Ridley v. DeRose, 2017 ONCJ 877

CITATION: Ridley v. DeRose , 2017 ONCJ 877 DATE: December 15, 2017 COURT FILE No.: 138/01 ONTARIO COURT OF JUSTICE BETWEEN: (a) (

b) SHERRY MONIQUE RIDLEY (

c) Applicant (d) — AND — (e) (

f) STEFANO DEROSE (

g) Respondent Before Justice Barry M. Tobin Heard on: June 7, 8, 9, 12, 13, 14, 15, November 23, and December 7, 2017 [1] Released December 15, 2017 Cheryl Hodgkin……………………………………………Counsel for the Applicant Richard Gordner (Counsel acting under a limited scope retainer)…for the Respondent TOBIN J. REASONS FOR JUDGMENT 1: Introduction [ 1 ] The parties entered into a Separation Agreement intending that it resolve issues arising from their cohabitation and subsequent separation. It has not entirely fulfilled that purpose.

In this case, the parties raised issues about their respective obligations and entitlements under the Separation Agreement, as well as the validity of the spousal support provisions contained within it. 2: Overview of facts [ 2 ] The following is a brief outline of the facts relating to the relationship of the parties beginning 1994. Greater detail regarding relevant facts will be set out in relation to the issues raised. [ 3 ] The Applicant and Respondent met sometime in 1994. [ 4 ] By October 1994, [2] the Applicant and Respondent began cohabiting.

The Applicant’s son from a prior relationship, Joshua Jerome Ridley, born May 17, 1991 (“Joshua”) also lived with them. [ 5 ] They briefly separated in 1997 for approximately four months. [ 6 ] While they cohabited the parties had two children together, Adrian Stefano DeRose, born October 26, 1998 (“Adrian”), and Luca Marco DeRose, born March 9, 2000 (“Luca”). [ 7 ] The Applicant did not work outside of the home while the parties cohabited. She was a homemaker. The Respondent provided financially for their family.

He did so from compensation he received each month from an annuity derived from a structured settlement awarded in a personal injury case. He was also involved in some construction enterprises. [ 8 ] The Applicant assisted the Respondent in the administration of his business by paying some bills for concrete and lumber. She also did some ordering of supplies and on occasion dealt with his trade creditors. [ 9 ] According to the Separation Agreement, the parties started to live separate and apart, though under the same roof, on September 15, 2000.

They remained in their home until February 2001 when it was sold and they then started to reside in separate residences.

[ 10 ] The Separation Agreement entered into by the parties was signed by them on October 17, 2000. It was prepared by a lawyer retained by the Applicant, and dealt with all matters arising from their cohabitation and separation. [ 11 ] The Respondent did not retain a lawyer. He signed an Acknowledgment and Confirmation as part of the Separation Agreement to the effect that he read and understood its terms and that he refused to obtain independent legal advice before signing it despite the recommendation of the Applicant’s lawyer that he do so. [ 12 ] With respect to custody, child support and spousal support, the parties agreed within the Separation Agreement that:

a) The Applicant would have custody of the children;

b) The Respondent would pay the Applicant $2,500.00 per month for child support. This was based upon him having an annuity payment of $12,407.71 per month which payment was not taxable in his hands;

c) The amount of child support was to increase every third year, beginning February 1, 2002 “and continuing until the youngest child attained the age of 18 years”. The amount of the increase in child support was to equal “one half of the increase in the monthly payments to the [Respondent]”;

d) The Respondent would pay to the Applicant as spousal support $700.00 per month until she remarried or died. Once the Respondent’s child support obligation ended, spousal support would increase to $2,000.00 per month until the Applicant remarried or died; and

e) The provisions concerning custody, access, child support and spousal support could be varied in the event of a material change in circumstances. A process for considering a variation request was also provided for in the Separation Agreement. [ 13 ] In accordance with the terms of the Separation Agreement, the children resided with the Applicant following their physical separation in February 2001 and the Respondent paid to the Applicant child support of $2,500.00 per month and spousal support of $700.00 per month. [ 14 ] In 2004, just before his 13 th birthday, Joshua moved from the Applicant’s home.

Notwithstanding this move, the parties orally agreed that the Respondent would continue to pay the Applicant child support of $2,500.00 per month. [ 15 ] Even though the parties entered into a Separation Agreement as described above, they maintained a relationship that the Applicant described as being an “on again off again” one, though they did not resume cohabitation. This relationship was a tumultuous one. The Applicant twice filed the Separation Agreement with the Clerk of this Court for enforcement by the Family Responsibility Office.

Both times she withdrew from the Family Responsibility Office because of the Respondent’s threats. In 2004 he pleaded guilty to a criminal charge arising from an incident of domestic violence between them. The Applicant applied for peace bonds against the Respondent in 2008, 2010 and 2011. [ 16 ] The Applicant started this court case by Application issued July 7, 2011 in the Superior Court of Justice. In it she sought:

a) Compliance with paragraph 14(c) [3] of the Separation Agreement, dated October 16, 2000;

b) Payment of the child support owing under the said agreement; and

c) Child support for Adrian and Luca. [4] [ 17 ] The Respondent delivered an Answer and Claim by Respondent whereby he sought custody of Adrian and Luca and an order setting aside the support provisions of the Separation Agreement. [5] [ 18 ] This case was traversed from the Superior Court of Justice to the Ontario Court of Justice pursuant to the Order of Justice George King of the Superior Court of Justice, dated October 9, 2015. [6] The matter was before Justice King on the Respondent’s motion to dismiss the Applicant’s claims regarding enforcement of the Separation Agreement on the basis that the Superior Court lacked jurisdiction to do so.

Justice King agreed with the Respondent based on the following:

a) The Separation Agreement that is at the centre of this case was filed with the Ontario Court of Justice on March 5, 2002. Subsection 35(1) of the Family Law Act provides that once properly filed, a Separation Agreement can be enforced or varied as if it were an order of the court where it is filed; and

b) Once filed in the Ontario Court of Justice, it is not subject to “review, revision or amendment by the other court.” [ 19 ] The case proceeded to trial in this court once the parties were ready to do so. [ 20 ] Both Adrian and Luca continue to reside with the Applicant and both are currently enrolled in school. 3: Issue #1: Is Adrian entitled to child support from the Respondent? [ 21 ] Adrian is now 18 years old. This makes him an adult for the purpose of considering his entitlement to child support. [ 22 ]

Section 31 of the Family Law Act (the “ FLA” ) provides that an adult child is entitled to child support if enrolled in a full-time program of education. 3.1 Facts [ 23 ] Adrian completed high school in June 2016. He was then 17 years old. [ 24 ] Beginning in September 2016 he was enrolled on a full-time basis in the Electrical Techniques course at St. Clair College. He was interested in this course because he was aware there were jobs in this field. He found the program very difficult and consequently

stressful. While enrolled in this program he sought medical attention for stress because it brought out in him symptoms of depression and anxiety. [ 25 ] Despite attending classes regularly, Adrian did not pass the fall 2016 semester. He tried again the next term beginning in January 2017. When he testified at the trial he had not yet received his marks for the January 2017 term but feared that he had been unsuccessful again in this program. [ 26 ] Acknowledging that he did not have an aptitude for the electrical program, he applied and was accepted to the full-time Culinary Management program at St.

Clair College beginning in September 2017. Adrian is enthusiastic and confident about completing this program. He has enjoyed and has had an interest in cooking for some time. His goals are to become a Red Seal chef and one day own his own restaurant. 3.2 Position of the Parties [ 27 ] The Respondent argues that Adrian is not entitled to ongoing support because:

a) he was not diligent in trying to complete his first and second semesters of post-secondary education;

b) anxiety and depression as an excuse for his scholastic failure was not proved. There were no medical reports submitted in evidence; and

c) there is nothing to suggest that he will be any more successful in this new program. [ 28 ] The Applicant submits that Adrian experienced a misstep in his first year of college. His failure was not due to irresponsible behaviour. 3.3 Legal Considerations [ 29 ] The onus of demonstrating eligibility for child support rests with the party seeking it: Aubert v.

