CITATION: Costa v. Perkins, 2012 ONSC 3165

DIVISIONAL COURT FILE NO.: DC-11-0091-00

DATE: 20120529

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: Urszula Olga Costa, Applicant/Respondent in Appeal

AND:

Robert Owen Perkins, Respondent/Appellant

BEFORE: Aston, Pepall, McGee JJ.

COUNSEL: Lisa Kadoory, for the Applicant/Respondent in Appeal

Gary S. Joseph/Vanessa Lam, for the Respondent/Appellant

HEARD: March 22, 2012

ENDORSEMENT

ASTON J.

Background

Background

1Robert Perkins appeals the final order of Ricchetti J. dated September 22, 2011 which ordered Mr. Perkins to pay Ms. Costa:

(i) the table amount of child support, $920 per month starting October 1, 2011;

(ii) “retroactive” child support of $21,304 for the three years preceding the application for the child support order, payable within a year at a rate of not less than $1,000 per month; and

(iii) $10,170 for costs.

2The parties were married in September, 1993 and separated approximately eight months later in May, 1994. When they separated, their daughter Brittany was a baby. She turned eighteen years of age in June, 2011, three months before the order being appealed.

3Proceedings first started by the mother in 1994 eventually resulted in a final order on consent May 5, 1998. Webber J. ordered Mr. Perkins to pay $339 for child support, which included a proportionate share of daycare expenses under s. 7 of the Child Support Guidelines. That order also required both parties to exchange income tax returns on an annual basis, together with copies of their annual Notices of Assessment.

4Both parties remarried. At the time of the hearing before Justice Ricchetti, Mr. Perkins was living with his wife and three children ages 7, 8 and 10. Ms. Costa was separated from her second husband. Brittany, her only child, continues to reside with her and was still a high school student at the time of the hearing before Justice Ricchetti. Brittany has not seen her father in many years.

5Ms. Costa’s Motion to Change was initiated September 25, 2010. She sought retroactive child support according to the applicable table amounts, and also a contribution towards special and extraordinary expenses, going back three years to September 1, 2007. During the course of the proceeding, and before the matter was heard by Justice Ricchetti, she abandoned the claim related to any s. 7 expenses and simply sought the table amount for child support, both prospectively and retroactively to September 1, 2007.

6The Motions Judge found that the father’s income in 2011 would be $105,485. He varied the ongoing child support to $920 monthly, the table amount for that income.

7The Motions Judge found that in the year of the original support order, 1998, the father’s income was $33,264. In 2007, he earned $85,426; in 2008, $97,203; in 2009, $100,264; and in 2010, $110,666. Taking into account the applicable table amount each of those years and the amounts Mr. Perkins paid from September, 2007 to the date of the order now under appeal, the Motions Judge calculated that the father had “underpaid” child support by $21,304. The mathematical accuracy of the calculation is not in dispute.

Issues on Appeal

Issues on Appeal

8There are four issues on appeal:

(i) did the Motions Judge err in failing to provide adequate reasons?;

(ii) did the Motions Judge err in law by failing to apply the correct legal test for an award of retroactive child support?;

(iii) did the Motions Judge err in law or in principle in his analysis of the father’s claim for relief from payment of the table amount, pursuant to the undue hardship provisions in s. 10 of the Child Support Guidelines?; and

(iv) did the Motions Judge err in law or in principle in the costs award?.

Standard of Review

Standard of Review

9The standard of review is governed by the principles in Housen v. Nikolaisen, 2002 SCC 33, 2002 S.C.C. 33. On a pure question of law, an appellate court is free to replace the opinion of the trial judge with its own, because the standard of review on a question of law is correctness. Findings of fact will not be reversed or ignored unless the trial judge made a palpable and overriding error. Questions of mixed fact and law are subject to the palpable and overriding error standard unless it is clear that the trial judge made some error of law or principle that can be identified independent of the judge’s application of the law to the facts of the case. If the error of law is extricable from questions of mixed fact and law, it must be separated out and correctly applied to the findings of fact.

