Wilson v. Wilson, 2011 ONCJ 103

Belleville Registry No. 478/06 DATE: 2011·II·18 CITATION: Wilson v. Wilson , 2011 ONCJ 103 ONTARIO COURT OF JUSTICE BETWEEN: KELLY LYNNE WILSON, Applicant, — AND — BOYD D’EYNCOURT WILSON, Respondent. Before Justice Rommel G.

Masse Heard on 6 January 2011 Reasons for Judgment released on 18 February 2011 SUPPORT ORDERS — Assessment of quantum — Child support guidelines — Payor’s income — Deductible expenses — Unreasonable deduction of expenses — According to subsection 19(2) of Child Support Guidelines , fact that self-employed or travelling sales person (such as payor in this case) may legitimately deduct certain expenses for income tax purposes does not necessarily mean that those expenses can be reasonably deducted from payor’s income for child support purposes — In such circumstances, payor has onus of clearly demonstrating basis of his net income and of demonstrating that deductions from gross income should be made in calculation of income for support purposes — In this case, court readily found that all of payor-father’s deductions were quite reasonable for purposes of calculating his tax liability, but when it came to deciding whether they were reasonable deductions from income for child support purposes: • Court conceded that “advertising and promotion” costs had to be incurred even for child support purposes but payor failed in his onus to explain how it could be about $400 in one year and 5 times as much in next year — In absence of explanation, court trimmed expense of $1,953.90 down to more reasonable level of $500 • Court completely disallowed deductions for payor’s expenses for food, beverages and entertainment for child support (even though allowed under Income Tax Act ) because he would still have to eat, drink and be entertained even if he were not travelling sales person — Any such deduction would personally benefit him to detriment of his children • Court recognized value of internet, e-mail and cellular telephone to travelling sales person and was therefore prepared to allow its cost to be deducted from income for child support purposes — But court was not so naïve to believe that payor never used these devices for personal purposes — Court estimated 80% for business use and 20% for personal use and adjusted amount of deductions accordingly • Court totally disallowed deductions for line-of-credit interest and credit-card interest because payor was asking his children indirectly to subsidize borrowing costs of his daily business operating expenses — Payor could have organized his affairs and cash flow so as to avoid any carrying charges • Court also disallowed deduction for “work-space-in-home” against his household expenses because his household expenses would still be same even if her were not travelling sales person — Court has no quarrel with his getting tax advantage by properly deducting portion of his household expenses, but could see no justification for making same deductions from income for purposes of calculating child support since it would confer personal benefit on him while depriving his children of needed child support • Because payor was travelling salesperson who had to service very large geographic area, he necessarily put on much more mileage on his vehicle than ordinary commuter — Court did not find payor’s 80%-20% ratio of business use to personal use unreasonable — Court also ruled that capital cost allowance for vehicle was reasonable business expense for travelling salesperson — Before he bought vehicle, payor had leased one and court found that lease payments were reasonable and that excess mileage balloon payment was unfortunate but not unreasonable in this case — Finally, court found list of itemized motor vehicle expenses to be reasonable (except for single large insurance payment for which payor offered no satisfactory explanation)

SUPPORT ORDERS — Assessment of quantum — Child support guidelines — Payor’s income — Variable or unstable income —Reliance on previous year’s income — Parents of 2 children entered into separation agreement 3 years ago that provided for childsupport — Payor father was travelling sales person whose income consisted of commissions based on total sales that fluctuated greatlyfrom year to year depending on prevailing economic conditions — Although court would have urged that parents rely on pattern of“rolling average” of incomes of past 3 or 4 years in subsection 17(1) of Child Support Guidelines to smooth out spikes and dips infather’s income and to introduce more predictability and stability of child supports, It was nevertheless court’s intention to give effect asmuch as possible to parties’ intentions of as evidenced in their separation agreement — And agreement was absolutely clear andunambiguous that parents wanted child support to be in accordance with guidelines based on father’s annual income of previous year.

STATUTES AND REGULATIONS CITED Child Support Guidelines, O. Reg. 391/97 [as amended],

section 15,

section 16, subsection 17(1), clause 19(1)(g), subsection 19(2) andSchedule III, clause 1(d). Children’s Law Reform Act, R.S.O. 1990, c. C-12 [as amended]. Divorce Act, R.S.C. 1985 (2nd Supp.), c. 3 [as amended]. Family Law Act, R.S.O. 1990, c. F-3 [as amended]. Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1 [as amended]. CASES CITED D.B.S. v. S.R.G.; Laura Jean W. v. Tracy Alfred R.; Henry v. Henry; Hiemstra v. Hiemstra, 2006 SCC 37, [2006] 2 S.C.R. 231, 351 N.R.201, 391 A.R. 297, 61 Alta.

