Bilodeau v Bilodeau, 2022 ABKB 799

Court of King’s Bench of Alberta Citation: Bilodeau v Bilodeau, 2022 ABKB 799 Date: 20221205 Docket: 4814 000861 Registry: St. Paul Between: Jennifer Debrah Bilodeau Plaintiff - and - Lenny Adelard Bilodeau Defendant _______________________________________________________ Reasons for Decision of the Honourable Justice W.N. Renke _______________________________________________________ [ 1 ] This matter had been set for a Special Chambers application on April 6, 2022. Circumstances required that the application be adjourned.

The parties chose to proceed by way of written submissions supplementary to their concise letters. [ 2 ] Jennifer Bilodeau (the Plaintiff) originally applied for an increase in child support payable retroactive to January 1, 2012 and for ongoing child support for the adult children of the marriage attending post-secondary education. In her written submissions, the Plaintiff abandoned the retroactive increase claim, sought the dismissal of the Defendant’s cross-application, and pursued proportionate contributions to the children’s post-secondary expenses for the last two years and ongoing child support.

The Plaintiff’s written argument stated the following at paras 41 and 42:

41. At this time ... we are not making a claim for an increase in retroactive child support that has already been paid ... and utilized. 42. What we are seeking to do here is to put the issue of retroactive child support to rest .... [ 3 ] Lenny Bilodeau (the Defendant) challenged the Plaintiff’s calculation of income available to pay child support. The Defendant advanced three overpayment claims. First, the Defendant cross-applied for a decrease in child support payable retroactive to January 1, 2012. Second, the Defendant sought a decrease in his contributions to s. 7 expenses from September 1, 2017 forward.

Third, the Defendant contended that the Maintenance Enforcement Program collected child support without authorization by the governing court orders. The Defendant’s position was that his obligation to contribute to the children’s post-secondary education would terminate according to the terms of the parties’ Divorce Judgment and Corollary Relief Order.

He opposed the extension of support obligations sought by the Plaintiff. [ 4 ] For the reasons that follow, I find that: • the Defendant’s cross-application for a retroactive decrease in s. 3 child support to January 1, 2012 is dismissed. • the Defendant’s cross-application for a retroactive decrease to his contribution to s. 7 child support to September 1, 2017 is dismissed. • the Defendant’s cross-application for wrongfully collected child support is neither granted nor dismissed as further submissions from counsel are required. • the Plaintiff’s application to extend the Defendant’s obligation to contribute to the post-secondary expenses of the children of the marriage (including s. 7 support) beyond the period established in the Divorce Judgment and Corollary Relief Order is dismissed. [ 5 ] After reviewing the background to the applications, I will consider the Defendant’s cross-applications respecting child support already paid, then the Plaintiff’s application to extend the Defendant’s obligation to contribute to the children’s post-secondary expenses. [ 6 ] I note that between the time that written submissions were provided and the date of this decision, the Court of Appeal released Peters v Atchooay , 2022 ABCA 347 .

I did not invite the parties to make submissions respecting this decision. In my opinion, this decision accurately reflects and confirms and does not depart from the principles of Colucci v Colucci , 2021 SCC 24 . Peters v Atchooay did not raise any new issue not raised by the parties. Hence, there was no need to request further submissions: R v Mian , 2014 SCC 54 , Rothstein J at paras 2-35; Whyte Avenue Landscaping v 406362 Alberta Ltd , 2022 ABQB 269 , Lema J at paras 5-6; Sysco Canada, Inc v Miscellaneous Employees , 2021 ABQB 459 , Kiss J at paras 31-33. Table of Contents I. Background . 4 A.

Divorce Judgment and Corollary Relief Order 4 B. Child Support from 2004 to 2011 . 4 C. Defendant’s Corporate Income . 4 D. Recalculation . 5 E. Pre-Application Litigation Steps . 5 F. Divorce Act 6 II. Payor’s Retroactive Recalculation Applications . 7 A. Retroactive Decrease in s. 3 Child Support to January 1, 2012 . 7 1. Material Change . 7 2. Commencement Date for Recalculation . 9 3. Departure from the Presumptive Commencement Date . 15 4. Fairness to the Defendant 19 5. Present Position of the Defendant 19 B. Retroactive Decrease in s. 7 Payments to September 1, 2017 . 24 C.

Unauthorized Collection of s. 3 Child Support 25 1. Foundation for the Claim .. 25 2. Nature of the Claim .. 27 3. Procedural Basis for Considering a Restitutionary Claim .. 28

4. Conclusion and Next Steps . 28 III. Post-Secondary Education Expenses . 29 A. Variation of the Divorce Judgment 29 1. Divorce Judgment Terms . 29 2. Authority to Vary . 30 B. Principles . 31 1. The Guidelines . 31 2. Entitlement Factors . 32 3. Contributions to Post-Secondary Expenses . 35 C. Facts Disclosed by the Record . 36 D. Assessment 37 1. Evidence for Continued Support 37 2. Some Evidence for Direct Payment of Children . 37 3. Inadequacy of the Evidence to Justify Continued Support 38 4. Failure to Contribute to Pre-Age 21 Post-Secondary Expenses . 39 5. Conclusion . 41 IV.

Summary . 41 V. Costs . 42 I. Background [ 7 ] The parties were married in June 1997 and separated in June 2001. [ 8 ] They have two children, Kristina, now age 23 (born 1999), and Shawna, now age 22 (born 2000). Since they are adults, I will refer to them collectively as the “daughters.” A.

Divorce Judgment and Corollary Relief Order [ 9 ] The parties were divorced by the November 30, 2004 Divorce Judgment and Corollary Relief Order of Justice Belzil (the Divorce Judgment). [ 10 ] Clause 2 of the Divorce Judgment provided that “the Plaintiff shall have sole custody of the ... children of the marriage” while clause 3 provided that the Defendant shall have “reasonable and generous access” to the children. [ 11 ] Clause 4 of the Divorce Judgment provided that: the Defendant shall pay to the Plaintiff the sum of $933 per month for the support of the children of the marriage … until the child shall attain the age of 18 years, becomes self-sufficient for a period of 3 months or sooner marries, whichever event shall first occur, provided however that if the child is in full-time attendance at a recognized educational institution, the payments will continue until the said child attains the age of 21 years and provided that support for a child attending a recognized educational institution shall only be for the period of time that the child is attending that institution in each year. [ 12 ] Clause 5 of the Divorce Judgment provided that: The Defendant shall pay to the Plaintiff eighty (80%) ( sic ) of all

Section 7 expenses as determined by the Child Support Guidelines. [ 13 ] The

preamble to the Divorce Judgment reflected that the Plaintiff had a guideline income of $31,656 and the Defendant had a guideline income of $68,900. B. Child Support from 2004 to 2011 [ 14 ] From 2004 until almost the end of 2011, the Defendant made child support payments without any issues arising.

C. Defendant’s Corporate Income [ 15 ] The Defendant earned income through a corporation, LB’s Earthwork Ltd. (Earthwork). (Some references to the corporation in the materials use the plural “Earthwork s .”) The evidence did not include corporate documents or Corporate Registry documents. There was no definitive evidence, then, of the corporate name, the shareholdings in the corporation, the directors of the corporation, or the date of incorporation. D.

Recalculation [ 16 ] The child support order embodied in the Divorce Judgment was registered with the Alberta Child Support Recalculation Program (CSRP). [ 17 ] In October 2011, the CSRP recalculated the Defendant’s child support payable based on his 2010 tax return information. His guideline income was set at $72,868, yielding child support of $1,053 per month payable as of December 1, 2011. [ 18 ] In October 2012, the CSRP recalculated the Defendant’s child support payable based on his 2011 tax return information.

His guideline income was set at $143,868, yielding child support of $2,018 per month payable as of December 1, 2012. This recalculation figured in the “effective notice” dispute. I’ll return to the recalculation below. E. Pre-Application Litigation Steps [ 19 ] The Plaintiff served a Notice to Disclose on the Defendant, filed November 13, 2014.

