ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
KILLEEN, GREER and NEWBOULD, JJ.
B E T W E E N:
RUSSELL BOND,
Applicant (Respondent in the Appeal)
- and -
URSEL BOND,
Respondent (Appellant in the Appeal)
John E. Johnson, Counsel for the Respondent in the Appeal
Thomas R. Hunter, Counsel for the Appellant
HEARD at Ottawa: JUNE 12, 2007
REASONS
1Ursel Bond (“the Appellant” or “former wife”) appeals from the Order of Mr. Justice Hackland made February 23, 2006, wherein, on Motion or Application by Russell Bond (“the Respondent” or “former husband”), the Judge varied the provisions of the parties’ Separation Agreement dated February 23, 1993 (“the Agreement”). He also says he varied an interim Order put in place on June 2, 2005, arising out of the former wife having registered the parties’ Agreement with the Family Responsibility Office.
2The former wife also appeals from the Order of the Judge dismissing her Cross-Motion, in which she sought adjustments to the child support Orders and sought retroactive child support for the period from April 1, 2001 to the date of the Order.
3The Appellant asks that the Order be set aside and that she be granted the following relief:
Child support for Andrew to be paid in accordance with the new Federal Child Support Guidelines, commencing January 1, 2006.
Since the daughter Sarah is over the age of 18, the Appellant asks that the Guidelines not be strictly applied to Sarah, and that any support for Sarah be determined by the Court as it considers appropriate.
Subject to verification regarding the former husband’s income, the Appellant asks that he pay to her the sum of $40,879.73 as retroactive child support for the period April 1, 2001 to December 31, 2005.
4The grounds for the Appeal are set out in the Notice of Motion. They relate to what the Appellant says are errors in law and errors in mixed fact and law regarding how the Judge calculated child support, dismissed the former wife’s claim for retroactive child support, failed to consider the tax implications of the child support paid by the former husband and failed to apply the appropriate case law to the circumstances.
Some background facts
5After 13 years of marriage, the parties separated and entered into the Agreement dated February 23, 1993. They were divorced on August 20, 1993. Under that Agreement, the parties agreed to joint custody of the two children of the marriage, who were to have their primary residence with their mother, with liberal and generous access given to the father. Andrew was born August 28, 1991, and was 14 years of age at the time of the variation motion, and Sarah, born December 5, 1986, was then 19 years of age. The parties undertook, in the Agreement, to use their best efforts to co-operate with one another in these custody arrangements.
6Under paragraph 10 of the Agreement, the former husband agreed to pay child support of $1,000 per month for each child, subject to the provisions of subparagraphs 10(1)(a) to (g) inclusive of the Agreement.
7In subparagraph (a), the child support ceased for that child when the child ceased to “reside full time” with the mother, including the child living away from home to attend an educational institution, pursue summer employment or vacation but “otherwise maintaining a residence with the wife;” and in (b) when the child attained the age of 18 and ceased to be in full-time attendance at an educational institution; and in (c) when the child attained the age of 21 years. The other subparagraphs are not applicable for purposes of this Appeal.
8Paragraph 11 of the Agreement, provides for a cost-of-living clause or indexing clause, which applies each year.
9Paragraph 12 of the Agreement, provides that each party is to contribute to a child’s post-secondary education, proportionately to the parties’ incomes, only to the extent that the child cannot pay for his or her own expenses through scholarships, bursaries, loans or reasonable saving from summer employment.
10Paragraph 15 provides for either party to bring on a variation motion or application in the event of a “material change in circumstances.” The parties wrote their own variations, by way of an “Amending Agreement” dated January 31, 1995. Paragraph 10(1) was amended to reduce the child support figure to $837.50 per child per month from $1,000. A further amendment to paragraph 15 allowed either party, if no agreement could be reached between them on a variation notice, to apply under the Arbitrations Act, to have an Arbitrator determine such support.
11By a further Amending Agreement dated July 20, 1997, the parties increased that child support to $850 per month. Neither Amending Agreement explained how the child support figure was calculated. Neither such Amending Agreement was ever incorporated into an Order of the Court.
