King v MacDonald, 2022 ABKB 736

Court of King’s Bench of Alberta Citation: King v MacDonald, 2022 ABKB 736 Date: 20221104 Docket: 4810 027536 Registry: Red Deer Between: Kassie Carol Elsie King Applicant/Respondent by Cross-Application - and - Nolan James MacDonald Respondent/Applicant by Cross-Application _______________________________________________________ Reasons for Decision of the Honourable Justice Eleanor J.

Funk _______________________________________________________ Introduction [ 1 ] This matter raises the difficult task of determining proper guideline incomes when one party fails to provide adequate, accurate and timely financial disclosure. [ 2 ] The parties were together for seven years and have two children. During their relationship, Mr. MacDonald was the main bread-winner while Ms. King was minimally employed. They have been separated since 2020 and they share parenting of their two

children. [ 3 ] This is Ms. King’s application for interim ongoing child and spousal support. Mr. MacDonald’s income is at issue. Mr. MacDonald derives his income through the corporation that he owns and operates. He has provided some financial documents in support of his claim that his corporation is operating at a loss and that his income should be set at $0. [ 4 ] Ms. King believes that Mr. MacDonald is over-inflating his business expenses to hide his true income. She also alleges that the financial disclosure that Mr.

MacDonald has provided is neither complete nor comprehensive to allow for a meaningful review of the reasonableness of his claimed business expenses. She asks that many of these expenses be added back to the pre-tax income of the corporation and that Mr. MacDonald’s income for the purposes of child support be set at $277,000. [ 5 ] When Ms. King filed her application, she was not employed and had no income. At this hearing, she advised that she has since found work and that she expects her yearly income to be $45,760. [ 6 ] Mr. MacDonald filed a cross application in which he claims Ms.

King is not entitled to spousal support. He asks that his income be set at $0 and Ms. King’s income be imputed at $31,500. Based on these incomes, he seeks child support from Ms. King. Upon learning in this hearing that Ms. King is now earning $45,000, Mr. MacDonald revised his position and suggested that his income also be set at $45,000. [ 7 ] One week before this hearing, Mr. MacDonald filed an update affidavit along with a 606-page Disclosure Statement. The sheer volume, and timing, of these materials made in difficult for Ms.

King’s counsel, and the Court, to properly review, absorb, and understand the ledgers and receipts that Mr. MacDonald provided in an effort to discern his legitimate business expenses from his personal expenses. [ 8 ] Against this backdrop, the threshold issue for me to determine is whether Mr. MacDonald has provided sufficient financial disclosure for me to determine what his actual income is, or, if I should impute his income.

If his income is to be imputed, the question is what that imputed income should be. [ 9 ] Once the guideline incomes of both parties are set, then any child support obligations will flow from the Federal Child Support Guidelines , SOR/97-175 (the Guidelines ). [ 10 ] On the issue of spousal support, there is no real issue in relation to Ms. King’s entitlement – she was minimally employed and took care of the children while Mr. MacDonald built his business and worked outside of the home. The real questions are 1) how much spousal support Ms. King is entitled to receive and 2) for how long.

Background [ 11 ] The parties started living together in April of 2012 and were married in September of 2019. They separated less than a year later, in July of 2020. Together they have two children: G, born in October 2012 (10 years old); and B, born in June 2016 (6 years old). [ 12 ] A few days after separating, the parties signed a Consent Custody and Child Support Order and a Consent Property Division Order. Mr. MacDonald’s counsel signed both Orders on his behalf. Ms. King, who was not yet represented by counsel, signed the Orders on her own behalf. Ms.

King has alleged that she was coerced into signing both Orders. [ 13 ] Justice Clackson signed the Order dealing with custody and child support in August of 2020. Under this Order, the parties share parenting on 4 days on – 4 days off rotating schedule; the issue of child support was reserved until further Court order. Mr. MacDonald has paid no child support since the 2020 separation. [ 14 ] On December 5, 2020, the Property Division Order was revised as a Property Division Judgment and signed by Justice Bast. In April of 2021, the Court of Appeal granted Ms.

King leave to appeal this Judgment and stayed enforcement of the Judgment pending the outcome of that appeal. [ 15 ] Ms. King has no advanced education. When the parties met, she was working as a waitress. She continued working a few shifts a week after the children were born but ultimately stopped to be a stay-at-home parent. After the parties separated in 2020, Ms. King struggled to get back into the workforce, in large part due to her lack of education and experience along with the Covid-related restrictions that affected the restaurant industry for much of 2020 and 2021.

She is now working again and expects her yearly income to be about $45,000. [ 16 ] During their relationship and marriage, Mr. MacDonald had two corporations operating in landscaping and supplies. He owned a half interest in Kamen Landscape Supplies Ltd. (Kamen). He sold this half interest in June 2020 (less than one month prior to separation) for $450,000. He distributed none of these proceeds to Ms. King. Mr. MacDonald continues to own and operate Graymac Yard Completions Ltd. (Graymac). [ 17 ] Mr.

MacDonald says that Graymac is struggling financially and is currently operating with exceptionally high overheard costs, and no profits. He hopes this is a short-term situation, with Graymac eventually becoming profitable in the future. Because of this, Mr. MacDonald claims to have a personal income of $0. As stated, once he learned, in this hearing, that Ms. King now earns $45,000 a year, Mr. MacDonald is now willing to also have his income set at $45,000. [ 18 ] There is no dispute that Mr. MacDonald runs his personal expenses through his corporation. In his affidavits, Mr.

MacDonald has also claimed business expenses for things such as casual labour; insurance; job materials; legal fees; meals and entertainment; office expenses; rent; and repairs and maintenance for equipment. Ms. King believes that Mr. MacDonald is artificially inflating many of these business expenses to hide his income.

