Ward v. Murphy, 2022 NSCA 20

Nova Scotia Court of Appeal Citation: Ward v. Murphy, 2022 NSCA 20 Date: 20220316 Docket: CA 505824 CA 507334 Registry: Halifax Between: Paul Ward Appellant v. Coralie Murphy Respondent Judge: The Honourable Justice Carole A. Beaton (dissenting in part)Appeal Heard: November 17, 2021, in Halifax, Nova ScotiaLegislation Considered: Parenting and Support Act, R.S.N.S. 1989, c. 160, s. 54B; Provincial Child Support Guidelines, N.S.Reg. 83/2017, ss. 18;19; Nova Scotia Civil Procedure Rules (Rule 77)Cases Considered: Reid v. Faubert, 2019 NSCA 42; Hickey v. Hickey, (SCC), [1999] 2 S.C.R. 518;Volcko v.

Volcko, 2020 NSCA 68; Joudrey v. Reynolds, 2020 NSCA 60; Doncaster v. Field, 2016NSCA 25; Donner v. Donner, 2021 NSCA 30; Link v. Link, 2022 NSCA 14; Cunningham v. Seveny,2017 ABCA 4; Palmer v. The Queen, (SCC), [1980] 1 S.C.R. 759; Armoyan v.Armoyan, 2013 NSCA 99; Daigle v. Mark’s Work Wearhouse Ltd., 2022 NSCA 5; Jiang v. Shi, 2017BCCA 232; Aubin v. Petrone, 2020 ABCA 13; Walker v. Walker, 2019 SKCA 96; MacLennan v.MacLennan, 2021 SKCA 132; J.O. v. M.C., 2017 NBCA 15; Riel v. Holland (2003), (ON CA), 67 O.R. (3d) 417; M.H. v. A.B., 2019 SKCA 135; Goett v. Goett, 2013 ABCA 216;Gosse v.

Sorensen-Gosse, 2011 NLCA 58; M.G.H. v. K.L.D.H., 2020 NBCA 46; K.A.W. v. M.E.W.,2020 ABCA 277; R. v. Potter, 2020 NSCA 9; Hryniak v. Mauldin, 2014 SCC 7; Armoyan v. Armoyan,2013 NSCA 136; Merrifield v. Merrifield, 2021 SKCA 85; Potzus v. Potzus, 2017 SKCA 15; Mason v.Mason, 2016 ONCA 725; Chekowski v. Howland, 2013 ABCA 299; Kowalewich v. Kowalewich, 2001BCCA 450; Duffus v.

Frempong-Manso, 2017 ONCA 360Texts Considered: Julien Payne and Marilyn Payne, Child Support Guidelines in Canada, 2020 (Irwin Law Inc.: Toronto,2020)Subject: Application; Application to vary; Child support guidelines; Civil Procedure Rule 77; Costs; Family;Family—application to vary child support; Family—child support; Family—child support—application to vary; Family—imputing income; Parenting and Support Act; Provincial child supportguidelinesSummary: The appellant applied to reduce his child support payment. He also included requests for otherunrelated relief in his application.

The hearing judge applied ss. 18 and 19 of the Provincial ChildSupport Guidelines to marginally reduce his annual income and adjust arrears accordingly, and to sethis obligation on a prospective basis. The judge also ordered, pursuant to s. 54B of the Parenting andSupport Act, that Mr. Ward be required to seek leave before filing any further variations of childsupport. In view of his limited success, costs were awarded against Mr. Ward based on an “amountinvolved” of $120,000, being the income amount imputed to him in a previous order. Mr.

Ward appealed the judge’s decision, alleging errors of fact and law in the judge’s approach, herfindings, and the application of the Guidelines. He also sought to introduce fresh evidence on appeal.In a separate Notice of Appeal, he argued the judge erred in her costs award.

Issues: 1. Should fresh evidence be admitted? 2. Did the judge misapprehend evidence, or make any factual or mathematical errors? 3. Did the judge make any errors of law? 4. Did the judge make an order outside of her jurisdiction? 5. Did the judge demonstrate bias? 6. (

i) Should leave to appeal costs be granted and, if so, (ii) did the judge err in assessing costs?

Result: The Court was unanimous in dismissing Issues No. 1, 2, 4, 5 and in granting leave on Issue 6(i).Beaton J.A. dissented on Issues No. 3 and 6(ii), and on the costs to be awarded on appeal. 1. The materials sought to be addressed as fresh evidence did not meet the test in Palmer v. TheQueen, (SCC), [1980] 1 S.C.R. 759 in relation to due diligence, relevancy and potentialto impact the result. 2. There was no misapprehension of evidence by the judge, nor factual errors, nor mathematicalerrors of any significance. 3.

Van den Eynden J.A. (Scanlan J.A. concurring): The judge’s failure to properly apply s. 18 of theGuidelines constituted an error in law. The s. 18 analysis must be re-mitted for fresh consideration. Beaton J.A. (dissenting): The judge’s mis-step in the erroneous application of s. 18 is withoutimpact or consequence in light of the judge’s application of s. 19. 4. The judge did not exceed her jurisdiction in making an order pursuant to s. 54B of the Parentingand Support Act. 5. The appellant could not meet the heavy onus to establish any misapprehension of bias on the partof the judge. 6. (

i) Leave to appeal costs was granted. (ii) Van den Eynden J.A. (Scanlan J.A. concurring): The judge’s costs award does not reflect hererror in the application of s. 18. The costs award is set aside as Issue No. 3 is remitted to the court, atwhich time costs can be determined afresh. Beaton J.A. (dissenting): The costs award would have been better expressed as a lump sum;however, it was not unreasonable under all of the circumstances. The majority remitted the matter for re-hearing on the s. 18 analysis and on the costs awarded on theapplication.

On an interim basis, the Court set child support at $512 per month based on a s. 19imputed income of $60,000. Costs on appeal awarded in favour of the appellant in the amount of$1,500, inclusive of disbursements. (Beaton J.A. would have awarded costs in favour of the respondentof $4,000.) This information sheet does not form part of the court’s judgment. Quotes must be from the judgment, not this cover sheet. The full courtjudgment consists of 49 pages. Nova Scotia Court of Appeal Citation: Ward v. Murphy, 2022 NSCA 20 Date: 20220316 Docket: CA 505824 CA 507334 Registry: Halifax

Between: Paul Ward Appellant v. Coralie Murphy Respondent Judges: Van den Eynden, Scanlan and Beaton JJ.A. Appeal Heard: November 17, 2021, in Halifax, Nova Scotia Held: Appeal allowed in part, with costs, per reasons for judgment of Van den Eynden J.A.; Scanlan J.A. concurring; Beaton J.A. dissenting in

part Counsel: Paul Ward, appellant on his own behalf Theresa O’Leary, for respondent Introduction [ 1 ] This decision concerns an appeal of a child support variation decision and the appeal of the related decision on costs. The appeals were heard together. The Court’s analysis addresses six issues. As will be seen, the panel is unanimous on four of them (issues no. 1, 2, 4 and 5). Van den Eynden and Scanlan JJ.A. would allow the appeal in part. Beaton J.A. dissents on the issue of the judge’s calculation of the payor’s income (issue no. 3) and the costs award (issue no. 6(ii)), and would dismiss the appeal.

Reasons for judgment of Beaton J.A. (dissenting in part): [ 2 ] The appellant Mr. Ward appeals two decisions of Justice Lee Anne MacLeod-Archer of the Supreme Court of Nova Scotia, Family Division (“the judge”). The first decision (“the support decision”) addressed his application to vary child support. The second decision concerned the costs consequences arising from the application (“the costs decision”). Mr. Ward also asks this Court to admit fresh evidence in relation to the support decision. [ 3 ] The questions raised by the appeals are: 1. Should fresh evidence be admitted? 2.

Did the judge misapprehend evidence, or make any factual or mathematical errors? 3. Did the judge make any errors of law? 4. Did the judge make an order outside of her jurisdiction? 5. Did the judge demonstrate bias? 6. (

i) Should leave to appeal costs be granted and, if so, (ii) did the judge err in assessing costs? [ 4 ] For the reasons that follow, I would dismiss the motion to admit fresh evidence and dismiss the appeals of both the support decision and the costs decision. Background [ 5 ] A brief history of the matter and the judge’s two decisions provide context for Mr. Ward’s arguments before this Court. On March 2, 2017, before a different judge, Mr. Ward was ordered to pay to the respondent Ms. Murphy table support for their child, based on an imputed income of $120,000 per year.