The Judge’s Decision
12The Judge found that the parties’ access to the children had been worked out by them so that the former wife had the children with her 4 nights per week and the former husband had the children with him 3 nights per week. The Judge accepted the former husband’s position that he had the children more than 40% of the time. He further accepted that the parties had agreed to what the former husband said in his e-mail of July 12, 1997 as follows:
I will agree to $1,700 in child support with no cost of living increases until April 1, 2001 as long as you will agree to the same. This does not mean that there has to be a change at April 1, 2001 but that either of us can, at that time, request a change.
The Judge found that there were no further negotiations between the parties until January 2005, when the former husband received a Notice from the FRO, saying that he owed child support arrears of $28,410. The FRO had based its calculations on the original Agreement, and may have applied indexing accordingly. The Judge found the former wife’s action in filing the Judgment with the FRO to be “unjustified and no explanation was provided for this action.” He held that the 1997 Amending Agreement was in place and continued to be in place after April 21, 2001, until the former wife took this action in January 2005. The former husband then brought on a variation motion on Consent of the parties, which was incorporated into the June 2005 Court Order. The former husband continued to make the $1,700 child support payments to the former wife, pending the outcome of the motion.
13The Judge decided to average the former husband’s income over the past 5 years from 2000 to 2004 and found it to be $138,000 per year and said that the former wife “earns a salary of $39,000 annually”. He found that the daughter, Sarah, who is a full-time university student, chose on August 15, 2005, to reside “full-time”, with her father. The Judge held that the former wife, based on her income, should pay to the former husband the sum of $337 per month pursuant to the Federal Child Support Guidelines (“Guidelines”). He found that Sarah’s earnings were “minimal” and that the parties should continue to share her “educational costs” on the current 4:1 basis.
14As for Andrew, the Judge found that he spent not less than 40% of his time with his father and that they had a “shared custody arrangement” within the meaning of s.9 of the Guidelines, for period January to August 2005. He set off the Guidelines’ support and calculated that from the payment of $1636 should be deducted the sum of $557, with a net payment of $1079 to be paid by the former husband to the former wife. The Judge then went on to reduce that payment by 10%, he said pursuant to case law. He then reduced the payment to the former wife to a net amount of $900 (although he also said $971 at one point in his Reasons, so the $900 figure may have been a typographical error.)
15Starting September, 2005, the Judge then found that the former husband would pay the mother $1,027 child support for Andrew and then he deducted the sum of $337 from this to make a net payment of $690 to the former wife. He then set off the $900 by the $337 to be paid and came up with a second net amount of $563 per month.
16As for the issue of retroactive support, the Judge dismissed the former wife’s claim for that and found that the former husband had not been underpaying child support and that the “child’s needs do not demonstrate the need for retroactive child support” and he said that there is no evidence that she had to encroach on her capital for the children’s needs.
17The Judge then determined that the former husband had overpaid his child support obligation and held he could recover the overpayment by reducing his current payments in 2007.
Standard of Review
18Neither counsel for the parties set out the standard of review in his Factum. Under s.19(1)(a)(ii) of the Courts of Justice Act an appeal lies to the Divisional Court from a final Order of Judge of the Superior Court of Justice for periodic payments that amount to more than $25,000 inclusive of costs in twelve months commencing on the date the first payment is due under the Order.
19The Supreme Court of Canada addressed the standards of review on an appeal from a judge’s decision, in Housen v. Nikolaisen, 2002 SCC 33, [2002] S.C.J. No. 31. On a pure question of law, the basic rule is that a trial judge’s findings may be replaced by the findings of an appellate court. Thus, the standard of review on a question of law is that of correctness.
20The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a “palpable and overriding error”, relying on the principle set down in Stein v. The Ship “Kathy K”. The standard for findings of fact is applicable even if the judge’s findings are not based on credibility, and no oral evidence is heard. See: Equity Waste Management of Canada v. Halton Hills (Town) (1997), 35 O.R. (3d) 321 (C.A.).
21With respect to appeals from support orders, the Supreme Court held in Hickey v. Hickey, [1999] 2 S.C.R. 518, that the findings of trial judges must be given considerable deference by appellate courts when such decisions are reviewed. It is not enough to overturn a support order simply because the appellate court would have made a different decision. Hickey stands for the principle that there must be a material error, a serious misapprehension of the evidence, or an error in law to overturn the trial judge.
22In the case at bar, there was no trial and no oral evidence given. There was a motion to vary support, based on affidavit evidence. Therefore, on issues of mixed fact and law, the standard is one of palpable and overriding error and on issues of law only is one of correctness.