Determining Guideline Income for the Purposes of Child Support [ 19 ] One of the objectives outlined at

section 1 of the Guidelines is to establish a fair standard of support for children that ensures that they continue to benefit from the financial means of both parents after separation and divorce. [ 20 ] Sections 15 through 20 of the Guidelines outline how to determine income for the purposes of child support. [ 21 ]

Section 16 provides that a spouse’s annual income is determined using the sources of income set out under “Total income” in the T1 General form issued by the Canada Revenue Agency (CRA) and adjusted in accordance with

Schedule III. [ 22 ]

Section 17 provides that where the court is of the opinion that the determination of a spouse’s annual income under

section 16 would not be the fairest determination of that income, the court may have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years. [ 23 ]

Section 18 permits departure from

section 16 where a parent is a shareholder, director or officer of a corporation and where the court is of the opinion that the spouse’s annual income under

section 16 does not fairly reflect all the money available to the spouse for the purposes of paying child support. If so, the court may consider the situations described in

section 17 and determine the spouse’s annual income as including, among other things, all or part of the pre-tax income of the corporation for the most recent tax year, or an amount commensurate with the services that the spouse provides to the corporation, provided that amount does not exceed the corporation’s pre-tax income. [ 24 ] In this exercise, all amounts that the corporation has paid as salaries, wages or management fees, along with other payments and benefits, to or on behalf of whom the corporation does not deal at arm’s length must be added to the pre-tax income, unless the spouse establishes that the payments were reasonable in the circumstances. [ 25 ]

Section 19 permits the court to impute income to a parent in various circumstances, including where it appears income has been diverted which would affect the level of child support to be determined under the Guidelines ; where a spouse has failed to provide income information when under a legal obligation to do so; where a spouse unreasonably deducts expenses; or, where 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 : Guidelines , ss. 19(1) (d), (f), (

g) and (h). [ 26 ] The court may choose to use the other spouse’s calculations or may choose an amount based on the best information that is available, even if incomplete, when determining the amount to impute: Sweezey v Sweezey , 2016 ABQB 131 at para 55 . [ 27 ] The Alberta Court of Appeal in Cunningham v Seveny , 2017 ABCA 4 stated that the parent who controls a corporation bears the burden of proof to demonstrate that the business expense deductions are reasonable for the purposes of calculating income for child support.

At paragraphs 25 to 28, the Alberta Court of Appeal held: [25] […] To establish a parent’s income for Guideline purposes, income declared at Line 150 of the disclosing party’s annual tax return may not accurately reflect the value of personal benefits that parent receives from self-employment, a partnership or a corporation controlled by the parent, or over which the parent has more than a 1% interest. Common examples include personal use of corporate vehicles, computers, cellphones, personal benefits associated with travel, entertainment and promotional expenses, and other non-arm’s length expenditures.

A parent whose income is derived from such a source, where the source deducted expenses for income tax purposes that may have resulted in a personal benefit to the parent and, therefore, may be relevant in determining child support obligations, must disclose those deductions.

In addition, if the parent takes the position that those deductions did not result in the parent obtaining a personal benefit, an explanation is required for why those expense deductions (or a part of them) should not be attributed to the parent’s income for child support purposes. [26] Furthermore, a parent challenging the reasonableness of the corporate or business expenses is not legally required to first establish a prima facie case that such expenses are unreasonable before disclosure becomes necessary.

The required disclosure arises at the outset and continues to be the obligation of the disclosing parent through the duration of all child support proceedings. [27] The content of required disclosure must be sufficient to allow meaningful review by the recipient parent, and must be sufficiently complete and comprehensible that, if called upon, a court can readily discharge its duty to decide what amount of the disclosing parent’s annual income fairly reflects income for child support purposes.

The issue is whether full deduction of an expense results in a fair representation of the actual disposable income of the party, and the court must balance the business necessity of an expense against the alternative of using that money for child support: Julien D Payne, “Some Notable Family Law Decisions from 2014 to 2015” (2015) 44:3 The Advocates’ Quarterly 271 at 295. [emphasis in original] [28] So as to leave no doubt about the correct principle: the evidential and persuasive onus under sections 18-21 of either the federal or provincial Guidelines as to the reasonableness of expenses, rests with the self-employed or corporate parent throughout, and is the most effective means by which to serve the best interests of the child. [ 28 ] Child support is based on what income is available to the payor, not just what the payor and their accountant declare for tax purposes: see s. 19(2) of the Guidelines ; see also RNJ v NDJ , 2021 ABQB 85 at para 6 . [ 29 ] Where a parent’s corporation or business undertaking is the primary vehicle through which he or she earns income, sufficient explanation for all payments and benefits claimed is necessary to enable the parties and the court to meaningfully review and assess their reasonableness: Cunningham at para 23 .

The ability of the court to determine the pre-tax income of a corporation, and for the court to undertake a proper analysis pursuant to

section 18 of the Guidelines requires that the court is provided with sufficient information:

Sweezey at para 33 ; see also ss. 21(1) and (2) of the Guidelines . [ 30 ] As stated by Justice Yungwirth in Sweezey at paragraph 36 , In my view, the requirement under s. 21(1) (

f) extends to providing an explanation and where applicable a breakdown, of all amounts paid to the benefit of non-arm’s length persons or corporations in relation to each and every category of corporate payment and expense...

For those categories in relation to which no explanation or breakdown has been provided, the shareholder runs the risk that, depending on the other available evidence, the court may presume that the payments have a personal benefit component unless the shareholder provides information upon which the court can conclude otherwise . [ 31 ] At paragraph 56 of Sweezey , Justice Yungwirth lists the following factors that courts have considered in determining whether all or part of a corporation’s pre-tax income should be included in a shareholder’s income for child support purposes: a. the nature of the corporation’s business; b. the historical spending patterns of the corporation; c. the role the shareholder spouse plays in the corporation; d. whether the shareholder spouse is the sole shareholder; e. the degree of control the shareholder spouse exercises, including his/her relationship with the controlling shareholder; f. the benefits received by non-arm’s length persons as a result of payment of corporate expenses; g. whether payments to non-arm’s length persons were for services for which the corporation would otherwise have had to obtain from a third party; h. whether the company’s pre-tax income is required to manage the business and ensure its ongoing financial viability. [ 32 ] In Sweezey at paragraph 48 , Justice Yungwirth wrote that as a general rule, the shareholder should provide at least the following: 1. a brief explanation concerning each payment category, including: a. the nature of the payment/expense; b. how it was calculated; c. why it was a reasonable corporate expenditure; d. whether any amounts paid or owing in relation to that category provided or resulted in a personal benefit to the shareholder or other non-arm’s length person (common examples of such expense categories in closely held corporations are vehicle, travel, promotion, phone, and insurance).