The order reflecting that decision was issued on July 12, 2017. Among other matters, it identified Mr. Ward owed arrears of $1,645, calculated on the basis the March 1, 2017 payment had been made. Eventually it was learned the March 1 payment had not been made, so counsel for the respondent withheld from other monies owed to Mr. Ward the sum of $300, representing the payment. As will be seen, that holdback lingered as a point of dispute and the subject ultimately made its way into Mr. Ward’s application and the judge’s subsequent support decision. [ 6 ] Mr. Ward filed his application in September 2018.

The thrust of it was his position the court had incorrectly imputed income to him in 2017. He sought to have his support payment reduced to reflect his “actual” income. [ 7 ] The hearing of the contested application began in 2020 but was interrupted by pandemic restrictions. When the matter was able to resume in early 2021, the judge permitted Mr. Ward to file additional financial evidence given the parties were then in a new calendar year. The hearing took six days to complete, which the record demonstrates was in no small measure due to Mr. Ward’s conduct of his

case. [ 8 ] In her support decision ( P.W. v. C.M. , 2021 NSSC 127 ) the judge began with a recognition of the burden on Mr. Ward to establish a change in circumstances following the granting of the 2017 order. She noted that in 2017 the court had treated all of Mr. Ward’s income as personal income, including that derived from a portfolio of rental properties. The judge understood that approach to have been taken by the judge presiding in 2017 because at that time Mr.

Ward’s disclosure was “so inadequate that it wasn’t apparent that the rental income was generated in a limited company.” [ 9 ] Applying the Parenting and Support Act , R.S.N.S. 1989, c. 160 , the judge was satisfied Mr. Ward met the test set out in s. 37(1) to establish a change in circumstances since the making of the previous order, by virtue of new information found in his financial disclosure. Extensive disclosure (relative to the 2017 hearing) satisfied the judge Mr.

Ward had in fact incorporated his rental business in 2016; he was the sole officer, director and shareholder of Shadover Rental Properties Ltd. (“the company”). The judge concluded the new details of the company’s ownership of the rental operation constituted a material change in circumstances, providing the basis for her to consider afresh Mr. Ward’s income and the corresponding amount of support payable. [ 10 ] To calculate Mr. Ward’s income, the judge properly started from the assumption the 2017 imputed income figure was correct. She then embarked on an examination of Mr.

Ward’s circumstances and those of the company, with a view to determining Mr. Ward’s annual income for child support purposes. In the course of doing so, she made numerous findings of fact. [ 11 ] Relying on this Court’s decision in Reid v. Faubert , 2019 NSCA 42 the judge first considered whether Mr. Ward’s total income (as reported in his income tax returns) reflected the monies available to him for payment of support. She adjusted downward Mr.

Ward’s income for each of the years 2018–2020, to reflect union dues he paid and the actual amount of dividends he received from the company, following the direction found in s. 16 and the accompanying

Schedule III of the Provincial Child Support Guidelines (N.S. Reg. 83/2017) (“the Guidelines ”). [1] [ 12 ] The judge then turned to ss. 18 and 19 of the Guidelines to further consider Mr. Ward’s income and his financial relationship to the company. She said she was doing so because Mr. Ward’s adjusted income did not fairly reflect “all money available to P.W. to pay child support.” The judge examined: Mr.

Ward’s discretion to draw money from the company, personal benefits he derived from allowable corporate deductions, whether his lifestyle suggested a higher income, and finally, his employment skills, qualifications and experience. The cumulative effect of her application of ss. 18 and 19 persuaded the judge Mr. Ward’s income for support purposes was different than the amount she had first calculated. [ 13 ] Applying s. 18(1)(

a) of the Guidelines , the judge was satisfied it was appropriate to add $2,505 of undistributed 2019 company income to Mr. Ward’s personal income for that year. She then examined a number of company expenses and concluded certain of them financed Mr. Ward’s personal activities (for example travel, meals and telephone). That component of the judge’s analysis, which forms a cornerstone of Mr. Ward’s argument on appeal, will be later discussed in more detail. [ 14 ] The judge next turned to s. 19. She used it to impute $60,000 annually to Mr.

Ward for 2018–2020, distinct from and in addition to the exercise she had conducted under s. 18. In doing so, the judge considered the history of paid work performed by Mr. Ward outside the company, his capacity for employment and his efforts to locate work. For example, in relation to the year 2020, she concluded Mr. Ward’s decision to devote time to company activities during that fall, in lieu of securing paid work elsewhere, was not reasonable based on his overall employment history. The judge concluded it was “still appropriate” to use s. 19 to impute $60,000 per year to Mr.

Ward, as had also been done in 2017, finding: [61] However, if P.W. had collected E.I. benefits and made himself available for work, he could still have completed renovations, subdivision, and infrastructure work while waiting for a call from the union. He could also have drawn money from his director’s account as he’d done in earlier years. I’m not satisfied that the choice to work for his company in the fall of 2020 was reasonable, nor that the work he completed couldn’t be interrupted or delayed if he got union work. [ 15 ] The essence of Mr.

Ward’s dissatisfaction with the support decision rests in the judge’s decision to increase his adjusted income in each of the years 2018–2020 to reflect the combination of certain of his personal expenses paid by the company (using s. 18) and an imputed income of $60,000 based on underemployment (using s. 19). [ 16 ] The judge ordered table support on a prospective basis, commencing May 1, 2021. She declined to order support retroactive to January 1, 2018, as Mr. Ward requested. Rather, the order was made retroactive to October 1, 2018, being the first month following the filing of Mr. Ward’s application.

I pause here to note the commencement date of the order, as within the judge’s discretion, was not out of the norm despite Mr. Ward’s objection to it before this Court. The judge next provided a repayment

schedule for any arrears the Director of Maintenance Enforcement might calculate in light of the adjusted annual income determinations found in her decision. [ 17 ] After addressing support, the judge moved to consideration of Ms. Murphy’s request for an order pursuant to s. 54B of the Act , employed to avoid frivolous or vexatious proceedings by putting limitations on litigants.

Reviewing the history of court proceedings between the parties, she found: [84] […] that P.W. has habitually, persistently, and without reasonable grounds or merit, started or pursued vexatious proceedings, and that he has conducted them in a vexatious manner. Some examples include the undue hardship claim he advanced in 2018 but never perfected, as well as the Small Claims matter referenced above.

His belligerent attitude throughout this proceeding, as well as the inappropriate comments made to the Court and C.M.’s counsel at the hearing, only compound the vexatious tone and nature of P.W.’s claims. [ 18 ] The judge imposed a requirement that going forward, Mr. Ward is required to seek leave of the court before filing any support application. In doing so, she noted that in 2017 the court had imposed a similar restriction, using s. 54B to require Mr.

Ward to seek leave before filing further applications concerning parenting issues. [ 19 ] Finally, the judge’s support decision addressed the matter of the $300 holdback referenced earlier. She canvassed the history of

that issue and confirmed her order would clarify the March 1, 2017 payment had been accounted for by the time the matter came beforeher. The judge commented: [86] P.W. asks the Court to deal with the issue of a $300.00 holdback. In the larger scheme of things, it’s not a large sum. But it hasbeen a bone of contention for P.W. throughout this proceeding. His insistence that the Court deal with it is indicative of the vexatiousmanner in which P.W. conducted these proceedings. [20] Following receipt of written submissions, the judge’s costs decision followed in June 2021 (Ward v.

Murphy, 2021 NSSC 207).It summarized each party’s position, reviewed Rule 77 of the Nova Scotia Civil Procedure Rules and considered principles set out incaselaw. The judge concluded Mr. Ward’s handling of the case was “problematic” but noted that because she had already “censured Mr.Ward for his litigation conduct in granting Ms. Murphy’s request under s. 54B of the PSA”, she was careful not to “penalize him again atthe costs stage”. [21] Using Rule 77.03(3), the judge looked at the relative success of each party in the outcome of the case.

She recognized Mr.Ward had proven a change in circumstances but achieved only a “slight” adjustment to income, resulting in a corresponding nominalreduction in child support. The judge also considered Ms. Murphy’s success in having certain expenses added back to Mr. Ward’sincome, and in securing the s. 54B provision in the order. The judge noted Ms.

