Court File and Parties

Court File No.: Toronto D219/98

Date: 2012-05-10

Ontario Court of Justice

Between:

EDYTA KATARZYNSKI

Applicant

— AND —

JACEK KATARZYNSKI

Respondent

Before: Justice Marvin A. Zuker

Heard on: April 16 and April 17, 2012

Reasons for Judgment released on: May 10, 2012

Counsel:

Claire Hepburn, Jennifer Wall and Amanda Carling — for the applicant

Jacek Katarzynski — on his own behalf

ZUKER J.:

BACKGROUND

[1] The purpose of these proceedings is to determine what is the income of the respondent father, Jacek Katarzynski, for the purpose of determining his obligation to pay child support pursuant to the Child Support Guidelines. What portion of the children's extraordinary expenses, mainly Monica's competitive gymnastics, Magda's competitive dance, and Monica's orthodontic treatment, ought the respondent father cover. What is the proper amount of retroactive support that should be paid from the date of separation, that is, August 1, 2008, up until December 31, 2009.

[2] The applicant seeks an order that the respondent pay child support in the amount of $1,318 a month, based on an imputed income of $93,000.

[3] Secondly, an order that the respondent father pay $736 per month, which represents 59 percent of the children's monthly extraordinary expenses. And an order for child support arrears to be paid back at a rate of $150 a month.

[4] Access was dealt with through the case management process and custody was decided by Justice Brownstone on November 14, 2011. The parties originally separated in 1998, which gave rise to a support order at that time then filed with the FRO. That order was for $318 per month. After the parties reconciled shortly after the order was filed, neither party took steps to withdraw the order. The order remained in place until a new SDO was issued in December 2011 by the Justice Sherr.

[5] The parties separated for a second and final time on July 31, 2008. After separation, the parties attempted to reach a negotiated resolution. The father prepared a separation agreement and voluntarily began paying $900 a month in support.

[6] The applicant and respondent were married on April 20, 1991. They separated on or about August 1, 2008. They have two children, Monica Katarzynski, born February 7, 1996 ("Monica") and Magdalene Maria Katarzynski, born September 26, 2001 ("Magdalene"). They agreed to be bound by a Separation Agreement (undated), found at Tab 1, Exhibit 1, Applicant's Book of Documents), which … "settles all past, present and future issues between them. …"

[7] The Agreement states in part that:

[8] "Jacek and Edyta will share joint custody of Monica and Magdalene; primary residence shall be with Edyta. Where either parent is not in the jurisdiction, the parent who has the children with him/her is authorized, after consultation/agreement with/from the other, to sign any necessary medical or educational documents.

[9] "At this time, Monica is very involved in gymnastics and has an intensive schedule.

[10] "The parties will ensure that Monica attends all scheduled gymnastics on holidays and other school breaks. The parties agree that gymnastics program can not affect school grades – the gymnastic program schedule will be adjusted accordingly if grade average will be below 85%.

[11] "For purposes of determining child support for Monica and Magdalene, Jacek's annual income will be revue base on T4 and support will be adjusted accordingly to guidelines.

[12] "5.3 Jacek will pay to Edyta as child support for Monica and Magdalene:

(a) the Table amount of $____, starting August 1, 2010, and on the 1st day of each month; and

(b) his share of the special or extraordinary expenses as set out in the applicable special or extraordinary expenses sections below, until a terminating event or a change as set out below.

[13] "5.4 The children's current special or extraordinary expenses are:

(a) Children's gymnastic expenses, including travel, competition fees, costumes, training,

(b) Uninsured medical, therapy, physiotherapy and dental expenses,

(c) Additional education, and

(d) School travelling

(e) Child care.

[14] "5.5 For apportioning of special or extraordinary expenses, the following formula will be used: Jacek's income X 100% / Edyta's income + Jacek's income.

[15] "5.11 Either Jacek or Edyta may seek a change in child support if there is a material change in the condition, means, needs or other circumstances of Jacek, Edyta, Monica or Magdalene that would affect child support.

[16] "5.13 Whoever seeks a change will give the other in writing:

a) notice of the proposed change,

b) evidence supporting the proposed change,

c) any requests for information to determine the issue.

[17] "8. Medical and Dental Benefits

[18] "8.4 Medical expenses not covered by either party's extended health insurance are special or extraordinary expenses and will be paid according to section 5.4 of this Agreement.

[19] "8.5 Jacek and Edyta are each responsible for his or her own medical, extended health and dental expenses. Jacek and Edyta will both maintain the children as beneficiaries of extended health insurance through his or her employment, and will sign documentation authorizing the other to make claims directly to his or her insurer. A party who is reimbursed for a medical expense paid by the other will immediately forward the reimbursed amount to the other.

[20] "10.5 Depth statement and division table as of July 18, 2008 – due to the special circumstances late child support and expenses are included since July 18, 2008.

