S.E.W. v. S.C.W. Date:, 2016 BCPC 32

Citation: S.E.W. v. S.C.W. Date: 20160129 2016 BCPC 0032 File No: 64760 Registry: Nanaimo IN THE PROVINCIAL COURT OF BRITISH COLUMBIA IN THE MATTER OF THE FAMILY LAW ACT , S.B.C. 2011 c. 25 BETWEEN: S.E.W. APPLICANT AND: S.C.W. RESPONDENT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE GOUGE Appearing in person: Ms. W

Appearing in person: Mr. W Place of Hearing: Nanaimo , B.C. Dates of Hearing: November 17, 2015, January 20, 2016 Date of Judgment: January 29, 2016 History [ 1 ] Mr. & Ms. W. are the parents of one child, K., now age 18. Mr. & Ms. W. married on June 30, 1994 and separated in December, 2006. They have not divorced, although they have a very hostile relationship. K. has resided with her mother since Mr. & Ms. W. separated, except for the period September, 2010 to June, 2011, during which she resided with her father. [ 2 ] Until 2007, Mr. W. was self-employed in the construction industry.

His business was not successful. In September, 2011, he returned to school to upgrade his high school courses sufficiently to qualify for admission to the nursing program at Vancouver Island University. He was admitted to the nursing program in September, 2012 and graduated in April, 2015. [ 3 ] Although he was out of the workforce from 2012 to 2015, Mr. W. received substantial income in each of those years. That income derived principally from three sources: a. Mr.

W. suffered two separate and significant workplace injuries prior to 2010, one to his ankle and one to his back, and was entitled to a lifetime pension benefit for each from the Workers’ Compensation Board. His monthly pension for his ankle injury was $122 per month and his monthly pension for his back injury was $1211 per month. In 2012, Mr. W. was offered, and accepted, a lump- sum payment of $37,000 in lieu of the pension benefit for his ankle. He still receives $1211 per month as a pension benefit for his back injury. b. Mr. W. earned some money from part-time employment each year. c. Mr.

W. receives rental income from a suite in his house. [ 4 ] In Dahlgren vs Hodgson 1999 ABCA 23 ; 43 RFL (4 th ) 176, Chief Justice Fraser held that, because workers’ compensation benefits are not subject to income tax, they should be “grossed up” for the purpose of applying the tables in the Federal Child Support Guidelines SOR/97-175 (“the Guidelines ”), which are based on pre-tax income. The calculation of the gross-up is complex and beyond the ken of ordinary mortals like me. There was no evidence to support the calculation of the gross-up in this case. I offered Ms.

W. an adjournment to procure the necessary opinion evidence, but she declined that offer, preferring to waive her right to the gross-up. [ 5 ] Immediately upon graduation from the nursing program, Mr. W. was offered, and accepted, employment by the Vancouver Island Health Authority as an emergency room nurse. He participated, as a paid employee, in a training program for that position in May and June, 2015, and began work as an emergency room nurse in June.

His regular rate of pay is $31.71 per hour, but he is also entitled to shift differential pay of $0.70 to $1.50 per hour, depending on the shifts worked, and to overtime rates for overtime work. His present

schedule contemplates that he will work 35 hours per week. [ 6 ] Under the terms of his collective agreement, Mr. W. will receive an increase in his hourly wage in June of each year. [ 7 ] Mr. W. was cross-examined at length respecting his opportunity to augment his income by working more overtime and more night and weekend shifts. It is apparent from his evidence that he had many such opportunities in July – September, 2015. He says that he has fewer now because of a change in scheduling practices at the hospital. I observe that the most recent pay stubs tendered in evidence were from September, 2015. [ 8 ] Ms.

W. first applied for child support by an application filed on November 28, 2011. On February 6, 2012, His Honour Judge Gould of this court made an interim order for child support at the rate of $250 per month. On July 25, 2012, His Honour Judge Joe made another interim order, providing: (

i) that Mr. & Ms. W. have joint custody and guardianship of K; (ii) that K’s primary residence be with Ms. W; and (iii) that Mr. W. continue to pay child support at the rate of $250 per month. [ 9 ] For the reasons given in paragraphs 11 and 12, it is difficult to determine how much child support Mr. W. paid in 2012 - 2014. [ 10 ] Ms. W. acknowledges receipt of $2500 in 2012, $3000 in each of 2013 and 2014, and $3750 in 2015. [ 11 ] The circumstances are unusual. Because of a past dispute with Canada Revenue Agency (“CRA”) and the collection methods pursued by CRA, Ms.

W. was, for some years, unable to open or hold a bank account in her own name. In order to facilitate transfers of funds to Ms. W., Mr. W. opened a bank account in K.’s name, and made deposits to that account, some for the benefit of K. and some for the benefit of Ms. W. Not surprisingly, Mr. W. was unable to recall the particulars of the various transactions. [ 12 ] Mr. W says that he made child support payments of $382.49 in 2012, $1679.15 in 2013 and $321 in 2014 by making direct deposits to K ’s bank account. Ms.

