2014 NBCA 67, 2014 NBCA 67

COURT OF APPEAL OF COUR D’APPEL DU NEW BRUNSWICK NOUVEAU-BRUNSWICK 134-13-CA D.E. APPELLANT D.E. APPELANT - and - - et - L.E. RESPONDENT L.E. INTIMÉE D.E. v. L.E., 2014 NBCA 67 D.E. c.

L.E., 2014 NBCA 67 CORAM: The Honourable Justice Larlee The Honourable Justice Quigg The Honourable Justice Green CORAM : l’honorable juge Larlee l’honorable juge Quigg l’honorable juge Green Appeal from a decision of the Court of Queen’s Bench: November 12, 2013 Appel d’une décision de la Cour du Banc de la Reine : le 12 novembre 2013 History of Case: Historique de la cause : Decision under appeal: Unreported Décision frappée d’appel : inédite Preliminary or incidental proceedings: N/A Procédures préliminaires ou accessoires : s.o.

Appeal heard: September 10, 2014 Appel entendu : le 10 septembre 2014 Judgment rendered: November 20, 2014 Jugement rendu : le 20 novembre 2014

Reasons for judgment by: The Honourable Justice Larlee Motifs de jugement : l’honorable juge Larlee Concurred in by: The Honourable Justice Quigg The Honourable Justice Green Souscrivent aux motifs : l’honorable juge Quigg l’honorable juge Green Counsel at hearing: D.E. appeared in person L.E. appeared in person Avocats à l’audience : D.E. a comparu en personne L.E. a comparu en personne THE COURT The appeal is dismissed without costs. LA COUR L’appel est rejeté sans dépens. The judgment of the Court was delivered by LARLEE, J.A. [ 1 ] The appellant, Mr.

E., contests an order for child support and spousal support in favour of the two children of the marriage and his ex-wife, Ms. E., rendered by a judge of the Court of Queen’s Bench pursuant to s. 17 of the Divorce Act , R.S.C. 1985, c. 3 (2nd Supp.). Both parties were unrepresented at the appeal hearing. [ 2 ] The respondent filed a Petition for Divorce in March 2012. On January 29, 2013, a judge of the Court of Queen’s Bench rendered a decision establishing child support for 2013 and an interim determination of spousal support. The resulting order provided that Mr.

E. would pay child support for the two children of the marriage in an amount of $2,010 per month based on an income for 2012 of $148,000. An interim order was also made for spousal support to be paid in the amount of $1,490 monthly. The income on which these amounts were based was imputed since complete financial information was not available for Mr. E. [ 3 ] Mr. E. filed a Notice of Motion seeking a variation of the interim court order with respect to child and spousal support; he based his motion on an alleged change in circumstances resulting from a change in the financial circumstances of his company, E.

Engineering Incorporated. He sought to reduce both amounts, and regarding spousal support, asked that an income be imputed to Ms. E. due to her limited efforts to find work. His motion was unsuccessful before the Court of Queen’s Bench; that decision appealed from in the present case was rendered November 12, 2013. [ 4 ] Mr. E. asks that the motion judge’s order be varied and that this Court make a determination as

to the amount of child support to be paid, as well as the amount and duration of spousal support and costs. [5] Mr. E. relies on several grounds of appeal. He argues the motion judge erred: 1) in fact and in law in setting the appellant’s income for the purpose of child support at $148,000 and by finding that there was nochange of circumstances which would affect income for child support, in particular by (

a) failing to consider business losses, (

b) byincorrectly attributing dividend income and (

c) by including income from an irrelevant prior fiscal period; 2) in fact and in law by finding that the appellant’s income for the purpose of determining spousal support is $142,000, again based onthe same errors as listed in the above paragraph; 3) in fact and in law in determining that there has been no change in circumstances with reference to spousal support, in particular: a. by failing to consider the re-partnering and cohabiting relationship of the respondent as a change in circumstance; b. by rejecting any consideration of the continuing refusal of the respondent to seek employment or to take any steps toward self-sufficiency; and c. in not designating as non-compensatory, spousal support payments to the respondent, contradictory to the Spousal Support AdvisoryGuidelines; and 4) in fact and in law in assessing costs of $1,500 against the appellant. [6] The motion judge’s decision must be given considerable deference.