10In support cases, the decision in Hickey v. Hickey, 1999 691 (SCC), [1999] 2 S.C.R. 518 addresses the standard of review with respect to the discretionary nature of such orders. An appellate court should only substitute its decision if the order is founded upon some error in principle, a significant misapprehension of the evidence or otherwise clearly wrong.

Father’s income

Father's Income

11At paragraph 12 of the Reasons, the Motions Judge writes: “The mother states the father is expected to earn approximately $105,485 in 2011. The father does not dispute this amount.” Mr. Perkins denies that he agreed his income would be $105,485 in 2011, pointing specifically to the evidence in his affidavit sworn May 7, 2011 which was part of the record below. He quoted independent evidence from his employer, in the form of an April, 2011 email, confirming that he would likely be paid for fewer hours in 2011 than he was able to work in 2010. He claimed his 2011 income would only be about $95,000 even though he had earned $110,666 in 2010. On appeal, Mr. Perkins submits that the Motions Judge misapprehended the evidence and made a palpable and overriding error.

12Part of the evidence included Mr. Perkins’ pay stub for the period ending September 10, 2011. This was the most up-to-date and reliable evidence the Motions Judge had concerning Mr. Perkins’ 2011 employment income. There are 36 full weeks and one partial week in the period January 1, 2011 to September 10, 2011. Dividing the year-to-date figure of $75,976.85 by 37 pay weeks and projecting that weekly average for 52 weeks produces a figure of $106,778. It is unnecessary for us to scour the record to find a concession by counsel for the father in order for us to determine that the finding of the Motions Judge does not reflect a palpable and overriding error. Rather, it is based upon cogent evidence of the father’s 2011 income. There was no evidence updating the earlier prediction from April predicting a substantial reduction in his hours and no apparent reason not to project his 2011 income based upon his most recent paystub.

13There is no merit to the submission that the Motions Judge err in his determination of the father’s 2011 income. On this appeal, counsel for the father does not challenge any other finding of fact by the Motions Judge, so the analysis of the issues which follows will be limited to whether there were errors in law or legal principle.

Did the Motions Judge err in failing to provide adequate reasons?

Did the Motions Judge err in failing to provide adequate reasons?

14Mr. Perkins raises two issues with respect to the adequacy of the reasons. First, he submits that the reasons did not explain why the Motions Judge decided what he decided, to a degree sufficient for the purposes of meaningful appellate review or as an explanation of the result to the parties. Second, he submits that the reasons do not reflect any analysis of the entire legal test required to be considered on the issue of retroactive child support.

15Generally speaking, reasons do not need to address issues which were not raised by the parties themselves. For example, the Motions Judge in this case referred to s. 3(1) of the Child Support Guidelines which mandates payment of the table amount for minor children. The Motions Judge was aware of the fact that Brittany had turned 18 years of age a few months before the decision. He was also aware of the fact that Brittany was living at home with her mother and attending high school. He began his analysis with the presumptive applicability of the table amount, without reference to s. 3(2) of the Guidelines which provides:

…, where a child to whom an order for the support of a child relates is the age of majority or over, the amount of an order for the support of a child is,

(a) the amount determined by applying these guidelines as if the child were under the age of majority; or

(b) if the court considers that approach to be inappropriate, the amount that it considers appropriate, having regard to the condition, means, needs and other circumstances of the child and the financial ability of each parent or spouse to contribute to the support of the child.

16The father in this case might have asked the judge to consider s. 3(2) of the Guidelines but he did not. In our view, it was not incumbent on the trial judge to address, or even acknowledge, s. 3(2) in those circumstances.

17The appellant also submits that the reasons are inadequate in failing to articulate or analyze all the factors that are in play on an application for retroactive child support according to the controlling jurisprudence on the subject from the Supreme Court of Canada in the case of D.B.S. v. S.R.G., 2006 SCC 37, [2006] 2 S.C.R. 231.

18In D.B.S., at paragraphs 99 to 116, the court set out four factors or criteria to consider:

(a) whether there is any reasonable explanation for why support was not sought earlier;

(b) the conduct of the payor parent;

(c) the circumstances of the child; and

(d) hardship occasioned to the payor by a retroactive award.