L.R. (4th) 1, 377 W.A.C. 297, [2006] 10 W.W.R. 379, 270 D.L.R. (4th) 297, 31 R.F.L. (6th) 1, [2006] S.C.J.No. 37, 2006 Cars​well​Alta 976. Duffy v. Duffy, 2009 NLCA 48, 289 Nfld. & P.E.I.R. 132, 890 A.P.R. 132, 73 R.F.L. (6th) 233, [2009] N.J. No. 245, 2009 Cars​well​Nfld211 (N&L C.A.). Hawrish v. Bank of Montreal, [1969] S.C.R. 515, 66 W.W.R. 673, 2 D.L.R. (3d) 600, , [1969] S.C.J. No. 17, 1969 Cars​-well​Sask 9. Meade v. Meade, , 31 R.F.L. (5th) 88, [2002] O.J. No. 3155, 2002 Cars​well​Ont 2670 (Ont. S.C.). Orser v. Grant (2000), 96 A.C.W.S. (3d) 644, [2000] O.J. No. 1429, 2000 Cars​well​Ont 1354 (Ont. S.C.).

Osmar v. Osmar, , 8 R.F.L. (5th) 368, [2000] O.J. No. 2058, [2000] O.T.C. 398, 2000 Cars​well​Ont 1928 (Ont. Fam.Ct.). Whelan v. O’Connor, , 28 R.F.L. (6th) 433, [2006] O.J. No. 1660, 2006 Cars​well​Ont 2581(Ont. Fam. Ct.). William D. Watson ........................................................................ counsel for the applicant mother William P.H. Procter ............................................ counsel for the respondent father (moving party) [1] JUSTICE R.G. MASSE:— Boyd Wilson brings this motion to change the child support provisions of a separationagreement dated 31 March 2008.

Boyd Wilson is a commissioned salesperson and the issue for the court is to determine what is hisincome for the purpose of calculating his child support obligations. 1: INTRODUCTION [2] The parties were married on 26 August 1995 at Warkworth Ontario. This union has produced two children; CandiceVerna Wilson (d.o.b. 16 February1996), now aged 15, and Riley Lorne Wilson (d.o.b. 6 May 1998), now aged 12. The marriage was nota successful one. Accordingly, the parties separated on or about 2 September 2006. They were granted a divorce on 20 August 2007,which became effective on 5 September 2007.

However, all corollary issues between the spouses remained outstanding. [3] In the spring of 2008, all outstanding issues were finally resolved by means of a separation agreement dated 31 March2008. The parties agreed to joint custody of the children with their primary residence to be in the home of Kelly Wilson, their mother. There were detailed provisions for child access, property division, spousal support and all other issues that would ordinarily concernseparated spouses and parents. [4] Paragraph 8 of the separation agreement dealt with child support.

The relevant provisions are as follows: 8.1 The parties acknowledge that they have been advised of the implementation of the FederalChild Support Guidelines.

8.2 The husband and wife agree that the husband shall pay to the wife for the support of the children the sum of $1,760.00 per month based on his agreed $130,000.00 gross income pursuant to the Federal Child Support Guidelines .

The child support shall commence on the 1st day of September 2007 and continue on the first day of each month thereafter for so long as the children remain children of the marriage. 8.3 The husband shall provide the wife with a copy of his personal income tax return or notice of assessment for the previous taxation year by June 1st in each year for the purposes of determining the proper guideline child support.

In the event that the support should be adjusted based on the said documentation provided, the parties shall sign the necessary amendments to this agreement to reflect the change in child support. [ 5 ] Paragraph 10 of the agreement also provides for variation of its provisions in the event of a material change in circumstances when it came to custody, access and child support. According to this paragraph, the parties were expected to negotiate and settle any such issue, failing which recourse could be had to the courts pursuant to the Family Law Act , R.S.O. 1990, c.

F-3, as amended, the Children’s Law Reform Act , R.S.O. 1990, c. C-12, as amended, or the Divorce Act , R.S.C. 1985 (2nd Supp.), c. 3, as amended. 2: THE EVIDENCE [ 6 ] Boyd Wilson is a commissioned sales person employed by Sysco Foods. His business is selling food products to restaurants. His gross revenue consists of commissions earned on sales and he is also paid a car allowance that generally amounts to about $11,500.00 per year. His total sales, and thus his earned commissions, depend a great deal on prevailing economic conditions.

Consequently, his gross revenue can fluctuate greatly from year to year depending upon sales. This is confirmed by the materials that have been filed with the court. [ 7 ] Boyd Wilson requires a vehicle for business purposes. He has to be on the road most of the time in order to service his clients. His geographical sales area is quite large, extending from Algonquin Park to Barry’s Bay to South of Bancroft. Not only is he required to travel in order to service his customers, but he must also attend sales meetings in Belleville, Kingston and Toronto.

