C.S.M. v W.S.L. Date:, 2015 BCPC 252

Citation: C.S.M. v W.S.L. Date: 20150915 2015 BCPC 0252 File No: F23217 Registry: Port Alberni IN THE PROVINCIAL COURT OF BRITISH COLUMBIA Held in Nanaimo IN THE MATTER OF THE FAMILY LAW ACT , S.B.C. 2011 c. 25 BETWEEN: C.S.M. APPLICANT AND: W.S.L. RESPONDENT RULING OF THE HONOURABLE JUDGE J.E.SAUNDERS C.S.M. not present

Appearing in person: W.S.L. Place of Hearing: Nanaimo , B.C.

Date of Hearing: August 17, 2015 Date of Judgment: September 15, 2015 THE RELIEF SOUGHT [ 1 ] The applicant, C.S.M., filed an application in March, 2014 for a determination of the value of an education fund (RESP) into which the respondent, his father, W.S.L., had been paying, and for an order that he pay out the fund to him in the amount of $9800. [ 2 ] W.S.L. filed a reply objecting to the relief sought and indicating that he had already paid out $3000 to C.S.M. towards his welding course and that the RESP was also intended to benefit his other children. [ 3 ] The application was dealt with in two family case conferences.

The issue of jurisdiction was never raised or considered. [ 4 ] When the matter came on for hearing before me, I raised the issue of jurisdiction whether the provincial court has the authority to grant the relief sought. [ 5 ] The parties who were self-represented were granted an adjournment to confer with counsel and required to provide materials on the issue of whether the provincial court can deal with an education fund and payment out of such a fund. [ 6 ] The matter was adjourned to August 17 th , 2015 when it came before me. W.S.L. was present. C.S.M. was not.

There was no reason provided for his absence and the Registry was not notified that he could not attend. The application proceeded and numerous materials including case law was filed and provided to the court. [ 7 ] The applicant’s position is that the RESP is an extraordinary expense and falls under child support under the Family Law Act ( FLA ) and child support guidelines.

The respondent views the education fund as a fund that he contributes towards and has control over until it is paid out to one or more of the children. [ 8 ] On a review of the material and the case law, I concluded that the provincial court does not have jurisdiction to deal with the application and dismissed it with reasons to follow. THE BACKGROUND OF THE RELATIONSHIP [ 9 ] C.S.M. was born [omitted for publishing] and is now 28 years old. [ 10 ] In 2005 there were orders made in Port Alberni file F1448 that W.S.L. pay child support to K.M. At that time C.S.M. was about 19 years old.

It is not clear why these orders were sought at a time when C.S.M. was that age. K.M. was in another relationship with E.J.A. who was C.S.M.’s step-father. He passed away in November, 2010. It is not clear from the material whether E.J.A. supported C.S.M. while he resided at home and attended school or why child support between E.J.A. and W.S.L. should not have been shared between them while the child was still at school. [ 11 ] The first orders were made in 2005. On April 20, 2005 W.S.L. was ordered to pay $400 per month child support and a further $50 per month into an RESP.

The order also provided that there had to be proof of report cards and school attendance for the years 2003, 2004 and 2005. [ 12 ] In July, 2005, W.S.L. was ordered to pay $507 per month and specifically “on the first day of each month $50 out of the maintenance payment will be forwarded into a RESP fund for the named child and the balance of $457 paid to K.M.” [ 13 ] He was also ordered to provide copies of his RESP reports for 2005. K.M. was required to provide copies of school attendance. [ 14 ] In August, 2006, W.S.L. was required to pay child support in the amount of $285 less $50 for a RESP contribution.

The intent according to the order was child support would only be paid if the child continued at school full time. By October, 2006, the requirement to pay child support terminated including the obligation to pay the RESP pursuant to the order. W.S.L. is not in arrears on the child support and RESP payments. C.S.M. was almost 20 years old when the child support order was terminated in 2006. [ 15 ] At some point after that, W.S.L. voluntarily paid out a sum of $3000 to C.S.M. for a welding course he was taking but did not complete. The application is for more funds to pay for another course.

THE NATURE OF A RESP [ 16 ] There is no specific reference to an RESP in the FLA or in the Federal Child Support Guidelines and little to no case law in the provincial court dealing with RESPs. [ 17 ] The Canada Revenue Agency defines an RESP as a contract between an individual (the subscriber) and a person or organization (the promoter). The subscriber names one or more beneficiaries and the promoter agrees to pay educational assistance payments to the beneficiary who pays income tax on the payments. If the payments are not made to the beneficiary the promoter pays the subscriber.

