MacDonald v. MacDonald, 2016 NSSC 290

Editor’s note: Erratum released November 09, 2016. Original judgment has been corrected, with text of erratum appended. SUPREME COURT OF Nova Scotia FAMILY DIVISION Citation: MacDonald v. MacDonald , 2016 NSSC 290 Date: 2016-10-27 Docket: SFHD No. 1201-63088 Registry: Sydney Between: Janet Leigh MacDonald Applicant v.

Frederick “Keith” MacDonald Respondent Judge: The Honourable Justice Lee Anne MacLeod-Archer Heard: August 11, 2016, in Sydney, Nova Scotia Written Release: October 27, 2016 Counsel: Danielle MacSween for the Applicant Alan Stanwick for the Respondent By the Court: [ 1 ] This case involves claims for retroactive and prospective child and spousal support, and a claim that income should be imputed to the payor. At the heart of these issues is Mr. MacDonald’s failure to disclose his income since the corollary relief order was issued.

FACTS: [ 2 ] The parties were divorced in April, 2010, at which time a corollary relief order was issued by consent. The order provided for child support payable by Mr. MacDonald in the amount of $202.00 per month, based on an income of $23,764.00. At that time, Mr. MacDonald’s income was comprised of employment insurance benefits. [ 3 ] The order also provided for payment of spousal support of $1,700.00 per month, although this was suspended while Mr. MacDonald was unemployed. Under the order, he was required to advise Ms.

MacDonald within two weeks of securing employment, and to provide her with confirmation of his anticipated income. Both parties were required to exchange income tax returns annually, commencing May 15, 2011. [ 4 ] Neither party exchanged tax returns and when Mr. MacDonald secured employment, he did not advise Ms. MacDonald. [ 5 ] Ms. MacDonald filed a variation application on May 26, 2011. The court sent Mr. MacDonald a notice to disclose and an order to disclose, but he failed to provide his income information as ordered. He brought copies of his tax returns to the hearing, and they disclose income as follows:

YEAR LINE 150 INCOME2011 $20,661.002012 $20,883.002013 $19,028.002014 $33,590.002015 $50,045.00 [6] Ms. MacDonald relies on Canada Pension Disability Benefits for income. She was the primary caregiver of the parties’ onlychild after the divorce. Their daughter, T.R.M. is now almost 26 years of age. [7] Ms. MacDonald seeks ongoing child support for T.R.M., as well as retroactive adjustment of child support based on Mr.MacDonald’s increased income since 2011. In addition, she seeks spousal support and asks the court to impute income to Mr.MacDonald. [8] Mr.

MacDonald argues that T.R.M. is no longer a dependent child, and that there should be no ongoing support payable forher. He argues that, given his child support obligations, he was unable to pay spousal support after 2011. He also says that Ms.MacDonald could earn income while collecting C.P.P. benefits, and her failure to do so should lead to an imputation of income to her forpurposes of spousal support. [9] Both parties are in agreement that the order should clarify clause 9 of the CRO. That clause does not require further paymentfrom Mr. MacDonald.

He paid third parties the amount of $9,531.00 as support for Ms. MacDonald before the divorce. She did notreceive any monies directly. The order will clarify that. ISSUES: 1. Should income be imputed to Mr. MacDonald and, if so, in what amount? 2. Should retroactive child support be ordered and, if so, in what amount? 3. Should Mr. MacDonald be required to pay ongoing child support and, if so, in what amount? 4. Should retroactive and/or prospective spousal support be ordered and, if so, in what amount? Issue #1 - Should income be imputed to Mr. MacDonald and, if so, in what amount? [10] Ms.

MacDonald argues that income should be imputed to Mr. MacDonald for several reasons: 1. He was a self-employed businessman who received benefits from his company. 2. He ignored his disclosure obligations under the order. 3. He has the ability to earn more than his current salary of $48,000.00. 4. He deceived her and the court in 2010, when spousal support was suspended due to his lack of employment income, becausehe’d already incorporated a company. 5. His reported income is inconsistent with his lifestyle. 6.

He had the opportunity to work for unreported cash income. [11] She cites the Nova Scotia Court of Appeal decision in Snow v. Wilcox, (1999) 1999 NSCA 163 , NSJ No. 453 whereFlynn, J.A. stated: 22. In the case of a self-employed businessman, like the respondent, there is very good reason why the Court must look beyond the baretax return to determine the self-employed businessman’s income for the purposes of the Guidelines.