Cipriani , 2015 ONSC 6103 (para. 24 ). [ 30 ] The purpose of child support for an adult child under the Act is to ensure ongoing assistance to children who are pursuing an educational program and remain dependent on their parents while they complete their education. Aubert v. Cipriani , supra (para. 23 ). [ 31 ] Where the claim for support relates to an adult child there must be tangible evidence of a child’s enrollment, attendance and participation in a full-time program of education.

In order to remain eligible for support the child’s participation must be meaningful from a quantitative and qualitative standpoint: Vohra v. Vohra , 2009 ONCJ 135 , referred to in Aubert v. Cipriani , supra , (para. 24 ). 3.4 Application of Legal Principles [ 32 ] I am satisfied that Adrian remains entitled to child support from the Respondent. [ 33 ] Adrian started his post-secondary education immediately after completing high school. He was then 17 years of age. The course he chose was one he expected would lead to employment. He enrolled on a full-time basis.

I accept Adrian’s evidence that he attended his classes. His inability to achieve success caused him stress which caused him to seek medical attention for symptoms of anxiety and depression. Despite experiencing these symptoms, he persisted in his attempts to complete this course during the first and second semesters. [ 34 ] Adrian enrolled in the Electrical Techniques program for a legitimate purpose – to obtain a skill that would lead to employment and independence – and I accept his evidence that he made a genuine effort to succeed. He did so despite the stress it caused him.

I did not understand Adrian’s evidence to be that symptoms of anxiety and depression caused his scholastic failure. I accept that Adrian’s lack of aptitude was the reason he was not successful and which brought on the stress.

A medical report would not have been of assistance to the Court in coming to this conclusion. [ 35 ] At 18 years of age, Adrian should not become disentitled to support because he genuinely tried and failed in a program. [ 36 ] Adrian is enrolled again on a full-time basis in a program that has the potential to allow him to become independent, and of more importance to this young man, to pursue a career about which he is passionate. 4: Issue #2: What is the Respondent’s income for child support purposes? [ 37 ] Having found that Adrian remains a dependant for child support purposes [7] , the next step is to determine the Respondent’s annual income in accordance with the provisions of the Child Support Guidelines (Ontario) (“the Guidelines ”). [ 38 ] The parties identified the following issues in connection with the determination of the Respondent’s income:

a) is the money the Respondent receives from a structured settlement, income for support purposes?;

b) if the structured settlement funds are to be considered for support purposes, should they be grossed-up because they are received by the Respondent on a tax-free basis?; and

c) should income be imputed to the Respondent based upon unreported income or interest income that the Respondent could earn on structured settlement funds? 4.1 The Structured Settlement [ 39 ] Is the money or any part of it, received by the Respondent, from a structured settlement annuity payment, income for child support purposes?

4.1.1 Position of the parties [ 40 ] The Applicant argues that the money received by the Respondent from the structured settlement annuity should be considered as income for child support purposes based on the decision of the Ontario Court of Appeal in Hunks v. Hunks , 2017 ONCA 247 . This case held that structured settlement annuity payments were income for spousal support purposes. [ 41 ] The Respondent’s position is that money received from the structured settlement annuity related to pain and suffering or future care costs is not income for child support purposes.

The evidence in this case is that at most 10 percent of the settlement proceeds were attributable to a loss of future wages. The Respondent argues that Hunks is distinguishable because the structured settlement annuity payments in that case were attributable to damages for future wage loss.

He further argues that the structured settlement annuity payments reflect a capital fund (as opposed to property) that should not be considered for child support purposes. 4.1.2 Facts The injuries sustained by the Respondent [ 42 ] When the Respondent was eight years old he was seriously injured as a result of the explosion of a gasoline container. The explosion caused 60 to 65 percent of his body to be covered in third degree burns. This means that his skin was damaged almost to the layer of his nerves. The areas of his body that were injured included from his knees to his feet and from his waist to his head.

At the time of the explosion the only clothing he was wearing was short pants. [ 43 ] The Respondent spent nine or ten months in the hospital and had many surgeries. He received treatments until he was approximately 16 ½ years old. Some of these treatments took place in the United States. From the time he was 11 years old until he was 16 ½ years old, he would be taken from time to time to Cincinnati, Ohio for skin grafts and reconstruction. [ 44 ] His physical injuries are significant and permanent. He has hearing loss of 60 percent in his right ear.

His entire face is disfigured because of the third degree burns and scarring. His arms and hands are also scarred. On his right hand he has three one-half digits. On his left hand he has two one-half digits. [ 45 ] The scar tissue is subject to contractures. This means a tightening occurs. The Respondent testified that sometime in the future he may have an operation to loosen up the contractures in his neck. No further evidence than that was provided about anticipated medical treatment. He also has to watch his waistline. The problem is the skin above the waist does not stretch.

When his waist expands it pulls on the scar tissue and this is very painful. [ 46 ] The Respondent can lift his right arm only to his head level because beyond that it pulls the scar tissue down to his waist. The Respondent also described that because his skin was covered in third degree burns, he has lost the pores that healthy skin use to breathe. This causes him to sweat profusely. As well, he must stay out of the sun because if he does not, his skin will crack.

The personal injury lawsuit [ 47 ] As a result of the injuries sustained by the Respondent, his parents retained Martin Wunder Q.C., a well-respected and experienced personal injury lawyer to represent them and their son. [ 48 ] Mr. Wunder died on January 13, 2015. [ 49 ] The Court heard evidence about the structured settlement from Theresa Wunder. She was Mr. Wunder’s spouse and legal assistant. She worked with him on the case pertaining to the Respondent. She assisted in document preparation and meetings with the Respondent and his parents. The file was in Mr. Wunder’s office for about six to eight years.

She described the case as the most important they had at the time due to the severity of the Respondent’s injuries. The case presented complicated issues related to liability and damages. From her evidence, it is clear that both Mr. Wunder and Ms. Wunder cared a great deal for the Respondent while he was a client of Mr. Wunder’s and that she continues to be most supportive of him. Settlement of the personal injury litigation [ 50 ] On March 15, 1982, an infant settlement was approved by Justice Haines of the Supreme Court of Ontario.

The substantial portion of the settlement approved by the Court was for the purchase of a non-assignable, non-commutable annuity issued by the Manufacturer’s Life Insurance Company. This appears to have been arranged by McKellar Structured Settlement Inc. [ 51 ] Ms. Wunder testified that the money award was based upon the Respondent’s pain and suffering as well as the then current and future needs for treatments and assisted devices.

At the time the settlement was approved it was expected that the Respondent would need extensive medical and psychological future care, along with assistive devices and medical costs not covered by government insurance. [ 52 ] In her evidence in-chief, Ms. Wunder did not allow that the global settlement provided for a claim for future wage loss.

She stated that her “recollection is that no part of his damage award, including the portion that was structured, was related to any future wage loss claim.” [8] At best, she testified, as part of the global settlement there may have been a small award respecting the compromise of the Respondent’s competitive position in the labour market. [ 53 ] With respect, I find that this is speculative on the part of Ms. Wunder. [ 54 ] Ms.

Wunder, as involved as she was in her late husband’s practice and this case, cannot reliably say how the settlement was arrived at by the parties. [ 55 ] This case was settled 35 years ago. While Ms. Wunder continued to work in her late husband’s practice until his death two years ago, she did not have available to her for review any contemporaneously made notes or other file contents, except for the final order granted on the infant settlement. [ 56 ] She was not part of the settlement discussions that Mr. Wunder engaged in with other counsel.

[57] Counsel for the Applicant submits that the concept of future wage loss claims for young children was not unknown at the timethe Respondent’s personal injury case was resolved. Counsel for the Applicant points out that the same Mr. Wunder was counsel on theleading case of Teno v. Arnold, (SCC), [1978] 2 S.C.R. 287. In that case, the infant plaintiff, a four-year-old, crossed thestreet with her brother to make a purchase from an ice-cream vending truck. She was hit by a car after being served and suffered catastrophicinjuries.