An appellate court isempowered to set aside or vary a decision or order where it is the product of an error of law, an error in principle, a significantmisapprehension of the evidence or if it is clearly wrong (see Hickey v. Hickey, (SCC), [1999] 2 S.C.R. 518, [1999]S.C.J. No. 9 (QL), at para. 11; Van de Perre v. Edwards, 2001 SCC 60, [2001] 2 S.C.R. 1014; Savoie v. Levesque, 2009 NBCA 47,[2009] N.B.J. No. 282 (QL); Ms. P.H. v. Mr. P.H., 2008 NBCA 17, 328 N.B.R. (2d) 245; Milton v. Milton, 2008 NBCA 87, 338 N.B.R.(2d) 300, at para. 14.; J.E.J. v. S.L.M., 2007 NBCA 33, 318 N.B.R. (2d) 119, at para. 35; S.H. v.

V.B., 2007 NBCA 69, 321 N.B.R. (2d)314, at para. 2; MacDonald v. MacDonald, 2011 NBCA 25, 372 N.B.R. (2d) 179, at para. 7, leave to appeal refused [2011] S.C.C.A. No.237 (QL)). The standard of review depends on the nature of the issue. If the issue involves the application of an extricable legalprinciple, such as the application of an incorrect standard or a failure to consider a required element of the legal test, the standard ofreview is correctness. If the issue on appeal involves the

interpretation of the evidence as a whole, the standard of review is palpable andoverriding error: Housen v. Nickolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 36. In H.L. v. Canada (Attorney General), 2005SCC 25, [2005] 1 S.C.R. 401, Fish J. explains: “Palpable and overriding error” is at once an elegant and expressive description of the entrenched and generally applicable standard ofappellate review of the findings of fact at trial. But it should not be thought to displace alternative formulations of the governingstandard.

In Housen, for example, the majority (at para. 22) and the minority (at para. 103) agreed that inferences of fact at trial may beset aside on appeal if they are “clearly wrong”. Both expressions encapsulate the same principle: an appellate court will not interferewith the trial judge’s findings of fact unless it can plainly identify the imputed error, and that error is shown to have affected the result.[para. 55] [7] The motion judge described the issue before him in these words: Mr.

E. is attempting to convince the Court that there was a material change in the income of his company and therefore the child supportshould be reduced and the spousal support reduced or eliminated. I readily accept that there has been a material change in the fortunes ofMr. E’s company, I must admit, I see no change whatsoever in Mr. E.’s personal income. [para. 27]

He went on to explain that Mr. E. is responsible for the support payments, and not E. Engineering Incorporated. [ 8 ] Although Mr. E. raises numerous grounds of appeal, a careful examination of the arguments made in support of these grounds shows that he is in effect asking us to rehear the case, rather than review the motion judge’s decision for error: Doiron v. Haché , 2005 NBCA 75 , 290 N.B.R. (2d) 79 , at para. 70 , per Richard J.A. Essentially, Mr. E. wants us to reassess the evidence, reach conclusions favourable to him and substitute those conclusions for those of the motion judge.

It has consistently been held that such is not the role of an appellate court. [ 9 ] Although Mr. E. maintains that the grounds of appeal address errors of fact and errors of law, the arguments raised in support of these grounds show that he is challenging the findings of fact made by the motion judge. Absent a finding of palpable and overriding error, we cannot interfere with a trial judge’s findings of fact or factual inferences. [ 10 ] Mr.

E. argues the motion judge included a dividend amount of $42,242.32 in his income for 2012, for the purpose of determining his support obligations, bringing his 2012 income to $162,810. According to Mr. E., the amount of $42,242.32 represents the grossed-up dividend amount for a dividend payable of $30,610.38: eligible dividends are grossed-up by 38% for tax purposes, i.e. 1.38 x $30,610.38 = $42,242.32. Mr. E. argues the $30,610 dividend is not 2012 income. It represents an amount which was borrowed from the company in 2010/2011.

He submits the amount was carried as a loan for two years and then, since it was not repaid to the company, he had to declare it as a dividend. Mr. E. contends the money was spent in 2010/2011, before the parties separated in March 2012, and should not have been included in his 2012 income. [ 11 ] According to s. 16 of the Federal Child Support Guidelines (subject to ss. 17 to 20 ), a spouse’s annual income is determined using the sources of income set out under the heading “Total Income” in his or her T1 General Form issued by the Canada Revenue Agency and is adjusted in accordance with

Schedule III.