The net business income, forincome tax purposes, of a self-employed businessman, is not necessarily a true reflection of his income, for the purpose of determininghis ability to pay child support. The tax department may permit the self-employed businessman to make certain deductions from thegross income of the business in the calculation of his net business income for income tax purposes. However, in the determination of theincome of that same self-employed businessman, for the purpose of assessing his ability to pay child support, those same deductions maynot be reasonable. … [12] The problem is that Mr.

MacDonald did not tender copies of his corporate returns. There is no evidence of what deductions heclaimed under his company, such as food or entertainment. He acknowledges that he drove a company truck, but I don’t know whetherhe paid his own gas expenses or not, and whether there were limits to its use. I find it’s likely that he used the truck for personal businessin addition to company business, because he testified that his girlfriend owns the car and his only other vehicle was a motorcycle, whichhe sold several years ago. [13] I would normally add back a reasonable sum to Mr.

MacDonald’s income for the benefits he enjoyed as its owner while thecompany was operational. But given the dearth of evidence, a reasonable sum is impossible to calculate. However, given my findingsbelow, this is a moot point in any event. [14] Ms. MacDonald argues that a negative inference should be drawn from Mr. MacDonald’s failure to disclose his income under

the order, and as ordered by the court. She further argues that Mr. MacDonald deceived both her and the court, by consenting to thesuspension of spousal support in the order, all the while knowing that he had already incorporated a company, and would soon beoperating his own business. [15] The Supreme Court of Canada has called failure to disclose income information the “cancer of family litigation”. It leads todelays, and leaves judges grappling with how to assess a payor’s true income for purposes of support. [16] Mr.

MacDonald tendered copies of his 2011, 2013 & 2014 tax assessments at the hearing, along with a copy of his unsigned taxreturn for 2012. The 2011 Assessment is dated June 17, 2013, so he had that document when he was ordered to disclose. The same istrue of the later Assessments. [17] Mr. MacDonald testified that he did not disclose his income because when his company failed, he was unable to pay hisaccountant and therefore could not retrieve his company records. When asked why he did not contact Revenue Canada for copies of hiscorporate returns, he said the returns weren’t filed.

However, if his girlfriend did the company books, he should have been able toproduce internal statements. [18] Mr. MacDonald declared personal bankruptcy in 2013. The Trustee prepared his personal returns in 2013. He could haveobtained copies of his personal 2013 return(

s) from the Trustee, but he failed to do so. [19] The question is whether I should draw a negative inference from his failure to disclose, or whether I should accept Mr.MacDonald’s evidence that between his business failure and health problems, he never got around to disclosing, and that his income asdisclosed at trial is his real income. [20] Ms. MacDonald cites the decision in Marshall v. Marshall, 2008 NSSC 11, where Justice Forgeron noted: [17] The discretionary authority found in

section 19 of the Guidelines must be exercised judicially in accordance with the rules of reasonand justice – not arbitrarily. There must be a rational and solid evidentiary foundation in order to impute income in keeping with the caselaw which has developed. The burden of proof is upon Ms. Marshall and it is proof on the balance of probabilities: Coadic v.

Coadic(2005), 2005 NSSC 291 237 N.S.R. (2d) 362(SC). [18} In reviewing the factors to be considered when a party has requested imputation, the court stated at paras 14 to 16 of Coadic: [14] In making my determination as to the amount of income to be attributed to Mr. Coadic, I am not restricted to the actual incomewhich he earned or earns, rather I am permitted to review Mr. Coadic’s income earning capacity having regard to his age, health,education, skills and employment history. [15] In Saunders-Robert v.

Robert, 2002 Carswell NWT 10(S.C.), Richard, J. stated at para. 25: “[25] When imputing income, it is an individual’s earning capacity which must be considered, taking into account the individual’s age,state of health, education, skills and employment history. In the circumstances of the respondent, in my view it would not beunreasonable to impute, at a minimum, one-half of the income that the respondent earned in 1995 and 1996, say $50,000. I note that therespondent’s present income, according to his own evidence, is approximately $42,500.00.” [21] Ms.

MacDonald argues that given his skills and employment history, Mr. MacDonald could have earned $67,300.00 per annum,which is what he earned in 2010. Mr. MacDonald says (and his employer confirmed) that he now works on salary earning $48,000.00per annum. [22] Dealing first with the reasons why Mr. MacDonald failed to disclose, I accept his evidence that he was off work for about 2months in 2013 with gallbladder problems. I also accept that he suffered heart problems, and now takes medication for hypertension andhigh cholesterol. However, there is no evidence that he was too sick to deal with this proceeding.