He testified that, in order to service his customers and to meet all of his employment obligations, he travels about 4,000 km. per month for business purposes. This is a rough estimate on his part. In 2007, he had two vehicles, one for business and one for personal use. Consequently, he wrote off 100% of all expenses for the vehicle that he used for business purposes. At the present time, he has only one vehicle and he claims 80% of his vehicle expenses as business expenses. As a check on this ratio, he logged the distance travelled in his vehicle from the end of June to the end of July 2010.

It was his evidence that, during that one-month period, he logged 4,400 km. out of which 500 km. were for personal use. This is a ratio of about 88.6% for business purposes. He stated in his evidence that he travels more during the summer than he does during winter months. In cross-examination, he admits that he did not keep an accurate log of distances travelled for business purposes throughout the year and he did not provide his accountant with any mileage logs. In fact, it would appear that he did not keep any records at all of distance travelled.

The 80% ratio of business-to-personal use is necessarily an estimate on his part. His “Motor Vehicle Expenses (Employment)” form for his 2008 and 2009 taxation year indicates that he only put 20,000 km. on his vehicle for those two years. It is highly unlikely that a travelling salesperson who requires a vehicle to do his job throughout an area as extensive as that for which Mr. Wilson is responsible would only travel 20,000 km per year. I accept his evidence that that is really just a ratio to be used for tax purposes.

He states that he did not give his accountant the kilometres travelled; he just gave her the ratio of business-to-personal use. [ 8 ] Boyd Wilson’s employer does not provide him with an office space; consequently, he claims 10% of all of his household expenses representing “Work-Space-in-the-Home-Expenses” for tax purposes. He also has other business expenses that he deducts from gross revenue in order to arrive at his annual income. These include: accounting and legal; advertising and promotion; food, beverage and entertainment; cell phone; internet and other business related expenses.

He testified that his cell phone is used exclusively for business purposes and none of his cell phone use is personal. Since he is on the road a lot, his clients can only get a hold of him by cell phone. He requires a home computer so he can work at home at night. He uses his home computer for e-mail — he states he gets about 100 e-mails per day and he responds to these at night. He also testified that many of the meals that he eats on the road are purchased from his clients as promotion when he makes a call on them. Just like his gross revenue, his business expenses can vary greatly from year to year.

He testified that he provides receipts for all expenses to his accountant in order for her to prepare his tax returns. [ 9 ] The income of a commissioned salesperson fluctuates greatly. It can be boom or bust. When times are good and expenses are kept low, Boyd Wilson can make a lot of money. On the other hand, a large spike in expenses together with an economic downturn can result in a drop of income of as much as $60,000.00 from one year to the next. [ 10 ] According to Boyd Wilson, this is what happened in 2008. That year, the lease on his rented vehicle expired.

According to the terms of the lease, he had to pay a balloon payment on account of excess mileage above and beyond the normal mileage contemplated by the lease. This balloon payment for excess mileage together with the normal monthly vehicle lease payments for 10 months resulted in total expenses for his leased vehicle of $10,500.00 for that year. Rather than lease a new vehicle, he purchased a new one. The purchase price was $33,900.00. He paid $4,000.00 of his own money as a down payment and he financed the rest.

He acquired this vehicle on 31 October 2008 and, as of the time of the hearing of this motion to change, he already had driven 99,000 km in this vehicle — that is just in the span of about 14 months. [ 11 ] Boyd Wilson submits that he has suffered a material change in circumstances in that his gross revenue has decreased and his business expenses have increased since the time of the signing of the separation agreement. His gross revenue has decreased to $118,122.00 for 2008 and his business expenses for that same year rose to $36,212.00.

He fared somewhat better in 2009 when his gross revenue recovered to $140,939.00 and his expenses dropped to $25,810.00. However, his economic condition is still not as rosy as it was in 2006, which was the base year used to calculate his child support starting in September 2007. It is anticipated that his situation for 2010 will improve. Consequently, he has brought this motion to change on 13 May 2009 in order to adjust his child support

obligations to reflect his income for 2008 and 2009. 3: ARGUMENT [ 12 ] Both Boyd Wilson and Kelly Wilson in their pleadings have outlined their theory of how the parties got to agree on a gross annual income of $130,000.00 for his 2006 income. Boyd Wilson asserts in his pleadings that support was based on 80% of his gross revenue. Kelly Wilson asserts in her pleadings that the 2006 amount of $130,000.00 was arrived at by averaging the gross income of Boyd Wilson over the years 2003, 2004 and 2005.