Analysis
- Child Support issues
23In my view, the Judge erred both in law and in making palpable and overriding errors in how he determined that the former husband had, in fact, overpaid his child support obligations and the former wife had improperly registered the Agreement with the FRO. The Appellant had the right to register the 1993 Agreement with the FRO, when no change was made by the father after April 21, 2001, to bring the child support payments into alignment with his income and the former husband failed to provide the former wife with his T4 slips she requested. No one put the parties’ amendments over the years into the form of a Court Order made on Consent. Thus, the FRO had nothing else to work on. It must have a Court Order in place if it is to reduce what it has calculated as arrears under the Agreement.
24Neither the 1995 nor the 1997 Amending Agreements cancels the operation of any of the provisions of the original Agreement. While the parties went along with changes to the child support being paid when they made the two adjustments, there was no court-ordered variation.
25The Judge found that the children had spent four evenings a week with their mother and three with their father. This does not equate to the former husband spending over 40% of his time with the children. The parties had a “joint custody” arrangement, not a “shared agreement” which was never varied. The parties’ evidence, in their e-mails, shows that they disagreed on the amount of the time the children spent with each before Sarah moved out in August 2005. The Judge erred clearly in making the finding he did that the 40% rule of the Guidelines applied.
26Given the contradictory evidence, the Judge should have ordered the trial of the issue on that point. An Order will go setting aside the Judge’s calculations of child support payments and set-off payments pursuant to s.9 of the Guidelines. If the parties wish to pursue the issue of whether the 40% factor applies, they shall do so by way of setting the issue down for trial through the Registrar in Ottawa.
27Under paragraph 2 of the Guidelines, where a child is over the age of majority, which Sarah was when she began living with her father in August 2005, the Guidelines may apply or, if the Court considers the approach to be inappropriate, then the Court examines the conditions, means, need and other circumstances of the child and the financial ability of each spouse to contribute to the support of the child.
28The Judge gives no explanation as to why he chose to apply paragraph 2(a) over 2(b) of the Guidelines, in this case, given that Sarah is at Carleton University and living in residence for the better part of the year. In addition, the parties had agreed in paragraph 12 of their Agreement how “Post-Secondary Educational Expenses” for a child enrolled in post-secondary education were to be dealt with.
29What the Judge is doing, without saying so, is giving Guidelines support on top of paragraph 12 support. In most cases where the child is at university and receiving what is essentially s.7 support from both parents, the Court awards Guidelines support for only those months that the child is not attending at university and has returned to live at home. Paragraph 12 of the Agreement still applies and the former wife should only be paying monthly support for Sarah for the months she is living full-time with her father. An Order will go varying the Judge’s Order accordingly. If the parties cannot agree on the number of months and the amount of support for the years in question, they should advise the Divisional Court accordingly.
30The Judge averaged the former husband’s income over 5 years and found the average to be $138,000 annually. He then used this to determine what support should have been paid under the Guidelines. The Judge gave no explanation as to why he applied s.17 of the Guidelines in the circumstances or why he used 5 years. Section 17(1) reads:
If the court is of the opinion that the determination of a spouse’s annual income under section 16 would not be the fairest determination of that income, the court may have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years.
31The Judge firstly erred at law in applying the section on a variation motion. There was no trial, which led to the parties’ Agreement. That Agreement, on consent, had been in place since 1993. The parties may consent to an Order changing their original arrangement, but averaging cannot be applied on a motion to vary. In Miner v. Miner, [2004] O.J. No. 448 (S.C.J.) the Court examined a similar issue where the parties had agreed on how income would be calculated under an agreement. The Court found that where the parties had such an agreement, s.17(1) of the Guidelines”, “…has no application in a variation application.” It went on to say in paragraph 71 of the decision:
The exercise of averaging an obligor’s income over a three-year period is one that is meant to be engaged in by the court charged with the responsibility of first assessing child support. And that method ought not to be employed where the support payor’s most recent tax year documentation provides the fairest determination of his income.
The Ontario Court of Appeal affirmed that decision in Miner v. Miner, [2002] O.J. No. 3033 (C.A.), noting:
…that the application judge was correct in declining to interfere and in declining either to alter the method of calculating changes by invoking the three-year patter of income provision of s.17(1) of the Guidelines or by imposing a different timing mechanism for disclosure.