	JACEK	EDYTA	DATE
RRSP	+$10,127.00	+$5,000.00
LINE OF CREDIT	-$28,373.07		July 18, 2008
CREDIT CARD	-$10,158.23		July 18, 2008
KIA*	-$23,000.00		July 2008
HONDA		+$7,000.00	July 2008
LATE CHILD SUPPORT AND EXPENSES SINCE AUGUST 2008	-$11,286.00
TOTAL	-$51,404.30	+$714.00
EQUALIZATION*	+$25,702.15	-$25,702.15

*Lines of Chart amended for clarity.

[21] "10.8 Edyta will pay 50 percent towards the total balance – equalization payment of $25,702.15 within 12 months.

[22] "12.12 Jacek and Edyta have both had independent legal advice, Jacek from full name and Edyta from Cathryn L. ___ul. Jacek and Edyta: (i) understand his or her rights and obligations under this Agreement and its nature and consequences, (ii) acknowledge that this Agreement is fair and reasonable, (iii) acknowledge that they are not under any undue influence or duress, and (iv) acknowledge that both are signing this Agreement voluntarily.

[23] "12.15 The effective date of this Agreement is the date on which the latter party signs it.

[24] "This Agreement was prepared jointly by both parties."

[25] In any event we do see the intent of the parties in the provisions of the separation agreement. In particular, great attention is paid to gymnastics and health-related expenses. Intention of the parties, therefore, is determined by their conduct. This is not a comprehensive separation agreement. The parties were not represented by lawyers who completed certificates of independent legal advice.

[26] Tab B of the applicant's affidavit is Monica's official report card for grades 9 to 12.

[27] The respondent, in cross-examination, states:

Q. Yes, and if you look at her marks, she earned an 87 in History, did she not? An 85 in French, a 78 in Math and a 93 in Healthy Active Living. So she's a very high-achieving student.

A. Yes, my uh...

Q. Yes she's a very high-achieving student.

A. ...the instructions to my kids or our kids is very simple. If they fall under, because the academics are the most important part, they fall under 85, there will be no activities after school, the school is the most important. Lately, unfortunately....

Q. But she is actually doing just over 85, right?

A. No this is from the last semester from February. Lately, actually, she is falling under 80.

[28] MS. HEPBURN: Q. I, want to go on now to Tab two of the book of documentary evidence. And it's at clause 5.3, there's a separation agreement at Tab two. Do you recognize that document?

THE COURT: Tab one of Exhibit 1. Yes.

MS. HEPBURN: Q. And it's a few pages in, it's clause 5.3 so we are one, two, it's the seventh page, okay? So I would just like you to look at clause 5.3 for me.

A. Yes.

Q. And can you read clause 5.3.

A. Yes, he will pay to Edyta as child support for Monica and Magda, (a) the table amount of expenses starting August 1, 2010, and then the first day of each month and his share of the special or extraordinary expenses as set out in the applicable special or extraordinary expenses section below until a terminating event or a change as set out below.

Q. And then can you continue to read paragraph 5.4?

A. The children's special or extraordinary expenses that are the children's gymnastics expenses including travel, competition fee, costing [ coaching?] , training, ensuring medical therapy, physiotherapy and dental expenses, additional education and school travelling, child care.

Q. Okay, thank you. So back when you when you presented this agreement, you had intended to fund the gymnastics, is that correct, for the extraordinary expenses?

A. At this time, the gymnastic expenses were $3,000.

Q. Okay, and you were also prepared to fund Magda's expenses as well?

A. At this time, expenses were $1,000.

Q. All right, but you had intended to fund. Okay and it's your preference actually that, that Monica continued to, continue on with T-Dot Tumblers, is that correct? You would prefer her to go to that, that club, is that true?

A. I believe that the club…

Q. Is that true? Yes or no?

A. No, there is no yes or no answer to that question.

Q. All right.

A. Because it's not a club-dependant. It's expenses-dependant.

[29] On June 25, 2010, Justice Sherr ordered that:

1. The requirement for the Respondent Father's signature on the passport application forms for Monica Katarzynski, born 7/2/1996, and Magdalene Katarzynski, born 26/9/2001, be dispensed with.

2. The requirement that the Applicant Mother obtain the Respondent Father's consent to travel with the children Monica Katarzynski, born 7/2/1996, and Magdalene Katarzynski, born 26/9/2001 be dispensed with.

3. The Respondent Father shall pay the fees for one urgent passport application for Monica Katarzynski, born 7/2/1996, totalling $107.

4. The passports shall remain in the possession of the Applicant Mother.

5. The mother will be responsible for transporting Monica Katarzynski, born 7/2/1996, to the gymnastics camp.

6. The Respondent is to pay the Applicant's costs fixed at $300, payable in 30 days.

[30] On September 29, 2010, the court ordered in part that:

1. A monthly statement of revenue and expenses of his business since April 1, 2010.

2. Documentary evidence of revenue and expenses of his business since April 1, 2010.

3. Copies of all business and personal bank account and credit card statements since January 1, 2010.

4. A breakdown of all salaries and employees from the business.

5. The Applicant Mother shall have temporary custody of the children, namely Magdalene Katarzynski, (born 26/9/2001, "Magda") and Monica Katarzynski (born 7/2/1996).