W. disputes the characterization of those payments as child support, and alleges that they fell into three categories: (

i) gifts by Mr. W. to K.; (ii) gifts by Mr. W. to Ms. W.; and (iii) payments on account of Ms. W.’s expenses for which Ms. W. later reimbursed Mr. W. [ 13 ] The evidence is insufficient to allow me to determine the purpose of each of the deposits.

Retroactive Adjustment of Child Support [ 14 ] Where, as in this case, there has been an interim order for child support and a final order is sought at a trial, it is the duty of the trial judge to make retroactive adjustments to the quantum of child support, so as to reflect the order which would have been made if the evidence at the trial had been available on the interim application.

The principle was stated by the Alberta Court of Appeal in Peterson vs Ardiel 2007 ABCA 218 ; [2007] AJ No. 687 ; 39 RFL (6th) 41 @ paragraph 11: The law recognizes that interim awards are interim only and are often made on an imperfect record. Chambers judges do the best that they can to set an interim balance between the parties, until the matter can go to trial.

The trial judge is expected to make all the necessary findings of fact, and then to readjust the interim orders back to the point that they were made so that they accord with the facts as found by the court. [ 15 ] Section 150(1) of the Family Law Act and

section 8 of the Family Law Act Regulation BC Reg 42/103 provide that child support is to be determined in accordance with the Guidelines . Mr. W. does not seek relief under

section 10 of the Guidelines . I am therefore obliged to assess his monthly child support obligation by reference to the tables set out in the Guidelines. That, in turn, requires me to determine his income in each year since 2011. [ 16 ] It is not suggested that Mr. W. was capable of earning more than he did in 2011 – 2014. [ 17 ]

Section 16 of the Guidelines provides that: … a 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 Canada Revenue Agency and is adjusted in accordance with

Schedule III. Mr. W’s “Total Income”, comprising the three elements described in paragraph 3, as assessed by CRA, for the years 2012 - 2014 was: 2012 $63,282 2013 $35,992 2014 $47,767 Ms. W. does not challenge the accuracy of Mr. W.’s tax returns and assessments. [ 18 ] Ms. W. points out that Mr. W. received scholarships and bursaries while attending Vancouver Island University. They were $7620 in 2012, $3970 in 2013 and $6910 in 2014. Those receipts were reported on his tax returns, but not included in his “Total Income”, as assessed by CRA.

She says that they should be added to his Total Income, as assessed by CRA, in each year, for the purpose of applying the tables in the Guidelines . [ 19 ] Ms. W. called as her witness Ms. Trimmer, who is a chartered professional accountant and an experienced tax practitioner. Ms. Trimmer says that scholarships and bursaries are not included in “Total Income” on the T1 General form. She says, however, that they should be included in income for the purpose of applying the tables in the Guidelines . [ 20 ] Ms. Trimmer’s view is not supported by the definition of “income” in

section 16 of the Guidelines or by the jurisprudence construing that definition. The superior courts have consistently held that “income”, for the purposes of the Guidelines , includes only those receipts which are included in “Total Income”, as defined by the Income Tax Act .

Subject to any demonstrated error (deliberate or accidental) in the payor spouse’s tax return, that figure can be found at line 150 of each year’s return. [ 21 ] In Dahlgren vs Hodgson, Chief Justice Fraser rejected the argument that workers’ compensation benefits should not be included in income for the purpose of applying the tables in the Guidelines . She said: This theory rests on the argument that these payments are not treated as income for income tax purposes. However, this argument misses the real issue.

The question is whether regardless of their tax treatment or source, they are income for purposes of the calculation of child support. We are of the view that they are. The definition of "income" in the Child Support Guidelines is very broad and clearly encompasses these benefits.

That definition reflects Parliament's intention that in dealing with a parent's obligation to support a child, it is fair and appropriate to take into account many forms of income, or benefits, or compensation, or attributed income, benefits or compensation, etc. that would not otherwise be treated as taxable income under the Income Tax Act .

Those comments were adopted and applied by Justice Wilcock in R.V. vs L.V. [2012] BCJ No. 2709 ; 2012 BCSC 1939 @ paragraph 21. [ 22 ] It should be noted that, for the purposes of the Income Tax Act , “Total Income” is not synonymous with “taxable income”. [ 23 ] So, for example, Mr. W.’s workers’ compensation benefits are included in “Total Income” on his notices of assessment, even though they are not taxable.

