Smederovac v Eichkorn, 2020 MBCA 57

Citation: Smederovac v Eichkorn, 2020 MBCA 57 Date: 20200602 Docket: AF19-30-09308 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Freda M. Steel Mr. Justice Christopher J. Mainella Madam Justice Karen I. Simonsen BETWEEN : MICHAEL CARY SMEDEROVAC ) L. A. Ryzniczuk ) for the Appellant (Petitioner) Respondent ) ) M. G.

Mercier ) for the Respondent - and - ) ) Appeal heard: CAROLYN ANN EICHKORN ) March 3, 2020 ) (Respondent) Appellant ) Judgment delivered: ) June 2, 2020 ) On appeal from 2018 MBQB 178 STEEL JA [ 1 ] This is an appeal of an order of child support following a two-day trial under The Family Maintenance Act , CCSM c F20 , as well as an appeal of the order of costs with respect to that trial. [ 2 ] The two-day trial was focussed primarily on the determination of income for both parties and the manner in which those findings affected the payment of child support.

On appeal, the only ground of appeal was that the trial judge erred by ordering an amount of child support over and above the set-off amount on a shared custody regime. Facts [ 3 ] The parties cohabited from 2009 to 2015. There are two children from the relationship, a girl born in 2011 and a boy born in 2013. [ 4 ] The petitioner (the father), is an employee with Manitoba Hydro and the respondent (the mother), is a veterinarian and is self-employed.

The parties have been litigating since 2015 and, as of the date of the appeal, the issue of accounting under The Family Property Act , CCSM c F25 , was still outstanding and in flux. Apparently, there is still further litigation, and motions regarding financial disclosure are outstanding. [ 5 ] However, the parties did agree to a shared care and control arrangement, which commenced at the end of May 2018. [ 6 ] The mother resides in a home purchased by the parties not long before their cohabitation ceased. At the time of the separation, construction of the new home had just started, but has since been completed.

Title to the new home is in the name of both parties, but the mother has been making all the mortgage and property and tax payments towards the new home. The mother has exclusive occupancy of the new home and the father resides in what used to be the marital home. [ 7 ] The trial took place in September 2018. Certain issues had been agreed to prior to trial including the fact that, as of June

2018, the father would owe to the mother $27,000 in retroactive child support and that amount would be offset against any child supportordered on an ongoing basis. [8] The issues for trial were the determination of the income of both parties and the subsequent determination of childsupport based on a shared care and control schedule. Since the father now has care and control of the two children for more than 40 percent of the time,

section 9 of the Manitoba, Child Support Guidelines Regulation, Man Reg 58/98 (the Guidelines) is applicable. In hisopening statement, father’s counsel suggested the amount of $1,250 per month as offset child support payable from the mother to thefather. The Trial Judge [9] The trial judge set the father’s income at $100,729 and imputed the mother’s income at $175,000.

In imputing themother’s income, the trial judge determined that $30,000 of the caregiver’s salary paid by the mother’s corporation, through which sheoperates her animal hospital, should be added back into her 2017 income of $120,226.82, as well as automobile expenses of $7,500, cellphone expenses of $325 and $17,948.18 in pre-tax corporate income from her corporation. [10] The trial judge determined the table amounts for each of the parties incomes, being $1,395.60 payable by the father, and$2,272 payable by the mother, resulting in a set-off amount of $876.40.

She then went on and ordered a higher amount of child supportto be paid by the mother based on standard of living. The judge ordered the mother pay to the father an amount of $623.60 over andabove the set-off amount of child support, which came to a total amount of $1,500 per month commencing June 1, 2018. [11] In 2019, the parties appeared in front of another judge to argue the issue of costs. That judge ordered that the mother paycosts of $11,000.