This would include an explanation for: i. what portion of the total expense formed the personal or non-arm’s length benefit; ii. how this was calculated; iii. a description of any services performed for the corporation by a non-arm’s length person (such as a new partner/spouse of the shareholder), and information regarding whether the salary s/he was paid for the services was commensurate with the market value of the services; and 2. documentation to support all of the above explanations, such as invoices and receipts regarding non-arm’s length payments. [ 33 ] Given that the information regarding the corporation, including corporate revenue and expenses, is within the knowledge, possession and control of the shareholder, director or officer parent, it is essential that the shareholder provide not only timely financial disclosure, but also complete and sufficient financial disclosure.

In Brear v Brear, 2019 ABCA 419 at paragraph 71 , the Court of Appeal noted that there is an enhanced obligation to provide financial disclosure when the payor parent derives their income from a corporate vehicle: It is clear that a parent who earns income through a corporate vehicle must not only provide a statement of all payments and benefits, but an explanation to facilitate the recipient’s review of the reasonableness of those payments in assessing the income available for child support obligations: Cunningham at para 23 . [ 34 ] The importance of timely and fulsome financial disclosure where a parent earns their income through a corporation cannot be understated.

This was recognized by the Supreme Court of Canada in Colucci v Colucci , 2021 SCC 24 at paragraph 49 : [49] […] The child support system depends upon adequate, accurate and timely financial disclosure. Disclosure is the linchpin on which fair support depends and the relevant legal tests must encourage the timely provision of necessary information. In a system that ties support to payor income, it is the payor who knows and controls the information needed to calculate the appropriate amount of support.

The recipient does not have access to this information, except to the extent that the payor chooses or is made to share it. What is the proper approach for determining Mr. MacDonald’s

guideline income? [ 35 ] As stated, the threshold issue in this application is determining Mr. MacDonald’s current guideline income for the purposes of ongoing child support. Mr. MacDonald has provided Income Tax Return Summaries for 2017-2020. He provided no Income Tax information for 2021. [ 36 ] In one of his affidavits, Mr. MacDonald stated that during the marriage, he made on average between $10,000 and $40,000 a year working as a business partner under Kamen and referenced his 2017-2020 Tax Return Summaries.

He did not reference any income that he made through Graymac during this same time frame. [ 37 ] During the relationship, Ms. King was minimally employed. She worked part time as a waitress for a while, and later stopped working to be a stay-at-home parent. Based on Ms. King’s limited work history, I question the reliability, if not the credibility, of Mr. MacDonald’s evidence that this family of four was able to survive on a yearly income that ranged from $10,000 to $40,000. [ 38 ] I further question Mr.

MacDonald’s stated income during these years when I consider the unaudited financial statements for Kamen that show year end revenues of $783,813 in 2019 and $1,184,055 in 2020 with net profits of $19,808 in 2019 and $188,312 in 2020. It seems unlikely to me that Mr. MacDonald would be earning less than a minimum wage income when the company, of which he was half owner, was posting these types of revenues and net incomes. [ 39 ] I have no evidence in relation to how much Graymac earned prior to 2020. I also have no evidence in relation to what personal expenses Mr.

MacDonald may have run through either corporation that were not captured in his personal tax returns. [ 40 ] Because of this, I am of the opinion that using

section 16 of the Guidelines to determine Mr. MacDonald’s income would not fairly reflect all of the money available to him for the purposes of child support and I turn instead to a consideration of Mr. MacDonald’s income under

section 18 of the Guidelines . i. The Add-Back Approach [ 41 ] Section 18(1) of the Guidelines allows me to consider, as part of Mr. MacDonald’s income, all or part of Graymac’s pre-tax income for the most recent tax year. Subsection (2) allows me, when determining Graymac’s pre-tax income, to add-back all amounts that Graymac paid as salaries, wages or management fees, along with other payments or benefits, to or on behalf of individuals with whom Graymac does not deal at arm’s length, unless Mr.

MacDonald establishes that these payments were reasonable in the circumstances. [ 42 ] Both parties provided submissions based on add-backs from Graymac’s pre-tax corporate income. Ms. King relied on the disclosure and 2021 ledger provided by Mr. MacDonald; while Mr. MacDonald relied on these same materials, along with, submissions by counsel in this hearing, reference to the 2022 draft ledger and accompanying receipts that Mr. MacDonald disclosed one week before this hearing. Neither party provided the court with any expert evidence to assist in determining Mr.

MacDonald’s income. [ 43 ] Using the add-back approach, the parties arrived at wildly different outcomes in relation to Mr. MacDonald’s income. Ms. King says his income should be set at $277,000; Mr. MacDonald says his income should be $0 (or $45,000). The greatest areas of conflict between the two positions arise from 1) Ms. King’s allegations that Mr. MacDonald is artificially inflating his business expenses, and 2) the lack of supporting documents and explanation in much of Mr.

MacDonald’s evidence to allow for a proper examination of the reasonableness of these claimed business expenses. [ 44 ] For the reasons I will explain here, I find that Mr. MacDonald has failed to provide sufficient and reliable financial information for me to be able to determine his current guideline income using the add-back approach. [ 45 ] Mr. MacDonald claims that Graymac “is severely struggling due to Covid and is barely staying profitable”. He says that the margins are thin and that most profits go back into the company.