Murphy had been required to respond to the applicationwithin a “short time” following the making of the 2017 order. [22] Applying Rule 77, Tariff A at Scale 1 (a 25% reduction from the Scale 3 usually applied), the judge calculated costs based onan amount involved of $120,000, plus the tariff calculation of $2,000 per day for each day of trial. She ordered Mr. Ward to pay costs toMs. Murphy totaling $20,688, at a rate of $1,000 per month commencing July 1, 2021. Grounds of appeal and standard of review [23] Mr. Ward seeks to introduce fresh evidence on appeal.

He asks the Court to set aside both orders made by the judge—the childsupport order and the costs order. He also asks the Court to recalculate and adjust child support payments back to 2016 and to issue anew order reflecting the “correct” retroactive and prospective payments. In addition, he seeks removal of the requirement upon him tosecure leave (pursuant to s. 54B of the Act) both with respect to support variations and custody variations.[2] Finally, Mr.

Ward asks theCourt to “adjudicate” the $300 holdback matter, maintaining it was outside the jurisdiction of the hearing judge and, in that vein, to nowimpose costs against Ms. Murphy’s counsel for having held back the funds after the 2017 order was made. [24] In his Notice of Appeal of the support decision, Mr. Ward asserts the judge made errors of fact and law in unreasonablyimputing income to him and in calculating his income for support purposes. In addition, he asserts the judge misunderstood evidence andmade mathematical errors, and that aspects of her decision were outside the court’s jurisdiction.

In his factum, Mr. Ward expands hisgrounds to include nine discrete matters, including an allegation of bias on the part of the judge. I have taken the liberty of consolidatingand reframing Mr. Ward’s arguments concerning both decisions, to better reflect the six discrete matters over which this Court hasjurisdiction (as previously listed at para. 3 herein). [25] There is no standard of review associated with Mr. Ward’s fresh evidence motion; it is a new matter before this Court. [26] As to the issues concerning the support decision, the long-established standard of appellate review set out in Hickey v.

Hickey, (SCC), [1999] 2 S.C.R. 518 requires an appellate court to show deference in relation to such orders: 12 There are strong reasons for the significant deference that must be given to trial judges in relation to support orders. This standardof appellate review recognizes that the discretion involved in making a support order is best exercised by the judge who has heard theparties directly. It avoids giving parties an incentive to appeal judgments and incur added expenses in the hope that the appeal court willhave a different appreciation of the relevant factors and evidence.

This approach promotes finality in family law litigation and recognizesthe importance of the appreciation of the facts by the trial judge. Though an appeal court must intervene when there is a material error, aserious misapprehension of the evidence, or an error in law, it is not entitled to overturn a support order simply because it would havemade a different decision or balanced the factors differently. See also Reid v. Faubert, supra at para. 16; Volcko v. Volcko, 2020 NSCA 68 at para. 23; Joudrey v.

Reynolds, 2020 NSCA 60 at para.18. [27] It follows that imputing income, a component of assessing child support, is also a highly discretionary exercise, and one that issimilarly entitled to deference by this Court. Again, we would only intervene if there were found to be an error in principle, a significantmisapprehension of the evidence or an award that is clearly wrong (Doncaster v. Field, 2016 NSCA 25 at para. 21). [28] As to the issue of costs, such awards are within the judge’s discretion; this Court must defer to that discretion, absent an error inlaw or an injustice (Volcko, supra at para. 24; Donner v.

Donner, 2021 NSCA 30 at para. 60; Link v. Link, 2022 NSCA 14 at para. 41). [29] Before addressing each ground of appeal, I comment on a theme that permeated Mr. Ward’s materials and submissions, both inthis Court and before the judge. Mr. Ward emphatically rejects the distinction, as discussed by the judge in her reasons, betweenpermissible deductions allowed by Canada Revenue Agency (“CRA”), and the discretion of a judge regarding treatment of thoseamounts for Guidelines purposes.

In her discussion of s. 18 of the Guidelines in the context of company expenses and deductions, thejudge correctly stated: [17] There is a difference between income calculated for income tax purposes, and income calculated for child support purposes.Deductions that are perfectly legal for tax purposes are not necessarily permitted for child support purposes.

The point is tocapture all income available to the payor, so that children are properly supported. [Emphasis added] [30] In using the Guidelines to determine income available for payment of support, a court has the ability to examine incomeregardless of any income tax treatment afforded it. Indeed, s. 19(2) of the Guidelines specifically directs that when imputing income for

child support purposes pursuant to s. 19(1)(g)—whether “the parent unreasonably deducts expenses from income”—a court is reminded“the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act(Canada).” Mr. Ward’s view is the judge should have treated the expenses and deductions of his solely-held company in the samemanner as did CRA for each year under scrutiny by the judge.

The judge was correct; what CRA may allow as a deduction is distinctfrom and does not automatically equate to or command the same treatment under the Guidelines. [31] To apply Mr. Ward’s view of the significance of CRA’s treatment of the company would have necessitated the judgeeffectively ignoring those expenses borne by the company that she was satisfied were to the personal benefit of Mr. Ward. Doing sowould undermine the raison d’etre of ss. 16–20 of the Guidelines—calculation of a payor’s income for purposes of payment of childsupport, not calculation of income taxes. As stated in Cunningham v.

Seveny, 2017 ABCA 4: [31] […] A parent’s legal obligation to pay child support that fairly reflects the parent’s income in accordance with child supportguidelines is not to be constrained or limited by income tax statutes that may confer entitlements in relation to deductibility of businessexpenses. Issue No. 1—Should fresh evidence be admitted? [32] Mr. Ward seeks to introduce fresh evidence before the Court. That evidence, provisionally admitted during the hearing,consists of the following: (

i) a 2020 report to Mr. Ward from the Nova Scotia Barristers’ Society; (ii) a draft court order proposed by Ms. Murphy after the 2017 decision of the court; and (iii) a copy of a Statement of Undue Hardship Circumstances (s. 10 of the Guidelines) filed with the court on January 9, 2019 (whichclaim for relief Mr. Ward later abandoned). [33] The well-known test for admission of fresh evidence set out in Palmer v. The Queen, (SCC), [1980] 1 S.C.R.759 was discussed in the family law context in Armoyan v.

Armoyan, 2013 NSCA 99: [131] Rule 90.47(1) permits the Court of Appeal to admit fresh evidence on “special grounds”. The test for “special grounds” stemsfrom Palmer v. The Queen, (SCC), [1980] 1 S.C.R. 759, at p. 775. Under Palmer, the admission is governed by: (1)whether there was due diligence in the effort to adduce the evidence at trial, (2) relevance of the fresh evidence, (3) credibility of thefresh evidence, and (4) whether the fresh evidence could reasonably have affected the result. Further, the fresh evidence must be inadmissible form. Nova Scotia (Community Services) v.

T.G., 2012 NSCA 43, paras 77-79, leave to appeal denied [2012] S.C.C.A. 237,and authorities there cited. McIntyre v. Nova Scotia (Community Services), 2012 NSCA 106, para 30. See also Daigle v. Mark’s Work Wearhouse Ltd., 2022 NSCA 5 at para. 27. [34] I am not persuaded Mr. Ward can meet any of the grounds enumerated in Palmer. The documents he seeks to introduce areirrelevant to the issues before this Court, and were previously available to Mr. Ward, Ms. Murphy and the judge during the application.Indeed, Mr.

Ward’s affidavit filed in support of his motion for fresh evidence states “that Exhibits A, B, C were all put before JusticeLee Anne MacLeod-Archer”. Therefore, any suggestion the evidence could have otherwise affected the judge’s decision is moot, as theevidence is not new. It is material the judge had available to her. Mr. Ward’s complaint the judge did not consider it does not equate to adetermination its admission in this Court would add anything to the issues on appeal. Furthermore, there are no special circumstanceshere, as that consideration was discussed in Jiang v.

Shi, 2017 BCCA 232: [11] There may be family law cases, particularly those involving the best interests of a child, in which an elastic approach can bejustified, even with respect to the due diligence requirement. Where, however, there are no special circumstances calling for a departurefrom the Palmer criteria, the mere fact that a case involves family law issues does not justify a dilution of the due diligence requirement. [35] Mr. Ward’s motion to adduce fresh evidence cannot succeed.

