of the cases provided by the parties refer to a similar paucity of evidence with respect to the children’s needs and circumstances: for example, see Emslie v Emslie , 2015 ABQB 581 at para 55 . In some cases, the Court demands further evidence in order to decide the issue.

In other cases, the failure to provide detailed evidence in respect of the children is visited upon one party or the other because only one party has access to the relevant evidence or in the application of the burden of proof. In this case, the parties have been in a shared parenting regime at all material times. Neither party suggests that they do not have information about the children’s needs and expenses, nor does the record support such an inference. The parties were each represented by experienced family law counsel in the Application proceedings.

In their written materials, each identifies the treatment of the capital gain inclusion in income as a key issue and each cites Ewing . In these circumstances, the Court should be entitled to proceed on the basis that each party knew that the needs of the children was a relevant factor and has made a considered choice at to the evidence they presented to the Court.

Notwithstanding the limited evidence, I am satisfied I can make a decision on the existing record without being unfair to the children and I am prepared to do so. [ 41 ] The inference available from the evidence as a whole is that the children live a comfortable life in each home. However, on a balance of probabilities, I do not find their lifestyle in either home to be “lavish” as alleged, and I am not satisfied that the inclusion of the non-recurring capital gain is unnecessary to provide proper child support.

The authorities presented by the parties do not suggest that “necessary to provide proper child support” should be interpreted as “otherwise without necessities.” [ 42 ] Mr. Bradley’s position is that the children are supported by Ms. Tweedy’s new partner. He argues that Ms. Tweedy’s partner’s income and asset information is relevant as part of the totality of the children’s circumstances, but she has refused to provide it. Without deciding that issue, I am prepared to assume that Ms. Tweedy’s new partner, who is a lawyer, has significant income and that the children benefit from it.

However, the new partner has no legal obligation to support the children. Mr. Bradley chose not to cross- examine Ms. Tweedy on her affidavit evidence that she splits household and travel costs with her partner. That leaves Ms. Tweedy’s evidence on that point uncontested because Mr. Bradley’s contrary position is based on presumption and speculation. On her own, during the year in question 2021, Ms. Tweedy’s employment income was $23,234.07 and she was receiving spousal support pursuant to the Divorce Judgment.

In other words, additional child support would still be of benefit to the children in the context of their mother’s financial circumstances. [ 43 ] I must also address Mr. Bradley’s position that including some or all of the 2021 capital gain would amount to a redistribution of property that has already been divided. If a capital gain arises from the disposition of an asset already accounted for in family property division, this is a relevant consideration under

section 17 of the Guidelines . That said, it is not determinative. There is authority for the proposition that since child support belongs to children, and not to either party, the concept of “double dipping” does not

necessarily apply when considering income for child support purposes: for example see Shields v Shields , 2006 ABQB 369 . In any event, Mr. Bradley has not established on a balance of probabilities that all, or even most, of the capital gain now in issue relates to property already divided. [ 44 ] The evidence establishes that the parties’ respective interests in the numbered company were dealt with as part of the family property division. The parties’ agreement specifically references the numbered company and confirms that Mr.

Bradley shall solely retain all of the parties’ interests in that business without further claim by Ms. Tweedy. Both parties also acknowledged and agreed that they had the opportunity to receive full and complete disclosure of all financial documents relating to the business and that neither required further disclosure or valuations (paragraphs 85 and 86 of the Agreement).

Further, the numbered company is listed as an asset in both Schedules “A” and “B” to the Agreement, which are stated to include the parties’ respective assets. [ 45 ] However, it is not clear on the record what value was actually ascribed to the business for the purposes of property division, or how any such value factored into the final property equalization. Mr. Bradley’s

schedule (Schedule “A” to the Agreement) estimates the value of the business to be $632,527. This is much less than the 2021 sale price received in total by Mr. Bradley and the numbered company. Ms. Tweedy’s

schedule (Schedule “B”) lists the value of the numbered company as “TBD”. The Schedules include other property such as the family home, vehicles, bank accounts and pensions, only some of which have specific values assigned. The record establishes that the property division as a whole resulted in an equalization payment to Ms. Tweedy of $460,000, but the parties have not provided me with the calculation that led to that payment, nor have they reconciled it to one or both of the Schedules. [ 46 ] Ms.