6. The Applicant Mother shall consult the Respondent Father on any major decisions regarding the children.

On consent:

7. The Respondent Father shall have access to the children every Tuesday after 6:00 p.m. and no later than 8:00 p.m. and three Saturdays per month from 10:30 a.m. to 9:00 p.m.

8. If the Respondent Father is out of the country for more than one Saturday during that month, no make up access will be provided.

9. The Respondent Father will provide the Applicant's lawyer with his work schedule within 7 days of the date of this consent.

[31] On December 13, 2010, Justice Sherr ordered in part that:

1. The Respondent Father pay the Applicant Mother the Child Support Guidelines table amount of $902 per month on the first day of each month, commencing on December 1, 2010. This is the Child Support Guidelines amount based on an income of $60,000 per annum. This order is without prejudice to adjustment as to quantum of income, start date of the temporary order or contribution to special expenses to be argued on the return date.

2. The Respondent Father shall pay the mother's costs of $250 for the December 13, 2010, motion forthwith.

[32] On January 3, 2011, the Court ordered in part that:

1. Income of both parties is fixed at $44,800 per annum.

2. Special Expenses:

a. Orthodontic (approximate, not cost) - $4,600 less 27% ($1,242) = $3,358.00.

b. Monica's gymnastics - $425 per month X 12 months - $5,100.00.

c. Chicago gymnastics trip = $1,200.00.

3. The Respondent Father, Jacek Katarzynski, shall pay child support for the children, namely Magdalene ("Magda") Katarzynski (born September 26, 2001) and Monica Katarzynski (born February 7, 1996) as follows:

a. Ongoing table support at $677 per month.

b. Special Expenses at $381.58 per month.

c. Total - $1,058.58 per month.

4. Child support arrears owing for 2010 are fixed at $658.00.

[33] On May 20, 2011, Her Honour Justice Curtis ordered in part that:

1. No third party is needed to be present at the time of access pick-up and drop-off.

2. The children are now 15 and 9 years old. If the youngest child is visiting alone, the mother may designate another adult to assist with transfer.

3. The mother shall respond to emails from the father sent to her personal email address within 48 hours.

4. The father shall not email the mother at her work email address.

[34] On August 9, 2011, the Court ordered in part that:

1. The father will be given one opportunity to comply with the child support order of February 3, 2011, or his pleadings will be struck and the Court will proceed in his absence. The Court finds that he has the ability to pay.

2. The father shall have until September 30, 2011, to pay arrears of $4,360.64 plus the September support payment of $1,058.58 to the Family Responsibility Office. The Court will require proof of payment.

3. The mother's motion to strike the father's pleadings (as set out in the Case Conference Brief) will be adjourned to see if there is compliance by the father.

4. The mother seeks costs of today. The question of costs will be reserved to the next appearance.

[35] On October 4, 2011, His Honour Justice Sherr ordered in part that:

1. On a final basis, the Respondent Father shall have access to the children, namely Monica Katarzynski (born 07/02/1996) and Magdalene Katarzynski (born 26/09/2001) three Saturdays per month from 10:30 a.m. to 9:00 p.m.

2. The Respondent Father shall communicate to the Applicant Mother by the first day of every month the three Saturdays that he will exercise access for the following month (i.e., by November 1, the Respondent Father will communicate to the Applicant Mother the three Saturdays in December on which he plans to exercise access).

3. If the Respondent Father does not communicate pursuant to Clause 2 of this Order, access shall occur on the first three Saturdays of the month.

4. The Respondent Father shall have access to Monica on Tuesdays from 6:00 p.m. to 8:00 p.m.

5. The Respondent Father shall have access to Magdalene from pick up at school at 3:00 p.m. to drop off at the Applicant Mother's home at 7:30 p.m. on Mondays and Thursdays.

6. The Respondent Father shall provide financial disclosure as follows:

a. An income statement from PROJK;

b. Statements of revenue and expenses from PROJK and GN Packaging Machinery;

c. Interim financial statements from PROJK and GN packaging Machinery;

d. Copies of his corporate and personal bank account statements, credit statements, and financial statements of business for the past six months, within 30 days of the next court appearance.

7. Both sides sought costs and oral reasons were given.

a. The father is to pay the mother costs of $300 for the August 9, 2011 appearance.

b. Costs of this settlement conference are set at $1,500, payable in the cause, as directed by the summary motion and/or trial judge; $500 to the custody issue; and $1,000 to the support issue.

8. A summary judgment motion shall be held on the issue of custody only on November 14, 2011 at 12:00 p.m. before Justice Brownstone.

[36] On a final basis, Justice Brownstone in part ordered on November 14, 2011 that:

The Applicant have final and sole custody of Monica and Magda.

The Respondent Father shall pay costs of $500 as per Justice Sherr's order dated October 4, 2011 (for the custody portion of the settlement conference) plus $1,000 for today's summary judgment motion. All costs to be paid forthwith.

On consent, the parties shall communicate only by email or through legal counsel, a police officer, or a CAS worker.

