Court Information
Ontario Court of Justice
Parties
Between:
Laura Smith Applicant/Respondent on Motion to Change
— AND —
Jeff Max Respondent/Moving Party on Motion to Change
Before: Justice D. Paulseth
Heard on: April 5, 2019
Endorsement on Motion to Change released on: April 15, 2019
Counsel
Laura Smith ……………………………………………………….on her own behalf
Poroshad Mahdi …………………………………………..counsel for the Moving Party
Decision
Overview
1The parties are the parents of a daughter, A.P., born on […], 2002. The parents were married in 2000 and separated in 2006. They executed a Separation Agreement in June 2007, providing for joint custody and financial arrangements.
2After several years of legal negotiations, mother brought a Motion to Change in December of 2014 to update father's income for the purpose of child support. A consent order was finally made on May 4, 2016 dealing with parenting time, child support and special expenses; such that:
(1) Father would pay ongoing child support based on income of $192,760. and
(2) Section 7 expenses would be agreed upon in writing in advance and shared equally; although mother's income had been generally under $20,000 for the previous 5 years.
3A costs award of $10,000 against father followed on May 6, 2016.
4In part of 2017 and into 2018, the child began to stay at each home in more equal amounts of time.
5In July of 2018, father brought the current Motion to Change as the child had moved to his home full time in April of 2018.
6On October 18, 2018, the parents agreed to terminate child support payable by father effective April 30, 2018 and, on a temporary basis, mother began to pay child support to father, based on a projected income of $48,000. Mother is self-employed, having incorporated, and earns income from several sources. She works as a moving consultant and office assistant, and at one point operated a food truck.
7The parents are once again in disagreement about their respective incomes and about the types of special expenses to which mother should be making contributions. Full argument was heard on these issues on April 5, 2019.
Father's Income
8For 2018, father has produced two T4's based on two successive employment positions. The total income is $194,663.61.
9Mother argues that he must have a more detailed commission package available as part of terminating the previous position and as part of his current position. Father denies this. Disclosure from his employer indicated a general package, already reflected in his income. Presumably, commissions and bonuses will result in T4 or T5 information in his Notices of Assessment.
10Mother argues that father's Notice of Assessment for 2017 indicated a line 150 income of $289,000, which should be used as his income for 2018. The parties have had a pattern of using the previous year's assessment to set the child support amount for the current year.
11The Court of Appeal for Ontario has indicated that when calculating prospective child support, income from the previous year is used to calculate future support, essentially as a matter of convenience, because actual income for the upcoming year is incapable of exact determination. However, where, as here, the actual amount of income earned in a prior year is known, it is that amount that should determine the quantum of support that should have been paid. See Vanos v. Vanos, 2010 ONCA 876, also Wright v. Christie, 2011 ONCJ 109.
12Accordingly, I find that Father's income for 2018 is $194,663.61.
Mother's Income
13Originally, father sought to impute mother's income at close to $100,000. At the hearing, counsel for father argued that her income was close to $75,000. because:
(1) She has undeclared income from her business as a moving planner;
(2) She earns $1000 a week as an employee, not as a self-employed person;
(3) She deducts more than her moving business earns;
(4) Her vacations courtesy of her mother and the gym membership from her employer should be added back into income as taxable benefits;
(5) She should add back into income more of her deducted expenses and gross up that amount by a percentage that reflects her tax bracket; and
(6) Mother's net worth has also increased; such as the growth in her investments and RRSP's while, during the same four year period, paying off some of her debt.
14Mother responds by arguing:
(1) Part of the businesses that she operates through the incorporated entity are closing down;
(2) Her expenses are legitimate and her accountant has helped her to create an add-back amount for some of the deducted categories to account for personal use; and
(3) Her vacations and some groceries paid for by her mother should not be added as a taxable benefit;
15Deductions accepted by Canada Revenue Agency are not automatically accepted as deductions from income for the purpose of determining a payor's income for child support. There should be some evidence that would justify a conclusion that the employment expenses qualify as a deduction pursuant to s. 8(1) of the Income Tax Act: see: Bentley v. Gillard-Bentley, 2013 ONSC 722 and Chase v. Chase, 2013 ONSC 5335; Haras v. Camp, 2018 ONSC 3456.
16A self-employed person has the onus of clearly demonstrating the basis of his or her net income. This includes demonstrating that the deductions from gross income should be taken into account in the calculation of income for support purposes. This principle also applies where the person's employment income is derived from a corporation that he or she fully controls. See MacKenzie v. Flynn, 2010 CarswellOnt 3450.
17In this case, mother has explained the expenses and her explanation makes common sense. Her professional accountant assists with her income tax filing on a June 1st annual date.
18Mother has disclosed all of her tax information and, with the assistance of her accountant, has provided a "personal portion adjustment" of 50% for the items entitled: advertising and promotion, insurance, car and cell phone expenses. To these she has added a gross up amount of 20% for tax. Her total income for 2018 would be $44,878.40 for child support guideline (CSG) purposes.
19There has been a great deal of discussion in the caselaw about when to attribute income from gifts.