The record did not disclose any follow- up application by the Plaintiff. [ 20 ] Some disclosure activity occurred between September 2019 and June 2020: • On September 18, 2019, the Defendant requested the Plaintiff’s disclosure for 2017, 2018, and 2019 (Defendant’s June 28, 2021 affidavit at para 6) • On January 14, 2020, the Defendant provided his records to the Plaintiff for 2017, 2018, and 2019 (Defendant’s Concise Letter of July 21, 2021 (DCL 2021) at para 6). On May 5, 2020, the Defendant provided his records back to 2012 ( ibid. ).

In view of the Plaintiff’s subsequent application, I infer that corporate financial statements back to 2012 were provided. • On June 25, 2020, the Plaintiff provided (partial) records for 2016 to 2019 ( ibid. ). [ 21 ] On February 17, 2021, the Plaintiff filed the application for the retroactive increase in child support, with the recalculation effective January 1, 2012. The application also sought s. 7 arrears and ongoing s. 3 and s. 7 child support.

The Plaintiff filed a Disclosure Statement attaching her tax returns and notices of assessment for 2017, 2018, and 2019, as well as three recent pay stubs. [ 22 ] On April 1, 2021, Justice Michalyshyn granted a Consent Order respecting the deadline for the Defendant to file and serve a response to the Plaintiff’s application.

The Order required the Defendant to provide his 2020 year-end pay statement or T1, most recent pay statement, and corporate financial statements for 2020 (if available) by April 1, 2021. [ 23 ] On April 14, 2021, the Defendant cross-applied for a retroactive variation of the child support order decreasing child support payable from January 1, 2012.

The Defendant provided a Disclosure Statement attaching his tax returns and notices of assessment and re-assessment for 2018, 2019, and 2020, as well as financial statements for his corporation for 2018, 2019, and 2020. [ 24 ] In clause 1 of an Order granted on May 10, 2021, Justice Clackson ordered that: Commencing the 1 st day of May 2021 and continuing up to and including the 7 th day of September 2021, all s. 3 child support and all s. 7 expenses payable by the Defendant to the Plaintiff [are] hereby suspended and no support shall be payable by the Defendant.

Justice Clackson ordered that the matter be set for a Special Chambers application. [ 25 ] On March 24, 2022, the Defendant filed an update affidavit providing a breakdown of corporate expenses. The update affidavit provided summaries of corporate information from 2012 to 2021.

Earthwork financial statements from 2012 to 2020 and the Defendant’s personal tax information from 2012 to 2020 are attached to DCL 2021. [ 26 ] The Defendant’s personal 2021 notice of assessment is attached to the Defendant’s June 30, 2022 Written Argument (DWA 2022). [ 27 ] The 2021 financial statements for Earthwork are not on the record. F. Divorce Act [ 28 ] Both parties urged variation of the Divorce Judgment.

Their applications (the Defendant’s at least in part) were brought under s. 17 of the Divorce Act : 17(1) A court of competent jurisdiction may make an order varying, rescinding or suspending, retroactively or prospectively, (

a) a support order or any provision of one, on application by either or both former spouses [under s. 2, “support order” includes a child

support order] ....

(3) The court may include in a variation order any provision that under this Act could have been included in the order in respect of whichthe variation order is sought, and the court has the same powers and obligations that it would have when making that order.

(4) Before the court makes a variation order in respect of a child support order, the court shall satisfy itself that a change ofcircumstances as provided for in the applicable guidelines has occurred since the making of the child support order or the last variationorder made in respect of that order ....

(6.1) A court making a variation order in respect of a child support order shall do so in accordance with the applicable guidelines .... [29] Under s. 14 of the Federal Child Support Guidelines, 14 For the purposes of subsection 17(4) of the Act, any one of the following constitutes a change of circumstances that gives rise to themaking of a variation order in respect of a child support order: (

a) in the case where the amount of child support includes a determination made in accordance with the applicable table, any change incircumstances that would result in a different child support order or any provision thereof; (

b) in the case where the amount of child support does not include a determination made in accordance with a table, any change in thecondition, means, needs or other circumstances of either spouse or of any child who is entitled to support .... II. Payor’s Retroactive Recalculation Applications [30] The Defendant sought a recalculation of s. 3 child support payable as of January 1, 2012 and a recalculation of s. 7 expensespayable as of January 1, 2017. The Defendant also contended that child support was collected from him in violation of the DivorceJudgment and Justice Clackson’s order. A.

Retroactive Decrease in s. 3 Child Support to January 1, 2012 [31] Three sets of issues must be addressed concerning the Defendant’s application to decrease s. 3 support: • whether a material change in the Defendant’s income occurred • if there were a material change, the presumptive date for commencing the recalculation • if there were a material change, whether there is any reason to depart from the presumptive date for commencing therecalculation. 1. Material Change (

a) Aspects of Material Change [32] Justice Pentelechuk wrote as follows in Peters v Atchooay at para 115: [115] Before a court can vary a child support order, the applicant seeking the variation has the onus of first showing a change incircumstances; that is, a change sufficiently material, that if known at the time of the application, would have likely resulted in a differentorder: Willick v Willick, (SCC), [1994] 3 SCR 670 ... at 688; Colucci at para 59.

See s. 17(4) of the Divorce Act and s. 14 of the Guidelines. [33] For the purposes of a payor retroactive variation application, “material change” has two aspects. The first aspect is financial.The payor must demonstrate that: • the payor’s income materially, non-trivially, or significantly decreased from the income reflected in the order-to-be-varied • the decrease was continuous and not brief and isolated • the decrease was real and not “one of choice” or engineered by the payor. See Peters v Atchooay at para 118; Colucci at paras 113(1), 61. [34] The second aspect of material change is evidential.

Justice Martin stated in Colucci at para 62 that: [62] The payor must have disclosed sufficient reliable evidence for the court to determine when and how far their income fell, and toascertain whether the change was significant, long lasting, and not one of choice. A decision to retroactively decrease support can only bemade based on “reliable, accurate and complete information” (Earle, at para. 28).

The payor cannot ask the court to make findings onincome that are contrary to the recipient’s interests “while at the same time shielding information that is relevant to the determination oftheir income behind a protective wall” (Templeton, at para. 67; see also Tougher v. Tougher, 1999 ABQB 552, at paras. 14-15; Terry, atpara. 9). [emphasis added] See also Colucci at para 82; Peters v Atchooay at para 119.

(

b) Assessment (

i) Deemed Child Support [ 35 ] Child support was set by the Divorce Judgment but recalculation occurred under the CSRP. Under s. 55.31 of the Family Law Act , the recalculated amount was deemed to be the ordered amount: 55.31 Subject to

section 55.4, if the recalculated amount differs from the amount of child support currently required to be paid by at least the prescribed amount, the recalculated amount is deemed to be the amount of child support required to be paid under the child support order effective 31 days after the day on which the payor and the recipient are notified in accordance with the regulations under this Division respecting the recalculated amount. [ 36 ] There was no evidence that the Defendant applied under s. 55.41 to vary the amount set by recalculation. [ 37 ] Hence, the material change must have been from the last recalculated amount, based on an attributed guideline income of $143,868. (ii) Decrease in Income [ 38 ] If the Defendant’s personal tax information were considered in isolation, his income would be significantly less than the last recalculated amount, except in one year, 2017.

This decrease in income below the last recalculated amount would be a material change. [ 39 ] However, the “reality” of the Defendant’s income available for child support must be assessed in conjunction with his receipt of personal benefits from Earthwork. (iii) Disclosure of Complete Information [ 40 ] The Defendant provided Earthwork financial statements for 2017 to 2019 in January 2020, and (I infer) financial statements for 2012 to 2016 in May 2020. The financial statement for 2020 was provided in April 2021.

The 2021 financial statement was not in evidence. [ 41 ] The Defendant did not provide a form of “ Cunningham disclosure” until March 24, 2022 (more on this below). (iv) Conclusion [ 42 ] The Defendant did not provide information sufficient to permit the Plaintiff and the court to determine whether and how far the Defendant’s income available for child support fell below the level set in the child support order until, at the earliest, March 24, 2022 when Cunningham disclosure was provided. [ 43 ] Applying Colucci and Peters v Atchooay , the Defendant has established a material change only as of March 24, 2022, no earlier.