[37] On February 14, 2012, this court ordered in part that:

1. The Applicant Mother and the Respondent Father shall serve and file affidavit evidence for the witnesses that they intend to call at trial by March 16, 2012.

[38] A detailed order of disclosure was also made and in part…

c. Records concerning the repayment of the loan that the Respondent Father received from Jerzy Katarzynski on March 1, 2010;

d. Records of rent and/or board payments made from the Respondent Father to his parents since he moved in with them;

e. A mileage log for the Respondent Father's vehicle, in support of his claim for deducting amounts related to it as a business expense;

f. An up-to-date accounting of the amounts that PROJK and CN Packaging Machinery have paid in legal fees;

g. An explanation of GN Packaging Machinery and PROJK's company's policies for reimbursement of expenses.

h. In accordance with Justice Sherr's Order of October 4, 2011, the following:

i. An income statement from PROJK, and

ii. A statement of revenue and expenses from PROJK, and

iii. Copies of statements from the corporate bank account and financial statements of business for PROJK, or

iv. Evidence that PROJK's bank accounts are closed, evidence that PROJK is no longer carrying on business, and evidence of where the monies in the PROJK account were transferred to.

FACTS

[39] Monica is a gymnast, currently competing at the national level. She has been involved in gymnastics since 2004. The applicant hopes that Monica will be able to get a gymnastics scholarship to university. The applicant submits that when the respondent father and the applicant lived together, they both placed a priority on Monica's gymnastics. I take note that this is extensively referred to in the separation agreement prepared by the respondent. Gymnastics, according to the applicant, for Monica (and later Magda) was not a significant financial strain during their marriage.

[40] Justice Sherr, on January 3, 2011, found that gymnastics-related expenses for Monica to be special and extraordinary expenses for the purposes of Section 7 of the Child Support Guidelines (Ontario).

[41] In September of 2009, the applicant enrolled Magda in dance classes. Magda currently takes three classes: ballet, jazz and acrobatic (a combination of gymnastics and dance). The dance school that Magda attends has four levels of competition. There are opportunities for Magda to get scholarships for dance as well, such as from prizes in competitions.

[42] I am somewhat troubled by the requirement that the respondent is required to pay much of the extraordinary expenses while the applicant, arguably, determines what those expenses will be. The order was made in the context of extraordinary expenses that were relatively modest. Were those expenses to increase significantly, a variation application would be appropriate. However, given the current level of expenses, I am not prepared to interfere.

Orthodontic Treatment

[43] Monica and Magda are under the care of an orthodontist. Monica received her braces on October 13, 2011. Magda will begin her orthodontic treatment two to three years from now. In the interim, plans are to extract several of Magda's teeth and then re-evaluate six to eight months later. The cost for Magda's treatment is not known.

RESPONDENT'S EMPLOYMENT HISTORY AND INCOME

[44] The applicant submits that when she married the respondent in 1991, he had attended college in Poland and had a diploma certifying him as a Mechanical Engineering Technician.

[45] During their marriage, the respondent completed a diploma program at Humber College (1993-1994) and was qualified as an Electronic Engineering Technician. He has some 26 years of experience in electrical technology.

[46] At separation, the respondent was employed at GN Packaging Equipment. In 2002, he became the Manager of Technical Support and Controls. While employed at GN Packaging Equipment ("GNPE"), he earned $117,575 in 2007. In 2008, he earned $109,843. In 2009, he earned $91,190. In December 2009, he lost his job at GN Packaging Equipment. The company went bankrupt.

[47] I find that the respondent has credible marketable skills with unlimited potential to earn a very significant income.

[48] In May 2010, the respondent formed a partnership, PROJK, with two other former employees of GNPE. Later in 2010, the respondent and his partners incorporated GN Packaging Machinery ("GNPM").

[49] The respondent and his partners are presently being sued in the Ontario Superior Court of Justice on the basis of an alleged illegal asset transfer agreement. Between October 2010 and December 2011, more than $142,000 was paid in legal fees according to the respondent's disclosure. This figure continues to grow.

[50] On March 18, 2010, the applicant made a consumer proposal under s. 66 of the Bankruptcy and Insolvency Act through Segal & Partners Inc. The applicant submits that the consumer proposal consolidated all her debts through the Administrator of the proposal, which amounted to $94,848.73 at the time. The Administrator recommended that her proposal of $16,200 (in aggregate) be accepted by her creditors because it would "provide a certain and greater recovery to the creditors [than] they would realize in a bankruptcy."

[51] The applicant started making payments towards the consumer proposal in March 2010. She continues to pay $270 per month and currently owes about $11,000 under the consumer proposal.

[52] The respondent submits that all the expenses which are reimbursed to him are the expenses for his company. Expenses, travel expenses – they are not his expenses, they are company expenses – expenses for car rentals, expenses for the flights, expenses to purchase the parts.

[53] Tab N of the applicant's affidavit is a list of creditors of the consumer proposal that the applicant prepared.

[54] The outcome of the credit proposal as a result of all of these debts was that a certain percentage of all the debts were going back to the creditors and was accepted by the creditors.

