Court File and Parties

Court File No.: 41/11 Date: January 31, 2013

Ontario Court of Justice

Re: Virginia Domik – Applicant

and

Emilio Ronco - Respondent

Before: Justice R. Zisman

Heard: December 20, 2011, February 2, 2012, October 22, 2012, November 5, 2012 and November 8, 2012 and by written submissions.

Counsel:

• Mark Rush for the Applicant
• Julian Lipkowski for the Respondent

Reasons for Decision

1. Introduction

[1] This matter commenced by means of an application dated January 24, 2011 filed by the applicant, Virginia Domik ("mother") to vary the terms of a separation agreement dated February 15, 2000, for full and frank financial disclosure from the respondent, Emilio Ronco ("father") from 2006 to 2010, for an order imputing income the father if he did not file full and frank financial disclosure and that the child support for all three children be determined based on his income once it is determined.

[2] The father filed an answer seeking to dismiss the claim. But if an order was made for retroactive adjustment for child support, the father sought credit for overpayments of support for the years 2004 and 2005, credits for some of the section 7 expenses he paid, that the mother pay her proportionate share of ongoing section 7 expenses and that the mother pay him child support for their son who began to live with him in December 2010.

2. Procedural Background

[3] Although the proceeding should have been commenced as a motion to change, as the mother was unrepresented at the time and the father had already filed his answer, it was agreed that the case would proceed on the pleadings as filed.

[4] In view of the procedural irregularities and the convoluted nature of the proceedings, I will briefly outline the background of the court proceedings before dealing with the factual background.

[5] At the case conference held on June 20, 2011, the mother had retained counsel, Ms Lewis. Ms Lewis and counsel for the father, Mr. Lipkowski, agreed that the issues could be resolved by a short focused trial to be heard by myself. The trial was to proceed based on the following endorsement:

There is an outstanding issue of retroactivity and whether or not income should be imputed to the respondent – both counsel agree that a short trial (1/2 day) credibility is an issue- could address these issues and thereafter the remaining calculations could be made.

[6] Counsel agreed to a disclosure order and the trial was then scheduled to proceed on October 7, 2011.

[7] The mother then became unrepresented and an attendance was scheduled before myself to determine how the trial should now proceed.

[8] At the court attendance on September 7, 2011, the mother advised that she was no longer prepared to agree that her request for a retroactive support order be limited to 2008 but was now seeking that any order be retroactive to 2006. She also sought further extensive disclosure for a forensic accountant that she intended to retain. Although the parties agreed that the previously ordered disclosure had been produced, the mother now sought further extensive disclosure. Counsel for the father objected as he indicated that the disclosure sought by the mother would cause his client to incur significant legal and accounting expenses. The matter was adjourned to permit the mother to bring a motion for further disclosure and for the father to bring a motion for security for costs for a forensic investigation if that was being sought by the mother. As the mother indicated she was considering retaining new counsel, it was suggested that both counsel determine if there was a more focused, streamlined and less expensive process than a trial involving extensive financial information and the evidence of accountants to resolve the outstanding issues. Costs were reserved.

[9] The matter was again before the court on October 7, 2011 at which time Gary Plastino had been retained to represent the mother. Neither counsel proceeded with any temporary motions. The mother was granted leave to amend her application. The case was adjourned for trial to December 20, 2011 for "a focused trial re issue of retroactivity". Costs were reserved.

[10] Despite the endorsement of October 7, 2011, when the trial commenced on December 20, 2011, counsel agreed and I confirmed that the issues to be determined were the mother's claim for a retroactive adjustment of child support to 2006 and if income should be imputed to the father.

[11] The mother's only witness was herself and her case was completed when the trial continued on February 2, 2012.

[12] The trial was then adjourned to May 14 and 15, 2012 for continuation. Unfortunately, Mr. Plastino, the mother's counsel, passed away and the trial needed to be adjourned so the mother could retain new counsel.

[13] The trial was finally able to resume on October 22, 2012. Based on the line of questioning by Mr. Rush, the mother's new counsel, it became clear that the mother was pursuing not just retroactive table child support but also retroactive section 7 expenses and that the mother was also seeking an order for ongoing support based on income being imputed to the father.

[14] After hearing submissions from counsel, I ruled that despite the original agreement of counsel for a "focused hearing" to determine the issue of retroactivity based on credibility findings the court made, it had become clear that it was not possible to determine if there was blameworthy conduct by the father, such that the mother's claim for retroactivity could be made for more than three years prior to the commencement of her application, in isolation from the evidence to be given in the entire case.

[15] I further ruled that it was not unfair to the father that the mother was claiming both retroactive table and section 7 expenses. Although I agreed that the amendment to the mother's pleadings were not clear in this regard, mother's counsel had sent correspondence to father's counsel on October 6, 2011 clearly stating that her client's retroactive claim was for both base table support and section 7 expenses. The mother had also attached a breakdown of the retroactive section 7 expenses to her financial statement. I therefore held that the father was on notice of the exact nature of the mother's claims.