The Supreme Court of Canada had to address the basis upon which an award of damages could be made to cover the income “theinfant plaintiff would have earned had she grown…and joined the workforce.” (See para. 96). [58] As difficult as it was to make the assessment, the Court held it must make an award for this head of damages. (See paras. 98,99 and 101). [59] All of this is to say that Mr. Wunder was part of a group of lawyers who were instrumental in having the Supreme Court ofCanada address this issue of an award of damages for future wage loss for a young child. [60] It is not speculative to find that Mr.

Wunder would have been keenly aware that future wage loss was a significant and availablehead of damages to the claim being made on behalf of the Respondent. [61] I find that it is not possible to determine the breakdown of the settlement achieved by the Respondent in the personal injuryaction. It was a global settlement. While I accept Ms. Wunder was an honest witness, I do not accept as reliable her evidence that at best 10percent of the damage award related to loss of competitive position in the labour market. [62] It is not possible to apportion the global damages to any particular head of damages.

The Order of Justice Haines does notinclude a breakdown of the heads of damages that comprise the settlement reached. [63] Ms. Wunder conceded in cross-examination that she had no idea what the defendants in the lawsuit considered when reaching asettlement. It was also her evidence that she was not part of the negotiations that resulted in the settlement being reached. Ms. Wundertestified without the benefit of reviewing Mr. Wunder’s file pertaining to the Respondent. She did not know where it was located. [64] Ms. Wunder was not able to recall the amount of money used to fund the structured settlement.

The monies received from the structured settlement [65] From the structured settlement, the Respondent receives a monthly payment that is not subject to income taxes. [66] Since July 2011, the month the application that is before the case was started, the Respondent has received structuredsettlement annuity payments as follows: Year Amount per month From February 2011 $17,175.18 From February 2012 $17,690.44 From February 2013 $18,221.15 From February 2014 $18,767.78 From February 2015 $19,330.81 From February 2016 $19,910.73 From February 2017 $20,508.05 How the structured settlement annuity funds are used [67] The Respondent did not provide evidence he needs day-to-day care for his injuries.

He did not identify any past or anticipatedcare expenditures since he started to receive the structured settlement annuity payments at age 18. The Respondent did not provide evidenceof past or expected significant medical or assistive device costs except for a possible operation to loosen the contractures in his neck. [68] The Respondent has and continues to use the structured settlement annuity income to pay his ongoing living expenses. He liveson the structured settlement annuity income. [69] In his financial statement sworn May 1, 2017 (Exhibit 28), the Respondent states that he has been unemployed since 2013.

Heclaims monthly expenses of $20,319.00. He does not include the annuity payment in the income part of his financial statement. Instead, helists as an asset the annuity payment of $20,506.00 per month for 2017. These are the funds he uses to meet his and his family’s ongoingexpenses. 4.1.3 Hunks v.

Hunks, 2017 ONCA 247 [70] As the Applicant relies upon Hunks in support of the proposition that the structured settlement annuity payment is income forsupport purposes and Respondent seeks to distinguish Hunks from the case at bar, a close examination of that decision is required. [71] In Hunks, the Ontario Court of Appeal dealt with the following issue: “… are the [structured settlement] annuity payments to be treated as property or income under the Family Law Act…?” (para. 3). [72] The Appellant in Hunks was seriously injured while shopping in a supermarket. The ensuing personal injury litigation was

resolved by way of minutes of settlement that provided that the appellant would receive $571,383.00. The minutes specifically provided that she was at liberty to use some or all of the settlement monies to purchase a structured settlement. Evidence was provided which set out the various heads of damages and the amounts attributable to each. Out of the total settlement funds, the sum of $302,100.00 was attributed to future income loss. The Appellant purchased the structured settlement annuity with $302,306.00 from the settlement funds.

The structured settlement was non-commutable, non-assignable and non-transferable. It provided monthly payments for the duration of the Appellant’s life and a minimum guarantee of 25 years. It also provided that she would receive four equal lump sum payments. [ 73 ] Sometime after the structured settlement annuity was acquired the Appellant and the Respondent in that case, who were married, separated. In proceedings arising due to the separation the Court was called upon to decide if the structured settlement annuity was property or income within the meaning of the FLA .

If income, the payments were to be taken into account when determining spousal support. If property, the Court would need to determine the extent to which it would be considered as excluded property under ss. 4(2)3 of the FLA. [ 74 ] The Court overturned the trial judge’s decision and held that the structured settlement annuity payments should be considered as income for the purposes of spousal support, and not property under

Part I of the Act . It did so because: (1) the structured settlement annuity arose from a structured settlement; and (2) the structured settlement annuity is analogous to disability benefits and not a pension. [ 75 ] The Court explained that a structured settlement is created when some or all of a personal injury settlement is deposited with a life insurance company in exchange for guaranteed tax-free payments for a specific number of years, or for the recipient’s lifetime. The Canada Revenue Agency does not view payments from a structured settlement as income in the hands of the recipient (para. 51).

It is the casualty insurer that owns and is the beneficiary under the annuity contract and reports as income the interest element inherent in the annuity contract while the payments received by the claimant represent non-taxable payments for damages (para. 53).

While the Appellant received payments from the structured settlement annuity, she did not own it nor did she have constructive receipt of the settlement monies used to create it (para. 55). [ 76 ] The Court also held that the structured settlement annuity is more analogous to disability benefits than to a pension (para. 57). [ 77 ] The Respondent argues that Hunks can be distinguished from the case at bar.

In Hunks , according to the Respondent, the Court decided that the structured settlement annuity was income and not property because the funds used to purchase it were attributable to the future income loss head of damages. [ 78 ] With respect, I disagree with the Respondent that Hunks stands for the proposition that to be considered income, the structured settlement annuity had to be purchased with damages arising from loss of future income for these reasons: (a) (

i) The characterization of the funds used to purchase the structured settlement annuity as damage for future wage loss was not a factor in the Hunks decision. (ii) The parties in Hunks disagreed about the source of the structured settlement annuity. (iii) Counsel for the Respondent in Hunks submitted that it was reasonable to infer on the balance of probabilities that the annuity was purchased with the amount of funds attributable to the future wage loss claim (paras. 20 and 48). The Respondent in the case at bar urges this Court to find that this was an essential element in the Court in Hunks finding as it did.

However, in Hunks , the Appellant’s position was that the annuity was not purchased with any specific head of damages funds (para. 20). This factual dispute was not resolved by the trial judge. (iv) The Court held that the parties had agreed on the facts necessary to decide the legal issue – income or property – even though there was no finding of fact as to the source of the funds used to purchase the annuity (para. 35). (

v) In essence, the source of the funds was not an essential element of the determination of the legal issue. (

b) At para. 28 of the Hunks decision where the issues to be decided were set out, the Court simply addressed whether structured settlement annuity payments were property or income. It did not identify the source of the funds as a necessary consideration in determining the issue. (

c) Also at para 49. the Court states that it concluded the structured settlement annuity payment were income for two reasons: i. The structured settlement annuity arises from a structured settlement; and ii. The structured settlement annuity is analogous to disability benefits and not a pension. Again, the Court did not identify the source of funds as being a consideration. (d) (

i) The decision of Hunks was considered by the Divisional Court in Phelps v. Childs , 2017 ONSC 1443 (Ont. Div. Ct.). Counsel did not refer to this case in their written submissions. They were asked to do so and appeared on November 23, 2017 to make further submissions. The Respondent argued that Hunks and Phelps were distinguishable because the funds used in both cases to purchase an annuity came from damages for future wage loss. He based this upon the Court in both cases likening the structured settlement annuity payments as an income stream to replace what was lost due to their personal injuries.

He also argued that the settlement funds used to purchase the structured settlement annuity was capital and not property. With respect, I do not agree with these submissions. (ii) In Phelps , the Court observed that in that case, the evidence did not establish that the structured settlement annuity was purchased with funds paid as damages for the costs of future care (para. 36). Further, it could not be inferred that the funds used to purchase the structured settlement annuity were for future care. Virtually, all of the income received was treated as family income.