Tweedy suggests that the business must have been under-valued at the time of property division because the value that Mr. Bradley has now received from CBI could not possibly have resulted in only a $460,000 equalization to her. Mr. Bradley argues that the business increased in value after division of property through the work of he and his partners. I will add a third possible explanation, which is that the Agreement defines the business as being the numbered company. The Panther shares that Mr.

Bradley held personally are not listed in the Schedules to the Agreement, nor is any value expressly ascribed to them. [ 47 ] Ultimately, I need not decide whether the business was properly valued in 2019 or why the value now received from CBI is higher than the number Mr. Bradley had in his

Schedule A to the Agreement. The bottom line is that I am satisfied on a balance of probabilities that the full value now received was not divided in 2019, for whatever reason. In these circumstances, it is harder to conclude that it would be unfair to Mr. Bradley for the children to benefit from at least some of the sales proceeds by way of child support. Conclusion on Capital Gain and Quantum [ 48 ] Considering the evidence as a whole, including all of the above factors, I agree with Mr. Bradley that his income for 2021, as calculated pursuant to

section 16 of the Guidelines would not be the fairest determination of income for child support purposes and should be adjusted in respect of the non-recurring capital gain. However, I do not agree that the entirety of the gain should be deducted. [ 49 ] Prior to the sale, Mr. Bradley basically had three sources of income through his business (either directly or through the numbered company): fees based on the physiotherapy work of he and his partners, management fees and regular dividends from Panther.

In respect of the latter, the owners of Panther were making money from work and operations other than their own physiotherapy services. By Mr. Bradley’s own evidence, supplemented by explanations provided during oral argument, after the sale of Panther to CBI, he still receives fees for the physiotherapy work of his group and management fees. However, there are no longer regular substantial dividends based on the profits of the Panther operation as a whole. Mr. Bradley has chosen not to put before the Court any of the valuation or deal information relating to the sale to CBI.

Without evidence to the contrary, it is reasonable to infer that at least a material part of the value that Mr. Bradley has received from CBI relates to the Panther business as a going concern. In effect, Mr. Bradley is receiving cash now instead of the future dividend income stream. There is no evidence that he has or intends to invest the cash so as to create another income stream to the benefit of the children.

At the same time, his income will be reduced going forward and he wants to reduce his support accordingly. [ 50 ] The children had a comfortable life when their parents were together, and they have continued to have a comfortable life, at least from a financial perspective, since separation. However, they are now looking at a reduction in support from their father going forward. Even assuming that Ms. Tweedy has a partner with means, he is not legally responsible for the children. If Ms. Tweedy were to return to teaching full time, as Mr.

Bradley argues she should, her income would not be so high as to make the 2021 support irrelevant. In these circumstances, I am satisfied that inclusion of capital gains in income is necessary to provide proper support for the children in the context of this family. I am aware that some of these factors are forward-looking whereas we are talking about support for the year 2021. In my view, the need for support in 2021 may be considered in the context of the circumstances as a whole, including planning and setting the foundation for the children’s future. [ 51 ] It is difficult to reconcile Mr.

Bradley’s own evidence with respect to his loan obligations and how the sales proceeds were used to meet them. In the Statement of Income, Assets and Liabilities accompanying his Affidavit in March 2022, Mr. Bradley lists a “divorce loan” with a remaining balance of $425,000. Neither that Statement, nor the one attached to the Agreement, references a loan from Mr. Bradley’s parents. However, in his Reply Affidavit dated August 2022, Mr. Bradley refers to owing his parents $720,000, which included funds used to pay out Ms. Tweedy in the divorce and to supplement income during the pandemic.