Issue No. 2—Did the judge misapprehend evidence, or make any factual or mathematical errors? [36] In his factum addressing the support decision, Mr. Ward posits there were no factual findings made by the judge which wouldsupport the decision to impute income to him, but he provides no argument in support of his contention. He also suggests the judge didnot “properly” determine the operating expenses of the company and she committed mathematical errors both in determining “add-backs”, and in grossing up corporate pre-tax income, but he does not elaborate on what it was that constituted such mathematical errors.Ms.

Murphy maintains there were no mathematical errors on the part of the judge and furthermore “the gross up is entirely appropriate toadequately reflect the tax implications avoided by Mr. Ward personally”. [37] As mentioned at the outset of these reasons, the judge made numerous findings of fact, as was within her discretion. Some ofthem were accompanied by mathematical calculations. Those findings do not demonstrate misapprehension of the evidence by the judge,nor factual errors. It would seem Mr. Ward equates his dissatisfaction with the judge’s factual determinations to judicial error.

Hedisagrees with the judge’s treatment of certain company expenses when recognizing them as a personal benefit to him. He says thesefacts as found by the judge, and the math she used to calculate each such benefit, constitute error. With respect, his argument ignores thewide discretion available to the judge under the Guidelines. The record establishes each calculation the judge made was supported by theevidence upon which she chose to rely, in a hearing at which the only evidence put before the court was from Mr. Ward and hisaccountant (the respondent did not tender evidence).

I am not persuaded, on this record, the judge misapprehended any of the evidence,or committed any of the factual or mathematical errors claimed by Mr. Ward. I would dismiss this ground of appeal. [38] My colleague Justice Van den Eynden has identified what I would characterize as only minor errors in the judge’s computationof some of the figures associated with calculations related to determination of Mr. Ward’s annual income. These errors of addition—or in

the case of the gross-up amount, an error in multiplication—are not those argued by Mr. Ward and are of no significance. They do not impact in any meaningful way the judge’s overall conclusions. Issue No. 3—Did the judge make any errors of law? [ 39 ] In a variation on the argument he advanced in relation to the first ground of appeal, Mr. Ward says the judge also erred in law when she added back to his income those amounts she determined appropriate in relation to certain company expenses which she was satisfied were paid on his behalf, or from which he personally benefitted in whole or in part.

Concurrent with that argument, Mr. Ward says the judge erred in imputing income on the basis of underemployment. [ 40 ] As with the second issue, consideration of this ground of appeal also begins with recognition there is a broad discretion provided to a judge, when grounded in the appropriate evidentiary framework, to assess income of a payor using the Guidelines. [ 41 ] Mr. Ward argues the judge over-inflated his income for child support purposes through her application of the Guidelines . It is useful to consider in greater detail what the judge did in applying ss. 18 and 19.

I will address first the approach the judge employed, followed by a discussion in relation to the steps required by s. 18. It is on this latter point that I respectfully differ with my colleagues. As will be seen, I do not agree the judge committed a legal error in her use of s. 18 that would require the Court’s intervention. Use of s. 18 and s. 19 [ 42 ] The judge framed her application of ss. 18 and 19 as two distinct exercises. This is helpful to understanding how she arrived at the final income figures she assigned to Mr. Ward for the years 2018–2020. The judge first used s. 18 to examine certain benefits Mr.

Ward derived from the company of which he was the sole director, officer and shareholder. Moving on from there, the judge also decided to impute additional income to Mr. Ward pursuant to s. 19, reflecting her conclusion he was intentionally underemployed (s. 19(1)(a)). [ 43 ] Sections 18 and 19 of the Guidelines provide: Shareholder, director or officer 18(1) Where a parent is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the parent’s annual income as determined under

Section 16 does not fairly reflect all the money available to the parent for the payment of child support, the court may consider the situations described in

Section 17 and determine the parent’s annual income to include (

a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or (

b) an amount commensurate with the services that the parent provides to the corporation, provided that the amount does not exceed the corporation’s pre-tax income. Adjustment to corporation’s pre-tax income

(2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm’s length must be added to the pre-tax income, unless the parent establishes that the payments were reasonable in the circumstances. Imputing income 19(1) The court may impute such amount of income to a parent as it considers appropriate in the circumstances , which circumstances include the following: (

a) the parent is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child to whom the order relates or any child under the age of majority or by the reasonable educational or heath needs of the parent; (

b) the parent is exempt from paying federal or provincial income tax; (

c) the parent lives in a country that has effective rates of income tax that are significantly lower than those in Canada; (

d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines; (

e) the parent’s property is not reasonably utilized to generate income; (

f) the parent has failed to provide income information when under a legal obligation to do so; (

g) the parent unreasonably deducts expenses from income; (

h) the parent 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; (

i) the parent is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust. [Emphasis added] [ 44 ]

Section 18 is a tool designed for a specific purpose. It permits a judge to look into the financial circumstances of a company by “piercing the corporate veil”. As stated in Aubin v. Petrone , 2020 ABCA 13 :

[37] The concept of the corporate veil enters family law most frequently on questions of child support. The first step in determining child support is determining the income of the payor parent.

Where a payor parent obtains his or her income from a closely-held corporation, the Federal Child Support Guidelines , SOR/97-175 , enable courts to look past the corporate veil to determine whether the parent is using a company to disguise income, for example by splitting income with a non-arm’s-length party, by paying for personal expenses , or by unnecessarily leaving earnings in the company rather than drawing them out as income: Cunningham v Seveny , 2017 ABCA 4 at paras 25-27 . [Emphasis added] [ 45 ] As noted earlier, the judge had started her calculation of Mr. Ward’s income by applying s. 16.

She then turned first to s. 18 of the Guideline s, ostensibly to see whether it was appropriate to attribute any of the pre-tax income of the company to Mr. Ward. To do so, she looked at company expenses. In relation to certain of them, she was not persuaded Mr. Ward had discharged his onus to establish the reasonableness of those payments as company obligations. The judge concluded some of the payments equated in whole or in part to a personal benefit to Mr. Ward, which she then grossed up, recognizing Mr. Ward had not paid any tax on them. She added those amounts to Mr. Ward’s income.

The judge also found that if her approach of utilizing s. 18(2) to attribute monies to Mr. Ward was not appropriate, then in the alternative she would have imputed those same amounts as income to Mr. Ward using s. 19(1)(

g) of the Guidelines . I will return to the significance of that statement later in these reasons. [ 46 ] After considering s. 18, the judge next applied s. 19 to impute additional income to Mr. Ward in view of what she determined to be his underemployment. [ 47 ] In her reasons, the judge observed courts have taken varying approaches to the use of s. 18 (attribution) versus s. 19 (imputation) of the Guidelines : [26] This takes me to s. 18 and s. 19 of the CSG .

Section 18 grants the court discretion to attribute pre-tax company income to a payor, while s. 19 grants the court discretion to impute income. Courts across the country have written about the intersection of these two provisions, yet there doesn’t seem to be a consensus on how they are to be applied in these circumstances. The Nova Scotia Court of Appeal has not ruled specifically on the issue. [27] In my view, it’s appropriate to use s. 18(2) to add back any personal expenses that P.W. ran through his company.

These are payments made “on behalf of persons with whom the corporation does not deal at arm’s length” and P.W. did not establish that the deductions were “reasonable in the circumstances”. [Emphasis added] [ 48 ] The judge was accurate about an absence of consensus as to how to apply both sections to the same set of circumstances. In Walker v. Walker , 2019 SKCA 96 the Saskatchewan Court of Appeal discussed how s. 18 and s. 19 may work together: [30] The concern is whether s. 19 of the Guidelines can be used instead of s. 18 to impute income from a corporation to the [payor] spouse.

It appears that the trial judge thought that it was more appropriate to impute the personal benefit that Mr. Walker received from the corporation under s. 19 rather than attribute the corporation’s income to Mr.

Walker’s income under s. 18. [31] Appellate courts across the country have interpreted s. 18 and s. 19 as provisions that work in tandem: “The sections are inextricably linked, designed to work in tandem, and are not mutually exclusive means of ascertaining that income ” ( Goett at para 18 ) and “the discretion provided for in s. 18 is a mechanism available to determine a fair amount of income for the purpose of paying child support. It does not exist in isolation from the other provisions and is specifically utilized in imputing income for the purpose of s. 19 “ ( Goett at para 20 ).