There is a reversionary interest vested in the subscriber.

[18] There are group plans in which contributions of a large number of subscribers are pooled. There are individual plans set up fora single beneficiary or family plans for more than one family member. The subscriber has discretion over how the assets are investedand the timing and amount of the payments of the education assistance. [19] Another categorization of an RESP is that it is property and falls within

Part 5 (Property Division), or

Part 8 (Children’sProperty) of the FLA. The RESP, according to the Canada Revenue Agency is the property of the subscriber contributing to theeducation fund for the child as beneficiary. The provincial court would not have jurisdiction to deal with the application under

Part 5. [20] There is no specific mention of RESPs in the FLA so I have considered how other courts have dealt with the question and howthe Canada Revenue Agency deals with these contributions. [21] The Canada Revenue Agency defines the RESP as a trust (section 146.1) which would preclude the provincial court havingjurisdiction to order the payment out of a trust whether to the child or otherwise (but see Stones v Stones, 2002 BCSC 1558 where the BCSupreme Court held the mother had a fiduciary duty in relation to the RESP for her daughter in a divorce action and there was noconstructive or implied trust). [22] The case law, predominantly in the higher courts, deals with RESPs as property while a few, in both the provincial court andSupreme Court, deal with an education fund as an extraordinary expense pursuant to

section 7 of the Child Support Guidelines. THE ISSUE [23] The issue is whether an RESP is property or child support or a

section 7 expense either special or extraordinary. It is my finding,for the reasons set out below, that an RESP is property and cannot be dealt with in the provincial court and is a matter for the SupremeCourt. THE RELEVANT LEGISLATION [24]

Section 3 of the Child Support Guidelines sets out the presumptive rule for child support including children over the age ofmajority or attending a post-secondary institution. [25]

Section 7 deals with special or extraordinary expenses which take into account the necessity of the expense in relation to thechild’s best interests and the reasonableness of the expense in the context of the means of the spouses. Special expenses are defined. Extraordinary expenses are not defined but are assessed according to certain criteria such as the child’s special interests, thereasonableness relative to the spouse’s means and spending habits prior to separation. [26]

Section 146.1(1) of the Income Tax Act (RSC, 1985, c1 (5th Supp) sets out certain

definitions as follows: a beneficiary, inrespect of an education savings plan, is a person designated by the subscriber to whom or on whose behalf an educational assistancepayment under the plan is agreed to be paid if the person qualifies under the plan. Qualification is a pre-requisite. [27] A subscriber is described, inter alia, (

a) as an individual with whom the promoter of the plan enters into the plan; (

b) anindividual who has before that time, under a written agreement, relating to a division of property between the individual and a subscriberunder the plan in settlement of rights arising out of, or on the breakdown, of their marriage or common-law partnership, or (

c) after thedeath of an individual described in paragraphs (

a) and (

b) above, any other person (including the estate of the deceased individual) whoacquires the individual’s rights as a subscriber under the plan or who makes contributions into the plan in respect of a beneficiary. [28] Any savings remaining in an RESP when it closes or expires (except for funds received from the Canada Education SavingsGrant or Canada Learning Bond) will be returned to the subscriber and any interest earned, subject to certain conditions, whenwithdrawn, is taxed at regular income tax rate plus an additional 20% (http://www.canlearn.ca/eng/savings/know_your_resp.shtml).

CASE LAW ANALYSIS [29] In Barnes v Bates, 2014 BCSC 905 the RESP was dealt with as property in the division of family assets in the divorceproceeding. In J.R. v N.R.F. [2013] BCJ No. 582 the parties were ordered to each pay into an RESP. The language of the decisionsuggests that the court considered RESPs to be assets such as RRSPs, bank accounts, pension and other matrimonial property. Whileboth parents were ordered to contribute into an RESP, that requirement was made in the context of child support although not categorizedas such, and was not dealt with as a

section 7 expense either. [30] The BC Supreme Court in Sodhi v Sodhi [2014] BCJ No. 2195 ordered the parties to open RESP accounts for the benefit of thechildren. The court did not treat the RESPs as child support or

section 7 expenses but as a separate issue akin to an asset or propertysimilar to J.R. v N.R.F. (above). [31] The cases referred to by C.S.M. arise out of both the provincial court and Supreme Court.