His evidence is that in July, 2022, he used approximately $620,000 of the Panther sale proceeds to pay his parents back. [ 52 ] On the totality of the evidence, I accept on a balance of probabilities that Mr. Bradley took some form of loan from someone to pay out the property division equalization of $460,000 in 2019 and that a balance of $425,000 remained in spring of 2022. There is no indication in the record that he would have had cash available in 2019 to pay out the property division without a loan.

However, to the extent that he otherwise borrowed money from his parents to supplement income during the pandemic, I do not find that to be particularly pertinent. Any reduction to Mr. Bradley’s personal or business income in 2020 should already be accounted for in respect of child support in the2020 calculations. [ 53 ] Mr. Bradley pointed out that another large portion of the capital gain went to pay tax. I am not persuaded that this should lead

to any particular deduction of income for child support purposes in these circumstances. Significant portions of various types of income are taxable and yet they are still included as gross income for the purposes of child support. Further, only half of the gain was taxable. [ 54 ] Again, as set out above, the evidence also establishes that the business was factored into the property equalization in 2019 in some way, which favours deducting some, but not all, of the capital gain from 2021 income. [ 55 ] Taking these factors into account, I am prepared to reduce Mr.

Bradley’s 2021 income by $597,436, being half of the capital gain he received personally. I am satisfied that calculating income on this basis does not amount to wealth-redistribution, but rather, to proper support for the children in all of the circumstances. [ 56 ] Accordingly, Mr. Bradley’s income for 2021 would be $1,345,872 - $597,436 = $748,436, subject to consideration of the other adjustments proposed by the parties.

Section 18 Pre-Tax Corporate Income [ 57 ]

Section 18 of the Guidelines permits the court to attribute corporate pre-tax income to a person who is a shareholder, director or officer of a corporation if the court is of the opinion that the amount of the person’s annual income pursuant

section 16 of the Guidelines “does not fairly reflect all the money available to the spouse for the payment of child support”. [ 58 ]

Section 18 works in tandem with

section 19, which permits imputation of income in various circumstances, including where a payor has unreasonably deducted expenses from income (s. 19(1)(g)): Goett v Goett , 2013 ABCA 216 at para 18 . Ms. Tweedy argues that pre-tax corporate income in the numbered company should be included in Mr. Bradley’s income for 2021 in the amount of $300,645 and that a further $39,033 should be added on account of corporate expenses that gave rise to a personal benefit. Ms. Tweedy relies on the Drybrough report, which calculates and includes these amounts. Mr.

Ropchan took neither into account. [ 59 ] In Goett , the Court of Appeal summarized some of the factors to be taken into account when deciding whether to pierce the veil and include corporate pre-tax income in an individual’s income for child support purposes: Goett at para 16 . Applying those factors in this case, there is no dispute that in 2021, Mr. Bradley was the sole shareholder and directing mind of the numbered company and that there was undistributed income in the corporation. In Mr.

Bradley’s Reply Affidavit, he made the following bare assertion: “My corporation pre-tax income should not be included as part of my guideline income because I require the funds in part for my corporation’s operational purposes”. He further averred in his Update Affidavit that the funds were required due to income fluctuations depending on how many patients he sees, and because physiotherapy equipment is very expensive. He swore that there is an understanding with his partners that they hold a significant amount of funds available for business operating purposes. [ 60 ] One of the things that Mr.

Ropchan may have been able to opine on, as the accountant for the numbered company, is the need to retain earnings in the company. He did not do so. [ 61 ] Mr. Bradley’s evidence may have been more compelling prior to the sale of Panther. However, by the end of 2021, the numbered company was simply a conduit for receiving payments from Panther as an independent contractor providing physiotherapy and management services. The numbered company no longer owned or operated Panther or any physiotherapy clinic, either on its own, or with Mr. Bradley’s partners.