(1) Where a party receives regular gifts from his or her parent, the court may impute the amount of those gifts as income for support purposes: Bak v. Dobell (2007), 2007 ONCA 304, 86 O.R. (3d) 196 (C.A.), at para. 75; Korman v. Korman, 2015 ONCA 578, 126 O.R. (3d) 561, at paras. 47-51, 62-65, 67; Marello v. Marello, 2016 ONSC 835.
(2) The court has found that the true purpose of a grandfather's generous gifts to his son, the father, appeared to be to provide the father with an income to support a comfortable lifestyle for himself and his children. Accordingly, this was a unique case in which the circumstances surrounding the receipt of generous gifts by the father from the grandfather are sufficiently unusual that they constitute an appropriate circumstance in which to impute income. See FBM v. BF, 2019 ONSC 708
(3) In Malkov v. Stovichek-Malkov, 2017 ONSC 6822, at paras. 69-73, Justice McGee found that when gifts to the husband (e.g., payments for housing, utility costs, realty taxes) take on the appearance of a long-term subsidy as if the spouse was a beneficiary of income or benefits from an unwritten trust, the advances bend towards income. In Kkabbazy v. Esfahani, 2012 ONSC 4591, at paras. 77-87, the court imputed income to the husband based on evidence that he typically received and expected to receive funds "as needed" to support his lifestyle from his family.
20Maternal grandmother filed an affidavit attesting to some vacations for mother and occasionally for mother and granddaughter and occasional grocery items. These items are not regular enough to be relied upon by mother as income, nor should grandmother's occasional actions lead to a presumption that she is now responsible for child support.
21A one time gym membership by the mother's employer is also not a regular enough injection into the mother's lifestyle to warrant an addition to her income.
22With respect to her net worth, unless the amounts should be increasing her income, they are not necessarily relevant. The guidelines are driven by available income. Monies needed for the legitimate operating needs of a business will not be included in a payor's income. While a payor may be imputed with income on the basis that they are under-utilizing a capital asset, the appreciation of an asset is not itself income. Richardson v. Richardson, 2013 BCCA 378.
23Although mother's investments have increased in value over the past 4 years, these have not generated more income for her, nor is there reason to believe that they are not being appropriately invested. She sold a food truck and used the proceeds to pay down debt from a loan. I accept mother's evidence that these do not reflect a large infusion from unreported cash sales.
24I find that mother's income for the purpose of CSG for 2018 is $44,982.98. Effective May 1, 2018, she should pay $417. for one child. This will correct the temporary order made on October 18, 2018, which was based on her income as projected in her case conference brief.
Special Expenses
25In the court order of May 4, 2016, incorporating much of the Agreement of January 20, 2016, the parties agreed to share special expenses equally, if they had agreed upon them in advance in writing. Further, in paragraph 6 of the order, the parties acknowledged that there were no arrears of special expenses owing between them as of January 20, 2016.
26For the purpose of this Motion to Change, the parties acknowledge that an amount proportionate to income would be appropriate.
27The onus is on the parent seeking the special or extraordinary expenses to prove that the claimed expenses fall within one of the categories under section 7 and that the expenses are necessary and reasonable, having regard to the parental financial circumstances. See: Park v. Thompson, 77 O.R. (3d) 601, (Ont. C.A.).
28Subsection 7 (1) of the guidelines reads as follows:
Special or extraordinary expenses
7 (1) In a child support order the court may, on either spouse's request, provide for an amount to cover all or any portion of the following expenses, which expenses may be estimated, taking into account the necessity of the expense in relation to the child's best interests and the reasonableness of the expense in relation to the means of the spouses and those of the child and to the family's spending pattern prior to the separation:
(a) child care expenses incurred as a result of the custodial parent's employment, illness, disability or education or training for employment;
(b) that portion of the medical and dental insurance premiums attributable to the child;
(c) health-related expenses that exceed insurance reimbursement by at least $100 annually, including orthodontic treatment, professional counselling provided by a psychologist, social worker, psychiatrist or any other person, physiotherapy, occupational therapy, speech therapy and prescription drugs, hearing aids, glasses and contact lenses;
(d) extraordinary expenses for primary or secondary school education or for any other educational programs that meet the child's particular needs;
(e) expenses for post-secondary education; and
(f) extraordinary expenses for extracurricular activities.
29The guidelines define "extraordinary" as follows:
7 (1.1) For the purposes of paragraphs (1)(d) and (f), the term "extraordinary expenses" means
(a) expenses that exceed those that the spouse requesting an amount for the extraordinary expenses can reasonably cover, taking into account that spouse's income and the amount that the spouse would receive under the applicable table or, where the court has determined that the table amount is inappropriate, the amount that the court has otherwise determined is appropriate; or
(b) where paragraph (a) is not applicable, expenses that the court considers are extraordinary taking into account
(i) the amount of the expense in relation to the income of the spouse requesting the amount, including the amount that the spouse would receive under the applicable table or, where the court has determined that the table amount is inappropriate, the amount that the court has otherwise determined is appropriate,
(ii) the nature and number of the educational programs and extracurricular activities,
(iii) any special needs and talents of the child or children,
(iv) the overall cost of the programs and activities, and
(v) any other similar factor that the court considers relevant.