19In Patton-Casse v. Casse 2011 ONSC 4424 at paragraphs 75 to 80 and 90 to 91, McDermot J. held that to correctly determine the retroactivity of a child support claim requires a full analysis according to these criteria set out in D.B.S. and that the failure to conduct such an analysis was a reviewable error.

20This case is distinguishable from Patton-Cass v. Casse. In this case the parties each filed a factum with the Motions Judge in which they identified the issues to be determined by him. The father’s factum in this case stated specifically that there were three issues for the Motions Judge to determine:

(a) whether Mr. Perkins would be “in a position of undue hardship” if the “chart amount” of support were ordered;

(b) whether Mr. Perkins would be “in a position of hardship” if retroactive support were ordered; and

(c) whether Brittany continues to be a “child of the marriage” entitled to ongoing child support from Mr. Perkins.

Quite clearly, the appellant narrowed the retroactive support issue for the Motions Judge to the determination whether it would cause him hardship, the fourth factor in the D.B.S. criteria.

21The father had failed to comply with the previous order requiring him to provide his tax return and Notice of Assessment on an annual basis, when compliance almost certainly would have triggered an increase in his child support obligation years earlier. It is hardly surprising that he asked the Motions Judge to simply focus on his present and future circumstances and whether a retroactive award would cause him and his new family hardship.

22In our view, there was no onus on the Motions Judge to delve into the first three factors articulated by D.B.S. to any greater degree than he did. Moreover, the reasons make at least passing reference to the evidence on the other factors in a manner that provides an opportunity for meaningful appellate review and an understanding of why the Motion Judge reached the conclusion that he did.

23There is no merit to this ground of appeal.

Did the Motions Judge err in law by failing to apply the correct legal test for an award of retroactive child support?

Did the Motions Judge err in law by failing to apply the correct legal test for an award of retroactive child support?

24Throughout this case, the payment ordered for the period starting September, 2007 has consistently been referred to as a “retroactive” award of support. I will continue to use that label for the sake of consistency but note in passing that Bastarache J. highlighted the difference between a retroactive order and a retrospective order in D.B.S. at paragraphs 67 through 74. He did so to make it clear that backdating the effective date of an increase in child support does not impose an obligation that the parent did not already have. It is a retrospective order because it merely serves to enforce an obligation that should have already been fulfilled.

25The Motions Judge began his analysis of this issue at paragraphs 33 and 34 of his Reasons stating [emphasis added]:

33There was really no argument by father’s counsel as to the quantum of retroactive support claimed. The sole issue by the father was that it would cause undue hardship if the court was to order any retroactive child support.

34For the reasons set out above, I disagree that payment of retroactive child support could cause undue hardship.

26At paragraph 37 of his Reasons, the Motions Judge stated [emphasis added]:

Will a retroactive award cause some financial hardship on the father? Yes, it will, but I am not convinced it will be undue. It will require careful financial planning and significant changes to the Father’s spending habits and lifestyle. In order to avoid this, the Father should have a considerable amount of time to pay the retroactive award.

27For prospective child support there is only a limited discretion to depart from the table amount. In this case, bearing in mind that the father did not raise s.3(2) of the Guidelines for consideration, the court has no discretion to order less than the table amount for ongoing child support unless Mr. Perkins can establish “undue hardship” under s. 10 of the Child Support Guidelines.

28However, with respect to retroactive support, the court is exercising a discretion reflected by the four factors noted above in D.B.S. The fourth factor in D.B.S. is “hardship” not “undue hardship”.

29The difference between prospective and retroactive child support when it comes to considering hardship for the payor is specifically addressed at paragraphs 114 and 115 of D.B.S. in these words:

114 While the Guidelines already detail the role of undue hardship in determining the quantum of a child support award, a broad consideration of hardship is also appropriate in determining whether a retroactive award is justified.

115 There are various reasons why retroactive awards could lead to hardship in circumstances where a prospective award would not. For instance, the quantum of retroactive awards is usually based on past income rather than present income; in other words, unlike prospective awards, the calculation of retroactive awards is not intrinsically linked to what the payor parent can currently afford. As well, payor parents may have new families, along with new family obligations to meet. On this point, courts should recognize that hardship considerations in this context are not limited to the payor parent: it is difficult to justify a retroactive award on the basis of a “children first” policy where it would cause hardship for the payor parent’s other children. In short, retroactive awards disrupt payor parents’ management of their financial affairs in ways that prospective awards do not. Courts should be attentive to this fact.