This is the same circumstances in the case at bar. (iii) The Court in Phelps also interpreted Hunks to provide that “…the source of the funds used to purchase the annuity is irrelevant on the issue of … whether the annuity is income or property” (at para. 39).

(iv) In other words, the Court of Appeal’s analysis was based on the instrument used to provide the Appellant with a stream ofincome to replace what she lost, not what part of the settlement was used to pay for it. [79] The structured settlement annuity in this case is not distinguishable from those in issue in either Hunks or Phelps. [80] As a matter of law, Hunks held that payments received from a structured settlement annuity are income and not property underthe FLA (Phelps, para. 34). [81] I also disagree with counsel for the Respondent that there is any merit in trying to distinguish a capital fund from property.

Iunderstand counsel to argue that even if the structured settlement annuity is not property, under the authority of Hunks, it should beconsidered as capital. I do not see a difference. No cases to support this distinction were provided. [82] For these reasons, I find that the structured settlement annuity payments received by the Respondent are income for supportpurposes under the FLA. [83] In Hunks, the Court found that the structured settlement annuity payments were income in the context of a spousal supportclaim.

In this case, the Applicant seeks both spousal support and child support based upon the Respondent’s structured settlement annuity. [84] I find that the structured settlement annuity payments received by the Respondent are income for child support purposes aswell. See Rilli v. Rilli, (ON SC), 2006 O.J. No. 4142 SCJ at para. 16. 4.2 Imputing income in the alternative [85] However, if I am wrong in my

interpretation of Hunks, I would impute income to the Respondent pursuant to s. 19 of theGuidelines having regard to the monthly payment he receives for the reasons set out below. 4.2.1 Legal Considerations [86] The Guidelines at sections 15 to 19 provide the methodology for determining a parent’s annual income for child supportpurposes. [87] As the structured settlement annuity is not taxable, it is not included in the calculation of the Respondent’s “total income”, thatis, in line 150 of his T1 tax return (Guidelines s. 16).

However, ss. 19(1) of the Guidelines provide that a court may impute such amount ofincome to a parent as it considers appropriate in the circumstances, which circumstances include those enumerated. The receipt of incomefrom a structured settlement annuity is not set out in the circumstances listed. However, the circumstances listed in ss. 19(1) are notexhaustive. The Court can impute income in appropriate circumstances bearing in mind the objectives of the Guidelines: see Bak v.

Dobell,2007 ONCA 304. 4.2.2 Application of Legal Considerations [88] In this case, I find it would be appropriate to impute income, or rather attribute the structured settlement annuity payments to theRespondent as income because:

a) the payments are received in predictable amounts, recurring on a monthly basis and are non-assignable;

b) the structured settlement annuity payments fund all of the Respondent’s expenses and his financial obligations. His financial statementdiscloses that this is the case. He also acknowledged this in his oral evidence. One of his most important financial obligations is to providefor his children to the extent he is capable of doing so: see FLA, ss. 31(1); and

c) according to Hunks, the structured settlement annuity payments are income for spousal support purposes. Courts generally treat incomefor spousal support purposes the same as income for child support purposes: see Rilli v. Rilli, 2006 O.J. No. 2142 SCJ, para. 14. 4.3 Gross-up for taxes 4.3.1 Position of the Parties [89] The Applicant asks that the amount of the structured settlement annuity payments be grossed-up to take into account the factthat there is no tax payable upon them by the Respondent. [90] The Respondent argues that there should be no or in the alternative, limited gross-up because:

a) the parties agreed in the Separation Agreement that support would be based on the actual payment;

b) there are special provisions in the Separation Agreement that would allow the Court, pursuant to FLA ss. 37(2.3), to make an orderother than in accordance with the Guidelines; and

c) if the gross-up to taxes is found to be appropriate it should apportioned only to 10% of the structured settlement annuity payment asthis is the amount he argues was at most attributable to wage loss. 4.3.2 Additional Facts [91] The Separation Agreement also addressed property issues. Title to the jointly-owned family residence was transferred to theApplicant. Debts were also dealt with by apportioning responsibility for specific debts between the parties. 4.3.3 Legal Considerations: Gross-up [92] The Guidelines permit a court to impute income to a support payor in circumstances where that person has a lower income tax

obligation than is usual. (See Guidelines cls. 19(1)(b)(

c) and (h)). The usual or prototypical support payor is one who derives income that istaxable, such as from wages, investments or rental income.

Section 19 allows the Court to impute income to those payors who do not fit thisprototype: See Rivard v.

Hankiewicz, 2007 ONCJ 180 (para. 26). [93] One of the objectives of the Guidelines is to “ensure consistent treatment of spouses and children who are in similarcircumstances.” (See Guidelines ss. 1(d)). [94] The Guidelines provide that parental responsibility for child support is based upon before tax income: (see Guidelines s. 16). [95] Grossing-up the income of support payors with a lower than usual tax obligation ensures consistent treatment of spouses andchildren who are in similar circumstances. 4.3.4 Legal Considerations: Special Provisions [96] Subsection 37(2.2) requires the Court to make any child support variation order in accordance with the Guidelines.

However, ifthe agreement contains special provisions, the Court can make an order not in accordance with the Guidelines. The special provisions mustbenefit the child such that the application of the Guidelines would produce an inequitable result (ss. 37 (2.3)). [97] The case of Wright v. Zaver (ON CA), [2002] O.J. No. 1098 (Ont. C.A.) addressed ss. 37(2.3) and providesthat:

a) The term “special provisions” is not to be read restrictively or limited to “out of the ordinary or unusual” provisions, so long as theprovisions replace in whole or part the need for child support in accordance with the Guidelines;

b) The special provisions must benefit the children; and

c) The special provision must lead to a result that the application of the Guidelines would produce an amount of support that would beinequitable – that is the equities between the parties would be out of balance – given the special provisions. 4.3.5 Application of Legal Principles [98] I do not agree with the Respondent that within the Separation Agreement the parties agreed to calculate child supportindefinitely on the actual account of the structured settlement annuity payment. The Respondent’s proposed

interpretation of the agreementdoes not necessarily follow when the entirety of the child support provisions are considered. [99] What is clear in the Separation Agreement is that:

a) The parties agreed to an amount of child support; and

b) They acknowledged the amount of the structured settlement annuity payment at the time and that it was a tax-free amount. [100] What is not clear from the Separation Agreement is the relationship between:

a) the amount of child support agreed to;

b) the structured settlement annuity payment; and

c) the Guidelines. [101] The parties did not expressly, nor do I find impliedly agree to a regime of child support only in accordance with the actual amountof the structured settlement annuity payment. Had they wished to do so they could have clearly included this in the Separation Agreement. [102] The parties recognized within the Separation Agreement that the structured settlement annuity payment was received on a tax-freebasis and did so presumably as this was a benefit to the Respondent.

They did not articulate how or if the benefit factored into the amount ofchild support the Respondent was to pay then and into the future. [103] It is for these reasons that I do not accede to the Respondent’s

interpretation of the agreement in this regard, nor do I find the s.15(2) of the Guidelines is engaged.[9] [104] I also respectfully disagree with the Respondent’s submission that there are special provisions within the agreement. [105] The Separation Agreement does not contain any wording to the effect that the property, child support or spousal supportprovisions whether looked at individually or collectively amount to or were expected to be special provisions as contemplated under FLA ss.37(2.3).

An explicit reference is not a necessary feature of a special provision on its own, but is one factor to be considered. [106] At most, the amount transferred was $9,000.00 and debt assumed was also $9,000.00.

The Respondent has not demonstrated howthe transfer of his equity in the family residence in conjunction with the apportionment of debt benefited the children, directly or indirectly. [107] Further, the Respondent has not demonstrated that grossing-up the Respondent’s structured settlement annuity payment for thecalculation of child support would put the equities of the parties out of balance. [108] The Respondent argues in the alternative that at best ten percent of the structured settlement annuity is attributable to wage loss,so the gross-up should only be on that amount.