Accordingly, it is difficult to understand why cash must be on hand for physiotherapy equipment. During oral argument, in response to questions from the Court, Mr. Bradley confirmed that following the sale, CBI deducts a monthly equipment fee from his physiotherapy revenues. With respect to fluctuating income, the main reason this would render pre-tax income unavailable is that the funds are required to be in the corporation as a safety net for months were income is reduced, but expenses remain.

However, in the post-sale environment, the numbered company presumably has reduced operating expenses. [ 62 ] The 2021 and historical calculations of undistributed earnings for the numbered company are set out in the Drybrough report ($50,212, $59,509, $-33,757, and $300,645 for 2018-2021, respectively). Mr. Bradley did not challenge the calculations, nor did he provide any explanation for why the company would now have need for greater retained earnings than it did when it was an owner of Panther. [ 63 ] In the circumstances, I conclude that the calculation of Mr. Bradley’s income for 2021 pursuant to

section 16 of the Guidelines , as adjusted pursuant to

section 17 for the non-recurring capital gain, does not fairly reflect all of the money available to Mr. Bradley in 2021 for payment of child support. The record does not establish any particular business purpose for leaving $300,000 in the corporation that year, and Mr. Bradley had complete control over what was retained and what was paid out.

While including corporate pre-tax income in personal income for child support purposes does not actually take the money out of the corporation, I am prepared to deduct $50,000 as a prudent contingency fund to be left in the corporation during the period of transition it was facing at the end of 2021. This amount is supported by the information available as to past practice, even when Mr. Bradley and his partners owned Panther. Accordingly, $250,645 will be added to Mr.

Bradley’s 2021 income. [ 64 ] I note that the undistributed earnings calculation for 2021 includes the capital gain of $134,700 received by the numbered company in the sale of its shares in Panther. This is distinct from Mr. Bradley’s personal gain on the sale of his shares. For the reasons set out above, I am satisfied that it is appropriate to include this amount in income even though it is non-recurring. Mr. Bradley’s debt obligations and other factors weighing against inclusion have already been accounted for in respect of his personal capital gain.

Accordingly, I have not made any deduction to corporate available pre-tax income in this regard. Section 19(1)(

g) Expenses [ 65 ] The undistributed earnings calculation of $300,645 is net of $53,164 of deducted business expenses for 2021. Ms. Tweedy argues that $20,297 of those should be added back to income on the basis that they were for Mr. Bradley’s personal benefit, along with a further adjustment for the commensurate tax savings Mr. Bradley accumulated by not paying for those with after-tax personal income. In total, Ms. Tweedy argues that $39,033 should be added to income pursuant to section 19(1) (

g) of the Guidelines . This position is

supported by the Drybrough report. Mr. Ropchan did not address this issue. [ 66 ] Mr. Bradley acknowledges that he has not made disclosure pursuant to Cunningham v Seveny , 2017 ABCA 4 to support the reasonableness of the deducted expenses. However, he questions the application of a straight 50% inclusion for a number of expenses, as set out in the Drybrough report. [ 67 ] In light of the lack of disclosure from Mr. Bradley, and the nature of the business and expenses at issue, the approach taken in the Drybrough report is reasonable. For example, deducted travel and automotive expenses were $11,983 for 2021.

There is no evidence that Mr. Bradley had a separate corporate vehicle, used his vehicle for particular business-related travel, or did any other business travel. 2021 was a year in which many professional conferences were cancelled due to the pandemic and there is no evidence of Mr. Bradley attending any such conference. In the circumstances, the add-back percentage could be higher than 50%. Similarly, there was a deduction for $2,239 for telephone. Yet, the Panther financial information indicates that Panther had significant office phone expenses. Again, there is no evidence as to what business use Mr.