He then stayed the order relating to the payment of child support pending an appeal. [12] On appeal and in her factum, the mother made clear that she was not appealing the determination of her income or that ofthe father. She also agreed that the appeal of costs would depend on the outcome of the appeal as to the quantum of child support. [13] Therefore, the only issue on appeal is whether the trial judge erred in the manner in which she set the quantum of childsupport pursuant to

section 9 of the Guidelines. The mother argues that the trial judge did not provide a proper analysis of income andexpenses, or explain in her reasons the basis upon which she arrived at the increased award over and above the set-off amount. [14] In particular, it is submitted that, although the trial judge increased the mother’s income by taking into account certainexpenses paid by her corporation, she did not take into account that the mother’s personal expenses would then correspondingly increase,for example, with respect to the cost of the children’s caregiver.

In addition, the trial judge ordered an increased amount of set-off childsupport without any evidence of increased costs incurred by the father nor did she explain the difference in standard of living between thetwo households that justified the increased set-off amount. [15] Alternatively, the mother argues that, at a minimum, the trial judge should have ordered a review of the quantum of childsupport after the completion of The Family Property Act accounting. Decision Standard of Review [16] The standard of review with respect to child support is highly deferential.

Appeal courts should not intervene unless thereasons disclose an error in principle, a significant misapprehension of the evidence or unless the award is clearly wrong (see Hickey vHickey, (SCC), [1999] 2 SCR 518 at para 11; Graham v Graham, 2013 MBCA 66 at paras 13, 22; and Johnson vMayer, 2016 MBCA 41 at para 11). Analysis [17]

Section 9 of the Guidelines reads as follows: Shared custody 9 Where each parent exercises a right of access to, or has physical custody or care and control of a child for not less than 40 percent of the time 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 parents; (

b) the increased costs of shared custody arrangements; and (

c) the condition, means, needs and other circumstances of each parent and of any child for whom support is sought.

[ 18 ] Determining an appropriate amount of child support in a proceeding under

section 9 necessarily entails balancing competing forces. The Supreme Court of Canada comprehensively addressed the appropriate approach to calculating child support amounts in shared custody situations in the case of Contino v Leonelli-Contino , 2005 SCC 63 . Given the similarity in wording between the Manitoba and the federal guidelines, the same jurisprudence is applicable. Indeed, our Court has applied the Contino case in the following cases, all of which involved

section 9 of the Guidelines : Stewart v Stewart , 2007 MBCA 66 ; Mehling v Mehling , 2008 MBCA 66 ; Kolisnyk v Loscerbo , 2010 MBCA 1 ; and Cherewyk v Cherewyk , 2018 MBCA 13 . [ 19 ] In the Contino decision, the Supreme Court of Canada confirmed that, in shared custody situations where the 40 per cent threshold has been established, there was not any presumption that the table amount was the appropriate amount, nor was there any formula mandated. Rather, Bastarache J observed (at para 24): . . . The court “must” determine the amount of child support in accordance with the three listed factors once the 40 percent threshold is met. There is no discretion as to when the

section is to be applied: discretion exists only in relation to the quantification of child support . . .. [ 20 ] Still, it is not a discretion that is meant to set aside all rules and predictability. The three factors structure the exercise of the discretion and are to be considered in a holistic fashion with none of them prevailing. The weight of each factor under

section 9 will vary according to the particular facts of each case (see para 82). [ 21 ] The first factor in

section 9(

a) requires the court to consider the set-off amount (the amounts set out in the applicable tables for each of the parents). However, that is to be considered as a starting point only in the calculation, not an end point. A court will depart from the set-off amount or make adjustments to it if it is inappropriate in light of the factors considered under sections 9 (

b) and 9 (c). [ 22 ] Under

section 9(b), the court will be called upon to examine the budget and actual expenditures of both parents in addressing the needs of the children and to determine whether shared custody has, in effect, resulted in increased costs globally. Increased costs would normally result from duplication resulting from the fact that the child is effectively being given two homes. The court would then apportion the total of such expenses between the parents according to their respective incomes (see Contino at paras 52- 53 ). [ 23 ] As for

section 9(c), Bastarache J wrote as follows (at para 68):

Section 9(

c) vests in the court a broad discretion for conducting an analysis of the resources and needs of both the parents and the children. . . . The court will be especially concerned here with the standard of living of the child in each household and the ability of each parent to absorb the costs required to maintain the appropriate standard of living in the circumstances. [ 24 ] In his helpful annotation of the case, Prof. Rollie D.A.