I recognize that this may seem a harsh and blunt result, but as Justice Pentelchuk explained in Peters v Atchooay , “insisting on financial disclosure before obtaining relief from child support obligations is grounded in solid policy considerations.” Those policy reasons, which I will not repeat, are set out in Peters v Atchooay at paras 121 and 122 . [ 44 ] The determination I have made respecting material change supports by itself the dismissal of the Defendant’s claim for retroactive variation for the January 1, 2012 to March 23, 2022 period.

As will be discussed below, I have found that no child support has been payable after September 2021. 2. Commencement Date for Recalculation (

a) Effective Notice and Formal Notice [ 45 ] The determination of the commencement date for recalculation relies on a distinction between “effective notice” and “formal notice.” (

i) Formal Notice [ 46 ] Formal notice of claimed recalculation is notice through filed and served application documents. (ii) Effective Notice [ 47 ] Effective notice of claimed recalculation is informal notice. In DBS v SRG , 2006 SCC 37 , Justice Bastarache wrote at para 121, in the context of a recipient’s variation application, that 121 .... By “effective notice”, I am referring to any indication by the recipient parent that child support should be paid, or if it already is, that the current amount of child support needs to be re-negotiated.

Thus, effective notice does not require the recipient parent to take any legal action; all that is required is that the topic be broached. Once that has occurred, the payor parent can no longer assume that the status quo is fair, and his/her interest in certainty becomes less compelling. See Colucci at para 86 .

[ 48 ] In a payor variation application, for informal notice to be effective, more than simply raising the issue is required. The payor knows his or her income circumstances. A payor’s effective notice must include information sufficient to permit the recipient to assess the payor’s claim meaningfully and to respond appropriately: Colucci at paras 88, 82, 86-87 ; Peters v Atchooay at para 127 ; Gray v Rizzi , 2016 ONCA 152 at para 62 .

In some instances, the payor’s objective personal circumstances (such as incarceration or serious illness) may demonstrate effective notice of a decreased ability to pay child support: Colucci at para 89 ; see Buckingham v Buckingham , 2013 ABQB 155 , Strekaf J, as she then was, at para 64(b). Otherwise, evidence of the payor’s changed financial position must be provided, whether the change arises from decreased income, new employment, or lost employment: Colucci at paras 89, 7, 119 ; Saindon v Demers , 2021 ABQB 972 , Labrenz J at para 20; Brown v Barber , 2016 ABQB 687 at para 28 .

Thus Justice Martin wrote in Colucci at para 113 (2) that “effective notice requires clear communication of the change in circumstances accompanied by the disclosure of any available documentation necessary to substantiate the change and allow the recipient parent to meaningfully assess the situation.” (

b) Presumptive Calculation Date [ 49 ] The presumptive calculation date assumes that the payor provided effective (informal) notice some time before bringing the formal application to decrease child support retroactively. [ 50 ] If the payor established a material change in circumstances, the presumptive date for commencing a retroactive recalculation (decrease) of child support is the date of effective notice, to a maximum of three years before formal notice. The presumptive recalculation date is not three years before effective notice.

The recalculation date is set by looking back from the date of formal notice to the date of effective notice. The date of effective notice will be the recalculation date, so long as the date of effective notice is within the period of three years preceding the date of formal notice: Colucci at paras 6, 80, 91, 113 (2); Peters v Atchooay at para 126 . (

c) Variations on Setting the Calculation Date [ 51 ] The relationship of the presumptive calculation date to effective and formal notice may vary. (

i) No Prior Effective Notice [ 52 ] If no effective notice preceded a formal notice and the first notice was service of application documents, the recalculation date would be set as of the date of formal notice: Colucci at para 95 ; Fleury v Fleury , 2009 ABCA 43 at paras 28 , 29, 31-33; Brown v Barber at para 29 ; Saidon v Demers at para 26.

This setting of the commencement date assumes that the formal notice provided sufficient information about the payor’s financial circumstances. (ii) Late Provision of Sufficient Disclosure [ 53 ] If no effective notice preceded formal notice and if formal notice was itself deficient by failing to provide sufficient disclosure supporting the decrease in payment, the recalculation date would be the date proper disclosure was provided, that is, a date falling after the date of formal notice: Colucci at paras 95, 113 (3); Saidon v Demers at para 28.

Justice Martin qualified this result in Colucci at para 95 : “However, if the payor can show a good reason for delayed disclosure, the court may vary back to the date of formal notice despite the delay. Payors facing such difficulties must be prepared to adduce evidence of their efforts to obtain the relevant documents in a timely fashion.” (iii) Delay Following Effective Notice [ 54 ] Even if effective notice preceded formal notice, if effective notice was provided too long before formal notice, the “effect” of the notice may be spent by the lack of action taken by the payor.

The longer the delay in commencing an application, the greater the potential reliance or expectation interest of the recipient respecting the unchallenged order: Colucci at para 92 ; Brown v Barber at para 35 ; Buckingham at para 64 . [ 55 ] At para 93 of Colucci , Justice Martin warned that: [93] The presumptive three-year limit allows the parties time to negotiate but recognizes that the payor must commence proceedings in a timely manner if negotiations fail in order to protect the certainty interests of the child and recipient .... [ 56 ] If effective notice is spent, the calculation date would be the date of formal notice, assuming that this notice provided sufficient information. (

d) Cunningham Disclosure [ 57 ] A critical issue in payor retroactive decrease cases for both the determination of material change and the calculation date is the degree of informational disclosure required when the payor earns income through a self-controlled corporation.

From a child support perspective, the T1 characterization of income may not fairly represent an economic position fed by unidentified, uncharacterized, and unvalued benefits received by the payor shareholder, benefits funded not by the payor but the corporation. [ 58 ] Since Justice Yungwirth’s decisions in Roseberry v Roseberry , 2015 ABQB 75 , rev’d other grounds 2015 ABCA 218 and Sweezey v Sweezey , 2016 ABQB 131 , with confirmation by the Court of Appeal in Cunningham v Seveny , 2017 ABCA 4 , it is now established that payors have an obligation to disclose sufficient information about benefits they receive from corporations they control to permit a proper determination of the amounts they actually have available to pay child support. [ 59 ] Justice Yungwirth wrote as follows in paras 95 and 96 of Roseberry :

[95] .... a spouse who is the controlling or sole shareholder of a corporation through which he/she earns his/her income, also has an obligation to provide a complete explanation for all of the expenses paid for by the corporation so that any personal benefit to or for the shareholder spouse (or other non-arm’s length persons or corporations) included in those expenses can be plainly seen . [96] Once that information has been provided, the onus is on the shareholder spouse pursuant to s 18(2) of the Guidelines to establish that such payments were reasonable , and failing that, those payments must be added to the pre-tax income of the corporation and considered in the s 18 analysis. [emphasis added] [ 60 ] Cunningham endorsed Justice Yungwirth’s approach (see, e.g., para 28) and the Court of Appeal stated the following at paras 22, 23, and 27, with paras 23 and 27 setting out the standard of reasonableness in this context: [22] In our view, the respondent did not fully comply with his disclosure obligations.

While his counsel has stated that he provided all financial statements required under section 21(1)(d)(

i) of the Guidelines , there was no indication that the respondent provided all of the information required under section 21(1)(d)(ii) - “a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the parent does not deal at arm’s length.” [23] The latter provision must also be interpreted broadly for child support purposes where a parent’s corporation or business undertaking is the primary vehicle through which he or she earns income.

It includes not only a requirement to provide a statement of all payments or benefits, but also a sufficient explanation to facilitate the recipient’s assessment of the reasonableness of these payments or benefits in the context of determining income available for discharge of child support obligations . [27] The content of required disclosure must be sufficient to allow meaningful review by the recipient parent, and must be sufficiently complete and comprehensible that, if called upon, a court can readily discharge its duty to decide what amount of the disclosing parent’s annual income fairly reflects income for child support purposes .

The issue is whether full deduction of an expense results in a fair representation of the actual disposable income of the party, and the court must balance the business necessity of an expense against the alternative of using that money for child support: Julien D Payne, “Some Notable Family Law Decisions from 2014 to 2015” (2015) 44:3 The Advocates’ Quarterly 271 at 295. [emphasis added] [ 61 ] In Sweezey at paras 47 and 48 , Justice Yungwirth provided an outline for reasonable disclosure: [47] .... The disclosure provided under s. 21(

f) must be sufficiently meaningful and clear to allow the other spouse, and the court, to draw the necessary conclusions. [48] As a general rule, the shareholder should provide at least the following: 1. a brief explanation concerning each payment category, including: a. the nature of the payment/expense; b. how it was calculated; c. why it was a reasonable corporate expenditure; d. whether any amounts paid or owing in relation to that category provided or resulted in a personal benefit to the shareholder or other non-arm’s length person (common examples of such expense categories in closely held corporations are vehicle, travel, promotion, phone, and insurance).