Section 5 of

Schedule III of the Guidelines states that where dividends are received from a taxable Canadian corporation, the actual amount of dividends received replaces the taxable amount of dividends received, which is grossed-up for income tax purposes. [ 12 ] In Austin v. Austin , [2007] O.J. No. 4283 (S.C.J.) (QL) , Smith J. held s. 5 applies where dividends are received from a Canadian corporation not controlled by either spouse (para. 24). That

section does not preclude a court from imputing additional income to a spouse who is the sole shareholder of a company and who elects to receive dividends from the company in lieu of salary. Smith J. points out in the circumstances of that case, “ s. 18(1) or s. 19(1) (

h) of the Federal Child Support Guidelines should be applied and would be a fairer method to determine child support where the corporation is solely controlled by the payor spouse” (para. 25). [ 13 ] The pertinent sections of the Guidelines read as follows:

(1) Where a spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the spouse’s annual income as determined under

section 16 does not fairly reflect all the money available to the spouse for the payment of child support, the court may consider the situations described in

section 17 and determine the spouse’s annual income to include (

a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or […] 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: […] (

h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and 18.

(1) Si l’époux est un actionnaire, administrateur ou dirigeant d’une société, le tribunal peut, s’il est d’avis que son revenu annuel déterminé conformément à l’article 16 ne correspond pas fidèlement aux sommes disponibles pour payer une pension alimentaire pour enfants, tenir compte des situations visées à l’article 17 et inclure dans le revenu annuel :

a) soit tout ou

partie du montant de profit avant impôt de la société, et de toutes autres sociétés avec lesquelles elle est liée, pour la dernière année d’imposition; […] 19.

(1) Le tribunal peut attribuer à l’époux le montant de revenu qu’il juge indiqué, notamment dans les cas suivants : […]

h) il tire une portion considérable de son revenu de dividendes, de gains en capital ou d’autres sources qui sont imposés à un taux moindre que le revenu d’emploi ou d’entreprise ou qui sont exonérés d’impôt; [ 14 ] In Leis v. Leis , 2014 ABCA 36 , [2014] A.J. No. 73 (QL) , the father relied on

Schedule III of the Federal Child Support Guidelines to seek an adjustment to his annual income for the taxes paid on his dividend income for 2011. The Chambers judge did not address the father’s argument about a tax adjustment for dividend income. The Court of Appeal concluded: The second basis upon which the appellant sought to establish a reduced income for 2011 was by arguing that his income should be adjusted for taxes paid on his dividend income.

Section 5 of

Schedule III to the Guidelines provides that for the purposes of calculating a spouse’s income the taxable amount of dividends received by the spouse should be replaced by the actual amount of dividends received after taxes. The only evidence on this point is found at paragraph 20 of the appellant’s January 11, 2013 affidavit. Therein he deposed that he received taxable dividends in the amount of $182,982.00, but actually received $137,236.50 after taxes, for a difference of $45,745.50. The appellant argued that his income should be reduced by this difference, in accordance with

Schedule III. The difficulty that arose in the court below, and which continues before this court, is that the appellant failed to provide appropriate tax documentation to substantiate this claim . Before the chambers judge the respondent was prepared to concede that an adjustment might be warranted, but argued that there was no evidence before the court as to what the appellant actually received by way of dividends after taxes. In the absence of that evidence, it was not unreasonable for the Chambers judge to hold that the appellant had not discharged his onus of demonstrating a material change in his income .

The appellant bore the burden of proving what dividends he received after taxes. This burden could have easily been discharged had the appellant provided the relevant tax documentation, as contemplated under

Part 5 of the parties Contract, and

section 21 of the Guidelines. Thus, on the civil standard alone we are not persuaded that the chambers judge erred in concluding there was no material change in this regard. [paras. 20-22]

[Emphasis added.] [ 15 ] In Dand v. Ady , 2014 SKQB 101 , [2014] S.J. No. 190 (QL) , McIntyre J. stated:

Section 5 of

Schedule 3 to the Federal Child Support Guidelines (SOR/97-175 ) (“Guidelines”) speaks to replacing the taxable amount of dividends from taxable Canadian corporations received by a spouse by the actual amount of dividends received for the purposes of determining income pursuant to s. 16 of the Guidelines. This is appropriate in circumstances such as where the spouse is receiving investment income by way of dividends.