Bradley made of the phone paid for by the numbered company. In the absence of other evidence, it is fair to infer that Mr. Bradley’s personal cell phone was being covered out of the numbered company. Expenses where the entire 100% is added back are explained in the Drybrough report and in the face of no further information or argument, I accept those explanations as reasonable. [ 68 ] Accordingly, a further $39,033 is added to Mr. Bradley’s income for 2021. Mr. Bradley’s 2022 Income [ 69 ] Both parties ask the Court to set 2022 income for Mr. Bradley.

It does not make sense for me to give a numeric estimate for 2022 based on evidence submitted mid-year, when the parties should now have most, if not all, of the actual numbers. However, I will give directions in principle. I retain jurisdiction over the setting of 2022 income. If the parties are unable to set 2022 income within 60 days of this decision based on the following principles, they may contact my office. [ 70 ] I have little to go on in terms of Mr.

Bradley’s actual personal income in 2022 because I do not know whether he and his advisors will use a similar pattern for paying money out of the numbered company as they did prior to the sale of the Panther interest. However, nothing turns on the actual personal income because pursuant to

section 18 of the Guidelines , and for the reasons set out above, the pre-tax income of the numbered company should be included in Mr. Bradley’s income for child support purposes. If he were an employee, or an independent contractor in his own name, he would receive payment from CBI/Panther for physiotherapy and management services. The fact that he has agreed to pool physiotherapy fees with his former partners in Panther does not substantively change the analysis. This income paid to the numbered company is available for the support of the children, regardless of how Mr.

Bradley chooses to move it between the numbered company and himself personally. The reasons for including pre-tax corporate income are in substance the same as those given above for 2021. [ 71 ] While I deducted $50,000 from retained earnings included in income as a contingency fund during 2021, this was based on historical operations when Mr. Bradley and the corporation still had an operational ownership interest in Panther and for transitional purposes. I would not make the same deduction for 2022. This is also appropriate given the expected reduced revenue.

As revenue decreases, holding the same amount of money in the company has a bigger proportional impact on income available for support. [ 72 ] There is no Cunningham type of evidence before the Court for 2022. In the absence of such information, I find that deducted expenses ( section 19(1) (

g) of the Guidelines ) should be dealt with in the same manner as I have done for 2021, for the same reasons. [ 73 ] It is expected that Mr. Bradley will personally receive another capital gain in 2022, due to re-payment of the promissory note from CBI entered at the time of the 2021 share sale or other share sale revenue. For the same reasons set out above, I am not satisfied on the record before me that the capital gain should be excluded from income, even though it is non-recurring. Unlike 2021, there is no evidence that Mr.

Bradley requires any part of the 2022 capital gain to pay off debt related to the separation. Also, when looking at whether it is needed for appropriate support, the amount of the gain is expected to be less and the amount of support otherwise available to the children is also expected to be lower due to the lack of dividends. Accordingly, inclusion of the full amount of the capital gain aligns with the children’s needs as they are inferred to be. Accordingly, for 2022, I direct that the entire capital gain received by Mr.

Bradley arising out of the sale of his Panther shares be included in income for the purposes of calculating child support. [ 74 ] I do not accept Ms. Tweedy’s argument that Mr. Bradley voluntarily sold his interest in Panther, such that income should be imputed to him as if he were still receiving ownership dividends at the same level as he did prior to the sale or that for the near future,

section 17 should be invoked to set income at a similar level as was earned prior to the sale to Panther. The evidence establishes on a balance of probabilities that the sale of Panther was something that Mr. Bradley did not and could not control. It was not a voluntary reduction of income. Further, by virtue of this decision by the Court, Mr. Bradley will be paying support on the value he took out of the business for his ownership interest in 2021. Imputing owner-level income to him on an ongoing basis would be double-counting. [ 75 ] I also decline to assume that Mr.

Bradley or the numbered company will have investment or interest income, as proposed in the Drybrough Report. Both parties acknowledge that this is not a fair assumption. [ 76 ] Accordingly, Mr. Bradley’s 2022 income should be based on the actual income of the numbered company, with the adjustments or specifics as set out above. [ 77 ] Ms. Tweedy’s counsel invited me to establish a formula for calculation of income going forward. However, neither party proposed a formula and I am not inclined to try to come up with one on my own, with no evidence past mid-2022.