She takes the position that at no time was it agreed that Boyd Wilson’s income for purposes of calculation of child support would be 80% of his gross revenue. [ 13 ] Mr. Proctor, on behalf of his client, Boyd Wilson, submits that the starting point for calculation of income is the amount shown on line 150 of his tax returns. From that amount has to be deducted all business related expenses such as they are reflected in his “Statement of Employment Expenses” included in his personal tax returns. This is in accordance with the method of calculating income pursuant to

section 16 and

Schedule III of the Child Support Guidelines , O. Reg. 391/97, as amended. He argues that all of Boyd Wilson’s employment expenses, whether they be “Work-Space-in-the-Home Expenses”, “Motor Vehicle Expenses” or other employment expenses, are not out of line in their totality. If it is determined that some vehicle expenses are too high, then certainly an adjustment ought to be made and he suggests a formula for such adjustment. [ 14 ] Mr.

Watson, on behalf of his client Kelly Wilson, submits that the court should take a look at the pattern of his income — this is suggestive of a “rolling average” method of calculating income as is contemplated by subsection 17(1) of the guidelines. Mr. Watson challenges some of the deductions made by Mr. Boyd Wilson. In particular, Mr. Watson challenges the “Motor Vehicle Expenses” claimed by Mr. Wilson since Mr. Wilson has not kept detailed logs of exactly how many kilometres he drove his vehicles such as would justify an 80/20 ratio for “employment use” versus “personal use” of his vehicle. Mr.

Watson also challenges the accelerated amount of capital cost allowance that was deducted for the 2008 taxation year and also the excess mileage balloon payment for his leased vehicle for that year. In addition, Mr. Watson argues that there is no justification for the food, beverage and entertainment deductions nor for the “Work-Space-in-the-Home Expenses” that Mr. Wilson is claiming.

These expenses, although permissible under the Income Tax Act , R.S.C. 1985 (5th Supp.), c. 1, as amended, are simply not reasonable when it comes to calculating income for purposes of determining child support according to the guidelines. 4: ANALYSIS [ 15 ] This issue for determination by this court is what is Boyd Wilson’s income for purposes of calculating his child support obligations effective 1 June 2009 and 1 June 2010 in keeping with the terms of the separation agreement dated 31 March 2008. [ 16 ] It is the intention of the court to give effect as much as possible to the intentions of the parties as evidenced in their separation agreement.

It is noteworthy that the separation agreement makes no mention at all of an 80% rule that was referred to in the pleadings of Boyd Wilson nor does it mention anything at all about a “rolling averaging” of income over the course of the past 3 or 4 years. Had the parties intended to institute either one of these methods of income calculation, then they certainly would have done so and this would have been clearly specified in their separation agreement. [ 17 ] The intentions of the parties, as evidenced in their separation agreement, could not be more clear.

The parties have agreed to the initial amount of child support and they also agreed to an automatic amending formula to child support in accordance with the guidelines based on the annual income of the previous year.

In my view, the wording of paragraph 8.3 is clear and unambiguous and it is not necessary to have recourse to extrinsic evidence in order to interpret the relevant provisions of the separation agreement. [1] The parties agreed that Boyd Wilson is obligated to pay to Kelly Wilson monthly child support in the amount of $1,760.00, effective 1 September 2007, for the support of his two children based upon an agreed gross annual income of $130,000.00. By 1 June of every subsequent year, Boyd Wilson is to disclose to Kelly Wilson his personal income tax return or notice of assessment for the past taxation year.

The child support payments are then to be adjusted in accordance with the guidelines, based upon the gross annual income of the previous taxation year. Although not specified, it is reasonable to conclude that the adjustment date should be 1 June since that is the date that disclosure of gross annual income is to be made.

Therefore, it is manifestly clear that the support payments beginning on 1 June 2009 will be based on Boyd Wilson’s gross annual income for 2008 and his support payments beginning on 1 June 2010 will be based on his gross annual income for 2009. [ 18 ] It is clear that the parties agree to have income and child support determined in accordance with the Child Support Guidelines . The relevant provisions of the guidelines are as follows: 15. Determination of annual income.—

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

(2) Agreement.— Where both parents or spouses agree in writing on the annual income of a parent or spouse, the court may consider that amount to be the parent’s or spouse’s income for the purposes of these guidelines if the court thinks that the amount is reasonable having regard to the income information provided under

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

Schedule III. . . . 19. Imputing income.—

(1) The court may impute such amount of income to a parent or spouse as it considers appropriate in the circumstances, which circumstances include, . . . (

g) the parent or spouse unreasonably deducts expenses from income;

. . .