[16] It was further the position of the mother that the trial should also determine the father's ongoing support obligations. Father's counsel took the position that this was not the original agreement between counsel and only the issue of retroactivity was to be determined.

[17] I ruled that the issue of the amount of ongoing support should also be determined at this trial. In view of the protracted nature of the proceeding, the number of days already devoted to the trial and the number of days needed to complete the trial, it would be unduly expensive for the parties to have the court determine the retroactive support issues, which requires a determination of the father's income for the years in question, and then not also determine the father's income for his ongoing support obligation. If instead the court simply determined the father's retroactive support obligation, the parties would then have to negotiate the issue of ongoing support and if they were not able to reach an agreement there would have to be another trial.

[18] Although it was regrettable that this proceeding had become so complicated and unwieldy, the only reasonable procedure now available was to allow all issues to be dealt with in this trial. This was consistent with the subrule 2 of the Family Law Rules requiring all cases to be dealt with justly which includes saving expense and time and giving appropriate resources to the case but taking into account resources needed for other cases. To ensure there was no unfairness to the father, his counsel was given wide latitude to re-examine the mother who was called in reply and to recall the father if there was any further evidence he wished to call and produce any further documentary evidence.

[19] It is with this unfortunate procedural backdrop that I will now outline the issues to be determined and the evidence.

3. Issues to be Determined

[20] 1. Should there be a retroactive adjustment of child support and if so, to when?

2. Should income be imputed to the father? If so, what is the father's income for child support purposes?

3. What are the ongoing child support obligations?

4. Summary of the Evidence

4.1 Background

[21] The mother is 49 years old and the father is 51 years old. The parties were married on June 21, 1986 and separated on January 28, 2000. They entered into a separation agreement on February 15, 2011.

[22] There are three children of the marriage, Melanie Kristine Ronco ("Melanie") born April 3, 1990, Michael Christopher Ronco ("Michael") born April 15, 1992 and Michelle Kathleen Ronco ("Michelle") born April 5, 1996. The children resided with the mother after the separation.

[23] Melanie began attending university in the fall of 2009 and lived away from home to attend school. Michael moved from his mother's home to live with his father at the beginning of December 2010. Michael completed high school in January 2011 and then worked until he began to attend college in September 2011. Michelle has continued to reside with the mother and has access to the father.

[24] The separation agreement required the father to pay child support in the amount of $1,528.04 per month as of April 2000. Although the agreement is silent with respect to the father's income, based on the 1997 Child Support Guideline tables this support would amount to $93,600.00 of income. The father paid this amount until December 2010 when Michael moved into his residence.

[25] The parties could not reach an agreement as to the father's support obligation including his refusal to pay support based on the 2006 Child Support Guideline tables. The father then arbitrarily reduced support to $1,325.00 for two children and then deducted $400.00, as the amount due by the mother for support for Michael, and in the net result paid the mother $925.00 per month. The father continued to base his support obligation on the 1996 Child Support Guideline tables.

[26] Almost immediately thereafter, the mother filed the separation agreement for enforcement and began these proceedings.

4.2 Separation Agreement

[27] Pursuant to paragraph 6 of the separation agreement the father is obligated to pay child support as follows:

a) the child ceases to reside full time with the Wife. "Reside full time" includes the child living away from home to attend an educational institution agreed to by the Husband or funded (at least in part) by a government in Canada, or pursue summer employment, or obtain medical treatment, or take a vacation, providing the child is otherwise maintaining a residence with the Wife;

b) the child becomes 18 years of age and ceases to be in full-time attendance (except for school vacations) at an educational institution agreed to by the Husband or funded (at least in part) by a government in Canada;

c) the child attains his or her first undergraduate degree or becomes 23 years of age;

d) the child marries;

e) the child dies;

f) the child is no longer a child of the marriage as defined by the Divorce Act;

g) the Wife dies; or

h) the Husband dies, having made adequate provision for the life insurance provided for in this agreement.

[28] Although the mother is the custodial parent, pursuant to paragraph 5 of the separation agreement the parties are to confer on all plans regarding the children and on all important matters relating to the children's health, welfare, education and up-bringing.

[29] The only provisions relating to special expenses are in paragraphs 7 relating to educational expenses and paragraphs 12 to 15 relating to medical and dental insurance and uninsured dental and orthodontic expenses. Those provisions provide as follows:

7. The parties will contribute to the best of their ability towards such of the costs of the Children's post-secondary education (which costs include such tuition, residence, supplies, equipment and other incidental expenses) as the Children cannot afford. The Children will be expected to make all reasonable financial contributions to these costs appropriate to his or her ability to do so.

8. The Husband will maintain in force for the benefit of the Wife and any child of the marriage medical/dental/drug coverage, if this is available under a group insurance plan through the Husband's employment, or if he obtains such coverage for himself privately:

a) in the case of the Wife, while spousal support is payable pursuant to the provisions of this agreement, but after divorce only if the policy permits; and

b) in the case of a child, as long as the Husband is obligated to support that child.