Neither Dahlgren vs Hansen nor R.V. vs L.V. is authority for the proposition that receipts which are not included in “Total Income” on the payor spouse’s notice of assessment may be taken into account when determining that spouse’s income for the purpose of the Guidelines . [ 24 ] In Gold vs Romhanyi [2006] BCJ No. 612 ; 2006 BCSC 243 , Justice Maczko considered whether the child tax credit should be taken into account when determining incomes under the Guidelines . He said @ paragraph 12: The plaintiff also receives $7,725.84 in federal Child Tax Benefit and B.C. Family Bonus payments.

This amount is not calculated as part of the plaintiff's income for the purposes of determining the proportion of extraordinary expenses to be paid by each party. Income is a defined term under the Guidelines ; in this case, the plaintiff's income is calculated pursuant to s. 16 of the Guidelines , which provides:

Subject to sections 17 to 20, a spouse's annual income is determined using the sources of income set out under the heading "Totalincome" in the T1 General form issued by the Canada Customs and Revenue Agency and is adjusted in accordance with

Schedule III. Amounts received under Child Tax Benefit and the B.C. Family Bonus are not included under the heading "Total Income" on the T1General form; therefore, it is not appropriate to include these amounts in the plaintiff's income when determining the parties'proportionate share of extraordinary expenses under s. 7(2) of the Guidelines.

The same conclusion was reached in Krislock vs Krislock [1997] SJ No. 698; (SK KB), [1998] 4 WWR 230; 34 RFL (4th) 420 @ paragraph 30. [25] In C.L.E. vs B.M.R. 2010 ABCA 187 , [2010] AJ No. 679; 2010 ABCA 187; 320 DLR (4th) 142; 86 RFL (6th) 26, adivision of five justices of the Alberta Court of Appeal considered the issue in relation to subsidized housing provided to the payor parentby his employer. Justice Cote gave judgment for the court.

He said @ paragraphs 95 - 97: The page on the T1 General form that contains the heading "Total Income" for the taxation year 2005 has listed on it fifteen separate line"sources of income" that then result in a "line 150" amount of income. The scheme appears to be quite straight forward. It seems to me that the common practice of the matrimonial bar and the courts in basing the amount of child support payable on inter aliathe so called "line 150 income" of the payor parent is nothing more than reflective of what one is directed to do by virtue of

section 16 ofthe Federal Child Support Guidelines. If any variation from the line 150 income amount is to be made, it must be expressly found in the specific wording of either sections 17through 20 of the Federal Child Support Guidelines or

Schedule III thereof. [26] In my view, the governing principle was correctly stated in C.L.E. vs B.M.R.

Section 16 of the Guidelines is clear, precise andunambiguous.

The following statement of the applicable principle was adopted by the Supreme Court of Canada in Verdun vs TorontoDominion Bank (SCC), [1996] 3 SCR 550 @ paragraph 22: In the construction of statutes their words must be interpreted in their ordinary grammatical sense, unless there be something in thecontext, or in the object of the statute in which they occur, or in the circumstances with reference to which they are used, to show thatthey were used in a special sense different from their ordinary grammatical sense. [27] While the rigidity of the definition of “income” found in the Guidelines may cause unfairness in some circumstances, itssimplicity is of great value in many other cases, because it allows parents to determine their child support obligations without theassistance of lawyers, accountants and judges.

That may be done simply by applying the tables in the Guidelines to the figure for “TotalIncome” in the CRA assessment for the payor spouse. Endless disputes would arise if, as Ms. W. argues, the CRA assessment were notdeterminative of the issue. For example, it would be open to Mr. W. to argue that the $37,000 lump sum which he accepted in lieu of hisdisability pension for his ankle injury should be regarded as a capital receipt rather than income. [28] I conclude that Mr.

W.’s scholarships and bursaries are not to be taken into account in determining his Guideline income. [29] Applying the tables in the Guidelines to Mr. W.’s assessed income in each year, Mr. W. ought to have been paying child supportat the rate of $587 per month in 2012, $326 per month in 2013 and $436 per month in 2014. Calculation of Arrears [30] If Mr. W. made cash deposits to K.’s account for the purpose of paying child support to Ms. W., he ought to have credit forthose deposits against any award of retroactive child support.

However, if he made such deposits to fund the purchase of necessaries orluxuries for K., he ought not to have such credit. The legal principle was stated in Haisman vs Haisman [1994] AJ No. 533; 1994 ABCA 249 , 116 DLR (4th) 671; 7 RFL (4th)1 @ paragraph 77 (leave to appeal refused @ [1995] SCCA No. 86): When a mother has custody of a child and a court orders the father to make payments to the mother for the maintenance of that child, it isnot open to him to make payments to the child instead.