(2) Reasonableness of expenses.— For the purpose of clause (1)(g), the reasonableness of an expensededuction is not solely governed by whether the deduction is permitted under the Income Tax Act(Canada). [19]

Schedule III of the guidelines deals with adjustments to the income calculated pursuant to

section 16. The relevantprovisions are as follows: 1. Employment expenses.— Where the parent or spouse is an employee, the parent’s or spouse’sapplicable employment expenses described in the following provisions of the Income Tax Act (Canada)are deducted: . . . (d) paragraph 8(1)(

f) concerning sales expenses; . . . [20] In the instant case, the total income of Boyd Wilson is subject to easy determination. However, it is contended that hehas unreasonably deducted expenses from income, thus bringing into play clause 19(1)(

g) and subsection 19(2) of the guidelines. Thecourt’s approach to this problem is of course assisted by jurisprudence. In D.B.S. v. S.R.G.; Laura Jean W. v. Tracy Alfred R.; Henry v.Henry; Hiemstra v. Hiemstra, 2006 SCC 37, [2006] 2 S.C.R. 231, 351 N.R. 201, 391 A.R. 297, 61 Alta. L.R. (4th) 1, 377 W.A.C. 297,[2006] 10 W.W.R. 379, 270 D.L.R. (4th) 297, 31 R.F.L. (6th) 1, [2006] S.C.J. No. 37, 2006 Cars​well​Alta 976, Justice Michel Bastaracheof the Supreme Court of Canada made is clear that payors must not arrange their financial affairs so as to prefer their own interests overthose of their children.

This theme was repeated by the Newfoundland and Labrador Court of Appeal in Duffy v. Duffy, 2009 NLCA 48,289 Nfld. & P.E.I.R. 132, 890 A.P.R. 132, 73 R.F.L. (6th) 233, [2009] N.J. No. 245, 2009 Cars​well​Nfld 211 (N&L C.A.), where it wasstated that the fundamental obligation of a parent to support his or her children takes precedence over the parent’s own interests andchoices.

In addition, a parent will not be permitted knowingly to avoid or to diminish his or her obligation to support his or her children. [21] As already indicated, the guidelines expressly provide in subsection 19(2) that the determination whether an expense isreasonably deducted from a payor’s income is not governed by whether it is properly deducted for income tax purposes. Commonexpenses that may be legitimately deducted for tax purposes, but personally benefit the payor to the detriment of his or her childreninclude expenses for car, home office, travel and entertainment.

In relation to such expenses, Justice David R. Aston made thatfollowing observation in Osmar v. Osmar, , 8 R.F.L. (5th) 368, [2000] O.J. No. 2058, [2000] O.T.C. 398, 2000 Cars​-well​Ont 1928 (Ont. Fam. Ct.), at paragraph [5]: [5] There is a substantial body of case-law under s. 19(1)(

g) of the guidelines, not all of itconsistent. It is fair to conclude that judicial discretion in this area makes the determination of incomemore of an art than a science. In my view, the guidelines require the court to examine expenses fromthe perspective of balancing the business necessity against the alternative of using those funds for childsupport.

The court should respect the right of self-employed persons to run their business as they see fit,but may, nevertheless, question whether particular expenditures ought to be indirectly subsidized bylower child support. [22] A self-employed person, or a commissioned salesperson such as Boyd Wilson, has the onus of clearly demonstrating thebasis of his net income. This includes demonstrating that the deductions from gross income should be taken into account in thecalculation of income for support purposes: See Whelan v. O’Connor, , 28 R.F.L. (6th) 433, [2006] O.J. No. 1660,2006 Cars​well​Ont 2581(Ont. Fam. Ct.).

Such payors have an inherent obligation to put forward not only adequate, but comprehensiverecords of income and expenses, from which the recipient can draw conclusions and the amount of child support can be established. SeeMeade v. Meade, , 31 R.F.L. (5th) 88, [2002] O.J. No. 3155, 2002 Cars​well​Ont 2670 (Ont. S.C.). The onus rests uponthe parent seeking to deduct expenses from income to provide meaningful supporting documentation in respect to those deductions,failing which an adverse inference may be drawn. See Orser v. Grant (2000), 96 A.C.W.S. (3d) 644, [2000] O.J. No. 1429, 2000 Cars​-well​Ont 1354 (Ont.

S.C.). [23] This court is therefore tasked with the duty of examining the deductions from income made by Boyd Wilson in order todetermine whether they are reasonable deductions from income for the purposes of calculating child support according to the guidelines. I have no difficulty in concluding that all of the deductions are quite reasonable for purposes of calculating Boyd Wilson’s tax liability. However, they may not be reasonable deductions from income for child support purposes.

The court will therefore examine thedeductions claimed by Boyd Wilson in 2008 and 2009. 4.1: Business Expenses [24] The court sees no problem with the amounts claimed for “Accounting and Legal”. [25] The amount claimed for “Advertising and Promotion” in 2008 was $1,953.90 whereas it was only $393.57 in 2009. Thisdiscrepancy has not been satisfactorily explained to the court. No doubt, some expense for advertising and promotion must be incurredbut there is no reason why it should have been as high as it was in 2008 compared to 2009.