He has provided unaudited financial statements that show Graymac with revenues of $380,538 in 2020; $531,134 in 2021; and, $449,651 in 2022. It is difficult for me to reconcile Mr. MacDonald’s claim that Graymac is “severely struggling due to Covid” when the financial statements show that Graymac’s gross revenues have increased nearly $70,000 from 2020 to 2022. [ 46 ] In a response to undertakings, Mr. MacDonald said that “Graymac rarely hires tradespeople and subcontractors, and if they are hired then they are not provided with documentation or tax slips”.

Graymac’s 2021 and 2022 financial statements show expenses incurred for Trades and Subcontractors at $80,854 in 2021 and $91,187 in 2022. While it may be true that Graymac does not provide T5s for trades and subcontractors, the expense amounts recorded in the financial ledgers and unaudited financial statements are not consistent with Mr. MacDonald’s undertaking response. [ 47 ] Mr. MacDonald acknowledged that there are some expenses listed in the 2021 Graymac financial statements that are mixed personal and business.

He attached to his reply affidavit a copy of the 2021 Graymac ledger and stated that his personal expenses “only amount to a few thousand dollars at most”. He provided no supporting receipts or documents to accompany the 2021 ledger. [ 48 ] From this 2021 ledger and Mr. MacDonald’s affidavit: • Graymac’s fuel costs were over $25,000 for the year. Of this, Mr. MacDonald estimated $3,000 was fuel for his personal vehicles. • Graymac’s insurance expenses for its various vehicles were over $13,000. Mr. MacDonald estimated that only $200 of this should

account for the insurance on his personal vehicle, that he also uses for work purposes. • Graymac spent over $120,000 in ‘job materials’. Mr. MacDonald explained this as “for things such as gravel, dirt, stone and other aggregates, sod, tress and other vegetation”. • In addition to ‘job materials’, the ledger includes ‘supply’ expenses in excess of $6,000, with the explanation that ‘this is just a subcategory of additional materials needed for the business.’ • In addition to ‘job materials’ and ‘supplies’, the ledger also listed over $2,000 in ‘tools’. In his affidavit, Mr.

MacDonald explained this particular expense was a misfiling and should actually be ‘casual labour’. • Graymac claimed over $6,000 in meals and entertainment. Mr. MacDonald offered half of this should be considered personal expenses. • Over $5,000 was included as ‘office expenses’ on the ledger. Mr. MacDonald explained that he saw a psychologist over issues surrounding the breakdown of the marriage that affected his ability to work and, according to him, were legitimate business expenses. • The ledger included a $315 entry for “charity”. In his affidavit, Mr.

MacDonald stated he did not know what this expense represented but concluded it was a misallocation and should be ‘casual labour’. • The ledger lists over $33,000 in ‘casual labour’ with Mr.

MacDonald’s explanation, in the affidavit, that Graymac has 2-3 permanent employees and also hired day labourers at a rate of $20/hour. • The ledger also lists over $85,000 as a payroll expense, with a similar explanation that Graymac has 2-3 full time employees who are paid as “T4” employees. • The ledger also lists over $47,000 in ‘subcontractors’ with an explanation that, in addition to his full-time employees and day labourers, Graymac hires sub-contractors to complete work if Graymac does not have the necessary skills or equipment. • The ledger includes $13,500 in rent. In his affidavit, Mr.

MacDonald explained that he lives on an acreage outside of Red Deer. The monthly rent for this acreage is $2,000. On this acreage there is also a shop in which he stores Graymac’s vehicles and equipment. In his affidavit, Mr. MacDonald provides his opinion, without evidence, that commercial rent space would be $1,500 a month. On this basis, he suggested only $3,375 of the rent expense should be included as a personal expense. • The ledger lists over $42,000 as ‘repairs and maintenance’ with an explanation, in the affidavit, that Mr.

MacDonald maintains Graymac’s leased vehicles with ‘things like engine repairs, oil changes, welding, car washes, towing, parts, etc”. • The ledger lists over $100,000 in ‘equipment’ with Mr. MacDonald’s explanation that ‘nearly all of the equipment is leased, and the payments are substantial’. Including the repairs and maintenance (for which the ledger already claimed over $42,000), Mr. MacDonald stated the equipment costs were $11,000 - $13,000 to lease and maintain. • $450 was included in the ledger as ‘training’. In his affidavit, Mr.

MacDonald was not sure what this was for but concluded it was a misfiling and should be ‘casual labour / subcontractor’. • Close to $2,000 was included in the ledger as ‘travel’, with an acknowledgment in Mr. MacDonald’s affidavit that he took the kids to Banff and that $1,000 should be added back to the corporate income. • Over $1,000 was included as ‘utilities’ with Mr. MacDonald’s estimate that 80% of this expense should be attributed to the business and 20% personal. • Over $85,000 was listed on the ledger as “depreciation”, with Mr.

MacDonald’s explanation that his business is almost entirely dependent on equipment that will eventually break down or need replacement. He provided no information in relation to the value of this equipment nor any calculations as to how he arrived at a depreciation cost of $85,000. [ 49 ] With this ledger, and the explanations provided in his affidavit, Mr. MacDonald claims that Graymac is operating at a loss and that his income should be set at $0. Ms. King takes issue with the reasonableness of many of these expenses. As stated, Mr.

MacDonald provided no receipts and no supporting documents in relation to any of the expenses listed in the 2021 ledger. [ 50 ] In Cunningham , the Court of Appeal clearly stated that the content of financial disclosure must be sufficient to allow meaningful review by the recipient parent and must be sufficiently complete and comprehensible that, if called upon, the court can readily discharge its duty to decide what amount fairly reflects income for child support purposes. The evidential and persuasive burden as to the reasonableness of the claimed expenses rests at all times with Mr.

MacDonald: Cunningham , at paras 27-28 . [ 51 ] To my mind, Mr. MacDonald’s explanations for what appear, on their face, to be exceptionally high business expenses, without any receipts or supporting documents to back up his explanations, are insufficient to allow me to meaningfully review and assess the reasonableness of those expenses. His explanations fall short of the requirements set out by Justice Yungwirth in Sweezey at paragraph 48 . [ 52 ] Without receipts, or other documents, and without more complete explanations for these expenses, the content of Mr.