Thompson, “Case Comment, Contino v Leonelli-Contino ” (2003) 42 RFL-ART 326, succinctly summarizes the step-by-step method for determining quantum, according to Contino as follows: 1. determine the simple set-off amount; 2. review the child expense budgets; 3. consider the ability of each parent to bear the increased costs of shared custody and the standard of living for the children in each household; and 4. distinguish between initial orders or agreements and variations. [ 25 ] The trial judge purported to apply the three steps indicated in Contino . First, she concluded that the set-off amount under

section 9(

a) would have the mother paying the father $876, based on the mother’s income of $175,000 and the father’s income of $100,729. The trial judge then indicated that

section 9 (

b) of the Guidelines required her to “consider the parties’ added expenses of shared custody” (at para 99). Although she considered the general expenses of both parents, she did not specifically determine the increase in expenses due to shared custody, nor specify the amount of child-related expenses for each parent. [ 26 ] For the father, the increased care and control represented the addition of a few extra days in a cycle, but still there was no evidence to suggest that increased costs for him were due to moving to shared care and control. This may have been due to the fact that the new

schedule had only been in place for three months, but in any case, no increased costs were identified. [ 27 ] With respect to the mother, the trial judge did not take into consideration the increased costs for the mother due to her no longer receiving child support, having her child tax benefit reduced, and having to pay child support, but still having to pay the same monthly expenses as before. She increased the mother’s personal income but failed to consider the equivalent amounts, which would then be incurred in the mother’s personal expenses.

[ 28 ] So, for example, she increased the mother’s income by $30,000 to account for the caregiver’s salary, but then failed to consider that the caregiver’s salary would now have to come out of the mother’s personal expenses. That increased the mother’s monthly expenses by $2,500 per month, an amount that was paid solely by the mother and had obviously not been included in the monthly expenses listed by the mother at the beginning of the trial.

The same reasoning applied to the addition of the annual automobile expenses of $7,500, and cell phone expenses of $325. [ 29 ] The trial judge noted further that the mother was living in a much more expensive and luxurious new home (which the parties started to build prior to separation) with significantly higher mortgage and tax payments, while the father continued to live in the smaller and older original family home with its lesser mortgage and tax expenses. In addition, the trial judge stated that she had to consider the condition, means, needs and other circumstances of each parent and of the children under

section 9 (

c) of the Guidelines , and found that the mother had access to corporate benefits not available to the father. [ 30 ] On the totality of the evidence, the trial judge concluded that the mother should pay child support of $1,500 per month, an increase of $623.60 from the set-off amount, indicating that, with this amount, “the father will increase the standard of living in his household and the two households will be relatively comparable” (at para 106). [ 31 ] Finally, the trial judge stated that the approach she followed was consistent with the approach taken in Martin v Martin , 2007 MBQB 296 , indicating that in that case, “Little J. suggested a presumption of mid-point somewhere between a straight set-off and regular Table amount” (at para 107). [ 32 ] It is true, as counsel for the father argues, that a trial judge need not refer to every piece of evidence heard in the course of the trial, as long as it is clear that the court has considered all of the relevant factors and applied the appropriate test.

Moreover, any error must be a material and overriding one. [ 33 ] However, the one question that the trial judge must answer is “Why?”. Why did the trial judge order the amount of $623.60 added to the presumptive amount of $876.40 and how did she arrive at that amount? Since

section 9 support orders are not to be “turned into a ramrod for equalizing the incomes of former spouses” ( Contino at para 103 ), there must be some explanation of the reasoning as to the quantification of the amount. [ 34 ] In Contino , the Supreme Court of Canada confirmed that the trial judge retains the discretion to modify the set-off amount where it would lead to a significant variation in the standard of living experienced by the children as they move from one household to another (see para 51). As stated by Julien D. Payne & Marilyn A. Payne, Child Support Guidelines in Canada, 2020 (Toronto: Irwin Law, 2020) at 325 , “The criteria defined in