30Many cases support the proposition that under s. 10 of the Guidelines, for ongoing child support, mere “hardship” is not enough. Cases have emphasized the word “undue”, in consistently refusing relief to payors except in what can fairly be described as very compelling circumstances. Successful undue hardship claims are rare.

31In this case, the Motions Judge did make an express distinction between hardship and undue hardship in his findings, findings which are a question of mixed fact and law. See paragraph 37 of the Reasons, quoted above.

32Read in isolation, paragraph 37 could be interpreted as saying immediate payment of the retroactive award would be a hardship without necessarily saying the quantum of the payment would be. However, in the context of paragraphs 34 and 35 noted above, we accept the appellant’s submission that the trial judge applied an incorrect legal test on the issue of the retroactive payments.

33On our reading of paragraphs 34, 35, and 37 of the Reasons, the Motions Judge conflated the “undue hardship” threshold in s. 10 of the Child Support Guidelines with the “hardship” threshold established by D.B.S. for retroactive child support. As noted, Mr. Perkins factum had recognized this distinction in defining the issues as “undue hardship” for ongoing support and “hardship” for retroactive support. In failing to differentiate the two, the Motions Judge applied an incorrect legal test with respect to the retroactive award.

34By application of the standard of review mandated by Housen to a question of mixed fact and law, it is open to us to apply the correct legal test and substitute our own conclusion for that of the trial judge if we are able to do so on the findings of fact which are otherwise unchallenged on appeal or clear from the record. As noted above, the only factual finding that was challenged was the finding as to Mr. Perkins’ 2011 income, which we have determined is not a reversible factual error. We also note that although the father’s factum limited the issue to whether the effect of a retroactive award would cause him hardship, he was nevertheless able to present other evidence on the first three factors set out in D.B.S. There is no apparent prejudice to him in our now determining the issue on the record, by application of the D.B.S. test to the facts as found or admitted.

35The following findings of fact or mixed fact and law emerge from the Reasons of the Motions Judge:

• The Motions Judge found Mr. Perkins’ evidence vague and unreliable with respect to his past financial circumstances.

• The Motions Judge rejected the father’s assertion that he was on the verge of bankruptcy or might lose his home. Having reviewed the father’s credit card statements and bank accounts, the Motions Judge did not accept that Mr. Perkins or his present family live a “meager lifestyle”. The Motions Judge rejected the father’s assertion that he was still indirectly burdened by debts dating back to the original separation between the parties thirteen years previously.

• Mr. Perkins’ wife is self-employed, running a day care. In 2010, her gross income was $39,340, but after deduction of expenses, including a portion of home costs (taxes, utilities, etc.) her net income from the daycare business was $18,082. The Motions Judge “would have, if necessary” imputed to her an income of approximately $35,000, “because many of the deductions she takes contribute to the accommodation expenses reducing the family’s costs”.

• Taking into account the combined income of Mr. Perkins and his present wife, the Motions Judge found that “it is difficult to conceive, with this level of income, that paying child support at the guideline [table] amount for Brittany would cause undue hardship”. The Motions Judge noted specifically that “although Mr. Perkins’ credit card balances are high, his debts do not deter him from spending significant amounts of money on lingerie, restaurants, cell phones, aquarian services, golf, The Love Shop, and so on”. The Motions Judge concluded that Mr. Perkins could not avoid child support by simply spending beyond his means and then claiming undue hardship.

• Mr. Perkins admitted that he does not manage his money well and the Motions Judge found that Brittany should not suffer as a consequence of that inability to manage his money or live within his means.

• In 1999, the year after the original order, the father’s income went up to approximately $44,000. There was no evidence of his income for the years 2000 through 2006 inclusive but it is a reasonable inference that he was paying less than the table amount during those years. Mr. Perkins has had the benefit of underpaying child support for years to the financial detriment of Ms. Costa. Taking into account the ages of the children now living with Mr. Perkins, the Motions Judge also took into account that Mr. Perkins “has unreasonably low child support payments for Brittany for some nine years, all accruing to the father and his new family’s benefit”.