MacDonald’s disclosure is neither sufficiently complete nor comprehensive to allow me to discharge my duty to decide the amount of Mr. MacDonald’s income that fairly reflects his income for child support purposes. Because of Mr. MacDonald’s insufficient evidence and explanations, I am not able to determine Graymac’s 2021 pre-tax income. Nor am I able to undertake a proper analysis, under

section 18 of the Guidelines , in terms of determining any appropriate add-backs. [ 53 ] Unfortunately, the evidence is not much better in relation to Graymac’s 2022 income. One week before this hearing, Mr.

MacDonald filed an update affidavit in which he provided Graymac’s 2022 draft financial statements along with a 606-page Disclosure Statement. [ 54 ] This Disclosure Statement was provided to Ms. King’s counsel, and the court, one week before this hearing, notwithstanding Mr. MacDonald had attended for questioning months earlier. No explanation was provided for why these materials could not have been disclosed sooner. The timing and volume of this disclosure was such that Ms. King’s counsel had insufficient time to properly review, understand, and respond to it. [ 55 ] For 2022, Mr.

MacDonald claimed Graymac had gross sales of just over $450,000 (down from $530,000 the year before). He further claimed that Graymac’s expenses in 2022 were $470,000, for a loss of close to $20,000. With this, he submitted that his income should be set at $0. [ 56 ] Unlike the 2021 disclosure, where no receipts or supporting documents were provided, in Mr. MacDonald’s most recent Disclosure Statement, he provided some receipts and documents in support of his claimed business expenses for 2022.

Not all of the ledger lines had accompanying receipts. [ 57 ] While these receipts and supporting documents appear mostly to reflect what is in the 2022 ledger, I continue to have concerns in relation to this most recent financial information. By way of example: • Professional fees ($3,800) and travel ($939) are listed under ‘expenses’ in Graymac’s 2021 unaudited financial statement but are not included in the accompanying 2022 ledger. • In Mr. MacDonald’s update affidavit, he claimed that no travel expenses were being claimed in 2021.

Yet travel expenses appear in Graymac’s 2022 financial statements. • Under ‘casual labour’, in the 2022 ledger, $3,000 is listed a ‘cash to pay labour’, with no documents in support of this. • Under the heading of ‘casual labour’, Mr.

MacDonald provided over 60 pages of confirmations of e-transfers, with no further details or explanations. • No receipts were provided for the category of ‘supplies’. [ 58 ] While inconsistencies in the evidence, on their own, may not be cause for concern, in my view, the inconsistencies that I have pointed out here, together with my concerns over the 2021 financial documents, raise with me concerns in relation to the reliability of Mr. MacDonald’s financial evidence.

These concerns lead me to conclude that I do not have sufficient evidence from which I can make a proper determination of Graymac’s 2022 pre-tax income and I cannot make a fair determination of Mr. MacDonald’s income for the purposes of child support using the add-back approach. [ 59 ] In addition, I do not accept Mr. MacDonald’s initial submission that his guideline income should be set at $0.

Not only has he failed to produce sufficient and reliable evidence to support this position, he has also failed to produce any explanation as to how he is managing to survive on a $0 income. [ 60 ] What’s more, in transcripts from Questioning, Mr. MacDonald indicated that he makes a lot of his purchases in cash. He spent over $2,800 on a tattoo and spent $45,000 in two months on “nights out, massages, toys for the kids, clothing, groceries.... everything, lots of things”. While this money may have come from the sale of Mr.

MacDonald’s half-interest in Kamen (a topic I will discuss in more detail later in these reasons), I find these answers troubling when asked in the context of determining Mr. MacDonald’s income for child support purposes. [ 61 ] Taking these answers at face value, Mr. MacDonald’s answers under oath do not suggest a spending pattern consistent with a person whose annual income is $0 and unable to pay child or spousal support. Nor is this pattern of spending suggestive of a person who is in dire financial straights. [ 62 ] I also do not accept Mr.

MacDonald’s further submission, at this hearing, that his income should be set at $45,000. It is curious to me that Mr. MacDonald so quickly revised his position in relation to his guideline income to match the income that Ms. King is earning in her new job. [ 63 ] From all of this, I am not satisfied that the documents and evidence provided here fairly reflect the money available to Mr. MacDonald for the payment of child support. ii. Imputing Mr. MacDonald’s income [ 64 ] As previously explained, I have concerns that Mr.

MacDonald is diverting income that would affect the level of child support to be determined under the Guidelines . I also have concerns that he is unreasonably deducting some expenses from income. With these findings, I turn to

section 19 of the Guidelines in an effort to determine the appropriate income that I should impute to Mr. MacDonald. [ 65 ] In Heuft v Bramwell , 2021 ABQB 642 , Justice Lema discussed the difficult task of imputing income when the payor has failed to provide proper financial disclosure. In this case, the mother was seeking to increase ongoing child support and a retroactive increase going back three years.

The mother had sought financial disclosure from the father three times, yet each time she did not receive material disclosure. [ 66 ] From the case law that Justice Lema reviewed and discussed, he concluded that “income imputing cannot be pure guesswork”; there must be a rational basis underlying the selection of the imputed figure: Heuft at paras 47, 51 . In the absence of complete income tax returns or other financial information, the court must look at other evidence, including circumstantial evidence for the purpose of imputing income: Heuft at para 48 , citing Poursadeghian v Hashemi-Dajah , 2010 BCCA 453 .

[ 67 ] Faced with a situation where there was “next-to-no evidentiary basis on which to impute income” to the father, Justice Lema held that this did not result in the mother having no recourse. He stated at paragraph 46, “I can vary support on pre-disclosure i.e. set support on a temporary basis, with Mr.