section 9 (

c) of the Guidelines confer a substantial discretion on the court in its assessment of the appropriate amount of child support.” However, “[t]he discretion should be exercised in a principled manner.” [ 35 ] The purpose of

section 9 is not to equalize household incomes, but rather to make adjustments for any significant and appreciable variations in household standards of living and the financial realities of the parties, including the ability to absorb costs related to maintaining a similar standard of living (see Wetsch v Kuski , 2017 SKCA 77 at paras 138-39 ). [ 36 ] While I understand that the mother’s house is larger than that of the father’s house (which had been the marital home), the judge did not explain why that constituted a disparity in the standard of living.

Even considering the mother’s access to corporate benefits such as travel points and household goods, the trial judge did not explain in what way the standard of living of the children differed in a material way between the two households. [ 37 ] It is perfectly understandable that, in many of these cases, perfect mathematical explanations are not possible and not necessary. Discretion is inevitable and necessary.

However, as the Nova Scotia Court of Appeal stated in Woodford v MacDonald , 2014 NSCA 31 , “The exercise of judicial discretion must be reasonably tied to the evidence so as to allow for a logical, rational explanation” (at para 3). In this case, the trial judge does not point to evidence which would suggest that there was a “significant variation in the standard of living experienced by the children as they move from one household to another” ( Contino at para 51 ). [ 38 ] Bastarache J in Contino asserted that the parties should lead evidence relating to sections 9 (

b) and 9 (

c) and courts should adjourn the motion and demand additional information where it is deficient (see paras 56-57). This is especially important for the application of 9(

c) since it will be important to consider the ability of each parent to absorb the costs associated with maintaining the appropriate standard of living—which in turn entails consideration of assets, liabilities and income levels and disparities (see paras 68- 69). [ 39 ] In Dyck v Bell , 2015 BCCA 520 , the British Columbia Court of Appeal similarly emphasised the obligation of judges to demand sufficient evidence to permit a proper analysis of

section 9 , and remitted the matter back for that evidence to be adduced (see paras 30-31).

See also GF v JACF , 2016 NBCA 21 ; and ASL v LSL , 2020 NBCA 15 , where the New Brunswick Court of Appeal remitted the matter back to the trial court for failing to adjourn the matter in order to have sufficient evidence regarding household income and the household standards of living. [ 40 ] Even if one accepted that the difference in the size of the home (and access to certain corporate benefits) constituted a significant disparity, there was not an explanation of how the amount of $623.60 was arrived at, other than by the trial judge’s reference to a formula used in Martin .

She states (at para 107): The approach I have followed in this case is consistent with Martin v. Martin , 2007 MBQB 296 ; 221 Man.R. (2d) 287. In that case, my brother Little J. suggested a presumption of mid-point somewhere between a straight set-off and regular Table amount. I am satisfied that by doing so, the standard of living between the two households is relatively concordant.

[ 41 ] The Contino case states that a formula is not appropriate. When determining a support order under

section 9 , all the three factors must be considered in arriving at an appropriate amount. However (at paras 92, 100): . . . “Appropriate does not mean mathematically or methodologically ascertainable with precision. It means within an acceptable range that is in each case determined by applying in a principled manner the factors set out in s. 9 to the proven facts and particular circumstances of the matter. In short, s. 9 requires judges to fix child support in shared custody arrangements without the benefits and constraints of a mandatory grid.

This deliberate rejection by Parliament of a precise formula or methodology does not authorize the courts to conjure one up from the void. See also Martin ; and Loscerbo v Loscerbo , 2008 MBQB 183 at para 36 , where both judges agreed that there was no formula that should be used as a substitute for the discretion under

section 9 . [ 42 ] Yet, it appears as though the trial judge took the approach of utilising a formula of one-half the difference between the set-off amount and the table amount of child support. [ 43 ] Interestingly, Little J did not end up adopting a mid-point presumption in the Martin case, as the trial judge indicates.