30Subsection 7 (2) of the guidelines sets out that the guiding principle in determining the payment of a section 7 expense is that the expense is shared by the parties in proportion to their respective incomes. The court has the discretion to deviate from the guiding principle to determine a just child support order.
31Father is claiming special expenses contribution from mother on these items for 2018:
(1) Her remaining share of the Bat Mitzvah,
(2) Summer camp,
(3) Martha Hicks Dance,
(4) Tutoring,
(5) Counselling,
(6) Torah High,
(7) March of the Living trip to Israel,
(8) Educational assessment,
(9) Contact lenses,
(10) Iron supplements,
(11) Drivers licence and training,
(12) Dr Klein, wisdom teeth removal, and
(13) future post-secondary expenses.
32Mother disputes the March of the Living trip to Israel as more in the nature of a vacation and I agree.
33Mother indicated that she was prepared to pay her proportionate share of dance, Torah High, Vocational assessment, Dr Klein, and tutoring. Based on the incomes set out above, her share would be 18.8 % and father's share would be 81.2%
34Regarding the Bat Mitzvah, which took place on November 22, 2015, mother agreed at one case conference to pay a further $1000.00. The father believes she owes an additional $1400. The dispute apparently arises from some items which mother paid cash for and father only agrees to account for items with invoices. I rely on the paragraph in the agreement incorporated into the court order of May, 2016, which indicates that as of January 20, 2016, there were no arrears of special expenses, which surely also would include a Bat Mitzvah from November of 2015.
35Mother does not agree to contribute to items she did not agree to fund in advance; such as drivers' education related expenses, the first two sessions of counselling about which she knew nothing, and iron supplements. I concur.
36Mother did provide 3 months of contact lenses in 2018, so she would receive a credit for that monies and then be responsible for 18.8% of the remaining cost, if the guiding principle is applied for the 2018 section 7 expenses.
Discretion for Fairness
37It is important that the court deal with child support issues in a manner consistent with fairness.
38The court finds that this is an appropriate case to deviate somewhat from the guiding principle that these expenses be paid proportionally to the parties' incomes for 2018 only for the following reasons:
a) the parties had a pattern of adjusting prospectively the CSG guideline amount after receiving the Notice of Assessment from the previous year.
b) father earned an unusually high amount of income in 2017, specifically $289,000.
c) father claims that the high amount of income is offset by the fact that they shared custody of their daughter for the last part of 2017 and first few months of 2018 and he did not adjust his child support. The child support owing would still have been a set off of their incomes and father would still have been paying CSG.
d) it may be coincidence that at about the exact time his Notice of Assessment would have shown a substantial increase in income, such that his go forward CSG would have risen substantially, the child moves to his home full time.
e) in any event, father enjoyed the full benefits of his increased income for both 2017, the year it was earned, and 2018, when he did not pay a set off. Without the court exercising its discretion on section 7 expenses for 2018, father would receive an unjustified windfall.
f) mother's income for 2017 was $26,299, and she was paying 50% of the agreed upon special expenses.
39In conclusion, I would direct that mother not pay special expenses for 2018, but that her contribution commence under this Motion to Change on January 1, 2019, in proportion to her income under section 7 of the CSG legislation.
Father's Overpayment to Family Responsibility Office (FRO) for the month of May, 2018
40Father claims that FRO deducted too much from his account, as the order transferring CSG responsibility to mother was not made until October of 2018; albeit to take effect terminating his responsibility April 30, 2018 and commencing mother's responsibility on May 1, 2018.
41Apparently FRO will not transition their accounts across payors, as FRO considers each payor to be a separate account.
42Mother disputes that he has overpaid.
43From the FRO statement, it is impossible for the court to determine where each payment starts and finishes.
44The court cannot really decide this issue but must rely on the commencement dates set by the court order and the accounting of FRO- if it creates a credit to father, then FRO will pay that to him.
Final Order
Commencing May 1, 2018, mother will pay CSG for one child on $44,982.98 of $417 per month.
Father will pay for any special expenses incurred during 2018.
Commencing January 1, 2019, the mother will pay 18.8% share of section 7 special expenses accruing since January 1, 2019, based on her income of $44,982.98 and father's share will be 81.2%, based on his income for 2018 of $194,663.61.
The specific eligible special expenses are:
(a) Tutoring,
(b) Summer camp,
(c) Martha Hicks Dance,
(d) Torah High,
(e) Educational assessment,
(f) Dr Klein for wisdom teeth, and
(g) Contact lenses.
A support deduction order will issue with annual disclosure.
Costs submissions may be filed with the Trial Coordinators' office, as follows: from mother with a maximum of three pages, with bills of costs and written offers attached within 10 business days of this decision and from father with a maximum of three pages with bills of costs and written offers attached within 10 business days of receiving mother's submissions.
Released: April 15, 2019
Signed: Justice Debra Paulseth