Bramwell having an opportunity (albeit time-limited) to provide his long-outstanding disclosure and as applicable, to argue that the temporary support exceeds his ability to pay support.” [ 68 ] Following a review of case law regarding pre-disclosure support orders, and after considering the specific circumstances in the case, Justice Lema drew “a (provisional) adverse inference” regarding the father’s income, granting an increase in the monthly amount of child support. [ 69 ] As I have explained, I have concerns in relation to the reliability of the information that Mr. MacDonald has provided about his income.

Mr. MacDonald has also failed to provide complete and comprehensive financial disclosure. Because of this, I am prepared to draw a (provisional) adverse interest that Mr. MacDonald’s income is higher than the $0 income he initially submitted and higher than the $45,000 income he readily suggested upon learning here that Ms. King now also makes $45,000. [ 70 ] This leaves me with the task of imputing Mr. MacDonald’s income based on the best information available to me. I have little evidence about the type of work that Graymac does, and I have no evidence about the type of work that Mr.

MacDonald actually performs within Graymac. [ 71 ] In his affidavit evidence, Mr. MacDonald says that Graymac is a landscape company “whose primary work consists of purchasing landscaping materials from suppliers and then delivering them to various construction projects”. In the winter months, Graymac uses “the skid steers and dump trucks to clear snow for businesses”. Mr.

MacDonald is the sole owner and share holder of Graymac. [ 72 ] While not provided in evidence before me, I note that Graymac also maintains a website (graymac.ca), on which it is described as a landscaping company servicing both residential and commercial clients. The website describes, “in addition to providing landscape services, we offer expertise in Aggregate and Firewood Sales, Excavation, Dirt Work, Commercial Snow Removal, Picker Service and Gravel Truck Services.” [ 73 ] Under the Services tab of the website, further descriptions are provided regarding each of the services that Graymac provides.

For example, Landscaping services include gradings, sod installation, irrigation, retaining walls, decorative concrete curbing, tree and shrub installation, flower beds/perennials, decorative rock and mulch installation, paving stones/flagstone, and fencing, among other items. As owner of Graymac, Mr. MacDonald is described on this website as “Beginning with the quote, the owner, Nolan MacDonald will personally coordinate each phase of your residential or commercial landscaping projects.” [ 74 ] In order to ground a rational basis for imputing Mr.

MacDonald’s income, I am guided by the description of Graymac’s work that Mr. MacDonald provided in his affidavit and further by the description found on Graymac’s website.

I also take judicial notice of the income information found on the Alberta Government website, Alis (Alberta Learning Information Service): see alis.alberta.ca/occinfo/wages-and-salaries-in-alberta/. [ 75 ] The Alis website includes as category of Wages and Salaries for landscape and horticultural technicians and specialists, which includes consulting with clients and other trades to carry out landscaping operations and design (including residential and commercial grounds). This description seems to best fit with the inferences that I can draw, based on the limited evidence before me, about the work that Mr.

MacDonald performs within Graymac. On the Alis website, the average salary in this category (based on a 37.2-hour work week) is $38,203, with the top end of the range being $84,552. [ 76 ] Using the very limited evidence before me, the information from Graymac’s website, the information from the Alis website, and noting that Mr.

MacDonald is the sole owner of Graymac with several years’ experience in this field of work, I set his income at the higher end of the range, at $70,000 per year. [ 77 ] It should be abundantly clear from these reasons that I make this finding based on a very incomplete set of facts and evidence. As this in an interim order only, for the purposes of any future applications or re-calculations Mr.

MacDonald must provide complete and comprehensive income information, including supporting documents and explanations, in accordance with Justice Yungwirth’s direction in Sweezey (at para 48 ), the clear directions of the Court of Appeal regarding full disclosure in Cummingham , and as most recently reiterated in Peters v Atchooay , 2022 ABCA 347 (at paragraph 65 ), the expectation that each parent provide complete, accurate and up to date disclosure, and bring forward the best available evidence to support their position on the appropriate Guidelines income. [ 78 ] Where, as in this case, there is significant dispute over the reasonableness of claimed business expenses and the amount of income available for the purposes of support, expert evidence such as an accountant’s report, may prove helpful to the parties and the court in future proceedings.

What is Ms. King’s guideline income? [ 79 ] In his cross application, Mr. MacDonald asked that Ms. King’s income be imputed at $31,500 (the equivalent of working full time at minimum wage). At the start of this hearing, counsel for Ms. King advised that, as of April of this year, Ms. King is working and expects her yearly income to be $45,760. While Ms. King provided no pay stubs in support of this submission, counsel for Mr. MacDonald took no issue with relying on this updated information, and I am prepared to also rely on counsel’s submissions in this regard. [ 80 ] Ms.

King started working in April of this year. If she continues to work, at this income, for the rest of the year (May – December), then her pro-rated income for 2022 would be $30,500. I therefore set her 2022 guideline income at $30,500.

What are the parties ongoing child support obligations? [ 81 ] The Supreme Court of Canada in Michel v Graydon , 2020 SCC 24 at paragraph 10 , reiterated and restated the governing principles regarding child support, which included the following: • Child support is the right of the child, which right cannot be bargained away by the parents, and survives the breakdown of the relationship of the child’s parents • Child support should, as much as possible, provide children with the same standard of living they enjoyed when their parents were together. • The child support owed will vary based upon the income of the payor parent, and is not confined to furnishing the “necessities of life”. [ 82 ] In situations of a shared parenting regime, it is necessary to consider

section 9 of the Guidelines , which states: If each spouse exercises not less than 40% of parenting time with a child over the course of a year, the amount of the child support order must be determined by taking into account: (

a) the amounts set out in the applicable tables for each of the spouses; (

b) the increased costs of shared parenting time arrangements; and (

c) the conditions, means, needs and other circumstances of each spouse and of any child for whom support is sought. [ 83 ] The Alberta Court of Appeal in MacDonald v Brodoff , 2020 ABCA 246 at paragraph 12 summarized the key principles for interpreting

section 9 factors as per the Supreme Court of Canada’s decision Contino v Leonelli- Contino, 2005 SCC 63 : • The language of s 9 is imperative. The courts must determine child support in accordance with all three factors; • No one factor should prevail, but the weight to be given to each factor depends on the particular facts of the case; • There is no presumption that the Guidelines Table amount, or the set-off amount calculated under the Tables will be awarded.