In Greenwood v Greenwood, (BCSC) which was under the Divorce Act, there had been a consent order made previously that the respondent subscribe toan RESP for the child of the marriage and in the subsequent application the court held that the RESP was an extraordinary expense. [32] In van Erp v van Erp 2015 BCSC 203 the parties had entered into a separation agreement in which they agreed to a childsupport payment and a $50 per month payment for half of the children’s RESPs which had been opened in 2005 and 2007 respectively,some years prior to the separation agreement in 2011.

Both parents were guardians of each account and contributed $50 per month peraccount. Mr. van Erp was to pay $50 per month to Ms. Van Erp representing half of the RESP contributions according to the agreementwhich he stopped doing in 2012 and Ms. van Erp continued to keep the accounts current. The court held that the amounts not paid by

Mr. van Erp relating to the RESPs were arrears in favour of Ms.van Erp. Interestingly, the RESP arrears were not included in the FEMPcalculation of arrears. The court further held that there would be no additional orders regarding the RESP accounts and that the partieswere to continue their commitments according to the agreement failing which Ms. van Erp could continue to seek compensation as RESParrears. The court did not characterize the RESP payments as child or spousal support arrears or

section 7 expenses. The separationagreement dealt with the RESP contribution as a special expense. [33] In the provincial court there have been cases where RESPs have been dealt with as extraordinary expenses (K.P.W. v K.W.W.2013 BCPC 40 , 2013 BCPC 0040). In D.J.K. v C.J.K, 2006 BCPC 326 the court dealt at length with extraordinaryexpenses but in the context of tuition and other university associated costs which are not the same as an RESP.

An RESP may be desirable but it is not necessary (Gaetz v Gaetz (NS FC), 11 R.F.L. (5th) 80 N.S.S.C.) and RESP contributions are notextraordinary expenses at law (Widney v Widney, 2014 BCSC 1694, para 210; Hosseini v Kazemi, 2010 BSCS 666).

Extraordinaryexpenses relate to actual and ongoing expenses for the children and a savings plan or life insurance plan does not fit into that category(ELL v RML, 2003 MBQB 13 where the court held that an RESP may be desirable but not necessary and the father was not required tocontribute). [34] In K.M. v C.Z. 2012 BCPC 105 , 2012 BCPC 0105 the provincial court distinguished between special andextraordinary expenses. Special expenses are defined in

section 7 and are exhaustive. Extraordinary expenses as set out in section 7(1)(

d) and (

f) are determined based on the combined incomes of the parents and other facts and must be reasonable and necessary (Bodine-Shah v Shah, 2014 (BCCA 191). The reference to expenses for post-secondary education in section 7(1)(

e) has not been interpreted as anRESP in the case law but is part of the ongoing child support obligation when the child continues onto university or college and is still adependent child under the guidelines. [35] The BCCA in Neufeld v Neufeld 2005 BCCA 7 in discussing whether a child over the age of 19 years is entitled tosupport under section 3(2)(

b) or extraordinary expenses pursuant to

section 7, held that that support for an adult child should bedetermined under section 3(2)(

b) and does not preclude a specific award for special and extraordinary expenses under

section 7 whereappropriate. There is no mention of RESPs. Furthermore,

section 7 expenses are shared proportionately between spouses (B.F. v A.B.2012 BCPC 85 , 2012 BCPC 0085) whereas RESPs are not. [36] Extraordinary expenses must be reasonable and necessary (McLaughlin v McLaughlin (1998), , 167 D.L.R. (4th) 39 (B.C.C.A.)). A contribution to an RESP is voluntary and the parties can agree to such an arrangement.

An obligation to payextraordinary expenses is a legal obligation which arises if the circumstances exist for reasonable, necessary, actual and ongoingexpenses. [37] In the British Columbia provincial court cases referred to above, I respectfully decline to follow their reasoning based on thedecision of the British Columbia Supreme Court of Hansard Spruce Mills [1954] DLR 590 and, due to the unusual circumstances that anRESP is property and not child support or a

section 7 expense, I cannot follow the reasoned decisions that find RESPs to be special orextraordinary expenses or child support. [38] I respectfully disagree with the higher courts regarding the categorization of RESPs as extraordinary expenses or child supportand if I am wrong in my characterization of an RESP as property or an asset to be dealt with under the division of property in therespective parts of the FLA, I welcome the scrutiny of an appeal. Dated at Nanaimo this 15th day of September, 2015. _______________________ THE HONOURABLE JUDGE J.E.SAUNDERS (PCJ)