He did point out that the Contino decision has produced a significant amount of uncertainty and litigation, and he did suggest, as an obiter postscript, that the adoption of a presumption of mid-point formula between the table and set-off amounts would be a reasonable amendment to the present jurisprudence. [ 44 ] However, (much as I might agree with Little J as to his suggestion that Contino needs to be reconsidered to provide parties with more clarity and minimize litigation), what Little J actually did in the Martin case is provide an incredibly detailed analysis of the financial circumstances of the parties and an explanation of the reasons for his quantification of the amount ordered under

section 9 . Little J states (at paras 74-75): I know that parties and counsel are often absolutely desperate to find some way to resolve the

Section 9 child support issue short of further litigation and the costs and risk associated with the process. I may be wrong, but I suspect cases across the country are being resolved on a “split the difference” approach to child support where the set-off or mid-point amounts are often used as the measure – not because on an evidentiary analysis it would be found to be “appropriate,” but because the cost of any adjudicated solution will result in only further losses to both sides without any real gains. . . . Based on Contino and a proper

interpretation of

Section 9, we are clearly to eschew formulaic approaches and multipliers. The outcome of future variation proceedings then will depend on the particular financial circumstances of the parties and the evidence to be mustered then. Conclusion [ 45 ] The trial judge erred in ordering an increased set-off amount of child support without explaining how she arrived at that figure and by not taking into account the increased child care expenses of the mother. Contino specifically stated that a formula was not to be used.

While mathematical perfection is not required in these circumstances, some explanation is. [ 46 ] The payment of all child support had been stayed. At the appeal hearing, the mother agreed that she owed the father the set-off amount as arrived at by way of the Guidelines , in the amount of $876.40 per month.

It was only the increased amount ordered by the trial judge that was at issue in this appeal. [ 47 ] Therefore, at the hearing, the panel ordered that the stay be lifted partially and ordered the mother to pay the father $876.40 per month until the issuance of this judgment. [ 48 ] While I have held that the trial judge erred in ordering the increased amount of set-off, I am reluctant for a number of reasons to make that calculation myself or to decide whether an increased amount is necessary at all. I understand the increased cost and trauma involved in sending this matter back to the Family Division.

However, this is the most proportionate course because the evidence filed in the 2018 trial was not only insufficient but also, at this point, out of date. The parties are still in the middle of litigation so their financial matters are in flux. Any order from this Court would be based on a situation, which would be out of date in a matter of months. [ 49 ] Therefore, I would allow the appeal and direct the parties to return to the Family Division for a quantification, if any, of the amount of set-off child support over and above the Guidelines .

The monthly amount ordered at the hearing of this appeal will continue until supplanted by an order of the Family Division. [ 50 ] Since the mother has been successful, she will have her costs on this appeal.

[ 51 ] As to her appeal with respect to costs on the trial, there were several issues in play during the two-day trial. The first issue related to the income of the father, and the key factor there was whether the change of position in his employment that he had accepted was reasonable. He was successful on that issue. The issue that took the most time was the determination of the mother’s income for which the father was partially successful. The third issue was the quantum of child support, which this appeal dealt with and which agrees with the position taken by the mother.

Taking all these factors into consideration, I would vary the order of costs to $5,500 payable by the mother to the father, inclusive of disbursements. That also takes into account the $2,000 costs order that had previously been made against the father with regard to an interim order and was taken into account by the motion judge when he made his cost order. [ 52 ] In closing, let me add that this matter has been ongoing for quite a few years, despite, I am sure, the best attempts at settlement.

Nonetheless, let me remind the parties that at this point they have probably paid more in legal fees than they stand to gain in further litigation, not to mention the ongoing emotional trauma to the parties, as well as their children. It is for this reason that the justice system has attempted to introduce dispute resolution measures outside of courts, such as mediation, that would make the family justice system less adversarial. Perhaps this might be of assistance to these parties. JA I agree: JA I agree: JA