There is no valid excuse for his failureto file and exchange disclosure with Ms. MacDonald at some point in the past five years. [23] Next, I note that because there were no corporate returns tendered, I am unable to determine whether the income reported byMr. MacDonald for tax purposes between 2011 – 2013 is reasonable. I do not know the company income, expenses, salaries paid tonon-arms-length parties, retained earnings or taxes paid in those years. [24] I do know that Mr. MacDonald declared bankruptcy in 2013 at which time he owed personal taxes and remittances.

If hewasn’t paying those sums to the government, then it’s a reasonable inference that he used those monies himself. I am prepared to draw anegative inference and conclude that Mr. MacDonald had access to more income than reported in the tax returns tendered at trial. [25] Ms. MacDonald also argues that Mr. MacDonald’s income information is inconsistent with his lifestyle. She called evidencefrom her daughter’s boyfriend, who worked for Mr. MacDonald in the summer of 2012. Mr. Devison lived with Mr. MacDonald and hisgirlfriend in their Halifax condo. He observed a hobby car, a work truck and a Lexus at the home.

He also noted the presence of a hottub. [26] Mr. MacDonald denies that he enjoys a luxurious lifestyle. He said that his girlfriend holds title to the home and the Lexus, andthat his hobby car is only worth @$1,000.00. He acknowledges that he helped pay for the hot tub and owned a motorcycle, which he hassince sold. However, he also testified that he now drives a 2004 Canyon truck, and has not taken a trip outside of Canada for the pastsix years. [27] Mr. MacDonald says that his girlfriend kept the books for his company. He did not say what salary she was paid.

There is noevidence that his girlfriend worked elsewhere while his company was operational. It is reasonable to infer that the condo and other

assets were acquired by him, by his girlfriend with income paid to her by the company, or with his contribution. The fact that title is not held in Mr. MacDonald’s name does not detract from this conclusion. There are many reasons why title would be placed in another person’s name. [ 28 ] I accept Ms. MacDonald’s evidence and find that while the company was operational, Mr. MacDonald enjoyed a lifestyle which suggests more disposable income than reflected in his tax returns.

The fact that he had accumulated arrears for taxes and remittances by 2013, only two years after the company started, suggests that he drew money from the company for his own use that should have gone to these expenses. He also employed his girlfriend in the company, which means a second salary from the company was available to support this lifestyle. In all, the evidence satisfies me that there was more income in his household than his tax returns suggest. [ 29 ] There is no evidence that other employment opportunities are available to Mr. MacDonald, in particular those which pay more than $48,000.00.

There is no evidence that Mr. MacDonald worked for cash which was not reported to Revenue Canada. I decline to impute income on either basis. [ 30 ] After reviewing all of the evidence, and considering the case law and legislation, I find that Ms. MacDonald has proven on a balance of probabilities that imputation of income is appropriate in this case. I find it is appropriate to impute income to Mr. MacDonald in the years 2011 - 2013 in the amount of $33,590.00. This is what he earned while working in his field in 2014.

This figure better reflects what he could have earned, and likely did earn, after company benefits, income splitting and his experience and skills are taken into account. [ 31 ] I decline to impute income in subsequent years, and accept that his income as reported to Revenue Canada in 2014 and 2015 is his true income for purposes of support. Issue #2 - Should retroactive child support be ordered and, if so, in what amount? [ 32 ] I am satisfied that there has been a change in circumstances sufficient to justify variation of the child support award made in 2010. Mr.

MacDonald was unemployed when the parties were divorced, but he has had employment income since at least 2011. His child support was never adjusted to reflect an increased income. [ 33 ] In determining whether retroactive support is appropriate, I have considered the test set out by the Supreme Court of Canada in D.B.S. v. S.R.G. , 2006 SCC 37 , [2006] 2 S.C.R. 231. The CRO required Mr. MacDonald to advise Ms. MacDonald when he secured employment. He did not do so. This is blameworthy conduct under the D.B.S. test. [ 34 ] I am satisfied that the other factors enumerated in D.B.S. have been met. Ms.