This would include an explanation for: i. what portion of the total expense formed the personal or non-arm’s length benefit; ii. how this was calculated; iii. a description of any services performed for the corporation by a non-arm’s length person (such as a new partner/spouse of the shareholder), and information regarding whether the salary s/he was paid for the services was commensurate with the market value of the services; and 2. documentation to support all of the above explanations, such as invoices and receipts regarding non-arm’s length payments. [ 62 ] I accept Justice Graesser’s caution that the sufficiency of a payor’s explanation must be assessed through the lens of common sense and in light of the principle of proportionality – the burden of complying with Cunningham disclosure should not outweigh the value of the benefits at issue (money spent on accountants is money no longer available for children).

See Tymko v Gilbert , 2020 ABQB 773 , Graesser J at paras 32-33. (

e) Assessment [ 63 ] In my opinion, the Defendant did not provide sufficient information about his claimed decreased ability to pay until he provided Cunningham disclosure in his March 24, 2022 affidavit. [ 64 ] In my opinion, the period for recalculating the Defendant’s overpayment commences effective March 24, 2022, assuming service as of that date. [ 65 ] I will consider whether effective notice occurred at some earlier dates. (i) 2012 CSRP Recalculation

[ 66 ] The Defendant considered the circumstances surrounding his response to the 2012 CSRP calculation to have provided effective notice to the Plaintiff. [ 67 ] This recalculation appears to have been prompted by a one-time deemed dividend received by the Defendant upon Earthwork transferring some land to him: see the Defendant’s June 28, 2021 affidavit at para 9. I need not decide whether the recalculation was or was not justifiable. [ 68 ] I infer that the Plaintiff was aware that the Defendant did not believe that the 2012 recalculation was correct.

The Defendant claimed that the Plaintiff “refused to cooperate:” ibid. [ 69 ] The Defendant suggested that the Plaintiff somehow blocked his ability to address the recalculation. [ 70 ] It is true that s. 55.3 of the Family Law Act provides that a payor and recipient may “agree in writing to waive a particular recalculation in accordance with the regulations under this Division.” The Plaintiff’s lack of cooperation precluded waiver but not other challenges to the recalculation.

The Plaintiff’s consent was not required for an application under s. 55.4. [ 71 ] The record did not show that the Defendant applied to vary the child support order under s. 55.4. [ 72 ] In his June 28, 2021 affidavit, the Defendant disputed the Plaintiff’s claim that he did not cooperate with the CSRP. The Defendant observed, correctly, that if a payor fails to provide updated information to the CSRP, the Director may apply for an order to determine the payor’s income (under s. 55.51(4)).

The Director, on the evidence, made no such application. [ 73 ] Exactly what occurred between the Plaintiff and Defendant in connection with the recalculation or between the Defendant and the CSRP cannot be established on the record, but the nature of those interactions is immaterial. The Defendant did not take steps to challenge the recalculation in 2012 or thereafter, until his cross-application some nine years later.

Whatever the interactions between the Plaintiff and Defendant may have been, the significance of any effective notice was lost by the passage of time and the Defendant’s failure to follow-up on any notice. [ 74 ] In any event, the Defendant did not disclose his corporate financial statements at or near the time of the CSRP recalculation and, on the record, provided no disclosure to the Plaintiff about any personal benefits he had received from Earthwork (bearing in mind that the Cunningham had not been decided in 2012). [ 75 ] And furthermore, what led to the recalculation was a deemed dividend arising from a particular transaction between the Defendant and Earthwork, not an attribution of personal benefits as contemplated in the Cunningham line of cases.

The circumstances giving rise to the recalculation were distinct from issues under s. 18 of the Guidelines and the amount of income available for child support. [ 76 ] I do not consider whatever occurred in 2012 surrounding the CSRP recalculation as amounting to effective notice for a retroactive decrease in child support. [ 77 ] Consider, by way of analogy, a circumstance discussed in Peters v Atchooay at para 128 : [128] In certain situations, clear communication of a desire to seek an adjustment may establish the effective date of notice.

Mr Atchooay argues that he provided Ms Peters with effective notice in 2016, when he sought her cooperation in having his driver’s license reinstated after it was suspended by Maintenance Enforcement. While Mr Atchooay indicated that lack of a license was holding him back and that “[w]ithout that piece of plastic I cannot make the money you know I’m capable of making”, he failed to disclose what his current level of income was and failed to clearly request an adjustment in his child support obligations.

This type of vague assertion, particularly absent provision of any financial disclosure, cannot constitute effective notice . [emphasis added] [ 78 ] The emphasized words could describe the recalculation circumstances as those circumstances appear on the record. (ii) September 9, 2019 Request for Disclosure [ 79 ] In my opinion, a request for disclosure is not, without more, effective notice of a proposal for a decrease in child support payments. It is only a request for information that may or may not contribute to a bid to decrease child support payments.

A request, further, does not provide information about the requester’s financial position. The Defendant’s September 2019 request for disclosure did not amount to effective notice. (iii) January 14 and May 2020 Record Disclosures [ 80 ] In my opinion, the provision of records, even including corporate records, is not without more effective notice of a proposal for a decrease in child support payments. The actual effect of providing the corporate records in this case was to prompt a claim for an increase in child support payments given corporate revenues.

It was not an obvious implication from the Defendant’s records that a decrease in child support would be sought. The Defendant’s disclosure of his corporate records in January and May 2020 was not effective notice. (iv) April 14, 2021 Cross-Application [ 81 ] The cross-application was formal notice of a claim to decrease child support. However, the application did not provide sufficient disclosure respecting the Defendant’s financial position.

The Defendant provided only general assertions about corporate costs and did not provide any explanations for particular benefits that he or non-arm’s length parties received. In his April 14, 2021 affidavit, he merely asserted that:

• he took only a “modest wage” as “I had to ensure the corporation had enough money to pay its bills and cover its costs ofoperation” (para 7) • “I would draw a reasonable wage from the corporation so that there was enough money within the business to covercontinuing operational expenses while I awaited payment” (para 17) • “I did not draw a managerial wage from the Corporation in 2018, 2019 or 2020 as it did not make enough revenue to coverits expenses” (he did not deny receiving some benefits) (para 20). [82] A similar level of assertion and lack of detail is found in the Defendant’s June 28, 2021 affidavit at para 8: 8.

There was a cost associated with the consulting work that I was doing, and I did not artificially lower my income when I filed mytaxes. I always had to ensure the corporation had money to continue operations while I awaited payment as a sub-contractor. I do notbelieve I acted unreasonably by making sure I could continue to earn a living to support my daughters. (

v) March 24, 2022 Update Affidavit [83] Only with the March 24, 2022 affidavit was information provided that at least approached the Cunningham disclosurestandard of sufficient completeness and comprehensibility permitting meaningful review by the recipient parent and permitting a court todecide the amount of the Defendant’s income fairly reflecting his income for child support purposes. [84] I will return to whether even this affidavit satisfied the Cunningham disclosure standard below. [85] Thus, the earliest date time justifying recalculation would be March 24, 2022, assuming service as of that date. 3.

Departure from the Presumptive Commencement Date [86] Is there any reason to depart from the presumptive commencement date for calculating any variation of the Defendant’s childsupport obligations? The discretion to depart from the presumptive commencement date must be exercised in all the circumstances,including the payor’s reasons for delay in bringing the variation application or providing effective notice, the payor’s conduct, thecircumstances of the children, and hardship to the payor: Colucci at paras 6, 113(4); Peters v Atchooay at para 130. (

a) Reasons for Delay [87] The Defendant provided no reasons for delay in his affidavits. Justice Martin outlined “understandable reasons for delay” inColucci at paras 98-99: [98] Understandable reasons for delay may include health problems or other difficulties that prevent the payor from confronting thesituation, or an unwillingness to disrupt a fragile parent-child relationship (D. Smith, “Retroactive Child Support — An Update” (2007),26 C.F.L.Q. 209, at p. 239).