However, I am hopeful that the above guidance will allow the parties to set income going forward.

Section 4 of the Guidelines – Income over $150,000

[ 78 ] Although Mr. Bradley’s application only sought a variation for two months in 2021, he did not contest that if the capital gain were included in income, support for all of 2021 was in issue. This makes sense given the circumstances, including the non-recurring nature of much of the income. [ 79 ] For the reasons set out above, Mr. Bradley’s income for 2021 for child support purposes is set at $1,038,114 ($748,436 + $250,645 + 39,033) for 2021. Once income is determined to be over $150,000,

section 4 of the Guidelines is in issue. Where the income of a payor spouse is over $150,000, support is presumed to be on the table amount unless the Court considers the table amount inappropriate. The payor has the onus of raising a concern that support on the table amount is unsuitable based on the totality of the evidence. The evidence for the deviation must be clear and compelling: Ewing at para 48 .

The actual situation of the children is important, and their condition, means, needs and other circumstances must be considered, both with respect to whether the table amounts are appropriate and in setting support if they are not: para 48. [ 80 ] Table child support for two children based on income of $1,038,114 is $13,856.10 per month, for a total of $166,273.20 in 2021. This is a significant amount. Mr. Bradley did not argue

section 4 in his written materials, but he did refer to it in oral argument. He argued that the children do not actually need the support being claimed, and that with that level of support, combined with the support they now receive through Ms. Tweedy and her new partner, they would be in a much better position than they were prior to separation. [ 81 ] As noted above when reviewing the needs and circumstances of the children, Mr.

Bradley has put almost no evidence before the Court with respect to the children’s actual needs and very little other evidence going to suitability of the support amounts that flow from his income when the capital gain or a significant portion of it is included. Primarily, Mr. Bradley refers to the income of Ms. Tweedy’s partner and the children’s allegedly lavish lifestyle in Ms. Tweedy’s home. However, his position in that regard is largely based on his own inferences and speculation and much of the speculation has been contradicted by Ms. Tweedy’s direct evidence.

As set out above, I am not satisfied that the evidence establishes that “lavish” is a fair characterization of the children’s life in either home. Further, the objective evidence shows the children having enjoyed a financially comfortable lifestyle prior to separation in a family with assets such as a boat and Sea-Doo, and that Mr. Bradley also continues to treat them to things like travel and vacations. [ 82 ] The sale of the business put more disposable income into Mr. Bradley’s hands in 2021 than the family previously had available.

However, this does not necessarily mean that support based on that income is unsuitable. On the record I have, including the parties’ property holdings, and the activities in which the children are involved, it is fair to infer that had the sale of Panther occurred for this same price during the marriage, the children would have benefited in a material way from the increase in family income for the year. [ 83 ] Though not argued by either party, as a check on the suitability of table support under

section 4 , I calculated what support would be payable on income of $1,038,114 pursuant to the formula that the parties chose for child support in their Agreement. Absent evidence to the contrary, it is fair to infer that the parties considered the chosen formula to provide suitable support to the children. Pursuant to sections 18 and 20 of the Agreement, until 2020, Mr. Bradley was to pay

section 3 support of $3321 per month (the table amount for income of $240,000 per annum) plus 16% of any income over $240,000. On this formula, with total income of $1,038,114, 2021 support would be $167,550.24 for the year 2021. To be clear, I do not find that the formula strictly applies. Rather, it is a helpful check on the appropriateness of the figure I otherwise arrived at, particularly in light of the limited evidence led by the parties relevant to the children’s needs and the suitability of support. [ 84 ] For the above reasons, I am not satisfied that the table amount for 2021 is inappropriate and I find that Mr. Bradley’s