MacDonald had no actual notice of Mr. MacDonald’s income. She filed her application in May, 2011. There was no delay on her part. I am satisfied that she would use any additional monies for the benefit of T.R.M., who remains living at home and works part time while saving for her education. [ 35 ] In the circumstances, I am prepared to exercise my discretion to grant retroactive child support based on Mr. MacDonald’s actual and/or imputed income from May, 2011 to June, 2015 when their daughter graduated from high school. [ 36 ] I calculate Mr.

MacDonald’s retroactive child support obligations as follows: Year Income Paid Owed Difference 2011 (8 m) $33,590.00 $1,616.00 $2,264.00 $648.00 2012 $33,590.00 $2,424.00 $3,396.00 $972.00 2013 $33,590.00 $2,424.00 $3,396.00 $972.00 2014 $33,590.00 $2,424.00 $3,396.00 $972.00 2015 (6 m) $50,045.00 $2,424.00 $2,520.00 $96.00 [ 37 ] In total, Mr. MacDonald owes retroactive child support of $3,660.00. He will repay the amount owing in monthly increments of $150.00 until the balance is paid in full. Issue #3 – Should Mr.

MacDonald be required to pay ongoing child support and, if so, in what amount? [ 38 ] I am not satisfied that T.R.M. continues to be a child of the marriage for purposes of ongoing child support. She graduated from high school in June, 2015 and then obtained employment. She lives at home while saving for her education, but at present she is not a student. Nor is there evidence that she is disabled or unable to withdraw from her mother’s care for other reasons. [ 39 ] Should T.R.M. become enrolled in post-secondary studies in future, she may be able to revive her dependant status.

However, I make no order for prospective child support at this time. Issue #4 – Should retroactive and/or prospective spousal support be ordered and, if so, in what amount? [ 40 ] Ms. MacDonald seeks retroactive spousal support based on an imputed income of at least $67,300.00. She suggests that Mr. MacDonald should pay this amount retroactive to May, 2011. Her claim for retroactive spousal support amounts to $93,500.00. [ 41 ] In response, Mr. MacDonald claims that, given his child support obligations, he was unable to pay spousal support after 2011.

He further says that because he was unable to pay spousal support, it doesn’t matter whether he made disclosure or not. That argument makes no sense. The CRO was clear. Mr. MacDonald did not comply. [ 42 ] In support of her claim for retroactive spousal support, Ms. MacDonald cites the Supreme Court of Canada decision in Kerr v. Baranow , 2011 SCC 10 at paragraph 201 where Justice Cromwell stated: While D.B.S. was concerned with child as opposed to spousal support, I agree with the Court of Appeal that similar considerations to

those set out in the context of child support are also relevant to deciding the suitability of a “retroactive” award of spousal support. Specifically, these factors are the needs of the recipient, the conduct of the payor, the reason for the delay in seeking support and any hardship the retroactive award may occasion on the payor spouse. However, in spousal support cases, these factors must be considered and weighed in light of the different legal principles and objectives that underpin spousal as compared with child support. [emphasis mine] [ 43 ] Neither party argued that Ms.

MacDonald must show a change of circumstances in order to have spousal support paid. Both counsel appear to recognize that the CRO contemplates that spousal support would become due and payable when Mr. MacDonald obtained employment. Even if a change of circumstances is necessary, I find the fact that Mr. MacDonald subsequently obtained employment is sufficient to merit a review of the spousal support payable under the CRO. [ 44 ] The Divorce Act s. 15 requires me to consider a number of factors in determining spousal support. It also requires the court at s. 15.2(6) to: (

a) Recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown. … (

b) Apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage; … (

c) Relieve any economic hardship of the spouses arising from the breakdown of the marriage; … (

d) In so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time; [ 45 ] Ms. MacDonald has suffered economic disadvantage from the breakdown of the marriage. Mr. MacDonald was the primary income earner during the marriage. Ms. MacDonald received no spousal support after the CRO was issued, yet she was providing primary care for the child, for whom inadequate child support was paid.

She had to resort to social assistance benefits initially, and now relies on CPP disability benefits. [ 46 ] There is insufficient evidence to determine if there are financial consequences arising from the care of the child, over and above the child support obligations payable by Mr. MacDonald. However, I do note that T.R.M. lives at home with her mother while saving for school, and child support is no longer payable. [ 47 ] Ms. MacDonald has suffered economic hardship, not only from the marriage breakdown, but also from her own health issues. She has limited income because of her disability.

There is insufficient evidence to determine whether her disability is connected to the marriage, but the CRO clearly contemplates both entitlement, and a significant monthly support payment. [ 48 ] An order for spousal support would not necessarily promote the economic self-sufficiency of Ms. MacDonald, but it would allow her to better meet her needs. There is no evidence that she can become self-sufficient through employment because she is currently on disability benefits. Although counsel for Mr.