32Even if this method of calculation had been put in place by a trial judge in the first instance, the legislation does not permit an averaging over 5 years. The section uses the words, “over the last three years” and there is no jurisdiction for the Judge to vary that figure in the first instance.
33The Judge erred in law in applying s.17(1) as he did. An Order will go setting aside paragraph 1 of his Order accordingly.
34In paragraph 21 of her affidavit, the Appellant sets out what she says is the former husband’s income over the period from April 2001 to December 2004. The former husband’s T4 slips were not before us. I have, however, used these figures for the calculation of what child support was owed to the former wife based on these figures. I infer that the parties have now agreed that the Guidelines apply and that indexing does not apply. If this is the case, the issue of the tax implications, which apply under the Agreement, must be dealt with by Court Order to take it out of the tax regime of taxing child support in the hands of the former wife and allowing the former husband the deduction. If the parties cannot agree on that in writing, the issue should be added to the trial of issue as noted above, to be heard together.
- Retroactive child support
35The Judge rejected the Appellant’s claim in her cross-motion for retroactive child support, and in so doing, made a palpable and overriding error. The Judge found that the parties’ contractual agreement for $1,700 per month remained in force until January 2005, despite the e-mail of the Appellant to the former husband dated April 26, 2001, that, “I am willing to accept cheques for the next year in the amount of $1,700 and not go to arbitration.” In that e-mail the Appellant pointed out that based on the father’s past year’s income, he should have been paying an additional $1,350 plus tax for a total of $2,025. The Appellant had previously asked for copies of the father’s T4 slips but these were not provided until after the variation application was started.
36The Appellant says the Judge erred in not awarding her retroactive child support , which she calculates at $40,879.73. At the time of the Judge’s decision, there were retroactive child support cases known as the “Alberta trilogy”, before the Supreme Court of Canada. The decision is now reported as D.B.S. v. S.R.B.; L.J.W. v. T.A.R.; Henry v. Henry; Hiemstra v. Hiemstra, 2006 SCC 37, [2006] 2 S.C.R. 231. In the circumstances of the case before us, that decision applies. Paragraph 10 of the Judge’s Order is therefore set aside. The former wife is entitled to retroactive child support in the amount of $40,879.73. An Order will go that the former husband pay such amount in monthly instalments as may be agreed by the parties in writing, until all such retroactive child support is paid.
37The Court, in the trilogy, held that parents have a free-standing obligation to support their children commensurate with their income. It is in the court’s discretion to make a retroactive award of support so long as the applicable statutory scheme permits it. The Supreme Court notes that under the general Guidelines regime, the underlying theory is that the support obligation should fluctuate with the payor parent’s income. It further says that it is the child who loses when the payor parent does not comply with increasing the child support when his or her income increases. This applies to the case at bar. Further, our courts have held that the payor cannot hide his or her increase in income.
38In the trilogy, the Court states, at p.49, that “A retroactive award is a poor substitute for an obligation that was unfulfilled at an earlier time.” At p.52 of the decision, the Court finds that retroactive child support should be awarded from “the date of effective notice.” In the case at bar, the former husband was put on such notice on April 26, 2001, in the former wife’s e-mail to him, which stated “…our 3 year agreement is expiring at the end of April.” As a result of the Court’s decision in the trilogy, it was an error in finding that the notice required to be given by either party was not effective until the wife filed with the FRO in January 2005. This was a palpable and overriding error.
39Based on the Appellant’s calculations before us, an Order will go that the former husband pay to the former wife, retroactive child support in the amount of $40,879.73 based on the former wife’s calculations at Tab 13 of the Appeal Book. We assume that the former wife’s counsel, in making such calculations, has taken into account all payments made by the former husband during the period, including the amount garnisheed in 2005.
Conclusion
40The Judge’s Order of February 23, 2006, is set aside, as set out in these Reasons, and his Costs Order of March 20, 2006 is also set aside.
41If the parties cannot otherwise agree on Costs, we will receive brief written submissions by counsel within 30 days after the release of our decision.
I agree ______________________________
Killeen J.
Greer J.
I agree ______________________________
Newbould J.
Date Released: September 25, 2007
COURT FILE NO.: 06-DV-1204
DATE: 20070925
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
KILLEEN, GREER and NEWBOULD, jj.
B E T W E E N:
RUSSELL BOND
- and -
URSEL BOND
REASONS
Greer J.
Date Released: September 25, 2007