section 3 support obligation for 2021 is $166,273.20. Obviously, the amount that Mr. Bradley already paid for 2021 would have to be deducted from the amount owing. I leave that calculation to the parties. [ 85 ] Without having a specific number in front of me for 2022 income, I would not make a finding on the application of

section 4 of the Guidelines . However, the same principles apply. Again, I retain jurisdiction over setting support for 2022 if the parties are unable to agree. Support Payable by Ms. Tweedy [ 86 ] Pursuant to the Agreement, up to September 2020, Ms. Tweedy had no obligation to pay child support even though the parties were in a shared parenting regime. Commencing September 2020, $50,000 in income was to be imputed to Ms. Tweedy and the method for calculating child support was reviewable. [ 87 ] While Mr. Bradley alleged that Ms.

Tweedy is under-employed, his counsel ultimately confirmed in oral argument that they were not seeking imputation of income beyond the $50,000 contemplated in the Agreement. Ms. Tweedy does not contest imputation of $50,000 for present purposes. Both parties acknowledge that they have not provided the Court with the evidence that would be required for an analysis under sections 9 (

b) and 9 (

c) of the Guidelines or Contino v Leonelli-Contino , 2005 SCC 63 . [ 88 ] I presume that whatever arrangement the parties have reached for 2020 addresses the months of September – December 2020. Both parties propose a straight set-off for 2021 and 2022 pursuant to

section 9 (a). Accordingly, for the years 2021 and 2022, Ms. Tweedy shall pay

section 9 child support to Mr. Bradley in the amount of $723 per month, the table amount for $50,000 income.

Section 7 Expenses for 2020-2022 [ 89 ] Ms. Tweedy asks the Court to order Mr. Bradley to pay $722.75 for 2021 and $414.50 for 2022, being 97% and 87%, respectively, of certain expenses for which she claims reimbursement pursuant to

section 7 of the Guidelines . She also wants the Court to vary the parties’ responsibility for

section 7 expenses going forward, from 55%/45% in the Divorce Judgment, to 87%/13%. I note that this is an update to the relief requested in Ms. Tweedy’s Affidavit. Again, there is no formal Cross-Application. [ 90 ] The only response Mr. Bradley made to Ms. Tweedy’s request for

section 7 relief was to point to paragraph 25 of the Divorce

Judgment, which states that “any issue arising with respect to

section 7 child support shall be referred to the Parenting Coordinator for a final determination.” In the oral hearing, I also questioned whether Ms. Tweedy could seek

section 7 relief without a cross-application. [ 91 ] On the latter point, while a cross-application would be preferable, particularly given that the Family Docket Court Endorsement contemplates a cross-application, I am satisfied that Ms. Tweedy may raise the

section 7 issue in the way she has in the circumstances of this case. The Agreement and the Divorce Judgment refer to “child support” as including

section 7 expenses, both expressly (for example, see paragraph 32 of the Agreement) and implicitly. Mr. Bradley’s Application refers generally to varying “child support”. Ms. Tweedy raised the

section 7 issues squarely in her Response Affidavit. A cross-application would generally have been due at the same time. Mr. Bradley had an opportunity to file a Reply Affidavit and then filed a further Update Affidavit. Accordingly, there is no prejudice to Mr. Bradley in respect of the

section 7 issues being raised without a formal cross-application. [ 92 ] With respect to paragraph 25 of the Divorce Judgment, the parties agree that they do not have a Parenting Coordinator at this time. They have differing accounts as to why that is. [ 93 ] In the absence of an existing Parenting Coordinator, and without prejudice to the positions of the parties as to the scope of paragraph 25 of the Divorce Judgment, I am prepared to make the following directions in respect of

section 7 expenses: (

a) I decline to vary the parties’ respective percentages of

section 7 expenses for 2021 or 2022 from the 55%/45% split set out in the Divorce Judgment. There are a number of reasons for this. First, the record and submissions do not confirm that the