For reasons set out earlier in this decision, I find that the entirety of the structured settlementannuity is to be treated as income for the purpose of calculating support. [109] The structured settlement annuity is used to meet all of the Respondent’s expenses and financial obligations. He has married anduses these funds to support his spouse and her three children.

[110] There is no amount out of these funds that is being used or is expected[10] to be used at this time for significant medical or otherexpenses arising from the Respondent’s injuries. [111] Grossing-up all of the Respondent’s structured settlement annuity income will put him in the same position as those supportpayors who receive income that is taxable and use it to meet their ongoing expenses.

This will allow for the Respondent’s children to receivesupport in a manner that is consistent with other children who are in similar circumstances. [112] I find that all of the funds received by the Respondent from his structured settlement annuity ought to be grossed-up to reflect theirtax-free receipt, not just ten percent of them. 4.4 Unreported or undisclosed income [113] The Applicant submits that income should be imputed to the Respondent on account of unreported earnings. She also sought toimpute income on interest the Respondent could earn on his structured settlement annuity payment.

In her written submissions, theApplicant stated that she would not pursue this claim if the Court found that grossed up structured settlement annuity payments were treatedas income for support purposes. Having found that they are, I make no order that the Respondent have income imputed to him on the basisof unreported income. Regardless of the Applicant’s conditional concession, I would not have made such an order. [114] I accept the Respondent’s evidence that he has not had unreported income to such an extent that income on this basis should beimputed to him.

In the past he had one significant business venture, building homes, and in the end it was not successful. The Applicantgave evidence that she was contacted on occasion by people looking for the Respondent to collect money owed to them arising from thisbusiness venture. [115] The Respondent has also undertaken small and infrequent concrete installation jobs. I find that he did attend at some jobsites. However, I also accept his evidence that he was not physically able to do all of the work so he had help, often from relatives.

The Applicantput in evidence photographs of the Respondent sitting in construction equipment. I accept his evidence that in these photographs he wasposing. He did not appear to be actively engaged in the operation of the equipment when photographed. [116] I also take into account that in his income tax filings the Respondent did include business income in some years. [117] I also accept that because of his physical limitations the Respondent did not work as an excavator operator on the Parkwayproject. I find that Dr.

Lee misinterpreted his statements to her in this regard. [118] Finally, I accept the Respondent’s submissions that any additional income he has received was nominal and that it is notappropriate on the evidentiary record before the Court to impute income to him on this basis. [119] I would not impute income on the basis of income that could be earned on the structured settlement annuity payment. These fundsare used to a significant extent to meet the Respondent’s ongoing expenses. 5: Issue #3 – What should be the start date for prospective child support? [120] In Mackinnon v.

MacKinnon (2005), (ON CA), 75 O.R. (3d) 175 (Ont. C.A.), the Court held that a supportclaimant is presumptively entitled to prospective support from the date that notice was given that a support claim was being pursued. I findthat there is no reason in this case to depart from the presumptive entitlement. In this case, the Application was issued July 7, 2011. It wasserved upon the Respondent on July 12, 2011.[11] Included in this Application is a claim for child support.

Neither party blamed the otherfor inordinate delay while this case was before the Superior Court of Justice. [121] The start date for prospective child support shall be August 1, 2011 being the first day of the month next following the issuanceand service of the Application. 6: Issue #4 – What has the Respondent’s grossed-up income been since August 1, 2011? [122] For the reasons set out above, I find that the Respondent’s income for child support purposes is the amount grossed-up for taxes ofhis structured settlement annuity payments.

The Applicant used DivorceMate to calculate the gross-up.[12] These calculations were notdisputed by the Respondent.

Accordingly, I find that the Respondent’s annual income for the calculation of prospective child support hasbeen as follows: August 1, 2011 to January 31, 2012 $349,186.00 February 1, 2012 to January 31, 2013 $359,603.00 February 1, 2013 to January 31, 2014 $370,760.00 February 1, 2014 to January 31, 2015 $394,834.00 February 1, 2015 to January 31, 2016 $423,237.00 February 1, 2016 to January 31, 2017 $438,213.00 February 1, 2017 and ongoing $452,662.00 7: Issue #5 – What amount of child support should be ordered where the Respondent’s income is over $150,000.00 per year? [123] The next issue raised by the parties is whether the Table amount of child support the Respondent is to pay should be adjusted ifhis income is determined to be over $150,000.00 per year. 7.1 Statutory Provisions

[124]

Section 4 of the Guidelines provides that where a payor’s income is over $150,000.00 the amount of child support can be otherthan the Table amount if that amount would be inappropriate. [125]

Section 4 provides as follows: Incomes over $150,000 4 Where the income of the spouse against whom a child support order is sought is over $150,000, the amount of a child support order is (

a) the amount determined under

section 3; or (

b) if the court considers that amount to be inappropriate, (

i) in respect of the first $150,000 of the spouse’s income, the amount set out in the applicable table for the number of children under the ageof majority to whom the order relates; (ii) in respect of the balance of the spouse’s income, the amount that the court considers appropriate, having regard to the condition, means,needs and other circumstances of the children who are entitled to support and the financial ability of each spouse to contribute to the supportof the children; and (iii) the amount, if any, determined under

section 7. 7.2 Position of the Parties [126] The Respondent argues that the Table amount of child support is inappropriate because it exceeds the Applicant’s expenses forthe children.[13] [127] The Respondent further argues that the Applicant should have provided a childcare expense budget but did not. Counsel for theRespondent cross-examined the Applicant at the trial on her most current financial statement. On the basis of that financial statement and thecross-examination, the Respondent submits that the expenses related to the children, Adrian and Luca, total $1,986.65 per month.

The Tableamount of child support for the two children based upon the Respondent’s non-grossed-up annuity payment at this time is $3,107.00.

Thisamount, he argues, exceeds the children’s needs based on their, what he describes as comfortable, but not extravagant lifestyle. [128] The Applicant’s position is that the Table support is appropriate having regard to the condition, needs, means and othercircumstances of the children and the respective abilities of each to contribute to their support. [129] The Applicant further argues that the children’s expenses as suggested by the Respondent are not accurate because it fails to takeinto account that he calculated her total monthly expenses at $5,353.00 and did not consider that these expenses were after tax ones to her.

He did not take into account that she has had to borrow money to meet ongoing needs. She has had capital expenses to help her meet theneeds of the children, including purchasing a vehicle necessary to transport them, continue repairs to her home and purchase life insurance forthe children. [130] As well, the Applicant argues that the Respondent incorrectly apportioned expenses between the Applicant and the children. Onthe support received she has not been able to save any money for her future or purchase a second vehicle for the use of the children. 7.3 Legal Considerations: income over $150,000.00 [131]

Section 4 of the Guidelines provides the Court with two options when dealing with a payor whose income is over $150,000.00 peryear. [132] The first option is to award Table support and an amount for special and extraordinary expenses. [133] The second option arises if the Court considers the first option to be inappropriate. [134] If the second option is found to be appropriate, then child support will be determined in a three-step process:

a) Table support is calculated on the payor’s first $150,000.00 of income;

b) In respect of the payor’s income in excess of $150,000.00, the Court must determine an amount it considers appropriate having regardto: (

i) the condition, means, needs and other circumstances of the children; (ii) the financial ability of each parent to contribute to the children’s support.

c) An amount for special or extraordinary expenses is determined. [135] There is a presumption that Table support is the appropriate amount to award: Francis v. Baker, (SCC), [1999]3 S.C.R. 250 para. 42. [136] A payor who wants the Court to order a different amount bears the onus of rebutting that presumption by “clear and compellingevidence”. Francis v. Baker, supra para. 43. The onus is to demonstrate on the evidence that the Table amount of support would beinappropriate. [137] The Supreme Court of Canada addressed the meaning of the word “inappropriate” in the context of s. 4 in Francis v. Baker,supra.

The Court held that “inappropriate” is to be broadly defined to mean “unsuitable” rather than merely “inadequate” (para. 40).