[55] In the opinion of the administrator, the offer of $16,400 by the (applicant) debtor provided a greater recovery to the creditors than they would realize in bankruptcy.

[56] The respondent's most recent Financial Statement from March 7, 2012, indicates that he is self-employed, carrying on business under the name of GN Packaging Machinery Inc., 6A-170 The Donway West, Suite 1018, Toronto Ontario Canada M3C 2E8, jack@gnpackaging.com.

[57] When GN Packaging went bankrupt in 2009, the customers started to contact the respondent, especially two customers whose two machines were on the floor of the GN Packaging ATR plant. They asked him to finish their machines for them and help them out with the delivery and also the installation.

[58] Those two customers "…kind of inspired me. Instead of looking for the work, instead of looking for the taxpayers to support me in my unemployment, I started, together with my partners, which are long employees of the GN Packaging as well, we started the partnership, Project K. So the Project K initially finished and helped those two customers to install their machines. It was absolutely the right choice to utilize our experience – when you combine it together, close to one hundred years of experience with those machines – and basically start supporting existing list of the customers…"

[59] Sam Cho, the owner of the company Gamma and the company GN2010, purchased the intellectual property of GN Packaging ATR. He asked the respondent basically to form the partnership with him to continue building the machines and to continue supporting the customers.

[60] They purchased the intellectual property from Sam Cho in August of 2010. We purchased the intellectual property of all the GN ATR.

[61] He indicates that last year, his gross income from all sources was $24,063.66.

Total monthly income from all sources: $3,048.64. Total monthly income X 12 = Total annual income: $36,583.68.

Housing – Rent or mortgage: $450.00. Total Amount of Monthly Expenses: $1,846.81. Total Amount of Yearly Expenses: $22,161.72.

Family Dept Line of Credit – Loan: Full Amount Now Owing: $17,213.27. Monthly Payments: $1,500.00.

Rent and Food: Full Amount Now Owing: $15,350.00. Monthly Payments: $450.00. Total Amount of Debts Outstanding: $48,309.46.

[62] Gary Eastwood and Ed Brunott deposed in their affidavits dated March 7 2012, and gave evidence on behalf of the respondent on April 17, 2012, that they knew Jack Katarzynski during the time he worked at GN Packaging Equipment.

[63] Jack Katarzynski and Gary Eastwood worked together at GN Packaging Equipment until the day it closed down, filing for bankruptcy in December 2009. In January 2010, the respondent was approached by two of the former customers of GN Packaging Equipment, ALCAN and Covidien, in regard to helping them complete the machine they had purchased unfinished from the Trustees of the GN Packaging Equipment.

[64] Their relationship endured from January 2010 until April 2010. They were contacted while at IJM by the owner of Gamma Machinery, Sam Cho, who had purchased the IP of GN Packaging Equipment from the Trustees of the GN Packaging Equipment and asked if they would like to join him in a joint venture, GN 2010. They agreed to provide services for GN 2010 while they negotiated the proposed joint venture. In the end, no agreement was formed. Sam Cho agreed to sell to PROJK ( Jack Katarzynski, Ed Brunott and Gary Eastwood) the IP of GN Packaging Equipment for their services, because he was no longer going to continue GN 2010.

[65] It is submitted that Sam Cho breached the contract between them for the IP of GN packaging Equipment by preventing them from completing the services agreed in the contract. "We kept the IP as per the contract so Sam Cho and Mark One Machinery filed the lawsuit against us which is currently before the courts…"

[66] The respondent submits,

"I do not have any benefits collected from GN Packaging Machinery Inc.

"I have a company VISA card which is used for business purposes only. The company VISA statements are paid by GN Packaging Machinery.

"I use my own car for business purposes. The company does not pay met anything for own-car use for business purpose."

[67] Ed Brunott deposed that, in August 2010, PROJK (Jack Katarzynski, Gary Eastwood and he) purchased the IP of GN Packaging Equipment from Sam Chow [sic]. Ed Brunott states that Gary Eastwood, the respondent and he are not underemployed. They are using the skills and knowledge obtained in the years working for GN ATR in an effort to create a new company based on servicing the customers of the old company. Also, directly after the closing of GN ATR, job searches did not yield any offers for a similar position as held at GN ATR.

[68] I find that there was a significant evidentiary dispute at trial. Documents were referred to but not presented. Disclosure was far from complete.

THE LAW

ISSUES

[69] The applicant's claim against the respondent is for child support. In order to conclude this matter, it is necessary for the court to determine the income of the respondent. There are occasions when sources of income do not give a reliable picture of someone's annual income for support purposes and on these occasions the Court has been given a discretion in Section 19 of the Child Support Guidelines (Ontario), O. Reg. 391/97 as am. ( CSG ). This discretion is broad allowing the court to impute such amount of income to a spouse "as it considers appropriate in the circumstances." Section 19 contains a list of circumstances but not exhaustive.