Similarly, there is no presumption that something other than the set-off amount should be awarded; • The analysis is necessarily contextual, so a sound evidentiary foundation, including the parties’ budgets and actual expenses of both parents, is critical to the court’s analysis. Courts cannot and should not make assumptions about the parties’ situation, and courts should demand information relating to s 9(

b) and (

c) when the evidence filed is deficient; • The analysis under s 9 reflects a stated objective of the Guidelines : to establish a fair standard of support for children that ensures that they continue to benefit from the financial means of both spouses after separation; • A critical inquiry is whether the children experience a difference in the standard of living as they move between the two households, as one of the overall objectives of the Guidelines is, to the extent possible, to avoid great disparities between households; • The goal under s 9(

b) is to apportion actual expenses between the parents in accordance with their respective incomes; • In shared parenting arrangements, the court has great discretion when assessing the three factors. In particular, the court has full discretion under s 9(

c) to consider “other circumstances”. [ 84 ] Following these principles, I reject Mr. MacDonald’s closing proposal in this hearing, that if his income were set at $45,000, Mr. MacDonald would waive child support, with shared

section 7 expenses on a 50-50 basis, and no spousal support. Child support is not Mr. MacDonald’s to waive. It is the right of his children. [ 85 ] As stated, I have set Mr. MacDonald’s 2022 income at $70,000 and Ms. King’s pro-rated income at $30,500 (based on her working for 8 months in 2022 at an annual salary of $45,760). Following the table amounts for child support owing for two children, on a shared parenting regime, the parties’ respective child support obligations are: • Mr. MacDonald will pay to Ms. King

section 3 child support in the amount of $ 1,019 and Ms. King will pay to Mr. MacDonald child support in the amount of $ 469 . These payments will start on September 1, 2022, and will continue to be payable until December 1, 2022. • In 2023, Mr. MacDonald’s income will continue to be set at $70,000. Ms. King’s income will be set at $45,760. Based on these incomes, Mr. MacDonald will pay to Ms. King $ 1,019 and Ms. King will pay to Mr. MacDonald $ 664 in

section 3 child support. These payments will commence on January 1, 2023 and will continue until further Court Order. [ 86 ] In shared parenting situations,

section 9 of the Guidelines requires me to determine the appropriate amount of child support by considering the amounts set out in the applicable tables for each spouse; the increased cost of shared parenting arrangements; and the conditions, means, needs, and other circumstances of each spouse and the children. [ 87 ] Here, the parties did not provide detailed evidence or submissions in relation to the second and third

section 9 factors. With insufficient evidence to analyze the

section 9 factors, I decline to direct any

section 9 setoff. As this in an interim order, this determination can be corrected and adjusted with more complete evidence at a later date.

[ 88 ] With respect to

section 7 expenses, the parties will be responsible for their proportionate share based on their respective guideline incomes, after any available insurance or other benefit programs have been allocated. This means that from September 1, 2022, until December 31, 2022, Mr. MacDonald shall be responsible for 70% and Ms. King shall be responsible for 30% of the

section 7 expenses, after available insurance and other benefit programs have been used. From January 1, 2023 going forward, Mr. MacDonald shall be responsible for 60% and Ms. King is responsible for 40% of the

section 7 expenses, after available insurance and other benefit programs have been used. [ 89 ] The parties’ respective child support obligations may be recalculated in 2023 based on income information available to the parties for the purpose of support following fulsome and complete financial disclosure in accordance with the case law and principles set out above in these reasons. How much spousal support is Ms. King entitled to receive? [ 90 ] Ms. King seeks interim ongoing spousal support. Mr. MacDonald claims she is not entitled to spousal support. [ 91 ]

Section 15 of the Divorce Act , RSC 1985, c 3 (2 nd Supp) gives me the authority and discretion to award spousal support. In making such an order, I must consider: 1) the length of the relationship; 2) the functions performed by each spouse; and 3) any orders, agreements or arrangements relating to spousal support: Divorce Act , s. 15.2(4).

Here, there are no previous orders, agreements, or arrangements. [ 92 ] The objectives of any spousal support order are to: 1) recognize any economic advantages and disadvantages to the spouses arising from the marriage or its breakdown; 2) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for child support; 3) relieve any economic hardship of the spouse arising from the breakdown of the marriage; and, 4) insofar as practicable, promote the economic self sufficiency of each spouse within a reasonable period of time: Divorce Act , s. 15.2(6). [ 93 ] In deciding the right to, amount of, and duration of spousal support, I must consider the condition, needs, and means of each party, along with the other circumstances of both spouses.

When I consider the condition of each spouse, I must consider factors such as their ages, health, need, obligations, dependents, and the station in life of both parties. [ 94 ] The amount and duration of spousal support will vary with the circumstances of the case. At the end of the day, courts have wide discretion when awarding spousal support. [ 95 ] Here, Ms. King is in her 30s. She has no advanced education and, prior to having children, she worked as a waitress. After having children, she continued to work part time as a waitress for a while, and then stopped to be a stay-at-home parent.

During the relationship, Mr. MacDonald was the main provider for the family. [ 96 ] After the parties separated in 2020, Ms. King struggled to find work, in part due to her lack of education and experience, and in part to the Covid restrictions that affected the restaurant and retail industries for much of 2020 and 2021. In the two years since separation, she states that she has relied on the assistance of friends and family along with any child tax credits that she receives. As of April of this year, Ms.

King is working and expects her yearly income to be $45,000. [ 97 ] The children are now 6 and 10 years old and in full time school. The parties share parenting on 4 days on – 4 days off schedule. [ 98 ] In her affidavit evidence, Ms. King presented a monthly budget of expenses of approximately $2,700. I note this budget was prepared in February of this year. I expect that many of these expenses have gone up in the intervening months with the current rate of inflation and increased costs of most items. I have no other evidence in relation to Ms. King’s household income or expenses. [ 99 ] Mr.