[138] The Court also considered the objectives of child support under the Divorce Act when considering what would be an inappropriateamount of support. The case before this Court is brought under the FLA which addresses the purposes for child support at ss. 33(7) asfollows:

(7) An order for the support of a child should, (

a) recognize that each parent has an obligation to provide support for the child; (

b) apportion the obligation according to the Guidelines. [139] These purposes are similar to those set out in the Divorce Act. [140] The Court in Francis v. Baker addressed standards of living and a child’s needs in paragraph 41as follows: 41 “…While standard of living may be a consideration in assessing need, at a certain point, support payments will meet even a wealthychild’s reasonable needs.

In some cases, courts may conclude that the applicable Guideline figure is so in excess of the children’s reasonableneeds that it must be considered to be a functional wealth transfer to a parent or de facto spousal support. I wholly agree with the sentiment ofAbella J. A. that courts should not be too quick to find that the Guideline figures enter the realm of wealth transfers or spousal support. Butcourts cannot ignore the reasonable needs of the children in the particular context of the case as this is a factor Parliament chose to expresslyinclude in s. 4(b)(ii) of the Guidelines.

Need, therefore, is but one of the factors courts must consider in assessing whether Table amounts areinappropriate under s. 4. In order to recognize that the objective of child support is the maintenance of children, as well as to implement thefairness and flexibility components of the Guidelines’ objectives, courts must therefore have the discretion to remedy situations where Tableamounts are so in excess of the children’s reasonable needs so as no longer to qualify as child support.

This is only possible if the word“inappropriate” in s. 4 is interpreted to mean “unsuitable” rather than merely “inadequate”. [141] The Court then addressed how “inappropriateness” is established at paragraphs 42 – 44: 42 “…under s. 4(b)(ii) any amount attributable to income above the $150,000 threshold can be reduced or increased by a court if it is of theopinion that the amount is inappropriate having regard to the condition, means, needs and other circumstances of the children, and thefinancial abilities of the spouses.

Nevertheless, based on the ordinary meaning of the provision, its context in the overall child supportscheme, and the purposes of the Guidelines, I find that in all cases Parliament intended that there be a presumption in favour of the Tableamounts… Accordingly, the Guideline figures can only be increased or reduced under s. 4 if the party seeking such a deviation has rebuttedthe presumption that the applicable Table amount is appropriate… 43 The recognition of a presumption in favour of the Guideline figures does not compel a party seeking a deviation from this amount totestify or call evidence.

No unfavourable conclusions should be drawn from this decision. Indeed, in some cases, such a party may not beable to provide relevant evidence.

Parties seeking deviations from the Table amounts may simply choose to question the evidence of theopposing party… 44 While there must be an “articulable reason” for displacing the Guideline figures … relevant factors will, of course, differ from case tocase. …[T]he factors relevant to determining appropriateness which Parliament expressly listed in s. 4(b)(ii), that is, the condition, means,needs and other circumstances of the children, and the financial abilities of both spouses, are likewise relevant to the initial determination ofinappropriateness.

Only after examining all of the circumstances of the case, including the factors expressly listed in s. 4(b)(ii), shouldcourts find Table amounts to be inappropriate and craft more suitable child support awards.” [142] In assessing the needs of the children – one factor in the inappropriateness inquiry – the Court considered evidence that may befound in a child expense budget at paragraph 45 as follows: “The task of determining whether Guideline figures are inappropriate under s. 4 must be undertaken by courts armed with all of the necessaryinformation.

Given that, as I explained above, children’s needs are one of the factors to be considered in assessing appropriateness under s. 4,child expense budgets which provide some evidence, albeit imperfect, of the children’s needs will often be required in contested case isconsistent with s. 21(4) of the Guidelines, which requires custodial parents to provide certain financial information within a specified timeafter learning that the paying parent’s annual income exceeds $150,000… However, unlike the forms of financial disclosure expresslyrequired under s. 21(4), Parliament did not choose to create a blanket rule requiring custodial parents to produce child expense budgets in allcases where s. 4 of the Guidelines is invoked.

I would therefore leave it to the discretion and experience of trial judges to determine on acase-by-case basis whether such budgets will be required.” [143] However, the Court also recognized at para. 49 that there are problems with childcare budgets: 49 While child expense budgets constitute evidence on which custodial parents can be cross-examined, their inherent imprecision must bekept in mind. Where one figure is overestimated, it is possible that another is underestimated.

Furthermore, as the trial judge recognized andcounsel for the appellant conceded in oral argument, the unique economic situation of high income earners must be acknowledged. Childexpenses which may well be reasonable for the wealthy may too quickly be deemed unreasonable by the courts. Of course, at some point,estimated child expenses can become unreasonable. In my opinion, a proper balance is struck by requiring paying parents to demonstratethat budgeted child expenses are so high as to “excee[d] the generous ambit within which reasonable disagreement is possible”: [Citationomitted]. [144] In R. v.

R, (ON CA), the Court found that in a s. 4 analysis, the family’s lifestyle and pattern of expenditureswere relevant in determining appropriateness. 7:4 Application of Legal Considerations [145] The Respondent wants the court to find that the Table support is inappropriate because it would be excessive having regard to the

needs of the children. In order to consider this argument, the presumptive amount of child support must be identified.

These amounts [14] , since 2011, for the two children, have been provided by the Applicant in her DivorceMate calculations. [15] They are: Year Monthly Table Amount 2011 $4,283.00 2012 $4,401.00 2013 $4,529.00 2014 $4,803.00 2015 $5,127.00 2016 $5,298.00 2017 $5,462.00 [ 146 ] The Applicant did not provide a child expense budget for any of these years. [ 147 ] While the parties cohabited, they resided in homes owned by one or both of them. [ 148 ] The Applicant remained at home with the children while the Respondent for part of the time they cohabited operated an unsuccessful home building business and occasionally contracted small concrete jobs.

They managed to meet family expenses out of the structured settlement annuity payments. Financial difficulties arose as the construction business failed and the Respondent gambled away more money than he could afford. Shortfalls in finances were on occasion made up by borrowing from their respective parents and other borrowing. [ 149 ] After the separation, the children’s needs were met by the child support payments made by the Respondent under the Separation Agreement of $2,500.00 per month, and when she was working, from the Applicant’s employment income.

She also received sporadic child support from her eldest son’s father until that child moved from the mother’s home. In 2004, the Applicant declared bankruptcy but was able to keep her home because she then had little equity in it. [ 150 ] Since starting this case in 2011, the Applicant has supported herself and the children with the support payments she receives from the Respondent under the Separation Agreement, and when working, employment income.

In 2011 and 2012 the Applicant had rental income of $4,200.00. [ 151 ] In her financial statement sworn June 17, 2011, the Applicant claimed expenses for the two children and her in the amount of $3,090.00 per month. The children were then 13 and 11 years of age. [ 152 ] In her financial statement sworn September 26, 2016, the Applicant anticipated annual income of $10,000.00 from employment. She also claimed monthly expenses of $6,585.20. Her monthly deficit based on that financial statement was $2,400.00 per month.

It is not clear from the evidence how such a deficit would have been financed. [ 153 ] In her April 21, 2017 financial statement, the Applicant swore that her monthly expenses for the children and her were $5,363.23. [ 154 ] It is not possible to extrapolate from these expense budgets an accurate or even somewhat reliable child expense budget. The Respondent attempted to do so in his submissions, however, it is arbitrary in the apportionment of the expenses between the Applicant and the children.

I do not find it to be a reliable children’s budget for the purposes of this inappropriateness analysis. [ 155 ] The evidence does disclose that the Applicant is able to meet the needs of the children except for being able to purchase them a car, take vacations and participate in counselling, having regard to the standard of living they can afford. There are no excessive expenses, nor does it appear that there is much, if any, discretionary spending on their behalf. [ 156 ] The Respondent’s financial statement sworn August 12, 2011, claimed expenses for himself in the amount of $16,716.00.

This included a payment of $5,700.00 to his mother each month. These expenses were all paid out of his structured settlement annuity payment. [ 157 ] The Respondent married and began living with and supporting his wife and her three children on September 26, 2015. [ 158 ] The Respondent swore a financial statement on December 14, 2016. In it he claimed monthly expenses of $21,069.00. This included a $6,000.00 monthly repayment of a loan to his mother. The budget also includes $2,450.00 for household expenses and $2,745.00 for transportation. It does not include any medical expenses for himself.