An important distinction between these provisions is that s. 18 allows for the piercing of the corporate veil and the attribution of some or all of a corporation’s pre-tax income to a [payor] for child support purposes. Because a company is a distinct legal entity, this provision is necessary to provide a mechanism for doing that.

Section 19, on the other hand, allows income to be imputed to a [payor] as a result of action the [payor] has taken. It does not allow for the piercing of the corporate veil. [Emphasis added] [ 49 ] More recently, in MacLennan v. MacLennan , 2021 SKCA 132 the compatibility of those two sections was again discussed by that same court: [27] The purpose of analyzing all potential sources of income, including that which may be attributed under s. 18, is to arrive at an amount that fully and fairly reflects the income available for support purposes. Each case must be decided on its own facts ( Merrifield at paras 47–48 ). [28]

Section 19 of the Guidelines confers a further judicial discretion to impute income where the payor spouse’s income as listed in their tax return does not truly represent the income available for child support purposes. In that respect, s. 19 is inextricably linked to, and designed to work in tandem with, s. 18 ( Walker at paras 28–31 ; M.H. at para 88 ). [Emphasis added] [ 50 ] The decision in J.O. v. M.C. , 2017 NBCA 15 referred to by the judge bears some similarity to the circumstances of this case, in that there the payor “had a history of charging his personal expenses to the company” (para. 17).

The New Brunswick Court of Appeal showed deference to the hearing judge’s decision to recognize certain corporate activities and payments as income to the payor, in that case using s. 18. The interplay between ss. 18 and 19 was described: [15] Sections 18 and 19 of the Guidelines permit a court to impute income to a parent in certain circumstances.

Section 19 allows imputation when the payor parent receives tax exempt income, fails to disclose income from all sources, or there has been an underutilization of capital assets.

Section 18 applies to a parent who is a shareholder, director or officer of a corporation when there is a finding he or she has taken unreasonable deductions, or income has been unreasonably diverted. In such cases, a court may include “all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year” or “an amount commensurate with the services the spouse provides to the corporation”, provided it does not exceed the corporation’s pre-tax income.

For the purposes of calculating pre-tax income, “salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm’s length” may be added, unless it is established the payments were reasonable. [16] The reasonableness of the deductions is a discretionary conclusion. At the end of the day, a court will not interfere with

reasonable economic decisions necessary to meet corporate sustainability. In Riel v. Holland, [2002] O.J. No. 5609 (S.C.J.) (QL), thecourt affirmed that, when a taxpayer arranges his or her business affairs so as to pay substantially less income tax, ss. 18 and 19 of theGuidelines may be applied in the interests of fairness and consistency. See also Scott v.

Scott, 2004 NBCA 99, 278 N.B.R. (2d) 61, perRichard J.A., writing for the Court. [51] While the above decisions support a recognition that the application of s. 18 is discrete from but not incompatible with that ofs. 19, they provide little guidance on the mechanics associated with the exercise of using both sections, beyond the specific“mathematical direction” set out in s.

Section 18 offers an opportunity to consider the relationship between a payor and a corporationin which the payor has a role. It permits a court to ascribe money’s worth to a payor by piercing the corporate veil to consider whethermonies could be made available, regardless of whether funds have actually been drawn out of the company by the payor. [52] As a separate tool, s. 19 is applied to assign a notional amount of income to reflect a payor’s circumstances “on the ground”,including, but not limited to, those enumerated in s. 19(1)(a)–(i), such as underemployment or a lack of disclosure, to name but two.

Thelanguage of s. 19 is “open-ended”. In Riel v. Holland (2003), (ON CA), 67 O.R. (3d) 417, also referenced by thejudge in her support decision, the Ontario Court of Appeal concluded a payor derived “a substantial benefit from organizing his affairsunder a corporate umbrella and using the corporation to pay personal expenses” (para. 31). In approving the practice of grossing up“other forms of income” to reflect a payor’s gross taxable income, the court commented on the language of s. 19: [36] Fortunately, such an

interpretation is not required. The wording of s. 19 of the Guidelines is open-ended (“which circumstancesinclude”), thus indicating that the categories listed in that

section are merely examples of situations in which income may be imputed.There are, therefore, other potential scenarios in which income can, and should, be imputed. Where significant amounts of untaxedbusiness income are used for payment of personal expenses, ‘grossing up’ business income to place a spouse’s real income on a par withwhat it would be in a salary income context is, in my view, another such scenario. As Lane J. expressed it, in a particularly practicalfashion, in Manis v.

Manis, at para. 99: “The fundamental principle is that the Court must estimate the actual means which the parent hasavailable for child support. If less tax is paid, more is available.” I would add only the reminder that the Guideline[s] table amounts arebased on the gross income of salaried employees without regard to potential differences in deductions. Accordingly, attempting toachieve absolute consistency between salaried employees and the self-employed is neither necessary nor appropriate. See also J.O. v.

M.C., supra at para. 24. [53] The language of s. 19 does not foreclose a judge utilizing it in a situation or for a reason other than those specificallyenumerated in s. 19(1).

As stated by Julien Payne and Marilyn Payne in Child Support Guidelines in Canada, 2020 (Irwin Law Inc.:Toronto, 2020) at p. 173: The list of circumstances under s. 19 of the Federal Child Support Guidelines that entitles a court to impute income to a spouse or formerspouse does not purport to be comprehensive and does not interfere with the power of the court to impute income in the othercircumstances. [Footnote omitted] […] [54] Sections 18 and 19 each afford an opportunity to apply the available evidence to determine a payor’s income and arrive at acorresponding quantum of support payable.

The use of one or the other, or both sections, will be driven by the facts of the particularcase. In M.H. v. A.B., 2019 SKCA 135 the Saskatchewan Court of Appeal recognized the appropriateness of using both ss. 18 and 19where the circumstances required, there in relation to the question of whether to gross up dividend income: [103] In Howe, Barrington-Foote J. recognized, correctly in my view, that attribution of pre-tax income from the corporation alonewill often achieve the goal of consistency in the treatment of income for child support purposes.

This is entirely consistent with thethread running through the jurisprudence, namely that the discretion provided in s. 19(1)(

h) must be exercised in tandem with s. 18(1) toensure that the income of the party receiving dividends from a corporation properly reflects all the money available for child supportpurposes, and achieves the consistency of treatment required by the Guidelines. [104] In some cases where a party receives dividend income from a closely-held corporation, achieving those goals will require thecourt to attribute corporate pre-tax income under s. 18(1) of the Guidelines. In others, it will be appropriate to impute the grossed-upvalue of dividends received from the corporation under s. 19(1)(

h) to achieve those goals. There may also be instances in which it isappropriate to do both, and yet others in which it is appropriate to do neither. It all depends on the particular circumstances of the case. [105] It is also trite to say that the decision to attribute corporate income under s. 18(1), or to impute the grossed-up value of adividend under s. 19(1)(

h) instead of using the actual amount of the dividend cannot be arbitrary. It must be based on evidence whichsupports the conclusion that doing so is appropriate and necessary to reflect the amount of money truly available for child supportpurposes, and to achieve the consistency of approach required by the Guidelines. [55] Similarly, in Goett v.

Goett, 2013 ABCA 216 the interdependent relationship between s. 18 and s. 19 was recognized as criticalto the meaningful application of those sections, although the Alberta Court of Appeal was more firm in its tone about turning first tos. 18: [16] A body of jurisprudence has developed under [s.] 18 in an effort to address the fundamental unfairness that arises if a parent candivert, manipulate or shelter income through the use of a corporate structure to avoid the payment of adequate child support.

At the sametime, in an effort to balance legitimate business expenses and capital requirements, criteria has developed to inform the exercise ofjudicial discretion.

These criteria include the role the payor plays in the corporation, whether he or she is the sole shareholder, the degreeof control the payor exercises, the evidence as to the availability of retained earnings to pay child support, and whether those earnings arerequired to manage the business and ensure its ongoing financial viability. [17] Despite his findings that the respondent was in fact the controlling mind and owner of the business and that there was nolegitimate reason for the transfer of the business to a new corporation the day following the divorce, the chambers judge was reluctant toapply s 18 or the relevant jurisprudence in the absence of “clear authority” allowing him to do so in a situation where the respondent wasnot, legally, a shareholder, director or officer.