MacDonald suggested that she should be working part time to generate some income, there is no evidence that she is cleared for, or able to pursue, remunerative work at this time. [ 49 ] Ms. MacDonald’s income is under $10,000.00. She was the primary caregiver of the dependent child. T.R.M. still lives at home with her mother. Support for her is no longer payable. Ms. MacDonald’s need is clear. [ 50 ] Mr. MacDonald has engaged in blameworthy conduct since the CRO was issued, by failing to disclose his income information. He knew that spousal support was suspended because he lost his job, and he knew that Ms.

MacDonald would seek spousal support once he started working again. [ 51 ] Ms. MacDonald did not delay in seeking support. She filed her application to vary on May 26, 2011. Any delays since she filed her variation application do not lie with her, but rather with Mr. MacDonald and the court. [ 52 ] Mr. MacDonald may suffer difficulty making ends meet if a lump sum retroactive spousal support award is issued, but the fault for that lies with him. He failed to make disclosure and he’s been on notice since 2011 that Ms. MacDonald is seeking support.

He should have planned for the possibility that he might be required to pay a retroactive award. Given his current income, he will not suffer hardship of the kind that would attract relief. [ 53 ] Ms. MacDonald has not reduced her claim for the tax implications of a lump sum payment versus periodic payments. Nor has she considered the impact of Mr. MacDonald’s child support obligations. I find her claim is excessive in all of the circumstances of this case. [ 54 ] At the same time, I reject Mr. MacDonald’s assertion that he was unable to pay spousal support after 2011.

The CRO clearly contemplates payment of support and it even sets a figure - $1,700.00 per month. If he had still been employed earning $67,300.00 at the time of the divorce, he would have been required to pay both child and spousal support based on that income. The suspension of support is clearly linked to his loss of employment. He was obliged to notify Ms. MacDonald when he became employed, and to estimate his income. He did neither. [ 55 ] I find Mr. MacDonald had the ability to pay spousal support, while also paying child support. The figure set in the CRO is

based on a higher income than I’ve imputed to Mr. MacDonald, and is therefore not appropriate. After reviewing the means, needs and circumstances of both parties, I conclude that a reasonable sum of periodic spousal support payable as of May, 2011 is $500.00 per month. After payment of child support, this sum brings the incomes of the parties more closely in line. [ 56 ] I decline to use the Spousal Support Advisory Guidelines in calculating support where the order sought to be varied was reached by consent, and there is no evidence that the SSAG was used to calculate the original payment. [ 57 ] Mr.

MacDonald will be required to pay spousal support retroactively between May, 2011 and June, 2015 (50 months). This is the same period during which the child of the marriage was still in high school, and during which child support is payable. The total of $25,000.00 is due and payable as a lump sum retroactive spousal support award. [ 58 ] In 2015 Mr. MacDonald earned $50,045.00. His child support obligation ends in June, 2015. So from July, 2015 prospectively, Mr. MacDonald will pay spousal support in the amount of $1,000.00 per month.

He did not ask the court to set a termination date for spousal support so I have not considered that question. CONCLUSION: [ 59 ] Income will be imputed to Mr. MacDonald, and retroactive child and spousal support is awarded. There will be no prospective child support payable after June, 2015 and spousal support shall be paid as outlined. [ 60 ] If counsel wish to be heard on costs, time may be arranged through scheduling. Counsel for Ms. MacDonald will prepare the order. MacLeod-Archer, J. SUPREME COURT OF Nova Scotia FAMILY DIVISION Citation: MacDonald v.

MacDonald , 2016 NSSC 290 Date: 2016-10-27 Docket: SFHD No. 1201-63088 Registry: Sydney Between: Janet Leigh MacDonald Applicant v. Frederick “Keith” MacDonald Respondent Judge: The Honourable Justice Lee Anne MacLeod-Archer Heard: August 11, 2016, in Sydney, Nova Scotia Written Release: October 27, 2016

Erratum Date: Counsel: November 9, 2016 Danielle MacSween for the Applicant Alan Stanwick for the Respondent Erratum: Paragraph 56 is changed as follows: I decline to use the Spousal Support Advisory Guidelines in calculating support where the order sought to be varied was reached by consent, and there is no evidence that the SSAG was used to calculate the original payment.