He had two vehicles and $40,000.00 in savings. [ 159 ] In his financial statement sworn May 1, 2017, the Respondent claims monthly expenses of $20,319.00. Included in this sum, is the amount of $6,000.00 on account of a repayment of a loan to his mother and $3,200.00 on account of child support and spousal support. The financial statement also discloses that he has three vehicles and savings.

The financial statement also discloses that he owes his mother $160,000.00 but no corresponding asset or purpose for the loan is shown within the financial statement. [ 160 ] In his oral evidence, the Respondent described the monies owing to his mother as accumulating over the years. He always borrowed monies from her, although he did not really keep track of it all but included in it were monies he borrowed from his mother to repay gambling debts he incurred. His indebtedness to his mother was paid in full at some point and then he borrowed again $190,000.00 from his mother.

[ 161 ] The Respondent’s evidence is that in November 2016 he borrowed $190,000.00 from his mother. He used these monies to pay legal expenses, a loader for a farm, to pay off credit card debt and $40,000.00 for his wedding. [ 162 ] The Respondent’s financial statements of December 14, 2016 and May 1, 2017 show that he is able to support himself, his wife and her children, accumulate assets and pay a substantial amount to his mother on account of indebtedness owed to her.

His financial statement suggests that he has enough to fund discretionary expenses, especially for household expenses, transportation and personal expenses.

I also take into account the apparently arbitrary amount of the monthly debt payment he makes to his mother. [ 163 ] When balancing all of the foregoing in the context of ss. 4 (b), I find that the Respondent has not shown by way of clear and compelling evidence that the presumptive amount under the Tables is or has been inappropriate since the commencement of this case in July 2011. [ 164 ] The amount of support payable pursuant to the Table is in excess of the amount the Applicant was able to budget or use for the children’s needs. She managed her affairs responsibly in this regard.

These children should have and should continue at this time to receive the benefit of the Table amount of the Guidelines . The amount of child support under the Tables is not so in excess of these children’s reasonable needs – in the context of the resources available to the Applicant and Respondent – that the payment amounts to a functional wealth transfer to the Applicant or de facto spousal support.

In this case, I recognize the Table support will provide some indirect benefit to the Applicant but not to the extent that it makes the Table amount inappropriate, that is, unsuitable. [ 165 ] In addition to the Table amount of child support, the Respondent shall be required to pay his proportionate share of post-secondary education expenses. [ 166 ] For these reasons, the Respondent is to pay to the Applicant Table amount of child support for the two children from August 2011.

The annual increase in child support shall be calculated and commence in February of each year as this coincides with the month there is an increase in the structured settlement annuity payment to the Respondent. The Respondent is to be given credit for all of the child support payments he has made since August 2011 under the terms of the Separation Agreement and temporary court orders. The Respondent is also to pay his proportionate share for Adrian’s post-secondary education.

He is to be given credit for his contribution of $4,000.00 towards this expense previously provided. 8: Issue #6 – What are Adrian’s post-secondary education expenses and how much should the parties and Adrian contribute? [ 167 ] The tuition costs for Adrian’s first year in the Culinary Management Program at St. Clair College which began September 2017 is $4,314.75.

The tuition cost for the second year of this program is expected to be $4,181.87. [ 168 ] Before determining the amount each parent should contribute I must consider what amount if any Adrian should contribute towards this expense. [ 169 ] In the 2016 tax year Adrian earned total income of $3,910.00. This income was earned in part during the school year while he worked part time approximately 15 hours per week. With his earnings he pays for a certain of his own expenses.

He did not save any of this income to assist with paying for his post-secondary education expenses. [ 170 ] Adrian received no bursaries or scholarships in the past nor is there any evidence that he will for this academic year. [ 171 ] Adrian must contribute a reasonable amount of money toward his needs including his post-secondary education cost. The only means he has to do this at this time is out of his part-time employment income.

Adrian has demonstrated that he understands his responsibility in this regard by maintaining part-time employment. [ 172 ] I find that it is not necessary for Adrian to apply for student loans. He and his parents together have the means to pay for his post- secondary education costs that he will incur at St.

Clair College. [ 173 ] Based on: 1. the costs of the program he is to engage in; 2. his ability to earn income and meet his expenses; and 3. the necessity that he be able to devote considerable amount of his time towards his academic pursuit so that he does not again experience that which he did in his first attempt at St. Clair College I find that Adrian should contribute $1,000.00 toward his post-secondary education costs at St.

Clair College for the academic year 2017- 2018 and a further $1,000.00 for the academic year 2018-2019. [ 174 ] The Applicant and the Respondent are to contribute their respective proportionate share towards Adrian’s post-secondary education expenses less the $1,000.00 to be paid by him each year in keeping with the guiding principle set out at ss. 7(2) of the Guidelines . These expenses will include those identified by St.

Clair College together with text book costs. [ 175 ] For the purpose of determining the parties’ respective proportionate shares, I find that the 2017 income of the Respondent for child support purposes is $452,662.00 and the Applicant’s is $21,949.17 based on her 2016 income from employment. The parties shall also take into account s. 3.1 of

Schedule III of the Guidelines which provides as follows: 3.1 To calculate income for the purpose of determining an amount under

section 7 of this Regulation, deduct the support, not including child support, paid to the other parent or spouse and, as applicable, make the following adjustment in respect of universal child care benefits: (

a) deduct benefits that are included to determine the parent or spouse’s total income in the T1 General form issued by the Canada Revenue Agency and that are for a child for whom special or extraordinary expenses are not being requested; or (

b) include benefits that are not included to determine the parent or spouse’s total income in the T1 General form issued by the Canada

Revenue Agency and that are received by the parent or spouse for a child for whom special or extraordinary expenses are being requested. [176] The same considerations should be made for the academic year 2016-2017. For that year the Respondent’s income was found byme to be $438,213.00. The Applicant’s income was $31,069.17 and Adrian’s $3,910.00. He should have contributed $1,000.00 toward hispost-secondary education expenses for that academic year as well. Again, the s. 3.1 of

Schedule III considerations are to be factored in thecalculation. 9: Issue #7 – What are Luca’s Orthodontic Expenses and are they special expenses? [177] The Applicant asks the Court to order the Respondent to pay his proportionate share of Luca’s orthodontic expenses. [178] Orthodontic treatment is an expense, the payment of which, is to be shared in accordance with s. 7 of the Guidelines (ss. 7(1)(c)and (2)). [179] This orthodontic expense has not yet been incurred by the Applicant. It is not yet known whether orthodontic treatment will benecessary.

The Applicant’s evidence is that the necessity for treatment will not be known until Luca stops growing. This is advice that shehas received from the Orthodontist consulted by her. Until the need for this expense is determined, the Court will not make an orderrequiring a specific contribution be made at some time in the future. Too many of the variables the Court must determine under s. 7 are notyet known.

The calculation can be made when it is determined, if the treatment is needed and the expense is known. 10: Issue #8 – Retroactive Child Support Child Support: Prior to the Commencement of this Case [180] The parties have put in issue the Respondent’s child support obligation from the date of separation to the date this case wasstarted. [181] Counsel referred to this as a retroactive child support obligation.

I will use the term ‘retroactive’ to refer to that period. 10.1 Position of the parties [182] In her written submissions the Applicant claims that the Respondent is in arrears under the Separation Agreement as he did notincrease child support tri-annually as provided for in cl. 14(

c) of the Separation Agreement. The amount calculated and claimed by theApplicant as owing during the retroactive period is $63,942.06.[16] She asks that the Respondent be ordered to pay this amount to her onaccount of retroactive child support. [183] Alternatively, the Applicant claims the Table amount of child support for the retroactive period based on the Respondent’sgrossed-up annuity payment for two children – Adrian and Luca – throughout this period.