Nor is it open to him to buy things for the child and to claim that the amountswhich he spends in this way should be deducted from the maintenance payments which he was ordered to make to the mother. In neithercase has he complied with the order of the court. Further, the mother, as the custodial parent, is entitled to decide how maintenancepayments for the child will be spent. Because I am unable to determine the purpose of each deposit, I cannot conclude that Mr. W. is entitled to credit for those depositsagainst his child support obligation. [31] Mr.

W. actually paid $2500 in child support in 2012, and $3000 in each of 2013 and 2014. He ought to have paid $7044 in2012, $3912 in 2013 and $5232 in 2014. The total accumulated arrears for those three years are $7688. [32] The determination of Mr. W.’s 2015 and 2016 child support obligations requires an estimate of his 2015 and 2016 “TotalIncome”. Such an estimate would require me to estimate how much shift and overtime work was available to Mr. W. in 2015, how muchwill be available to him in 2016, and how much shift and overtime work it would be reasonable to expect him to accept.

Those questionswere hotly debated during the evidence at trial. No independent evidence on the question, oral or documentary, was provided by eitherparty. For example, Mr. W.’s shop steward and supervisor were not called to give evidence. None of his pay stubs after September,2015 were tendered in evidence. [33] Rather than determine Mr. W.’s 2015 support obligation on such a weak evidentiary basis, I think it better to make a furtherinterim order now, subject to adjustment when better evidence is available.

For example, CRA’s notice of assessment in relation to Mr.W.’s 2015 income will give a precise figure for Mr. W.’s “Total Income” for that year, and would provide a reasonable basis forestimation of his 2016 “Total Income”. The parties might or might not think it helpful to require his shop steward or supervisor to give

evidence Interim Order in Relation to Mr. W.’s 2016 Child Support Obligation [ 34 ] If Mr. W. works a 35-hour week at $31.71 per hour for 50 weeks, he will earn $55,492.50 in 2016. For the purpose of an interim award of child support, I think it fair to add 5% on account of shift differentials and overtime, yielding an estimate of his 2016 employment income of $58,200. He will also receive his workers’ compensation benefit on account of his back injury, which is $14,532 annually. In past years, the rental income from his suite has been modest, and so may be disregarded for the purpose of an interim order.

As a result, I think that $72,700 is a fair estimate of his 2016 income for the purpose of an interim order for child support. The Guideline figure for an income of $72,700 and one child is $680 per month. Special and Extraordinary Expenses [ 35 ] K. plans to enrol in post-secondary education in September, 2016, and it is likely that she will incur special and extraordinary expenses, as defined in

section 7 of the Guidelines . However, she has the benefit of a registered education savings plan, from which her first year’s expenses can be paid, in whole or in part. Ms. W. suggests that consideration of this issue should be deferred, and I think that wise. Disposition [ 36 ] The interim orders made by Judge Gould on February 6, 2012 and by Judge Joe on July 25, 2012 are rescinded. [ 37 ] There will be a final order: a. fixing the arrears of child support owing from Mr. W. to Ms. W., as at January 1, 2015, at $7688; b. that Mr.

W. make payments on account of those arrears at the rate of $200 per month, payable on the first day of March, 2016 and on the first day of each month thereafter until the arrears have been paid in full. [ 38 ] There will be an interim order that Mr. W. pay to Ms W. the additional amount of $680 on the first day of March, 2016 and on the first day of each month thereafter until further order of the court, as payments on account of his 2016 child support obligation, subject to retroactive reassessment and adjustment after August 1, 2016. [ 39 ] There will be an order that Mr. W. deliver to Ms.

W.: a. on or before the 15 th day of each month, commencing March 15, 2016, copies of his paystubs from the preceding month; b. on or before August 1, 2016, a copy of his notice of assessment from CRA for the 2015 tax year. [ 40 ] The following issues are adjourned generally: a. the determination of the arrears of child support, if any, owing from Mr. W. to Ms. W. in relation to 2015; b. the final determination of Mr.

W.’s child support obligation for 2016, and the retroactive adjustment of that obligation, taking into account the interim payments ordered in paragraph 37; c. all issues relating to special and extraordinary expenses under

section 7 of the Guidelines . I hope that it will be possible for Mr. & Ms. W. to agree on item “a”, which is relatively simple. All they need do is determine the Guideline figure, using the figure for “Total Income” on Mr. W’s notice of assessment, and deduct the payments actually made. Item “b” will be similarly simple after Mr. W. receives his notice of assessment for the 2016 tax year. If Mr. & Ms. W. are able to agree on those items, they need not bring them before the court for decision. Item “c” is more complex. I refer Mr. & Ms.

W. to K.S.L. vs B.M. [2015] BCJ No. 1491 ; 2015 BCPC 201 , in which I considered similar issues. That judgment may assist Mr. & Ms. W. in their discussion of K.’s special and extraordinary expenses. [ 41 ] I am seized of future proceedings in this case. January 29, 2016 ____________________________________ T. Gouge, PCJ