MacDonald is self employed through his corporation, Graymac. As discussed in earlier portions of these reasons, I have set his 2022 guideline income at $70,000. I do not have a budget of monthly expenses for Mr. MacDonald. I have no evidence in relation to Mr. MacDonald’s other household income or expenses. [ 100 ] Entitlement to spousal support can be based on compensatory or non-compensatory grounds, or both. Spousal support based on compensatory grounds looks at the economic disadvantages and advantages that flow from the roles that each spouse adopted during the marriage.

Common markers of compensatory claims include staying home with children, being the secondary earner in the family, and having primary care of children after separation. [ 101 ] The question when considering compensatory grounds is “where the person would be in the labour force if not for the roles assumed during the marriage and after its separation”. When I consider that Ms.

King was employed as a waitress during the relationship and was later not employed to be the children’s primary caregiver prior to the 2020 separation, I have no difficulty finding that she is entitled to interim ongoing spousal support on compensatory grounds. Ms. King clearly suffered an economic disadvantage that flowed from the role that she assumed during the marriage. [ 102 ] When the parties separated in 2020, the children were approximately 4 and 8 years old and the parties shared parenting. At that time, Ms. King was presumably able to return to work.

I accept her evidence that she struggled to rejoin the workforce, in part due to her lack of education and experience, and in part due to Covid factors. [ 103 ] When I consider the question of where Ms. King would be in the workforce today, but for the roles she assumed during the relationship, I find her strongest claim to spousal support on compensatory grounds flows from the fact that she stepped out of the workforce when the children were young to be a stay-at-home parent. With the shared parenting regime that the parties have followed since separating in 2020, this claim becomes weaker with time and as Ms.

King is increasingly able to enter the labour market.

[ 104 ] Spousal support based on non-compensatory grounds looks at the needs and means of each spouse. These types of claims consider the economic disadvantages that flow from the breakdown of the marriage and no longer having access to the income of the other spouse. Common markers of non-compensatory claims are the length of the marriage, a drop in the standard of living of one spouse, and economic hardship.

This ground of support reflects the economic interdependency that develops from a shared life. [ 105 ] Non-compensatory support often corrects what would otherwise be a significant decline from the marital standard of living. Here, I must consider the length of marriage, and separation, along with Ms. King’s actual ability to support herself. [ 106 ] This was a seven-year relationship that ended two years ago. Ms. King has no advanced education and limited work experience. During their relationship, Mr. MacDonald worked and financially supported the family. Because of this, I have no difficulty finding that Ms.

King experienced a significant drop in her standard of living after the parties separated in 2020. [ 107 ] This is the type of economic interdependency that is contemplated by spousal support based on non-compensatory grounds. At Ms. King’s current level of education and work experience, she may never be able to earn enough to maintain the standard of living that she enjoyed during the relationship. One of the goals of spousal support is to promote self sufficiency, as much as possible, within a reasonable period of time. [ 108 ] Ms. King is now working and earning $45,000 a year.

This is a good start towards the economic self sufficiency that we hope to see when families separate. I would hope and expect that with the assistance of spousal support, for a limited period of time, Ms. King may be able to pursue some form of advanced education and training that will increase her options in the workforce that will, in turn, provide her greater options for self sufficiency. [ 109 ] For these reasons, I find that Ms. King is also entitled to spousal support on non-compensatory grounds. What was a strong non- compensatory claim when the parties first separated weakens over time as Ms.

King is able to advance in the workforce towards economic self sufficiency. [ 110 ] Having found entitlement to limited ongoing spousal support, the next question is how much spousal support Ms. King is entitled to receive, and for how long. Based on the parties’ ages, child support in a shared parenting scenario, the length of the relationship (seven years), and there being 11 years before the youngest child finishes high school, I set Mr. MacDonald’s spousal support obligation at $150 per month, starting on September 1, 2022 up to and including December 1, 2022.

Starting on January 1, 2023, and continuing until further Court Order, Mr. MacDonald’s spousal support obligation is set at $100 per month. This decrease is to reflect the increase in Ms. King’s guideline income from 2022 to 2023. [ 111 ] I arrive at these number, using the Spousal Support Advisory Guidelines and in keeping with the objective of maintaining consistent standards of living between the two households, based on the incomes that I have found here. [ 112 ] As this can only be an interim order it will need to be corrected and adjusted once Mr.

MacDonald provides proper income information based on the legal principles that I have outlined herein. How to treat the proceeds from the sale of Kamen [ 113 ] As stated, less than a month before the parties separated in 2020, Mr. MacDonald sold his half interest in Kamen for $450,000. He shared none of these sale proceeds with Ms. King. [ 114 ] In her materials and submissions, Ms. King raises, a few times, the issue of this sale and argues that Mr. MacDonald is dissipating assets. It is unclear from her submissions if Ms. King is also seeking a portion of these sale proceeds to be included in determining Mr.

MacDonald’s income. [ 115 ] Mr. MacDonald says that he only received $250,000 from these sale proceeds, after paying capital gains. In his affidavit evidence, he says that the proceeds from the Kamen sale have been “spent on keeping Graymac operating, paying legal fees, and basic living expenses for myself and the children”. [ 116 ] While the issues of property division and dissipation of property are not before me, the proceeds from the sale of Kamen must be properly accounted for, they cannot simply be forgotten as spent money.

However, I do not find it appropriate to account for these sale proceeds through a determination of guideline income in an application for interim child and spousal support. In my view, these proceeds are more properly dealt with in the context of property division. Costs [ 117 ] The parties may address me on the issue of costs by submitting their submissions, in writing, to me within the 30 days of the receipt of this Judgment. Heard on the 09 th day of August, 2022. Dated at Red Deer, Alberta this 04 th day of November, 2022.

E.J. Funk J.C.K.B.A. Appearances: Julia R. Ibanescu for the Applicant/Respondent by Cross-Application David M. Boris for the Respondent/Applicant by Cross-Application