However, where the spouse is a shareholder of a company and receives dividends from the company in lieu of salary, it is more appropriate for the spouse’s income to be determined by using the taxable amount of the dividend. See, for example, Gursky v. Gursky , 2008 SKQB 253 , 317 Sask. R. 186. This approach puts the spouse who receives a dividend in lieu of salary in the same position as a spouse who receives the same amount simply as salary. [para. 6] See also B v. B , 2013 NBQB 308 , 420 N.B.R. (2d) 56 , per French J. and Lahanky v. Lahanky , 2011 NBQB 220 , 375 N.B.R. (2d) 370 , per B.M.

Robichaud J. [ 16 ] There are cases which have applied different considerations where the non-recurring dividend income is paid to the child support payor. In Brown v. Brown , 2014 BCCA 152 , [2014] B.C.J. No. 679 (QL) , Mr. Brown received dividends in 2008 and 2009 that were of a non-recurring nature. The dividends fell within s. 17(1) of the Federal Child Support Guidelines , which allows a court to consider fairness in determining income, because they were paid on a one time basis, at the discretion of the principal of the company, and they did not form part of Mr. Brown’s regular income stream: Mr.

Brown had no choice but to use the dividends to finance the purchase of shares. The chambers judge accepted Mr. Brown’s argument regarding the dividends, that while they were classified as income for tax purposes, they had no impact on his ability to pay child support. It would therefore be unfair to include them in income under the Federal Child Support Guidelines for the purposes of quantifying a retroactive child support award. The Court of Appeal opined that whether or not the dividends should be included or excluded from Mr.

Brown’s Guidelines income depended on the Court’s fairest determination of his income: “The ‘fairness’ referred to in s. 17(1) is not of a subjective or elusive sort. Rather, it is a fairness that is determined in accordance with the values inherent in the Guidelines as reflected in the objectives expressly set out in s. 1.

In particular, a court should keep in mind the objective that children benefit from the financial means of their parents (s. 1(a)), and that spouses and children in similar circumstances are treated consistently (s. 1(d))” (para. 29). [ 17 ] In this case, with respect to child support, the motion judge concludes: Mr. E. is presenting a unique argument based upon the economic conditions of the company operating in New Brunswick rather than his actual personal income. He is attempting to pay child support based upon how much money the company has after he has withdrawn his income. If the Company thrives, Mr.

E. may be able to draw more money and his children and his wife will receive more money. If the Company does poorly, Mr. E. will still receive his income but his dependents may have to take less. Child support is the right of the child and it is a claim that takes priority over all non-governmental debts and obligations. Spousal support is somewhat less of a priority than child support, despite that it, too, has priority over all other outstanding claims upon the Payor’s income save only taxes and child support.

The Payor is responsible to pay support from actual annual income before covering the mortgage, any RRSP payments and the housekeeping bills. The dependents are the priority, not the personal assets. [paras. 35-36] [ 18 ] On February 22, 2013, the motion judge ordered, on an interim basis, child support be paid for the two children in an amount of $2,010, based on Mr. E.’s income for 2012 which he calculated for child support purposes to be $148,000. On the motion appealed from he did not vary the amount because he found Mr. E.’s income for 2012 was actually $162,800 (that amount includes the dividend).

I do not find the motion judge made any error in establishing the amount of income on which to base child support; it was a fair determination and reasonable in light of Mr.

E.’s pattern of income. [ 19 ] The motion judge concludes regarding spousal support: The determination of entitlement is based upon a number of factors including the length of the co-habitation; whether the spouse has worked during the relationship; whether she supported the other spouse through school or covered other accounts; the extent the spouse subordinated her own work opportunity to raise children; and whether there are factors that might justify payment of support such as a long term illness or other factors that might require support where it would not otherwise be granted.

And I note specifically this is a reference to the spousal support provisions which are set out under […]

section 15.2 DA dealing with the condition, means, needs and

other circumstances of each spouse and with reference to the objectives for which spousal support is established, that being also set outunder

section 15.2. In this case, I determined in the decision of January 29, 2013, that Ms. E. was entitled to spousal support. I did not set the actual amountor the duration for the support. Instead, I set an amount I considered to be below Ms. E.’s entitlement under the S.S.A.G. and Iestablished the actual amount would be calculated when the parties returned before me. Ms. E.’s claim for support was filed in herApplication for Divorce, March 12, 2012. She is entitled to spousal support from that date, following receipt of actual notice.

However,the order of February 21, [2013] dealt with the retroactive support to that date. The amount and the term of the claim was to bedetermined as a result of this hearing and in accordance with the Spousal Support Advisory Guidelines. Mr. E. raised the question of determining his responsibilities for payment of spousal support based upon fluctuation in his employmentincome which, in turn, was based upon the operations of E. Engineering Incorporated. I consider that the 2012 and 2013 years’ incomeswere relatively constant and, accordingly, I will impose spousal support upon Mr.