section 7 expenses now claimed are the only ones incurred for those periods. I would be hesitant to vary the percentages for some expenses if others had already been shared according to the Divorce Judgment. Second, the parties’ incomes for

section 9 child support for those years, as set or discussed herein, are either anomalous (Mr. Bradley due to the business sale) or imputed (Ms. Tweedy). I have very little evidence or disclosure about Ms. Tweedy’s actual 2021 income and I only have partial income information for 2022 for both parties. I am not convinced that including a non-recurring capital gain in income for the benefit of the children in the context of

section 3 or

section 9 necessarily means it should be included for the purposes of sharing of

section 7 expenses. The pattern of expenses and how they should be shared is often part of a Contino analysis, but the parties have declined to conduct one. Third, the amounts in issue are relatively low. In all of these circumstances, even though

section 9 support was payable by Ms. Tweedy in 2021 and 2022, which is different than the state of affairs when the 55%/45% split was set, I am not prepared to order a variation of percentages for 2021 or 2022. (

b) I not giving any other direction in respect of setting 2021 or 2022

section 7 expenses, as my understanding from the oral hearing is that there has never been an attempt to collect through MEP based on the existing Divorce Judgment. (

c) For 2023 forward, I direct that

section 7 expenses be shared 70% by Mr. Bradley and 30% by Ms. Tweedy until further order of the Court. I am satisfied that it is appropriate to vary the 55%/45% split agreed to in the Agreement and the Divorce Judgment, given that Ms. Tweedy is now paying

section 9 support, which was not the case when those percentages were set. Also, spousal support payments have ceased. In these circumstances, and in the absence of a Contino analysis, it is appropriate to have

section 7 expenses shared in a manner that better reflects the respective incomes of the parties. Given the evidence of significant discord between the parties, I find it is in the best interests of the children, the parties and the administration of justice to set fixed percentages, rather than having them vary by actual income each year, at least based on the record before me. The latter method is more precise, but in my view, the benefits of precision are outweighed in this case by the risks of additional conflict. I have chosen 70%/30% based on estimated income of $130,000 for Mr.

Bradley and imputed income of $50,000 for Ms. Tweedy. The $130,000 for Mr. Bradley is simply an extrapolation of a full year of income from the numbered company’s actual receipts between January – June 2022, as set out in Mr. Bradley’s Reply Affidavit. It does not include capital gains triggered by further pay-outs on the sale of his shares. As set out above, while I have found that those amounts should be included in income for the benefit of the children through base child support, I am not convinced that they should necessarily affect the split of

section 7 expenses. They remain extraordinary. By 2023, there should be less such payments in issue, but this accounts for those that remain. I note that the 70%/30% split is in the appropriate range regardless of whether approximately $15,000 for expenses is deducted from Mr. Bradley’s income (the approximate net amount of deducted expenses for 2021 after the add-back set out above). Declaration of Adult Interdependent Relationship [ 94 ] Pursuant to the Divorce Judgment, spousal support could be varied if Ms. Tweedy cohabited in an adult interdependent partnership. Spousal support was resolved prior to the hearing of the Application. Absent a full analysis under

section 9 (

b) and 9 (

c) of the Guidelines or Contino , I do not see any relevance as to whether Ms. Tweedy is in such a relationship for the purposes of child support. Neither party pressed this issue in oral argument. Accordingly, I decline to make any finding as to whether Ms. Tweedy has been in an adult interdependent partnership. Costs [ 95 ] If the parties are unable to agree on costs within 45 days of this decision, they may each make written submissions of no more than 5 pages (1.5 spaced), to be filed and sent to my office no more than 60 days from today.

Heard on the 9 th day of September, 2022, with further written submissions the 19 th day of December, 2022. Dated at the City of Calgary, Alberta this 6th day of March, 2023.

April Grosse J.C.K.B.A. Appearances: Max Blitt, KC for the Applicant Nancy Collins for the Respondent