[70] The wording is such that the categories listed in section 19(a) through (i) are examples where income may be imputed. The purpose of the section is to attribute income to a spouse/parent who has not provided the court with a true indication of his or her income. See Bak v. Dobell, 2007 ONCA 304, 2007 O.J. No. 1489 (Ont.C.A.); Riel v. Holland, 2003 O.J. No. 3901(Ont.C.A.) and Mascarenhas v. Mascarenhas, 1999 O.J. No. 37 affirmed 2000 O.J. No. 6030 (SCO).

[71] Child support may properly be awarded pursuant to the Family Law Act of Ontario (subsection 33(3) and the Child Support Guidelines ) (CSG).

[72] Sections 15 to 20, inc. of the CSG can be relied upon to determine a payor's income before the court can determine the Table amount that a party would owe to the other.

[73] In addition to the monthly amount that the payor may owe the recipient, the recipient may seek an additional contribution by the payor toward a child's "special or extraordinary expenses," as defined in section 7 of the Guidelines.

[74] A parent may seek to pay less than the amount determined or a parent may seek to receive more than the amount determined, based on the ground of undue hardship.

RETROACTIVE CHILD SUPPORT

[75] In D.B.S. v. S.R.G., L.J.W. v. T.A.R., Henry v. Henry and Hiemstra v. Hiemstra, 2006 SCC 37, [2006] 2 S.C.R. 231, the S.C.C. decided that a payor parent always has the obligation to pay, and the dependent child always has the right to receive, child support in an amount that is commensurate to his/her income." The corollary of this obligation is that "a [payor] parent will not have fulfilled his/her obligation to his/her children if (s)he does not increase child support payments when his/her income increases significantly." There is a positive duty on a payor parent to increase child support payments when his/her income increases significantly, failure to do so placing the payor at risk of a retroactive award.

[76] The S.C.C. addressed a number of factors to consider in making a retroactive child support award, summarized as follows:

The term "retroactive" is really a misnomer. The general concern about applying obligations retroactively does not apply in the case of retroactive child support orders, since it is only the enforcement of an unfulfilled obligation, namely child support, that is retroactive, and not the imposition of the obligation itself, which existed all along.

[77] A child support obligation in an agreement may be given considerable weight provided it is reasonable. Where circumstances have changed (or were never as they first appeared) and the actual support obligations of the payor parent have not been met, courts may order a retroactive award so long as the applicable statutory regime permits it.

[78] Where there is no existing payment of child support, absent special circumstances (e.g., hardship or ad hoc sharing of expenses with the custodial parent), it may be unreasonable for the non-custodial parent to believe he or she was acquitting him/herself of his/her obligations towards their children. The court may award retroactive child support.

[79] A recipient parent's delay in seeking child support is not presumptively justifiable, unless there is a reasonable excuse (i.e. recipient's justifiable fear that the payor parent would react vindictively to the detriment of the family; recipient's lack of financial or emotional means to bring an application; or inadequate legal advice).

[80] Has the payor parent engaged in blameworthy conduct, characterized expansively as any conduct that privileges the payor parent's own interests over his/her child's right to an appropriate amount of support? I would answer this in the affirmative.

[81] Blameworthy behaviour on the part of a payor includes hiding income, intimidating a recipient parent from pursuing child support and/or misleading a recipient parent into believing that appropriate child support is being paid. However, failing to increase child support automatically will not necessarily qualify as blameworthy. It may be a question of how reasonable the payor's belief is that his/her obligations were being met.

[82] In Price v. Price, 2010 BCCA 452, the B.C. Court of Appeal upheld a trial judge's finding that while there was underpayment, there was no blameworthy conduct. The Court carefully noted that "blameworthy conduct is a question of the defendant's subjective mental state."

[83] A payor's conduct can mitigate a retroactive award in some circumstances, such as where a parent has met an increased obligation indirectly.

[84] Justice Bastarache, supra , in D.B.S. , for the majority, held that the date of retroactivity would generally be the date of effective notice, defined as the date on which the topic was broached by the recipient parent. Once broached, the recipient's responsibility is not automatic but discussions must move forward or legal action must be contemplated. Even if effective notice is given, it is usually not inappropriate to delve too far into the past. It may then be inappropriate to make a support award retroactive to a date more than three years before formal notice was given to the payor/parent.

[85] In making a retroactive award, the court may consider of the following:

(1) whether the recipient parent has supplied a reasonable excuse for his/her delay;

(2) the conduct of the payor parent;

(3) the past and present circumstances of the child; and

(4) the hardship the retroactive award might entail.

[86] A retroactive award is generally retroactive to the date when effective notice was given to the payor parent, unless the payor acted in a blameworthy manner, in which case support should be retroactive to the date when the payor's circumstances changed materially. See Franklin v. Franklin, 2010 ABQB 787.

[87] Soon after the release of D.B.S. , supra , the Ontario Court of Appeal considered its application in a trio of appeals of trial decisions that predated its release. In a brief endorsement in Neil v. Boudreau, [2007] O.J. No. 169 (C.A.), the court upheld the trial judge's retroactive award. It accepted that notice given by the recipient of a desire to renegotiate child support in 1997 constituted effective notice for the purposes of D.B.S. Further, it accepted that a subsequent agreement could not effectively erase that notice where it was based on misinformation that the payor had deliberately supplied.