[18] While the wording of s 18 does not specifically address the situation here, the jurisprudence clearly allows for the piercing of the corporate veil in these circumstances.

Section 19 of the guidelines affords the court a discretion to impute income in circumstances where the court is of the view that the income as stated in the tax returns does not truly represent the income available to pay child support.

Section 18 is one method that assists the court in determining what is appropriate income for the purpose of child support. The sections are inextricably linked, designed to work in tandem, and are not mutually exclusive means of ascertaining that income. [19] The chambers judge found that the purpose of the new corporation was to divert income and to avoid the payment of child support (and presumably the garnishment provisions of the previous order) and determined that s 19(

d) of the guidelines applied.

He found that the respondent had control of the corporation, that share ownership was transferred to a non-[arm’s] length party for the purpose of avoiding child support, that the transfer of the business for no consideration was to divert income, that the business was the same business that had been running for many years, that there was no explanation for the new wife’s salary increase and the husband’s corresponding salary decrease, and that the submission that the business had diminished was not established on the evidence. [20] The chambers judge declined to consider what amount of pre-tax income from the corporation ought to be available for the payment of child support under s 18 (although he expressed concern about the expenses and salaries as noted above).

He was in error in failing to do so. As discussed above, the discretion provided for in s 18 is a mechanism available to determine a fair amount of income for the purpose of paying child support. It does not exist in isolation from the other provisions and is specifically utilized in imputing income for the purpose of s 19. In circumstances such as the case at bar, where it has been established that the payor is the de facto shareholder or remains the controlling mind of a corporation, there is no basis to decline to consider the methodology of determining income in s 18 or the jurisprudence under that

section that guides the exercise of discretion. Where a payor has transferred shares to a non-[arm’s] length party to avoid the payment of child support, a purposive

interpretation of the guidelines and the discretion afforded under them, particularly s 19, permits a s 18 analysis to be undertaken by piercing the corporate veil. To interpret the guidelines otherwise is to allow the payor to avoid his or her obligations by employing a corporate structure, potentially creating fraudulent conveyances, and deprive the children of the support to which they are reasonably entitled. [ 56 ] The goal, through the use of either or both sections, is to arrive at the fairest and most reasonable assessment of income.

The chief difference between the two sections is in the pointed language of the directions prescribed in s. 18, versus the broader power of imputation found in s. 19. I recognize that ultimately the use of either or both sections will result in an approximation of income that is less precise than in those cases where a judge need only consider Line 150 of the payor’s tax return to calculate the amount of support payable. [ 57 ] In my view, the judge did not err in using both s. 18 and s. 19 to arrive at the most comprehensive picture possible of Mr. Ward’s income.

There may be occasions when a court does not have any basis or reason to contemplate s. 18 due to a lack of any corporate presence or influence, or due to insufficient information about that entity. If the pertinent information does not exist or is not available in sufficient form or extent to allow the court to make use of it, then moving directly to a consideration of s. 19 may be inevitable.

While s. 18 may assist in deriving a more complete picture of corporate income available to be accessed by a payor, the judge might instead apply s. 19 if the evidence is better suited to the exercise of that discretion. [ 58 ] I am satisfied there was nothing to prohibit the use of both s. 18 and s. 19 here, where the facts as found by the judge led her to call into use both sections to address different aspects of Mr.

Ward’s circumstances, being his relationship to the company and his personal employment history. [ 59 ] In my view, where a s. 18 analysis can be embarked upon, it is a logical starting point for the exercise of determining a payor’s income for Guidelines purposes, although not necessarily to the exclusion of the application of s. 19 . I do not see that the two sections operate as an either/or proposition.

Section 18 avails the fact-finder of a more concrete approach to the task of determining income than the sometimes more subtle or nuanced use that must be made of s. 19 , such as in those cases where the judge has only dated or historic information concerning a payor’s employment history. [ 60 ]

Section 18 is the preferred starting point under relevant or applicable circumstances where, as here, the payor has a role in the company and sufficient information is available to conduct the analysis. To do otherwise would render s. 18, offering as it does the opportunity to pierce the otherwise impenetrable corporate veil, pointless. However, these comments should not be interpreted as suggesting first resort to s. 19 , under circumstances where it would be reasonable or could be justified, should automatically constitute error.

In my reading of the Guidelines there is nothing in the language of them that prohibits or limits in such a manner their application, nor the considerable discretion they imbue in the decision-maker. [ 61 ] Gosse v. Sorensen-Gosse , 2011 NLCA 58 was another of the cases referenced by the judge in her support decision. There the payor was, like Mr. Ward, the sole owner and officer of the company.

The Newfoundland and Labrador Court of Appeal expressed in obiter its preference to use s. 18 over s. 19 when considering a payor’s personal expenses paid by the company: [113] Thus, it must be concluded that the full amount of the pre-tax corporate income of SSDL is available to Ms. Sorensen for use as she sees fit. (See Hausmann at paragraph 61; Reis v. Bucholtz , 2010 BCCA 115 , at paragraph 48 and Miller v. Joynt , at paragraph 37)[.] The manner in which the whole of that income is spent is entirely a decision for Ms. Sorensen.

Whether she chooses to use it for child support, funding her own lifestyle, or business expansion of SSDL is her decision. Imputing the whole of the amount shown as pre-tax profit of SSDL as income of Ms. Sorensen simply ensures that she is treated on the same basis as Mr. Gosse, and ensures “the fairest determination of [their] income”. Mr. Gosse has to include all of the income “available” to him without any allowances for business investments or other endeavors he might wish to undertake. […] [115] The UFC judge imputed, as income to Ms.

Sorensen, 75% of the legal fees of this litigation which were paid directly by SSDL, and 50% of the vehicle and cell phone expenses paid for by the company. While the principle that would justify imputing such income is fairly obvious, the use of guideline 19 seems somewhat circuitous. I assume that it is was done on the basis that paragraph (

g) of guideline 19(1) is applicable. That provision reads:

19(1) The Court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following: … (

g) the spouse unreasonably deducts expenses from income; … [116] Where the expenses involved were expenses paid directly by the wholly owned corporation, it would seem more appropriate to treat them as adjustments to the pre-tax corporate income of the corporation, SSDL, as was done by the British Columbia Court of Appeal in Reis v. Bucholtz . Even though there might be no difference in the net effect, on the determination of income for Guidelines purposes, it seems somewhat indirect to treat the accounting for vehicle or cell phone expenses by the wholly owned corporation as an unreasonable deduction from Ms.

Sorensen’s income. However, as the matter was not in issue between the parties, and the end result is the same in any event, these comments are obiter . [ 62 ] The comments in Gosse stand in contrast to the view expressed in M.G.H. v. K.L.D.H. , 2020 NBCA 46 where, although the New Brunswick Court of Appeal declined to interfere with the trial judge’s decision to credit certain company expenses to the payor using s. 18, it noted it would have used s. 19 to do so: [73] Section 19(1)(

g) provides that income may be imputed when it is concluded a spouse is unreasonably deducting business expenses from business income – sometimes referred to as the lifestyle analysis. In this case, s. 19 was pleaded in the alternative. The mother submitted:

a) the father’s business expenses were inflated;

b) the father paid his partner, S.D., a salary, provided her with a cell phone and a vehicle, and those expenses should be added to his income; and

c) that cash income either in kind, or through gift cards should be added to his income. It was the mother’s position that up to $90,000 should be imputed to the father under s. 19 of the Guidelines as a result. The mother testified that when they were together, the father transacted some of his business in cash which he used for vacations, gambling, recreational purposes and special purchases. However, much of the evidence on this issue was historic and was known to both parties at the time of separation.

The judge added back these expenses under s. 18 and then arbitrarily added a further amount under s. 19. […] [79] In adopting Mr. Whittaker’s report, the judge added the amounts she determined to be tax-free benefits and ineligible business expenses taken by the father from his companies, including S.D.’s salary, cell phone and the car purchased for S.D., who had been hired by P. Inc. to act as a consultant. Those payments, broken down, total: (2016) $3,725 (income), $8,900 (cell phone); (2017) $5,200 (income), $8,900 (cell phone); (2018) best estimate – $14,100.