E. based upon the average of his actual income foreach of 2012 and 2013. Mr. E. has not yet received the necessary information to confirm his 2013 income. I expect him to provide a copyof his T-4 by not later than March 1, 2014. For 2013’s taxes only, I will require he provide a copy of his Final T-1 General Income Taxform by April 30, 2014 and the Notice of Assessment from the Canada Revenue Agency within 15 days of its receipt. [paras. 39-41] [20] The motion judge did not base spousal support on the 2012 income of $162,860, line 150, whichMr. E. alleges included the grossed up dividend. He ordered Mr.

E. to pay spousal support based on an income of $142,000, which wasthe average of Mr. E.’s 2012 and 2013 incomes. He had previously made the finding that Mr. E.’s income was relatively constant. Hewas aware of Mr. E.’s argument that the dividend should not be included because it was income used before the parties separated, as itwas argued before him. The motion judge made two comments with respect to this dividend. He notes that Mr. E. did not provide a finalcopy of his 2012 General Form or a copy of his Notice of Assessment for 2012.

He concludes there is no proof the Canada RevenueAgency had received or accepted these tax forms. In addition, on his motion, Mr. E. attached to his Financial Statement Profit and LossStatements for the years ending June 30, 2012 and June 30, 2013, and a Balance Sheet for the year ending June 30, 2012. The motionjudge could not find any information to establish these documents had been reviewed by an appropriate financial specialist. Thus, Mr. E.failed to provide appropriate tax documentation to substantiate this claim: Leis v.

Leis, at para. 21. [21] It should also be noted that the motion judge set the amount of spousal support to be paid($2,654 a month) at the lowest of the three suggested ranges. In my view, the motion judge cannot be faulted for what he did: it appearshe took a fair approach and I would not interfere with the amount of support he ordered. As the Court stated in Brooks v.

Brooks, 2014NBCA 29, 419 N.B.R. (2d) 326 “[t]he determination of spousal support by a motion judge is, ultimately, an exercise in reasoneddiscretion informed by the Act, the jurisprudence and the Spousal Support Advisory Guidelines” (para. 15) and it is therefore oweddeference. [22] With respect to the other grounds of appeal, the judge’s reasons for decision clearly show thathe understood the principles of law to be applied in this case. While the motion judge did consider the re-partnering and cohabitingrelationship of Ms. E., he had no evidence on which to find that Ms.

E.’s new partner is contributing any substantial amount to her livingexpenses. Thus, the argument was premature and without merit on appeal. [23] According to Rule 59 of the Rules of Court, the costs of a proceeding are in the discretion of thecourt, which may determine by whom and to what extent costs shall be paid. I reiterate the comments of Drapeau J.A. (as he then was) inAcadia Marble, Tile & Terrazzo Ltd. v. Oromocto Property Developments Ltd. (1998), (NB CA), 205 N.B.R. (2d)358, [1998] N.B.J.

No. 412 (C.A.) (QL) on the issue of the awarding of costs following an event: It is undoubtedly true that, where the trial judge has exercised his or her discretion as to costs, this Court will not intervene unless it issatisfied that the exercise of discretion was manifestly wrong. See Williams et al. v. Saint John, New Brunswick and Chubb IndustriesLtd. (1985), (NB CA), 66 N.B.R. (2d) 10 (C.A.). […] [para. 34] [24] The party who recovers judgment is normally entitled to costs, although a judge may exercisehis or her discretion by refusing to make such an award: Flieger v.

Adams, 2012 NBCA 39, 387 N.B.R. (2d) 322. [25] In this case, the motion judge determined Ms. E., who was represented by a lawyer at thehearing, was successful in all particulars and awarded her costs of $1,500: the motion judge’s exercise of discretion is not impeachable.This ground of appeal is without merit.

[ 26 ] I am unable to find any overriding error of law, error of principle or overriding error in the

interpretation of the evidence in the decision on appeal. Applying the applicable standard of review there is no basis for intervention on appeal. Accordingly, I would dismiss the appeal and award no costs since the parties represented themselves. ____________________________________ M.E.L. LARLEE, J.A. WE CONCUR: ___________________________________ KATHLEEN A. QUIGG, J.A. ___________________________________ BRADLEY V. GREEN, J.A.