[88] In Baldwin v. Funston, 2007 ONCA 589, the parties had entered into a comprehensive separation agreement in 1994, after which the payor husband's income increased dramatically in 1996. The recipient wife knew of the change by 1997 but not the extent of it. She did not seek disclosure until late 2002 when notice seeking increased and retroactive child support was given. The trial judge dismissed the claim for retroactive child support, concluding that the respondent did not engage in blameworthy conduct as the separation agreement did not obligate the payor to disclose material increases. The Court of Appeal upheld the trial judge's conclusions regarding the agreement, but found that the trial judge had erred in concluding that the payor had not engaged in blameworthy conduct.

[89] The presumption that by complying with a settlement agreement, a payor is not engaging in blameworthy conduct is rebutted where the change in the payor's income is sufficiently pronounced. The reasonableness of the payor's belief that he/she is meeting his/her child support obligations should be gauged by comparing how much he/she actually paid and how much he/she should have paid. However, the court found that the trial judge had taken a holistic view of the matter consonant with D.B.S. and upheld the decision.

[90] In Connelly v. McGouran, 2007 ONCA 578, the trial judge had applied the criteria in Walsh , supra , to award approximately two years retroactive support, but did not award support back to the date of effective notice, some four years before trial. The court held that in light of D.B.S. the trial judge was required to place significant emphasis on the father's failure to make the required financial disclosure pursuant to a settlement agreement, which constituted blameworthy conduct and had resulted in a finding of contempt.

[91] The court noted that the SCC effectively found that a payor parent should not be permitted to gain any advantage from blameworthy conduct of this type. The court also noted that the trial judge was required, as per D.B.S. , to consider alternate methods of payment that might eliminate or reduce hardship occasioned by the retroactive award. The case was sent back for a rehearing.

[92] In order to ensure that child support payments keep up with the financial circumstances of the payor, the Guidelines mandate ongoing disclosure of income: see subsection 25(1). Every spouse/parent against whom a child support order has been made must, on the written request of the other spouse, not more than a year after the making of the order, provide the income information referred to in subsection 21(1) for any of the three (3) most recent taxation years. A similar obligation to provide income information exists on the part of the recipient in cases where his/her income was used to determine the amount of the order (as, for example, with section 7 expenses): see subsection 25(3).

[93] In D.B.S. , Bastarache J. emphasized at para. 99 that in considering the question of retroactive support, a court should strive for a holistic view of the matter and decide each case on the basis of its particular facts. Bastarache J. also set out at paras. 100-116 four factors that should be considered in making a retroactive child support order, noting that none of the factors is decisive: the reason why support was not sought earlier, the conduct of the payor parent, the circumstances (both past and current) of the child, and potential hardship on the payor parent flowing from a retroactive award.

[94] I rely on Justice Bastarache's comment at para. 116 of D.B.S. that hardship for the payor parent is much less of a concern where it is the product of his/her own blameworthy conduct.

[95] In D.B.S. , Bastarache J. said at para. 97:

Lest I be interpreted as discouraging retroactive awards, I also want to emphasize that they need not be seen as exceptional. It cannot only be exceptional that children are returned the support they were rightly due. Retroactive awards may result in unpredictability, but this unpredictability is often justified by the fact that the payor parent chose to bring that unpredictability upon him/herself. A retroactive award can always be avoided by appropriate action at the time the obligation to pay the increased amounts of support first arose.

[96] The exception to the general rule is articulated in D.B.S. , namely, if the payor parent engages in blameworthy conduct, then the presumptive date of retroactivity moves back to the time of that conduct. As explained by Bastarache J. at para. 124:

The date when increased support should have been paid, however, will sometimes be a more appropriate date from which the retroactive order should start. This situation can most notably arise where the payor parent engages in blameworthy conduct. Once the payor parent engages in such conduct, there can be no claim that (s)he reasonably believed his/her child's support entitlement was being met. This will not only be the case where the payor parent intimidates and lies to the recipient parent, but also where (s)he withholds information. Not disclosing a material change in circumstances – including an increase in income that one would expect to alter the amount of child support payable – is itself blameworthy conduct. The presence of such blameworthy conduct will move the presumptive date of retroactivity back to the time when circumstances changed materially. A payor parent cannot use his/her informational advantage to justify his/her deficient child support payments.

[97] The test for a material change of circumstances is set out by the Supreme Court of Canada in Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, in the context of determining whether spousal support should be awarded, given a release of spousal support in a separation agreement. At paragraph 88, the court stated:

The parties ' intentions , as reflected by the agreement, are the backdrop against which the court must consider whether the situation of the parties at the time of the application makes it no longer appropriate to accord the agreement conclusive weight. We note that it is unlikely that the court will be persuaded to disregard the agreement in its entirety but for a significant change in the parties ' circumstances from what could reasonably be anticipated at the time of negotiation. Although the change need not be "radically unforeseen", and the applicant need not demonstrate a causal connection to the marriage, the applicant must nevertheless clearly show that, in light of the new circumstances , the terms of the agreement no longer reflect the parties ' intentions at the time of execution and the objectives of the Act. Accordingly, it will be necessary to show that these new circumstances were not reasonably anticipated by the parties , and have led to a situation that cannot be condoned.