• Child support is the only financial burden Mr. Perkins has for Brittany. He incurs no costs for exercising access to her.

• In paragraph 35, the Motions Judge observed: “Mr. Perkins did not suggest Ms. Costa delayed in seeking retroactive child support”. The evidence is controversial on this point, but the observation can fairly be attributed to Mr. Perkins’ factum, as noted above.

• Brittany has always been properly cared for by her mother and there is nothing to demonstrate that her standard of living had suffered because of the lack of proper child support from Mr. Perkins. However, the Motions Judge referred to the fact that the Supreme Court in D.B.S. said at paragraph 113 that a payor’s obligations do not disappear where the child does not need his financial support.

• Mr. Perkins did pay the child support as ordered in 1998 and apart from his failure to comply with that order’s provisions relating to income disclosure, there is no other misconduct on his part in relation to Brittany’s support.

36Counsel for the Appellant points out that the mother did not disclose her own financial circumstances or comply with the 1998 Order provision requiring production of her annual tax returns and Notices of Assessment. There was evidence Brittany was able to participate in dance lessons, horseback riding and had the benefit of a tutor during the period September, 2007 to 2010. These facts are all relevant, but only marginally so when the claim is limited to the table amount.

37There is no question that the father’s financial responsibility for his present family is a factor deserving serious consideration and weight. However, another weighty consideration is the father’s failure to comply with the financial disclosure provision in the original order. He had a clear-cut obligation to pay the table amount for Brittany’s support. That amount would have been readily apparent from line 150 of his tax return each year. He underpaid his legal obligation for child support for many years, even predating the three year retroactive period of the order made against him in this case.

38In D.B.S. there was no separation agreement or court order requiring annual income disclosure. The most obvious purpose of annual income disclosure is to enable parties to easily fine tune child support without incurring significant costs, costs which would often be out of proportion to the small amount of money involved in adjusting the child support already being paid. In this case the efforts of Ms. Costa to have Mr. Perkins make the required disclosure over the years may fairly be characterized as half-hearted at best. However, it sends an inappropriate message for the court to shift the blame to her, and thereby excuse Mr. Perkins for defaulting in his clearly defined legal obligation. There is no question his default is blameworthy conduct under the second of the four D.B.S. factors. His disregard for the 1998 Order needs to be afforded significant weight. It might have justified going back more than just three years in retrospectively adjusting his child support obligation for Brittany.

39It may sometimes be appropriate to characterize a retroactive child support order as a “wealth transfer” when the retroactive sum includes a discretionary s. 7 add-on component to the table amount. However, it hardly seems appropriate to characterize a retroactive award in that fashion when it is nothing more than the table amount. By compensating the mother for the underpayment of the amount which is intended to assist with food, clothing, shelter, and other basics, the retroactive award avoids the payor’s ability to profit from his non-disclosure and consequent underpayment.

40Present hardship is an important consideration but it is not an absolute defence to the award in this case. The long history of underpayment more than offsets any present inability to pay the “arrears” that are instantly created by the retroactive award. The court can address any consequent hardship to Mr. Perkins and his other dependants through an extended time to pay, as suggested in paragraph 116 of D.B.S. which reads as follows:

I agree with Paperny J.A., who stated in D.B.S. that courts should attempt to craft the retroactive award in a way that minimizes hardship (paras. 104 and 106). Statutory regimes may provide judges with the option of ordering the retroactive award as a lump sum, a series of periodic payments, or a combination of the two: see, e.g., s. 11 of the Guidelines. But I also recognize that it will not always be possible to avoid hardship. While hardship for the payor parent is much less of a concern where it is the product of his/her own blameworthy conduct, it remains a strong one where this is not the case.

41In our view, the table amount that would otherwise have been payable for the three year period preceding the mother’s motion to change the earlier order is the fairest method by which to quantify Mr. Perkins’ obligation in this case.