The payor may also lack the financial or emotional wherewithal to proceed with the matter .... [99] In some cases, the recipient’s conduct may be at play, such as where the recipient threatens to withhold access or uses othertactics to discourage the payor from applying to reduce support. [88] Nothing like the types of circumstances described by Justice Martin was supported by the Defendant’s evidence. (

b) Payor’s Conduct [89] The payor’s conduct as it bears on delay may be assessed from different perspectives. [90] On the one hand, the payor may have complied with the governing court order and the payor, to that extent, did not attempt toevade his or her obligations.

Justice Martin commented as follows in Colucci at para 103: [103] The court may also consider whether the payor made voluntary payments against the arrears, continued to pay in accordance withtheir ability to pay, cooperated with enforcement agencies, and showed a willingness to support the child rather than evading childsupport obligations (see DiFrancesco v. Couto (2001), (ON CA), 56 O.R. (3d) 363 (C.A.), at para. 25).

It should gowithout saying that a person who is subject to a child support order must “comply with the order until it is no longer in effect”, and thisprinciple is now expressly enshrined in the Divorce Act “[f]or greater certainty” (s. 7.5). Genuine efforts to continue paying as much asthe payor can will show good faith and a willingness to support the child. [91] On the other hand, the payor’s performance of the disclosure obligation remains important to the assessment of the payor’sconduct.

While diligent payment reflects better on a payor than sporadic payment or non-payment, diligent known underpayment doesnot count strongly in a payor’s favour in the recalculation assessment.

Thus, Justice Martin wrote in Colucci at para 102 that [102] The payor’s efforts to disclose and communicate will often be prominent considerations in assessing the payor’s conduct in thecontext of an application for a retroactive decrease of support. [92] Justice Pentelechuk wrote as follows at para 122 of Peters v Atchooay: [122] The entire family law system benefits when parents abide by their fundamental disclosure obligation. This allows for timelyadjustment – up or down – with resultant saving of judicial and public resources.

It facilitates children receiving the proper amount ofsupport and ensures arrears do not accumulate based on inaccurate financial information. In short, the system should disincentivize bothavoiding child support obligations and ignoring court processes. Permitting a payor to seek relief from the courts, when they decide it

appropriate or convenient , regardless of their failure to provide disclosure, undermines the efficiency and effectiveness of the family law system, and is incongruent with the modern approach to child support and the renewed focus on the importance of timely and accurate financial disclosure .... [emphasis in original] [ 93 ] The Court of Appeal’s observations in Goulding v Keck , 2014 ABCA 138 at para 44 are relevant: [44] DBS says that failing to disclose a significant increase in the payor’s income may be “blameworthy conduct”.

No level of conduct that prejudices the rights of the child can be encouraged ( DBS at para 107 ). That may be the case not merely where a payor intimidates or lies to the recipient parent, but also “where (s)he withholds information” ( DBS at para 125 ). Since DBS , many courts have held that a failure to disclose amounted to “blameworthy conduct”, weighing heavily in favour of a retroactive award ....

The payor’s subjective intention is rarely relevant - the real question is whether the payor’s conduct had the effect of privileging his or her interests over the child’s right to support. [emphasis in original] Goulding v Keck concerned a recipient’s application not a payor’s application. But if failure to disclose “weighs heavily” in favour of a retroactive increase, a failure to disclose “weighs heavily” against a retroactive decrease. [ 94 ] The payor conduct factor has aspects that favour the Defendant.

The Defendant had at least expressed dissatisfaction with the 2012 CSRP recalculation but he continued to pay child support. He did not seek to avoid his obligations.

He did not miss payments and had not accumulated arrears. [ 95 ] However, again, the Defendant did not make adequate efforts to disclose or communicate with the Plaintiff about his financial situation, particularly as regards income available to him for child support as a result of corporate benefits received until very late in the litigation process. [ 96 ] Despite the laudable features of the Defendant’s conduct, I do not consider his conduct as a whole, that is, considered in all its aspects, as supporting any deviation from the presumptive commencement date for variation. (

c) Circumstances of the Children [ 97 ] The “circumstance of the children” factor also has several aspects. [ 98 ] A child being currently in need of support in excess of a recalculated amount would count against a decrease in support.

Para 104 of Colucci states that “[i]f the child has experienced hardship or is currently in need, this factor militates in favour of a shorter period of retroactivity.” [ 99 ] In this case, the evidence does not establish current need or past hardship for the daughters. [ 100 ] If the daughters were still minors living with the Plaintiff, a retroactive decrease in child support would have the effect of diminishing the Plaintiff’s resources for supporting the children. The harm to the children would count against a decrease in support.

See Colucci at para 105 . [ 101 ] As will be discussed further below, the daughters’ connection to the Plaintiff is transient and diminishing. [ 102 ] The daughters had the advantage of what the Defendant contended was an improperly high level of support. The recalculation would not deny the daughters the benefit of the support they already received.

Now, after the daughters have benefited, the Defendant is seeking to be paid back not by them but by the Plaintiff. [ 103 ] But this leads to yet another aspect of this factor, described at paras 105 and 106 of Colucci : [105] ... whether the retroactive decrease would result in an order requiring the recipient to repay support to remedy an overpayment .... [106] In cases involving claims of overpayment, it will rarely be appropriate, given the recipient’s absence of knowledge, to retroactively decrease support to a date before the recipient could have expected that child support payments received from the payor might need to be repaid at some future date ....

It should be considered whether a payor through a long-standing failure to challenge a child support order and failure to disclose his financial interest fully should be excused from the reasonable expectations his conduct (his omissions) produced.

I am put in mind of Justice Kerans’ comment that “in very general terms, one clear principle that emerges is that we regulate voluntary relationships by regard to the expectations raised in the mind of a party by the word or deed of the other , and which the first party ordinarily would realize it was encouraging by its words and deeds:” Westfair Foods Ltd v Watt , 1991 ABCA 122 , 1991 CarswellAlta 63 at para 26 (CarswellAlta). [ 104 ] The comments of the Court of Appeal in Fleury at paras 29, 31-32 , denying a retroactive recalculation sought by a payor, are instructive: [29] The mother had no reason to believe that she faced an award against her for overpayment of child support until after the application was in progress.

Prior to that time, she was entitled to accept the support payments as being made pursuant to agreement and confirming court orders .... [31] .... In the meantime, the payments were not paid under protest or with any warning that the father intended to seek a retroactive adjustment. Nor did the father make disclosure of his tax returns or other financial information prior to the application. [32] In short, the mother was never put on notice that the child support payments being made to her were subject to repayment.

The father knew his own financial circumstances, and no reasonable excuse has been provided as to why he did not earlier alert the mother as

to his financial circumstances and his intention to seek to recover the child support that he was paying to her. Certainly, the continuation of his expensive lifestyle gave no indication that he would be seeking to recover child support payments made to the mother. [ 105 ] The Defendant sought recalculation back to 2012. I have found that the 2012 CRSP cannot be regarded as notice respecting the Defendant’s overall financial position. It concerned the financial implications of a specific corporate transaction. No disclosure and no applications followed the 2012 recalculation.

The Defendant did not even request disclosure until 2019 and did not provide some disclosure until 2020. I have found that his Cunningham disclosure did not occur until 2022. The Plaintiff, in Fleury’s words, had no notice that the Defendant’s child support payments were subject to repayment. In my opinion, it would be highly unfair to the Plaintiff to spring a repayment obligation on her now, particularly one extending back to 2012. (

d) Hardship to the Payor [ 106 ] Hardship to the payor is a final factor. According to Justice Martin at para 107 of Colucci : [107] ... The payor must adduce evidence to “establish real facts” supporting a finding of hardship ( Goulding , at para. 57 ). Bald assertions are not enough ( ibid ).

The payor must also provide a complete picture of their financial situation, including income, assets and debts .... [ 107 ] The Defendant did not adduce evidence to establish hardship. [ 108 ] Further, para 108 of Colucci states that: [108] A showing of hardship will not automatically justify a departure from the presumed date of retroactivity. Hardship carries much less weight where brought on by the payor’s own unreasonable failure to make proper disclosure and give notice to the recipient ( D.B.S. , at para. 116 ).