The onus is on the payor to justify suchexpense and I am not satisfied that he has. The court will consider the sum of $500.00 to be a reasonable deduction — this bears a roughequivalency to the amount expended in 2009. [26] The payor has claimed expenses of $2,689.21 in 2008 and $3,163.89 in 2009 on account of “Food, Beverage &Entertainment Expenses”. This represents 50% of total expenditures as permitted under the Income Tax Act. Boyd Wilson has testifiedthat a lot of this is the result of purchasing meals in the restaurants operated by his clients. There is no doubt that Mr.

Wilson would stillhave to eat and to drink and to be entertained even if he were not a commissioned salesperson. To allow this deduction from income forpurposes of calculating child support results in Mr. Wilson’s obtaining a tax benefit to the detriment of his children. This deduction isdisallowed for both years.

[ 27 ] The court has no quarrel with the amount claimed for postage. [ 28 ] Mr. Wilson has claimed $252.44 for Internet and also $744.67 for computer expenses in 2009. This technology is certainly a wise investment and allows him to correspond with his clients by way of e-mail. However, I cannot accept that the computer and the internet are used exclusively for business purposes. It is a fact of modern society that computers are everywhere and access to the Internet is practically universal. I would be naïve to believe that Boyd Wilson did not use his computer and the Internet for personal purposes.

I accept that the primary use being made of the computer and the Internet are for business purposes but, certainly, a portion of these expenses is attributable to personal use. In my estimation, 80% for business use and 20% for personal use is not unreasonable. In any event, these expenses are fairly inconsequential. An adjustment will accordingly be made to these expenses to reflect 80% business use and 20% personal use. [ 29 ] Boyd Wilson also claims that his cell phone is used exclusively for business purposes. These expenses are significant: $3,586.31 in 2008 and $2,606.79 in 2009.

These expenses average almost $300.00 per month in 2008 and more than $200.00 per month in 2009. Although it is reasonable to conclude that Mr. Boyd Wilson uses his cell phone extensively for work purposes, I do not accept that all of these expenses are exclusively work-related. Cell phones are ubiquitous in today’s society and the court is not so naïve as to believe that Mr. Wilson will refrain from using his cell phone for personal use and will instead find another means of communication for his social and personal life. Certainly, some portion of these expenses must be for personal use.

The court is prepared to allow a deduction of 80% of these expenses for business use and 20% for personal use. Those percentages are certainly arbitrary but 20% would roughly represent the costs of a personal use landline. An adjustment will be made accordingly. [ 30 ] The court will disallow deduction from income of the “Line of Credit Interest and Visa Interest” claimed for both years. By claiming these deductions, Mr. Boyd Wilson is asking his children indirectly to subsidize the borrowing costs of his daily business operating expenses. Mr.

Wilson has to organize his business affairs and his cash flow so as to avoid any carrying charges. This is especially so in the case of Visa interest where the interest rates are in the range of 18% and more. It is unfair to expect his children to accept lower child support payments just so he can borrow money for daily operating expenses. An adjustment will accordingly be made disallowing these expenses. 4.2: Work-Space in-the-Home Expense [ 31 ] Boyd Wilson deducted from income 10% of his total household expenses on account of “Work-Space-in-the-Home”. This amounted to $1,456.56 in 2008 and $1,157.42 in 2009.

There is no evidence that Boyd Wilson requires a larger home or any special space requirements in his home than he would if he were not working as a commissioned salesperson. He likely would incur these same household expenses even if he were in some other line of work that did not require a home office. The court has no quarrel with the fact that he obtains a tax advantage by properly deducting a portion of his household expenses; however, to make these same deductions from income for purposes of calculating child support results in Mr.

Wilson’s obtaining a tax benefit while at the same time depriving his children of needed child support. [ 32 ] The court is disallowing this deduction in its entirety. 4.3: Motor Vehicle Expenses [ 33 ] There are several issues in relation to motor vehicle expenses, and they are: (

a) The ratio of business use to personal use. (

b) Capital cost allowance. (

c) Leasing costs and excess mileage balloon payment (

d) The reasonableness of some of the itemized expenses. 4.3(a): Ratio of Business to Personal Use [ 34 ] Boyd Wilson claims a deduction from income of 80% of all his vehicle expenses; the other 20% is for personal use. Mr. Watson points out that Boyd Wilson simply does not keep a detailed log of distances travelled for business purposes. The issue is further complicated by the fact that, in his income tax returns, he only reports total distance travelled of 20,000 km. That is simply not a realistic figure. Consequently, Mr.