42The one year extended time period for interest-free payment of the retroactive “top-up” of support already paid reflects a proper exercise of discretion by the Motions Judge. There is no identifiable error in principle in the extended time for payment nor is there any basis upon which the appellate court ought to interfere with the Motions Judge’s discretion, given the applicable standard of review in Hickey.

43We therefore confirm the conclusion of the Motions Judge on the retroactive child support award.

Did the Motions Judge err in law by failing to apply the correct legal principles in his analysis of the father’s claim for relief from payment of the full table amount having regard to the undue hardship provision in s. 10 of the Child Support Guidelines?

Did the Motions Judge err in law by failing to apply the correct legal principles in his analysis of the father’s claim for relief from payment of the full table amount having regard to the undue hardship provision in s. 10 of the Child Support Guidelines?

44The Motions Judge applied the correct legal test. See paragraphs 19-23 of his Reasons. There was ample evidence to support the factual finding leading to his ultimate conclusion that any hardship that would be occasioned by payment of the table amount on an ongoing basis did not rise to the level of “undue hardship” as set out in the controlling jurisprudence.

45Although there is no fixed upper income level in the Child Support Guidelines which bars a claim for undue hardship relief, we note that the father’s income exceeds $100,000 per annum. Counsel for the appellant concedes that there is apparently no precedent for granting undue hardship relief to any payor having an income anywhere close to that level. Although the standards of living test contemplated in s. 10(2) of the Guidelines compares the relative standard of living of the two households, it is clear that, in and of itself, this would not establish undue hardship, even if we were to assume that Mr. Perkins’ household standard would be a lower ratio than Ms. Costa’s. The household standard of living comparison test operates to deny relief based on undue hardship. It does not create a qualifying finding that there is undue hardship.

46We agree with the Motions Judge that it was never necessary to consider s. 10(2) of the Guidelines because Mr. Perkins failed to establish “undue hardship” on the evidence.

47There is no merit to this ground of appeal.

Did the Motions Judge err in law or principle in the costs award?

Did the Motions Judge err in law or principle in the costs award?

48Ms. Costa claimed costs in the amount of $18,166.74 on a mixed partial indemnity basis for costs incurred prior to her Offer to Settle and substantial indemnity thereafter. The Motions Judge fixed costs at $8,000 inclusive of HST, plus $2,170 for disbursements.

49The Motions Judge erred in his determination that “the mother did better than her offer of April 15, 2011 and should receive substantial indemnity costs thereafter”. Her offer included a non-severable provision requiring the father to contribute to future expenses under s.7 of the Child Support Guidelines, unspecified as to the nature of the expense or its magnitude. Under rule 18 of the Family Rules a party may be entitled to “full indemnity” after making a formal Offer to Settle, based upon an outcome better than that party’s formal offer. That rule does not apply in this case.

50Rule 24(11) governs the quantification of costs. In M. (C.A.) v. M. (D.), (2003) 2003 18880 (ON CA), 67 O.R. (3d) 181, at para. 42, the Court of Appeal specifically approved the conclusion in Sims-Howarth v. Bilcliffe, (2000) 2000 22584 (ON SC), 6 R.F.L. (5th) 430 that Rule 24(11) of the Family Law Rules effectively does away with the two traditional scales of costs. Instead, the court must fix the amount of costs at some figure between a nominal sum and full indemnity. The subrule demands flexibility in examining the enumerated list of factors without any assumption about categories of costs.

51On appeal Mr. Perkins submits that the Motions Judge erred by failing to consider that the mother’s costs are tax deductible. That argument was not advanced below. We decline to consider it for the first time on appeal, particularly when there is such an obvious gap between the costs award to the mother and her actual costs, a shortfall that undermines her success on the child support issues.

52We have the benefit of the same written costs submissions that the Motions Judge considered. Taking into account the factors in rule 24(11) it is our view that costs of $8,000 plus $2,170 for disbursements is at the low end of the appropriate range. There is no cross appeal seeking an increased amount. We fix the costs at the same amount ordered by the Motions Judge.

Disposition

Disposition

53The appeal is dismissed, with costs of the appeal fixed at $7,500, all inclusive, in favour of the Respondent mother.

Aston J.

Pepall J.

McGee J.