Hardship to the payor must also be viewed in the context of hardship to the recipient and child if the court were to extend the period of the retroactive decrease ( Goulding , at para. 56 ). It is a holistic and relative assessment ( Michel , at para. 100, per Martin J.). (

e) Assessment [ 109 ] The main factor supporting the Defendant’s claim for recalculation is his commitment to paying what the Divorce Judgment and the recalculation required. [ 110 ] This factor is in turn supported by the daughters no longer living with the Plaintiff, suggesting that they would not be prejudiced by a recalculation. [ 111 ] The Defendant, though, did not provide evidence supporting reasons for delay. His own failure to provide adequate information and his own failure to take litigation steps led to the prolongation of what he alleges was overpayment.

The financial harm to the Plaintiff would be profound. The Defendant provided notice of his intention to seek recalculation very late. He did not provide the requisite disclosure information until 2022. He induced reasonable expectations that payment according to the Divorce Judgment and the 2012 recalculation would continue. He cannot now resile from the expectations he induced. [ 112 ] I find that there should be no departure from the presumptive commencement date for recalculation. 4.

Fairness to the Defendant [ 113 ] Is the Defendant being treated unfairly, because of the Plaintiff’s abandonment of her recalculation claim? [ 114 ] If the Plaintiff had persisted with this claim, the Defendant could have established what he was actually earning over the periods in question. [ 115 ] However, while evidence of the Defendant’s income and benefits may be been relevant to rebut the Plaintiff’s claim, even if the Plaintiff’s claim would have been dismissed, that would not have the consequence that the Defendant’s child support obligations would be recalculated.

The Defendant’s application is distinct from the Plaintiff’s. Her lack of success would not have entailed his success. Her lack of success would have meant that she would not have obtained an increase of child support, not that child support should be decreased. The Defendant would still have had to deal with the effective notice and lack of Cunningham disclosure matters that have shut down his claim. These defects in his claim would have precluded a decrease in child support. [ 116 ] The Defendant is no worse off than if the Plaintiff had pursued her claim and been unsuccessful.

He remains now in the very same position that he would have been in had she pursued her claim. 5. Present Position of the Defendant [ 117 ] The dispute between the parties concerns the Defendant’s income available for child support. [ 118 ] I have found below that no further child support is payable by the Defendant at this time. Child support for Kristina terminated under clause 4 of the Divorce Judgment when Kristina turned 21 in 2020 and for Shawna when she turned 21 in 2021.

The earliest date for recalculation of the Defendant’s income was in 2022, that is to say, after child support ended. [ 119 ] Hence, there is no need for me to make a determination of the Defendant’s income available for paying child support since no child support is payable. [ 120 ] I do provide the following observations.

(

a) Current Income [ 121 ] It appears that the Defendant’s total income is levelling off at between about $100,000 to $105,000 per year: 2018, $105,374; 2019, $100,000; 2020, $102,703; 2021, $103,600. Personal benefits from Earthwork have ranged from a low of $4,614 in 2021 to $9,835 in 2018. (

b) Comments on the Defendant’s Cunningham Disclosure [ 122 ] The Defendant has not disclosed Earthwork’s 2021 financial statements (this is not a criticism since these may not have been available in time for filing deadlines).

Inferences about available income could be drawn from the most recent financial statements but those inferences would have to be reviewed in light of the 2021 financial statements. [ 123 ] Audited financial statements are not necessary for Cunningham disclosure, contrary to the Plaintiff’s suggestion. [ 124 ] The fact that the Earthwork financial statements were prepared by the company accounting firm does not preclude use for Cunningham disclosure.

The Court of Appeal stated in Cunningham that [35] Simply put, parties ought not to be put to time-wasting, money-draining line-by-line justifications of every dollar that has been spent. In keeping with the foundational rules, pre-trial disclosure must not become a process that wholly consumes the very parental resources that otherwise would be available for child support. Cunningham disclosure does not have to meet the evidential standards for an expert’s report for trial.

See the parenthetical comment in Cunningham at para 34 : “(Or, had this case involved a larger law partnership, then relevant and material disclosure might have been most quickly and cheaply achieved by having the managing partner provide a letter confirming that expenses claimed in the partnership financial statements conferred no personal benefit on the disclosing parent.)” If there were concerns with the report, as the Court of Appeal noted in Cunningham at para 33 , pre-trial questioning could be pursued.

The question would be whether the cost of this sort of process would be justified by the likelihood of economic benefit. A less expensive starting point would be a request for further and better disclosure from the recipient’s counsel, specifying the alleged deficiencies. [ 125 ] Cunningham disclosure does not itself require a sworn statement of income, assets, and liabilities. That would form part of a response to a Notice to Disclose. However, the Plaintiff’s last Notice to Disclose was sent in 2014.

I was not directed to any follow-up application by the Plaintiff or any relevant court order respecting the Defendant’s response. [ 126 ] Justice Yungwirth had referred to “documentation to support all of the above explanations, such as invoices and receipts regarding non-arm’s length payments:” Sweezey at para 48 . These were not provided by the Defendant. I suspect that the Plaintiff was not concerned with every bit of paper supporting the Defendant’s expenses (this might fit under the “money-draining line-by-line justifications of every dollar that has been spent” classification).

If expenses related to non-arm’s length transactions, though, invoices and receipts would be required: see Zdyb v Zdyb , 2017 ABQB 44 , Graesser J at para 63. If there were other suspect expenses or expenses that required some further justification, or expenses relating to non-arm’s length transactions, I would consider it reasonable for those expenses to be identified so the specific back-up documentation could be provided, or if not provided, could be ordered to be provided.

These sorts of steps should, if possible, be completed before a Special Chambers application is heard. [ 127 ] The Defendant’s Cunningham disclosure did not provide explanations for each payment category, stating why the expenses were reasonable corporate expenses. Instead, the focus was on expenses with a personal benefit component.

Neither did the disclosure provide much detail on how personal benefit components were calculated, besides calling the quantifications “estimates.” That may, I realize, be the maximum feasible degree of precision. [ 128 ] Had earlier years been at issue, when Earthwork was a going concern in the oil patch, greater narrative about what assets and expenses were required for a “consulting” business would have been required.

The Cunningham disclosure did not provide an account of Earthwork’s consulting business that would have permitted a court to assess whether expenses were reasonably connected to the business. [ 129 ] The author of the disclosure should assume that the reader knows nothing about the nature of the business and provide enough detail so that the financial statement entries are embedded in real life. This does not require a lot of language.

I have had self-represented payors explain very succinctly why, for example, certain types of equipment were necessary for a construction business or why a type of vehicle and the mileage it would incur were necessary for attending to do repairs at wellheads. (

c) Retained Earnings [ 130 ] A more significant issue, if child support had remained a live obligation, would have concerned Earthwork’s retained earnings. Again, we lack the 2021 financial statements, but in 2020 Earthwork showed retained earnings of $248,027. [ 131 ] I recognize that Miller v Joynt directs at paras 27 and 30 that pre-tax income and not retained earnings is the starting point for a determination of income available for child support purposes under s. 18(1)(

a) of the Guidelines . Looking at retained earnings involves a shift in focus from earnings to assets: McCarty v McCarty , 2016 ABQB 91 at para 112 . It also involves a shift from s. 18 to s. 19(1)(

e) of the Guidelines : 19(1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following: .... (

e) the spouse’s property is not reasonably utilized to generate income .... [ 132 ] I also recognize that retained earnings are not necessarily money in the bank but have a more notional accounting existence:

Miller v Joynt at para 27 (“Retained earnings are the result of subtracting from pre-tax earnings income tax and shareholder dividends,and other changes to the capital accounts”); Nykiforuk v Richmond, 2007 SKQB 433, Ryan-Froslie J at para 22: Retained earnings are a shareholder’s “equity” in the corporation (its assets less its liabilities). They do not represent “cash” available fordistribution, nor do they reflect the pre-tax income of the corporation.