She argues that the child support provisions in theSeparation Agreement were never intended to apply to Joshua. [184] The Applicant calculated the difference between the amount paid and the Table amount that should have been paid as$128,298.00.[17] She asks that if arrears are calculated on this basis, that the Respondent only be required to pay $75,000.00. [185] The Respondent argues that he has paid all that was required of him during the retroactive period. The basis of this submission isthat he honoured the oral agreement made by the parties after Joshua moved from the Applicant’s home.

It is his position the child supportprovisions pertained to three children and the reason for the oral agreement was to reflect that Joshua had moved from the Applicant’s homebut that the amount of $2,500.00 would be paid and no tri-annual increased would be sought. [186] If the Court calculates retroactive child support based on the Guidelines, the Respondent submits in the alternative that he hasunderpaid child support in the sum of $19,747.00 to January 1, 2016.[18] This calculation is based on the Respondent’s actual annuitypayment, three children to 2004 and two children thereafter.

He asks that if the Court finds that there are any arrears owing they berescinded. He relies upon D.B.S. v. S.R.G. 2006 SCC 37 , [2006] 2 S.C.R. 231 (“DBS”). 10.2 Discussion [187] For the reasons that follow, I find: 1) The child support provisions in the Separation Agreement as drafted pertain to three children; 2) The arrears that accrued during the retroactive period are $63,942.00 based upon cl. 14(

c) of the Separation Agreement; and 3) The arrears that accrued should be rescinded. 10.2.1 Did the child support provisions of the Separation Agreement pertain to two children or three children? [188] The parties spent a considerable amount of time during this trial dealing with this issue. In submissions, they referred to theSeparation Agreement and parol evidence of surrounding circumstances when the agreement was made. [189] In order to determine this issue, I will first consider just the cl. 14. [190] Cl. 14(

a) of the Separation Agreement provides as follows: “14(

a) Commencing on the first day of the month following the sale of the home, or in the event that the home is not sold and the wife has

refinanced the mortgage, on the first day of the first month following same, and on the first day of each and every month thereafter, thehusband shall pay to the wife the sum of $2,500.00 per month for the support of the children of the marriage until one or more of thefollowing occurs…” [191] This clause specifically provides that the Respondent is to pay child support for the “children of the marriage.” The clause thendeals with the events that will result in the termination of a child support obligation for a child. [192] The next reference in the Separation Agreement relevant to this issue is to the Applicant being entitled to claim tax benefits for the“children” (cl. 14(b)). [193] The particular words “support for the children of the marriage” in cl. 14 do not specifically set out whether the child supportprovisions relate to two children or three children.

The term “children of the marriage” is not defined within this clause. The phrase“children of the marriage” is inappropriately used as the parties were not married. The fact that they cohabited and were not married isspecifically referred to in the background clause of the agreement at paragraph 2(

a) which provides: “2(

a) The husband and the wife never married, although they have lived in a common law relationship commencing in October, 1993;” [194] In interpreting cl. 14, I would not rely on the words “of the marriage” and simply read the claim as providing for child support forthe “children”. This alone does not resolve whether the term refers to two children or three children. [195] It is necessary therefore to consider cl. 14 in the context of the agreement as a whole. [196] I take note that in cl. 14(

a) the commencement of child support is to take place in relation to the sale or refinancing of “thehome.” The phrase “the home” is not defined in cl. 14(a). It is not defined anywhere in the agreement. However, in the

definitions sectionthere is a definition of “family residence” and it meant the property, lot and buildings located at 2255 Forrest, Windsor, Ontario. Again, it isnecessary to contextually read the definition of the “home” as being the “family residence”. [197] The Respondent is described in the Separation Agreement as standing in loco-parentis to the child, Joshua (cl. 1(

a) and 2(d). Inthe past, such a description grounded an obligation upon that person to pay child support for that child. The Child Support Guidelines nowprovide at s. 5 that this obligation is imposed upon a person who “stands in the place of a parent for a child.” In the context of the SeparationAgreement as a whole, I interpret loco-parentis as used in it as creating a child support obligation upon the Respondent with respect toJoshua. [198] In the definition

section of the Separation Agreement “children” is defined at cl. 1(

a) iii as follows: “Children” means Adrian Stefano DeRose, born October 26, 1998, and Luca Marco DeRose, born March 9th, 2000, who are children of therelationship and Joshua Jerome Ridley, born May 19, 1991, who was not the biological child of the husband, however, the husband has stoodin loco-parentis.” [199] In the background

section of the Separation Agreement it provides at cl. 2(d): “There are three children of the relationship, namely, Joshua Jerome Ridley born May 19, 1991, Adrian Stefano DeRose born October 26, 1998 and Luca Marco DeRose born March 9th, 2000. Joshua Jerome Ridley, is not the biological child of the husband, however the husbandhas stood in loco-parentis to this child.” [200] Throughout the custody and access provisions of the Separation Agreement the parties’ rights and obligations are to their“children”.

One can reasonably conclude that the rights and obligations relate to the children whose custody is being dealt with, that is, thethree children. [201] When looked at in the context of the entire agreement, I find that the child support provisions contained in paragraph 14 pertain tothe three children at the time the agreement was made. [202] If I am wrong and there can be said to be ambiguity in the meaning of “children of the marriage” within cl. 14, I would considerparol evidence to resolve this issue.

Parol Evidence – Legal Considerations [203] The parol evidence rule is a general principle of Contract Law prohibiting the use of extrinsic evidence to interpret a contract: SeeRateja v. Rateja, (2008), (ON SC), 57 R.F.L. (6th) 408 at 5. [204] There are exceptions to the parol evidence rule. One of the exceptions arises where there is ambiguity in the contract.

If the Courtfinds ambiguity exists, the Court, in certain circumstances may look at extrinsic evidence to resolve the meaning of an ambiguous term: SeeRateja, para. 10. [205] When the issue of parol evidence arose during the trial I allowed such evidence to be admitted on the basis that in my view, theevidence was relevant and potentially probative of the issue raised: See Corey Developments Inc. v. Eastbridge Developments (Waterloo)Ltd. (1997), (ON SC), 34 O.R. (3d) 73. [206] I have considered the following parol evidence. [207] I find that the Respondent treated the child Joshua as his own.

The child called him “Dad.” The Respondent provided for hissupport while the parties cohabited. He took Joshua on a trip to Disneyland on his own. The Applicant received only sporadic support fromJoshua’s biological father and the child rarely saw that person. The Respondent provided financially for the child. The parties’ family wascomprised of the two adults and the three children. This is reflected in the custody and access provisions of the Separation Agreement. TheRespondent was to have reasonable access.

[208] I do not accept the Applicant’s evidence that she told the Respondent at or before the time the Separation Agreement was madethat child support was only for two children and that she would not make him pay for a child who was not his. The agreement specificallyprovides that the Respondent stood in loco-parentis to the child, Joshua. He was part of their family while the parties cohabited.

TheApplicant’s evidence on this issue is inconsistent with the weight of all the surrounding circumstances of the family and the wording of theSeparation Agreement. [209] I do not consider it helpful as suggested by counsel for the Respondent to compare the amount of child support agreed to in theSeparation Agreement with the Guideline Tables in force at the time. The Respondent submitted that based on his structured settlementannuity payment being $148,884.00 per year the table amount of child support for the three children at that time was $2,282.00.

He askedthe Court infer that the $2,500.00 per month figure must therefore be for three children. However, the only evidence that explains how theamount of support was arrived at was given by the Applicant. She explained that when she was a child her father was required to pay hermother $32.00 per month. On this basis she told the solicitor she retained to draft the agreement that she wanted $3,200.00 per month insupport. It was the lawyer who apportioned the requested sum between child support ($2,500.00) and spousal support ($700.00).

The basisfor doing so was not provided in evidence. [210] Taking into account the facts that led to the making of the Separation Agreement and the circumstances as they existed at the timeit was entered into I find that the children referred to in cl. 14 are the three children referred to in the

definitions

section of the SeparationAgreement. 10.2.2 What, if any, arrears accrued during the retroactive period? [211] The formula to calculate the child support increases the Respondent should

[…]