The judge added back to the father’s income the sum of $20,500 under s. 18, which she estimated, based on his post-trial brief, were personal benefits he received from the companies. These benefits were calculated as:

a) gift cards: $8,500;

b) meals: $4,000; and

c) vehicles: $8,000; for a total of $20,500 plus tax gross up at 35% for a final total of $27,695. She added a further arbitrary amount of $15,000 under s. 19. [80] Overall, I would not interfere with the judge’s decision to add back the above expenses; however, I would add them under s. 19 of the Guidelines , not s. 18. She explained in detail how she arrived at her conclusions. This was a discretionary decision, and it was not unreasonable. Courts of appeal do not tinker […]. [ 63 ] A “middle ground” approach was endorsed in K.A.W. v. M.E.W. , 2020 ABCA 277 .

There the trial judge had adopted the path suggested by the respondent, adding all of the pre-tax corporate income and all of certain corporate expenses to the payor’s income. The Alberta Court of Appeal endorsed the use of a formula to best reflect the payor’s relationship to his company: [21] The chambers judge accepted Ms W’s approach of adding in the entire amount of certain corporate expenses to arrive at a Guideline [ s ] income without addressing in any way the evidence that Mr W produced showing he received some personal benefit from a few, different, corporate expenses.

Not addressing this relevant evidence is a legal error. […] [25] We also conclude that the chambers judge’s approach was too broad: including all of the pre-tax corporate income; plus all of the expenses for amortization, advertising and promotion, and meals and entertainment. We direct that a middle ground approach be taken.

The Guideline [ s ] income for each year at issue for the retroactive child support order shall be set according to the following formula: Mr W’s Line 150 income + the total personal benefit claimed from the corporate expenses by Mr W for the applicable years + 50% of the difference between the amount calculated by Ms W, and the first two numbers in this formula. [ 64 ] The distinction between the circumstances in that case and this one is here the judge did not include one hundred percent of each of the expenses for which she determined Mr.

Ward had personally benefitted. [ 65 ] As the cases discussed above demonstrate, there is no singular methodology to the application of s. 18 and/or s. 19 of the Guidelines that can be endorsed, as desirable as that might seem. Each case will be fact specific, determinable within the matrix of the wide discretion available to a judge when using ss. 16–20 of the Guidelines to calculate income for child support purposes.

The steps required by s. 18 [ 66 ] The heart of the difficulty in this case rests in the contradiction that while the judge began the use of s. 18 recognizing it “grants the court discretion to attribute pre-tax company income to a payor”, she did not fully complete the specific exercise directed by s. 18, which directed her to add back to pre-tax corporate income those amounts with which she was concerned. I repeat the direction found in

s. 18 for ease of reference: Shareholder, director or officer 18(1) Where a parent is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the parent’s annual income as determined under

Section 16 does not fairly reflect all the money available to the parent for the payment of child support, the court may consider the situations described in

Section 17 and determine the parent’s annual income to include (

a) all or part of the pre-tax income of the corporation , and of any corporation that is related to that corporation, for the most recent taxation year; or (

b) an amount commensurate with the services that the parent provides to the corporation, provided that the amount does not exceed the corporation’s pre-tax income. Adjustment to corporation’s pre-tax income

(2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits , to or on behalf of persons with whom the corporation does not deal at arm’s length must be added to the pre-tax income , unless the parent establishes that the payments were reasonable in the circumstances. [Emphasis added] [ 67 ] The judge correctly commenced her consideration of s. 18: [29] Before proceeding to analyze expenses under s. 18, I must first consider whether any pre-tax corporate income should be attributed to P.W. as personal income.

His company reported losses in the last four of five years. In 2019 he reported nominal income of $1,921.00. [30] The onus is on P.W. to establish that there was a sound business reason not to withdraw that money. Absent evidence to the contrary, I am entitled to conclude that this was money available to P.W. as income. P.W. didn’t advance evidence to show that, for example, there were cash flow or capital needs that would require him to leave that money in the company.

Thus there’s no evidence to prove that its withdrawal would have affected the viability of his company ( Reid v Faubert , 2019 NSCA 42 ). [31] That amount must be grossed up as well. For purposes of this analysis I’ve used 23%, so $2,505.00 will be added to P.W.’s 2019 income. [ 68 ] The judge properly considered the matter of the 2019 pre-tax corporate income of $1,921 sitting inside the company. Not persuaded Mr. Ward had discharged his obligation to explain why the monies remained inside a solely-held company, she attributed them to him personally and grossed up that amount.

In doing so the judge was not requiring the company to actually disburse the monies to Mr. Ward; rather, she was using s. 18 to attribute those monies to him despite the fact they had been left inside the company. [ 69 ] Turning her attention next to company expenses, the judge concluded certain of the expenses paid by it were, in part or in whole, depending on the expense, incurred for the personal benefit of Mr. Ward: [32] Next, I’ll consider C.M.’s claim that P.W. personally benefits from business expenses. If so, the amounts deducted will be attributed to him as income under s. 18.

I must also consider whether these sums will be grossed up in accordance with the Ontario Court of Appeal decision in Riel (supra). In that case, it was noted that courts have discretion to “level the playing field” between salaried employees, and those payors who use their company to pay personal expenses. The distinction is that salaried employees pay their personal expenses from after-tax dollars.

Where P.W.’s lifestyle suggests that his ability to run expenses through his company greatly benefits him, I find that a gross up is appropriate. [33] According to the G.I.F.I. tendered by P.W.’s accountant, the company expenses include: meals and entertainment, interest and bank charges, repairs and maintenance, heat, amortization, office expenses, wages, travel, telephone, insurance, professional fees, director’s fees, and municipal water. [34] In reviewing these expenses, I’ve considered the type of business that P.W. runs, whether the amounts are paid out of pocket or not, and the need for the expense in terms of operating the business. [ 70 ] It was at this point in her analysis the judge strayed from the instructions set out in s. 18 to add monies back to the pre-tax corporate income.

Once the judge identified those particular expenses with which she was concerned, the corresponding amounts were not added back to the pre-tax income of the company for each year, as required by the language of s. 18(2). Doing so would have allowed the judge to arrive at a figure representing the pre-tax corporate profit in each year with which the court was concerned. From there, the judge could have then assessed, under s. 18(1)(a), whether and in what amount she might be persuaded income available inside the company could be attributed to Mr.

Ward for each of those years. [ 71 ] The judge found there had been a company loss reported in each of 2017, 2018 and 2020. She did not consider, pursuant to s. 18(1)(a), whether monies representing expenses paid on behalf of or to the benefit of Mr. Ward, had she added them back to pre-tax corporate income, would have reduced or eliminated the loss shown and left money in the company available to Mr. Ward. [ 72 ] The judge calculated those portions of specific company expenses she was satisfied represented a benefit to Mr. Ward, but then added those amounts directly to Mr.

Ward’s personal income, as opposed to adding them back to the company. The chart found at

Schedule A of the judge’s decision illustrates the difficulty. It lists each type of company expense examined by the court for each of the years 2018, 2019 and 2020, the amount that the judge “added back” in each category of expense, and the total of the amounts added back for each year. Applying a reasonable gross up factor of 23% to each yearly total, the judge then added directly to Mr. Ward’s income the following amounts: $41,146 in 2018, $40,553 in 2019 and $43,845 in 2020.

[ 73 ] At that point, what the judge had actually done was to impute all of those so-called “added back” expense amounts directly to Mr. Ward’s income, not to the pre-tax corporate income. What she did amounted to a s. 19 exercise, as she imputed the sums directly to Mr. Ward’s income, in the same manner as was done in Walker , supra . It is not clear from her reasons why the judge seemingly “switched gears” midstream during her discussion of s. 18.

Perhaps it was due to the company having shown a loss in three of the four years put before her in evidence, but one cannot be certain. [ 74 ] In principle, the judge was not wrong to strive to capture the benefits Mr. Ward was achieving by having his company bear certain of his personal expenses.

As discussed in Child Support Guidelines in Canada, 2020 , supra at p. 164: Where the lifestyle of the obligor is inconsistent with his or her stipulated income, the court may attribute income to the obligor based on the pre-tax income of a family company and the obligor’s ability to draw significant amounts from the company for household living expenses. Income may be readily imputed to an obligor with a history of minimizing his or her salary and utilizing his or her companies for the payment of personal expenses.