In REG v TWJG, 2011 SKQB 269 at para 154, Justice Ryan-Froslie stated that “Retained earnings are the accumulated profits of thecorporation after tax and may include capital, non-cash assets.” In Russell v Ullett Russell, 2021 ABQB 769 at para 57, Justice Ashcroftwrote that [57] Retained earnings are the accumulated profits of the corporation after tax and constitute the equity in a corporation: Potzus vPotzus, 2017 SKCA 15 at para 92.

As entered on financial statements, however, retained earnings do not necessarily consist of cash orany particular assets owned by the corporation; they are not an asset that can be attributed to the controlling shareholder, but may be asignificant factor in determining the financial viability of a corporation: Bear at para 30. While retained earnings are a barometer of thecorporate health and economic resilience of a corporation, they are not directly factored into the

section 18 income attribution analysis orconsidered as an income source for child support purposes: Potzus at para 94. See also Battaglini v Battaglini, 2020 ABQB 665, Feth J at para 90. [133] As Justice Feth has warned, a danger with basing child support determinations on retained earnings, given the contribution ofretained earnings to corporate value, is “negatively affecting an orderly division of the [corporate] asset” for division of family propertypurposes: Battaglini at para 91. [134] I further recognize that retained earnings would represent the residue of past pre-tax corporate income.

Insofar as a payor’sincome available for child support were calculated based on pre-tax corporate income, there should not be recourse as well to retainedearnings since that would in effect “tax” the payor twice for the same income or “double-dip.” [135] However, if, as in this case, a payor controls a corporation that has retained earnings, the payor’s income for child supportpurposes has not been based on corporate pre-tax income, and the retained earnings are represented by some cash or equivalent held bythe corporation, the amount of the retained earnings may be available to the payor to pay child support.

What is needed, as part ofCunningham disclosure, is an explanation for why the corporation must have the retained earnings, why the corporation cannot pay outthese funds to the payor. [136] In Battaglini at paras 83, 84, and 89 Justice Feth described the general test and approach to the assessment of whether retainedearnings should be considered in determining income available for child support: [83] The general s 19(1)(

e) test is whether the spouse’s “property has been utilized to generate income in a manner that a ‘reasonablyprudent’ businessperson would, keeping in mind the need for the funds for legitimate business objectives”: Mollot v Mollot, 2006 ABQB249 at para 63 ... aff’d by 2007 ABCA 183 and McCarty v McCarty ... at para 254 .... [84] The Courts recognize numerous legitimate business reasons for retaining earnings within a corporation.

Examples include: tooffset net income losses in subsequent years, to satisfy the requirements of lending institutions or to acquire or replace equipment andinventory: Morley [v Morley, , 176 Sask R 287] at para 9; Bembridge [v Bembridge, 2009 NSSC 158] at para 40;and... Mollot at paras 64 and 65. [89] Section 19(1)(

e) will only apply if it can be shown that the payor spouse has caused the corporation to unduly retain earnings:Morley at para 10 and Blaine v Sanders, 2000 MBQB 13 at paras 34 and 35. See also Damphouse v Damphouse, 2020 ABQB 101, Loparco J at paras 92, 93; Stockall v Stockall, 2020 ABQB 229, Richardson J atpara 40 (“Likewise, I am not inclined to include half (or any part) of the retained earnings to increase Mr.

Stockall’s guideline income asI find his explanation for why the earnings were retained is reasonable and this decision was for a valid and prudent corporate purpose.As well, in 2017, the whole of the retained earnings for 2016 was withdrawn. However, this amount will be captured in the matrimonialproperty division”). [137] Justice Chappel provided a useful checklist of information relevant a s. 18 assessment but also to the contribution of retainedearnings to income available to pay child support in Thompson v Thompson, 2013 ONSC 5500 at para 92: [92] A review of the case-law relating to

section 18 indicates that courts have considered the following factors in determining whetherall or a portion of a corporation’s pre-tax income should be included in a party’s income:

a) The historical pattern of the corporation for retained earnings. [I note Justice Feth’s comment at para 87 of Battaglini: I infer frompast practice some reasonably prudent operational need.”]

b) The restrictions on the corporation’s business, including the amount and cost of capital equipment that the company requires.

c) The type of industry the corporation is involved in, and the environment in which it operates.

d) The potential for business growth or contraction.

e) Whether the company is still in its early development stage and needs to establish a capital structure to survive and growth.

f) Whether there are plans for expansion and growth, and whether the company has in the past funded such expansion by means ofretained earnings or through financing.

g) The level of the company’s debt.

h) How the company obtains it financing and whether there are banking or financing restrictions.

i) The degree of control exercised by the party over the corporation, and the extent if any to which the availability of access to pre-tax corporate income is restricted by the ownership structure.

j) Whether the company’s pre-tax corporate income and retained earnings levels are a reflection of the fact that it is sustained primarily by contributions from another related company.

k) Whether the amounts taken out of the company by way of salary or otherwise are commensurate with industry standards.

l) Whether there are legitimate business reasons for retaining earnings in the company. Monies which are required to maintain the value of the business as a going concern will not be considered available for support purposes. Examples of business reasons which the courts have accepted as legitimate include the following: (

i) The need to acquire or replace inventory; (ii) Debt-financing requirements; (iii) Carrying accounts receivable for a significant period of time; (iv) Cyclical peaks or valleys in cash flow; (

v) Allowances for bad debts; (vi) Allowances for anticipated business losses or extraordinary expenditures; and (vii) Capital acquisitions. [footnotes omitted] [ 138 ] The distinction between operating corporations and holding corporations is important. In JDL v TLGM , 2019 ABQB 572 at paras 53 and 54 , Kendell J added back to a payor’s income 100% of undistributed pre-tax income held in holding corporations as there was no legitimate business reason why the funds could not be withdrawn. [ 139 ] Earthwork is a holding corporation now.

The Defendant did not provide a justification for not including the value of the retained earnings as income available to pay child support for his daughters. If I had concluded that child support continued to be payable for the daughters, I would have looked to the retained earnings to determine the amount of income the Defendant had available to pay child support. [ 140 ] But again, since no child support is payable at this time, I need not determine whether all or some of the value of the retained earnings should be used to determine the quantification of the Defendant’s child support obligations. B.

Retroactive Decrease in s. 7 Payments to September 1, 2017 [ 141 ] The Defendant sought recalculation of s. 7 expenses back to September 1, 2017. These expenses were not detailed on the record but would appear to concern post-secondary expenses for the daughters.

The recalculation would have required the variation of clause 5 of the Divorce Judgment specifying that the Defendant was responsible for 80% of s. 7 expenses. [ 142 ] The Defendant’s claim must fail for the reasons provided respecting the s. 3 child support. [ 143 ] Determining the Defendant’s appropriate proportional contribution to s. 7 expenses requires determining his income as compared to the Plaintiff’s income. But the Defendant provided the requisite information concerning his income in March 2022. The recalculation could not commence earlier than that.

There was no indication on the record that s. 7 expenses have been paid by the Defendant on the basis set out in the Divorce Judgment since March 2022. There are, then, no s. 7 expenses to be recalculated. [ 144 ] It follows that I need not address the issue of the imputation of income to the Plaintiff over any period prior to March 2022. C.

Unauthorized Collection of s. 3 Child Support [ 145 ] The Defendant’s claim about unauthorized collection and payments of child support stands on a different footing than the personal benefit-related and proportional contribution claims. [ 146 ] Counsel did not segregate the legal nature of this claim from the other claims. My view of the legal nature of this claim differs from counsel’s. I am in Mian territory here, since argument relating to the points I shall raise was not made by counsel. I should, though, explain my understanding of this claim and the approach for dealing with this claim. 1.

Foundation for the Claim (

a) Clause 4 of the Divorce Judgment [ 147 ] This claim relies primarily on clause 4 of the Divorce Judgment: the Defendant shall pay to the Plaintiff the sum of $933 per month for the support of the children of the marriage … until the child shall attain the age of 18 years, becomes self-sufficient for a period of 3 months or sooner marries, whichever event shall first occur, provided

however that if the child is in full-time attendance at a recognized educational institution, the payments will continue until the said child attains the age of 21 years and provided that support for a child attending a recognized educational institution shall only be for the period of time that the child is attending that institution in each year. [ 148 ] To this point, save for the amount of child support payable, this clause remains unvaried and operative. [ 149 ] Three time periods for the two daughters are important. First, the period up to just before a daughter’s 18 th birthday.