Watson urges the court not to accept Boyd Wilson’s contention that the 80:20 ratio is reasonable and therefore the court should not allow these deductions; or, the court should fix a much lower ratio. The onus is certainly on Mr. Boyd Wilson to satisfy the court that this ratio for deduction of business related motor vehicle expenses is reasonable. Mr. Wilson is a travelling salesperson who has to service a very large area. He must necessarily put a lot of mileage on his vehicle; much more than the ordinary citizen.

He stated in his evidence that he had already put about 99,000 km. on his car as of the date of this hearing — that would be during a period of only a bit more than 14 months. That total distance does sound reasonable for a travelling salesperson with a large area to cover. A lifetime of experience and common sense tells me that an ordinary citizen might drive anywhere between 15,000 to 20,000 km. during that same period of time. Consequently, I am of the view that the “rough ratio” of 80:20 is not unreasonable in the circumstances of a travelling salesperson. 4.3(b): Capital Cost Allowance [ 35 ] Mr.

Boyd Wilson purchased a new vehicle at the end of October 2008. He only operated this vehicle for two months during that year. However, he had the benefit of an accelerated capital cost allowance (CCA) and he was able to write off 50% of the CCA for that year rather than have it prorated for the two months that he actually operated the vehicle. That amounts to a tax benefit to him while at the same time resulting in a reduction of child support for his children for that year. At first glance, this would appear to operate unfairly.

However, it must be remembered that CCA is just one method of spreading the capital cost of an asset over its useful life rather than claiming the entire cost in the year in which the acquisition was made. It also reflects the reality that an asset decreases in

value much faster when it is new than it does towards the end of its useful life. CCA that is claimed in one year will diminish the amount of CCA that may be claimed in all subsequent years. What is not claimed in one year will be carried over and claimed in another year. If an accelerated claim is made in the first year, then that means that less will be available to be claimed in subsequent years.

The end result is that the effects of the accelerated CCA deduction will be spread out over the years as it is used up for a given capital asset. [ 36 ] I am of the view that CCA for a vehicle is a reasonable business expense for a travelling salesperson. 4.3(c): Leasing Costs and Excess Mileage Balloon Payment [ 37 ] Boyd Wilson was renting a vehicle and the lease ended in 2008. The lease provided for a balloon payment for mileage travelled in excess of the mileage provide for in the terms of the lease. The lease payments together with the balloon payment amounted to $10,500.00 for the 2008 taxation year.

A vehicle lease in a situation such as Boyd Wilson found himself is a bad business decision. Surely, he must have foreseen that he would drive much further than the mileage contemplated in the vehicle lease — after all, he is a travelling salesperson. Nonetheless, this was a true expense that he incurred for business purposes and he did not incur it for the purposes of diminishing his child support obligations.

It would of course have been preferable for the effects of the balloon payment to have been averaged out over the term of the lease but it was not, nor could it have been since no one could anticipate exactly the distance that the leased vehicle would be driven. [ 38 ] I am of the view that the lease payments and the excess mileage balloon payment is unfortunate but not unreasonable in the circumstances. 4.3(d): Itemized Expenses [ 39 ] In reviewing all of the itemized expenses that are listed under the heading “Motor Vehicle Expenses”, there is only one expense that I find to be unreasonable.

In 2008, Boyd Wilson deducted $2,455.98 whereas he only incurred insurance costs of $783.61 for 2009. No satisfactory explanation has been provided for this large discrepancy. There is no reason why the insurance in 2008 should be any higher than the costs of insurance in 2009. I will allow only $1,000.00 for insurance costs for 2008. An adjustment will be made accordingly. 5: CALCULATION [ 40 ] The table set out in Appendix “A” sets out all of the expenses that have been considered for 2008 and 2009. Where an adjustment has been made, the dollar figures are shown in bold font, italicised and in parentheses.

The calculations of income for purposes of child support are shown and the table amount of child support is determined in consequence thereof. [ 41 ] On the basis of the calculations set out in Appendix “A”, the income of Boyd Wilson for 2008 is determined to be $90,749.89, resulting in child support payments for two children of $1,290.00 effective on 1 June 2009.

His income for 2009 is determined to be $124,698.08 resulting in child support payments for two children of $1,698.00 effective on 1 June 2010. [ 42 ] I would ask counsel to carefully review the calculations that I have made and to bring any discrepancy to my attention if there are any. 6: CONCLUSION [ 43 ] For all of the foregoing reasons, and in keeping with the letter and the spirit of the separation agreement entered into by the parties dated 31 March 2008, this court finds that the income of Boyd Wilson for 2008 to be $90,749.89 and his income for 2009 to be $124,698.08.

Consequently, this court orders as follows: 1. Boyd D’Eyencourt Wilson shall pay child support to Kelly Lynne Wilson for the children Candice Verna Wilson (born on 16 February 1996) and Riley Lorne Wilson (born on 6 May 1998) in the amount of $1,290.00 per month, in accordance with the tables under the Child Support Guidelines based on Boyd D’Eyencourt Wilson’s annual income of $90,750.00, commencing on the 1st day of June 2009 and then on the first day of each month that follows. 2.