An obligor cannot treat personal and business expenses as interchangeable. [Footnotes omitted] [Emphasis added] [ 75 ] Use of s. 19 where a hearing judge was provided with corporate disclosure and had identified pre-tax corporate income, but chose nonetheless to impute income, formed the basis of the appeal in Walker , supra : [30] The concern is whether s. 19 of the Guidelines can be used instead of s. 18 to impute income from a corporation to the [payor] spouse. It appears that the trial judge thought that it was more appropriate to impute the personal benefit that Mr.

Walker received from the corporation under s. 19 rather than attribute the corporation’s income to Mr. Walker’s income under s. 18. […] [36] Similarly, I would say that the decision of the trial judge to impute Mr. Walker’s personal expenses paid by Safari to Mr. Walker as income represents an indirect, but not incorrect, method of imputation. [37] The trial judge stated there was evidence that would support an imputation of income under s. 18 (at para 149); however, the trial judge was not presented with much evidence on the reasonableness of the corporation’s expenses (at para 144).

Instead of determining the proportion of the pre-tax income that should be attributed to Mr. Walker, the trial judge decided to impute the portion that was used by Mr. Walker for personal expenses. This seems like a roundabout route to come to the same conclusion but may have occurred because of the lack of evidence available to the trial judge on Safari’s pre-tax income and the reasonableness of the corporation’s expenses. [Emphasis added] [ 76 ] The judge’s lack of completion of the exercise under s. 18 resulted in her moving wholesale to imputing income, the equivalent of an exercise under s. 19.

It was open to the judge to use either s. 18 or s. 19, or both, but not at the same time. Nonetheless, I am not persuaded the judge’s treatment of those of Mr. Ward’s expenses borne by the company ultimately constitutes an error that would justify intervention. The judge’s expressed alternate intention (as referenced earlier at para. 45), whereby she stated she would have imputed income directly to Mr. Ward in the event of any misapplication of s. 18, was an appropriate alternative. Its effect would have been to take the parties to the same end result.

I return again to Walker , supra : [40] This decision should not be taken as a carte blanche to avoid the operation of s. 18. While the trial judge expressed concern that the evidence presented to him was not sufficient to enable him to properly evaluate the reasonableness of Safari’s expenses, it is rare that trial judges have all the evidence necessary to properly calculate pre-tax income. Here, however, the trial judge exercised his discretion to employ s. 19 on the basis that Mr. Walker had taken money from Safari without accounting for it as wages, dividends, or a shareholder loan.

He had, in effect, received income he did not declare. Under these particular circumstances, I see no error in proceeding under s. 19 of the Guidelines . [41] Mr. Walker goes on to argue that even if the use of s. 19 was open to the trial judge, he erred by relying on a non-enumerated factor under that

section to impute income. This argument invites this Court to ignore the plain language of s. 19 and depart from existing jurisprudence. [42] The opening language of s. 19 permits a court to impute income to a spouse “as it considers appropriate in the circumstances, which circumstances include the following...” (emphasis added). The

section goes on to list examples of circumstances that might warrant the imputation of income to a spouse. It is well accepted that inclusive lists signaled by the word “include” are non-exhaustive. Accordingly, the plain language of s. 19 does not bear an

interpretation that would prevent non-enumerated factors from being considered by a trial judge. [Emphasis added] [ 77 ] It can easily be said the judge’s overall rationale in calculating Mr. Ward’s income for support purposes, regardless of which

section of the Guidelines she applied, was made clear in her reasons, and was grounded in the evidence she accepted. Had she treated the “add-back” amounts by conducting only a s. 19 analysis to recognize the benefits conferred on Mr. Ward, rather than using s. 18(2) to address those same benefits, I am satisfied the judge would ultimately have ended up in the same place—ascribing to Mr. Ward additional annual income, in an amount reflecting expenses assumed by his company from which he directly benefitted despite the absence of any equivalent cash transfer.

The judge said as much when she stated her alternate intention to employ s. 19. Doing so was within her purview. [ 78 ] The judge was clearly cognizant the finances of his company were super-imposed on Mr. Ward’s income. While she did not, strictly speaking, complete the exercise in s. 18, the judge nonetheless arrived at a set of conclusions about Mr. Ward’s income that, practically speaking, took her decision and the parties to an outcome supported by the evidence.

I am not persuaded the effect of the judge’s lapse in this case, occurring as it did despite her correct recitation of the law, amounts to an error that requires this court’s intervention. Nor does it, in the end, unduly prejudice Mr. Ward. While the judge’s decision adopts an approach to s. 19 to which my colleagues object, in the end her reasons permit a clear understanding of the analysis she used to reach her conclusions. As I alluded to earlier, the exercise of imputing income is inherently not one of precision.

However, the judge did much more than “guesstimate” in arriving at final numbers she was satisfied were a reasonable representation of Mr. Ward’s income in each year assessed.

[79] I am not persuaded there is reason to interfere with the judge’s conclusions arising from her use of s. 18 and s. 19, nor theoutcome of her decision. I would dismiss this ground of appeal. Issue No. 4—Did the judge make an order outside of her jurisdiction? [80] Mr. Ward says the judge’s decision on the $300 holdback was outside her jurisdiction. He maintains the judge effectively actedas an appellate court in adjudicating the issue. With respect, this argument is without merit. Indeed, it ignores it was Mr. Ward whoinsisted the judge address the issue, as demonstrated in the record.

The judge was within her jurisdiction to do so, and her decision on thepoint was to Mr. Ward’s benefit. Mr. Ward’s expressions of dissatisfaction before this Court as to respondent counsel’s conduct inholding back funds in another proceeding is a matter outside our jurisdiction. [81] Mr. Ward also says the judge both erred and acted outside her authority when she invoked s. 54B of the Act to require him toobtain leave to file future support-related applications.

He does not point to the exact nature of the error he says the judge committed,other than asserting a failure “to weigh the evidence in determining her decision is an error and needs to be reviewed and corrected”. [82]

Section 54B of the Act provides: 54B(1) Where a court is satisfied that a person has habitually, persistently and without reasonable grounds started frivolous or vexatiousproceedings or has conducted a proceeding in a frivolous or vexatious manner in the court, the court may make an order restraining theperson from (

a) starting a further proceeding on the person’s own behalf; or (

b) continuing to conduct a proceeding, without first obtaining leave of the court.

(2) An application for an order under subsection (1) may be made by the party against whom the proceeding has been started orconducted, a court officer or, with leave of the court, any other person. [83] Ms. Murphy proposed the judge consider making such an order. In examining the request, the judge reviewed the history ofcourt proceedings between the parties concerning or related to their child. The judge described it as “lengthy” and commented that, ashad been argued by Ms. Murphy, “the idea seems to be that until P.W. gets a decision he likes, he’ll just keep on filing newapplications.” Noting Mr.

Ward had met with marginal success on the application, but that it required a six-day hearing to achieve, thejudge was persuaded the combination of the history of his litigation with Ms. Murphy and his actions during the hearing justified theimposition of a leave requirement going forward. [84] I see nothing in the record to support any suggestion the judge acted outside her jurisdiction in applying s. 54B of the Act. Thatsection positions a court, where it deems appropriate, to manage the potential for frivolous or vexatious proceedings.

The judge waspersuaded on a balance of probabilities that putting parameters around Mr. Ward’s ability to pursue future variation applications waswarranted. There was no error by the judge in exercising that discretion, which was clearly within her jurisdiction. I would dismiss thisground of appeal as I am satisfied there is no basis for this Court to interfere with her conclusion. Issue No. 5—Did the judge demonstrate bias? [85] In his support decision factum, Mr. Ward makes a general assertion of bias on the part of the judge, which he says resulted in alack of fairness toward him during the court process.

During oral argument, he refined his concern, focusing on what he says amountedto unfair treatment of him, owing to the judge’s management of the hearing. [86] In R. v. Potter, 2020 NSCA 9 the Court reviewed the test for assessing a reasonable apprehension of bias: [741] This Court canvassed the principles governing a claim of judicial bias, or reasonable apprehension thereof in Nova Scotia(Attorney General) v. MacLean. There, Saunders J.A. wrote: [39] First, as a matter of law, there is a strong presumption of judicial impartiality, which is not easily displaced.

Second, there is aheavy burden of proof upon the person making the allegation to present cogent evidence establishing “serious grounds” sufficient tojustify a finding that the decision-maker should be disqualified on account of bias. Third, whether a reasonable apprehension of biasexists is “highly fact-specific”. Such an inquiry is one where the context, and the particular circumstances, are of supreme importance.The all

[…]