Second, the period between age 18 and 21 (assuming full-time attendance at a recognized educational institution). Third, the period commencing on the daughter’s 21 st birthday. [ 150 ] During the first period, s. 3 child support is paid monthly. During the second period, s. 3 child support is paid during “the period of time the child is attending that institution in each year,” e.g., not over the summer break. [ 151 ] Upon reaching age 21, s. 3 support ceases (according to the terms of clause 4). (

b) Kristina [ 152 ] Kristina turned 18 in 2017. [ 153 ] Hence, in 2017, support should not have been payable by the Defendant for July and August (high school would have concluded in June, University would not have begun until September). [ 154 ] However, Exhibit A to the Defendant’s June 28, 2021 affidavit shows that MEP collected support payments of $2,018 in each of July and August, 2017. See para 4 of this affidavit as well. [ 155 ] In 2018 and 2019, support would not have been payable for Kristina during the four summer months of May to August.

The evidence did not support a finding that Kristina was in a spring, summer, or intersession program during these periods. In both years, $2,018 was paid by the Defendant for each of May, June, July, and August. [ 156 ] In 2020, Kristina turned 21. According to clause 4, s. 3 support for her ended and so the last payment for her should have been for April 2020. Exhibit A does appear to show a drop in monthly s. 3 payments to $1,251, so support ceased to be collected for Kristina. (

b) Shawna [ 157 ] Shawna turned 18 in 2018. [ 158 ] In 2018, support should not have been payable for Shawna for July and August. However, as indicated, $2018 (support for both daughters) was paid in July and August 2018. [ 159 ] In 2019, support should not have been payable for Shawna for May to August. Again, as indicated, $2018 was paid by the Defendant in July and August 2019. [ 160 ] In 2020, support should not have been payable for Shawna for May to August. And again, $1,251 was paid by the Defendant for these four months. [ 161 ] In 2021, Shawna turned 21. (

c) Justice Clackson Order [ 162 ] On May 10, 2021, Justice Clackson ordered that Commencing the 1 st day of May 2021 and continuing up to and including the 7 th day of September 2021, all s. 3 child support and all s. 7 expenses payable by the Defendant to the Plaintiff is hereby suspended and no support shall be payable by the Defendant. [ 163 ] By operation of clause 4 of the Divorce Judgment and under clause 1 of Justice Clackson’s order, no support was payable by the Defendant for May 1, 2021, through to September 7, 2021. [ 164 ] Nonetheless, Exhibit C to the Defendant’s June 28, 2021 affidavit shows that support in the amount of $1,251 was paid in May and June 2021. (

d) No Further Payments [ 165 ] On the evidence, the overcollection ceased as of April 30, 2021. The Defendant made no MEP-enforced payments of s. 3 support for either daughter after this time. (

e) Overpayment from 2017 to 2021 [ 166 ] In 2017, the Defendant paid two months of support relating to Kristina not authorized by the Divorce Judgment (support was payable to Shawna for these months because she was under 18). [ 167 ] In 2018, the Defendant paid four months of support relating to Kristina and two months of support relating to Shawna (July and August should have attracted $0 in payments) not authorized by the Divorce Judgment.

[ 168 ] In 2019, the Defendant paid four months of support relating to Kristina and Shawna (May to August should have attracted $0 in payments) not authorized by the Divorce Judgment. [ 169 ] In 2020, the Defendant paid four months of support relating to Shawna (May to August should have attracted $0 in payments) not authorized by the Divorce Judgment. [ 170 ] In 2021, the Defendant paid two months of support relating to Shawna (May and June) not authorized by the Divorce Judgment or Justice Clackson’s order. [ 171 ] In total, MEP collected 22 months of unauthorized payments from the Defendant. [ 172 ] There are some complications respecting the valuation of these 22 months. [ 173 ] First, the table amounts for the number of children does not turn on a “simple multiple” of children (child support for two children is not twice as much as for one).

See, e.g., Formula for the Table Amounts Contained in the Federal Child Support Guidelines: A Technical Report (Justice Canada), https://www.justice.gc.ca/eng/rp-pr/fl-lf/child-enfant/1997_1/p1.html. For months in which support was payable for only one child, the amount payable is not simply the amount for two divided by two. [ 174 ] Second, the Defendant’s position had an additional layer. He also overpaid because his guideline income at the material times was less than the guideline income corresponding to the child support payments made.

It follows that even the payments he was obligated to make were over-valued. Revisiting the Defendant’s income for the purpose of decreasing the amount of child support he should have been paying is the same retroactive recalculation issue already addressed. Since I have found that effective notice was in March 2022, effective notice came too late to recalculate the child support payable over the period in question. [ 175 ] Nonetheless, the Defendant’s evidence shows that amounts were paid that were not required to have to been paid and should not have been collected. 2.

Nature of the Claim [ 176 ] I said that this claim was not like the Defendant’s other claims. By that I mean that this claim is not a recalculation claim. The claim does not depend on a variation of a court order. The claim does not depend on an order being changed but on two orders that already existed. The claim is based on payments actually made that should not have been collected or received. [ 177 ] The precise mechanism of the collection of the payments from the Defendant was not elaborated in evidence.

These may have been direct withdrawals as contemplated by s. 2.1(2) of the Maintenance Enforcement Regulation . I will not speculate. These were amounts considered owing by MEP and therefore enforceable and I assume that the amounts were transferred to the Plaintiff. [ 178 ] In my opinion, this claim is restitutionary. I do not know if the Defendant paid because of mistake, but MEP does appear to have been mistaken as to what payments it could collect.

MEP, the Defendant would argue, had no legal right to extract payment from him and the Plaintiff had no legal right to receive payment from him. [ 179 ] I am not suggesting that the Defendant would succeed in this claim. [ 180 ] If the Defendant’s claim is restitutionary, the claim would be subject to ordinary limitations rules.

The general rule is set out in s. 3(1) of the Limitations Act : 3(1) Subject to subsections (1.1) and (1.2) and sections 3.1 and 11, if a claimant does not seek a remedial order within (a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known, (

i) that the injury for which the claimant seeks a remedial order had occurred, (ii) that the injury was attributable to conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, or (b) 10 years after the claim arose, whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim. [ 181 ] There is a risk to the Defendant (if my approach is correct) that even if he commenced an action immediately respecting the overpayments/overcollection, some elements of his claim may be statute-barred under s. 3(1)(a). [ 182 ] I also note s. 5.1 of the Maintenance Enforcement Act : 5.1 No action lies against the Director or a person acting for or under the direction of the Director for anything done or omitted to be done in good faith in the exercise or performance or the intended exercise or performance of a power, duty or function under this Act.) In my opinion, I cannot adjudicate the overpayment claim.

First, counsel did not advance this claim in the terms that I have described it – and, indeed may contest my characterization of the claim. Second, I lack a procedural basis to do so.

3. Procedural Basis for Considering a Restitutionary Claim [ 183 ] If the Defendant’s claim should be characterized as I have described it, it is a type of unjust enrichment claim. The Defendant’s argument would be, essentially, that there was no juristic reason supporting the MEP’s collection and the Plaintiff’s receipt of the benefit of child support payments not provided for by the Divorce Judgment or permitted by Justice Clackson’s order. [ 184 ] But a claim for unjust enrichment must be made by a statement of claim. See rule 12.10. [ 185 ] Further, for me to adjudicate this claim in the present procedural context would amount to a form of

summary judgment procedure not countenanced by the rules. 4. Conclusion and Next Steps [ 186 ] I have offered observations respecting the Defendant’s “unauthorized collection of child support” claim but I decline to adjudicate this claim at this time. Again, I have raised new issues so I cannot come to any final determinations. [ 187 ] The timelines for submissions respecting this claim will be set out below. III.

Post-Secondary Education Expenses [ 188 ] The Plaintiff sought: • ongoing child support for Kristina and Shawna “for so long as the children of the marriage are attending post-secondary education” • payment for the last two years of post-secondary education on a proportionate basis. In her February 17, 2021 application, the Plaintiff characterized these claims as claims for the Defendant to pay s. 7 child support in an amount proportionate to his guideline income, and for the Defendant to pay s. 7 arrears. These claims were clarified in the application grounds at para

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