Boyd D’Eyencourt Wilson shall pay child support to Kelly Lynne Wilson for the children Candice Verna Wilson (born on 16 February 1996) and Riley Lorne Wilson (born on 6 May 1998) in the amount of $1,698.00 per month, in accordance with the tables under the Child Support Guidelines based on Boyd D’Eyencourt Wilson’s annual income of $124,700.00, commencing on the 1st day of June 2010 and then on the first day of each month that follows. 3.

Unless this support order is withdrawn from the office of the Director of Family Responsibility Office, it shall be enforced by the Director and amounts owing under the support order shall be paid to the Director, who shall pay them to the person to whom they are owed. Support deduction order to be issued. 4. Each party shall bear his or her own costs. [ 44 ] I would like to make a comment of a precatory nature if I may. It is clear that Mr. Boyd Wilson’s gross revenue varies greatly from year to year. It is also clear that his expenses will also experience both highs and lows.

In a year where we have the “perfect storm” of low gross revenue and abnormally high expenses, the resultant child support payments will be unusually low compared to years of normal revenues and expenses. This can create a hardship, not only for Mr. Wilson but also for his children who are dependent on regular and predictable child support payments. I have already held that the parties have agreed to a formula for the calculation of child support based on the last year’s income. However, I share Mr.

Watson’s thinking that perhaps the parties should be looking at the pattern of income and expenses and they should perhaps contemplate the “rolling average” method of income calculation

as is contemplated in subsection 17(1) of the guidelines. This would smooth out the spikes and dips that are endemic to Mr. Boyd Wilson’s employment and would be inherently fairer to both parties. This would also result in more predictability and stability of child supports. I urge the parties to think about negotiating an amendment to their separation agreement so as to implement a “rolling average” method of income calculation. [ 45 ] I am thankful to both Mr. Proctor and Mr. Watson for their able assistance in this matter.

APPENDIX “A” Table of Business Expenses, Home Office Expenses, Vehicle Expenses and Total Income for 2008 and 2009 Used to Calculate Child Support Item 2008 2009 Business Expenses Accounting and Legal $367.50 $393.57 Advertising & Promotion $1,953.90 $389.67 (Adjusted Expense) ($500.00) Food, Beverage and Entertainment (50%) $2,689.21 $3,163.89 (Adjusted Expense) ($00.00) ($00.00) Postage $53.74 ***** Internet ***** $251.44 (Adjusted Expense @ 80%) ($201.15) Computer ***** $744.67 (Adjusted Expense @ 80%) ($595.74) Cell Phone $3,586.31 $2,606.79 (Adjusted Expense @ 0%) ($2,869.05) ($2,085.43) Line of Credit Interest $999.76 $1,005.39 (Adjusted Expense) ($00.00) ($00.00) Visa Interest $360.51 $377.62 (Adjusted Expense) ($00.00) ($00.00) TOTAL $10,010.93 $8,933.04 (Adjusted total) ($3,790.29) ($3,665.56) Work-Space in-the-Home Expenses Utilities $2,425.81 $1,371.41 Maintenance $480.67 ***** Insurance $695.52 $1,167.30 Property Taxes $2,604.45 $1,888.20 Mortgage Interest $8,359.13 $6,671.20 Heat (Oil) ***** $475.89 TOTAL $14,565.58 $11,574.02 Work-Space-in-the-Home Expense at 10% of the Total $1,456.56 $1,157.42 (Adjusted Expense) ($00.00) ($00.00) Motor Vehicle Expenses Fuel $8,275.10 $6,172.96 Maintenance & Repairs $3,984.26 $1,979.70 Insurance $2,455.98 $783.61 (Adjusted) ($1,000.00) Licence & Registration $298.00 $149.00 Leasing $10,500.00 $00.00 Protection Package $97.22 $583.32 Interest $235.19 $1,394.03 Capital cost allowance $5,085.00 $8,586.39 TOTAL $30,930.75 $19,649.01 (Adjusted) ($29,474.77) Employment Use @ 80% $24,744.60 $15,719.20 (Adjusted) ($23,579.82) ($12,575.36) Total expenses before adjustment $36,212.26 $25,809.66 Total expenses after adjustments ($27,370.11) ($16,240.92) Employment Income less employment expenses before adjustments $118,120.00 $140,939.00 Less $36,212.26 Less $25,809.66 = $81,907.74 = $115,129.34 Income for purposes of Child Support $118,120.00 $140,939.00 Less $27,370.11 Less $16,240.92

(Employment Income less employment expenses after adjustments) $90,749.89 $124,698.08 Child Support Table Amount for two children $1,290.00 $1,698.00