[98] As set out by Justice L'Heureux-Dubé in Willick v. Willick, [1994] 3 S.C.R. 670, a proper variation of child support where a mother's income increases takes into account the needs of the children as well as the increased income of the wife. An increase in the mother's income could very well lead to a conclusion that although the amount of spousal support should be reduced, the amount of child support should be commensurately raised in order to address realistically the situation of the family and the fact that child support had previously been understated because of its interrelationship with the means of the payor.

ARREARS

[99] The Ontario Court of Appeal decision in DiFrancesco v. Couto, (2001), 56 O.R. (3d) 363 (C.A.) at para. 23 instructs that the following factors are to be considered in a decision to rescind or not to rescind arrears:

(1) the nature of the obligation to support, whether contractual, statutory or judicial;

(2) the ongoing financial capacity of the [payor] spouse;

(3) the ongoing need of the custodial parent and the dependent child;

(4) unreasonable and unexplained delay on the part of the custodial parent in seeking to enforce payment of the obligation, tempered, however, in the case of child support with the fact that such support obligation exists for the child's benefit, is charged with a corresponding obligation to be used by the custodial parent for the child's benefit and cannot be bargained away to the prejudice of the child;

(5) unreasonable and unexplained delay on the part of the [payor] spouse in seeking appropriate relief from his obligation; and

(6) where the payment of substantial arrears will cause undue hardship, the exercise of the court's discretion on looking at the total picture, weighing the actual needs of the custodial parent and child and the current and financial capacity of the [payor spouse], to grant a measure of relief, where deemed appropriate.

[100] Section 19(1) , supra, of the Child Support Guidelines reads as follows:

IMPUTING INCOME

[101] 19. (1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following:

(a) the spouse is intentionally underemployed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse;

(b) the spouse is exempt from paying federal or provincial income tax;

(c) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;

(d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines ;

(e) the spouse's property is not reasonably utilized to generate income;

(f) the spouse has failed to provide income information when under a legal obligation to do so;

(g) the spouse unreasonably deducts expenses from income;

(h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and

(i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

[102] The section 19 specified circumstances are just examples of situations where the court might well impute income to a payor: see Riel v. Holland (2003), 42 R.F.L. (5th) 120 (Ont. C.A.).

[103] In applying section 19 in the question of under-employment or unemployment, the trial judge must consider the following three questions.

(1) Is the spouse intentionally under-employed or unemployed?

(2) If so, is the situation required by virtue of the spouse's reasonable educational needs?

(3) If not, then what income is appropriately imputed in the circumstances?

[104] The court, in Drygala v. Pauli (2003), 61 O.R. (3d) 711 (Ont. C.A.) , cited with approval inter alia , in Lawson v. Lawson, [2006] O.J. No. 3179 (Ont. C.A.) , found that there is no need to find a specific intent to evade child support obligations before income can be imputed.

[105] Section 19 has no bad faith requirement: See Oxley v. Oxley, 2010 ONSC 1609 ; additional reasons at 2010 ONSC 3540 . In Homsi v. Zaya, 2009 ONCA 322, the Court of Appeal followed Drygala v. Pauli , supra , finding that the onus is on the person claiming that the other person is intentionally unemployed or underemployed to establish an evidentiary basis to support an imputation of income. I find that the applicant has satisfied the onus on her.

[106] As set out in Drygala v. Pauli, a parent cannot avoid his/her child support obligations by a self-induced reduction of income. Where obtaining an education is the reason for self-reduced income, once it is proved that a spouse is intentionally under, or unemployed, the onus then shifts to that spouse to establish what is required by virtue of his/her reasonable educational needs.

[107] A parent is not excused from his/her child support obligations in furtherance of unrealistic or unproductive career aspirations. Is the under, or unemployment required by virtue of so-called reasonable educational needs? Are the demands of the course(s) preventing him/her from keeping employment or can the program be done over a longer period of time so that the spouse could work full-time or part-time? As an example, could the spouse still work in the summer?

[108] The right to impute income is not an invitation to the court to select arbitrarily an amount as imputed income. The court must indicate how the imputed income is determined.

[109] The selection of an income must be grounded in the evidence. The question is: what amount is reasonable in the circumstances ?

[110] The relevant factors to consider again are: age, education, experience, skills and health of the parent, as well as such matters as the availability of job opportunities, the number of hours that could be worked in light of the parent's overall obligations including educational demands and the hourly rate that the parent could reasonably be expected to obtain. I have considered all of these factors.

[111] It is appropriate for the court to consider the amount that can be earned if a person is working to capacity while pursuing a reasonable educational objective. If the person does not provide the court with adequate information on the types of jobs available, the hourly rates for such jobs and the number of hours that could be worked, then the court can consider the person's previous earning history and impute an appropriate percentage of it