13. Where the Wife is obliged to pay for any services covered by such insurance the Husband will forthwith reimburse her or endorse over to the Wife any cheque the Husband receives in reimbursement of amounts paid by the Wife. To facilitate processing of such claims, the Husband will give the Wife a supply of claim forms whenever she requests them.

14. If the Husband fails to maintain these or any equivalent plans to the extent required by this agreement, he will pay the cost of all health services which would ordinarily be paid by the insurance plan(s).

15. The parties will share in proportion to their respective incomes the cost of any dental and orthodontal expenses of the Children not covered by insurance. The party wishing to arrange such treatment will consult the other on any major dental or orthodontal treatment and obtain his or consent, which consent will not be unreasonably withheld, before the commencement of the treatment.

[30] Paragraph 11 requires the father to provide annual disclosure and outlines the variation process. The paragraph provides as follows:

11. The amount of support in paragraphs 6 may be varied by a written and witness agreement or by application to the Court if there is a material change in the circumstances of the parties. The Husband shall provide the Wife with his personal Income Tax Returns and that of any corporation in which he has a financial interest and Notice of Assessment by June 30th each year.

[31] Paragraph 10 also provides that the father deliver to the mother 12 post-dated cheques annually for his support payments as long as he is obligated to pay support. The provision also provides that the mother not file the agreement for enforcement as long as the cheques are not returned for insufficient funds.

4.3 Evidence of the Father's Conduct

[32] It is the mother's position that the father has engaged in blameworthy conduct as he was controlling and threatening. She also takes the position that he was non-compliant with the terms of the separation agreement from its inception and as a result she was intimidated from pursuing compliance through the court process.

[33] In support of her position the mother testified about the father's behaviour as follows:

a) He would threaten to call the children's aid society, threaten to remove the children from her care and told the children she needed psychiatric help;

b) When she raised the issue of money, he would refuse to take the children or switch times;

c) He threatened to take her van away which was registered in his name but was her only mode of transportation;

d) He left her threatening telephone messages or made threatening telephone calls;

e) He refused to provide her with the health care insurer claim forms for reimbursement of the amounts she had incurred for eligible health care costs, he refused to submit and process her health care claims in a timely manner and cashed the cheques for the reimbursement of health care costs she had incurred and did not reimburse her;

f) He initially refused to pay his share of Melanie's orthodontic costs and it took two and half years and required the intervention of lawyers to settle the issue. It cost her $8,000.00 in legal fees to get him to pay $9,000.00;

g) He resisted paying for more than one week of summer camp in 2005 and in previous years he resisted paying his share of summer camp and only paid half not his proportionate share;

h) He did not comply with his obligation to provide financial disclosure; it was only through correspondence between counsel in 2002 and 2003 that he provided his 2000, 2001 and 2002 corporate and personal tax returns and Notices of Assessment; the mother in re-examination admitted that the father had provided her with his T-4s from his numbered company and the corporate tax returns;

i) He did not provide any financial disclosure after 2003 until she initiated these court proceedings; the mother then corrected herself and confirmed that the father had provided her with his T-4 for 2004 and 2005;

j) He refused to provide 12 post-dated cheques as required by the separation agreement despite repeated requests by the mother and her counsel;

k) When she requested a change in the child support in June 2006 in accordance with the new Child Support Guidelines, he provided her with misleading information about his income by taking the position that his dividend income should not be included in his income because he had used the monies to pay for the children's orthodontic care, that he was entitled to deduct a capital loss and that he overpaid support in 2004 and 2005; the father told her that if she pursued support payments pursuant to the new guidelines she would receive less money as he was earning less;

l) He unilaterally reduced child support when Melanie turned 18 years old; the mother then testified that when she pointed out that he was required to continue to pay if Melanie was in school he reimbursed the funds;

m) He unilaterally reduced child support at the beginning of 2011 as Michael had moved into his home and used calculations that favoured himself; he ignored the provisions for variation in the separation agreement; and

n) As a result of the father's conduct, she was worn out, emotionally and physically; since 2000 she has suffered from stress, anxiety and depression and has been taking medication for her condition; she could not afford to pursue court proceedings and had consulted several lawyers who told her it would cost $20,000.00 to pursue any proceedings.

[34] The father testified, in response to these allegations as follows:

a) He denied that he had bullied, controlled or intimidated the mother; the mother conceded in cross-examination that both had been rude to each other; he denied the mother was under a lot of stress because of him;

b) In the first few years after the separation, he felt the biggest issue was that the mother was interfering with his access and this became progressively worse; the biggest upset being the mother using Melanie to ask him for money for soccer and then unilaterally withdrawing this activity from the children knowing that he had coached the children and this was an important bond between himself and the children; he testified he will never forgive her for that;

c) He accused the mother of putting the children, especially Melanie in the middle of their conflict and accused the mother of reading their separation agreement to Melanie;

d) He blamed the long, protracted correspondence between counsel to settle the issue of Melanie's orthodontic expenses on the mother having two different counsel for the two different stages of the orthodontic work, the mother would not reveal her income and she did not disclose that she received a credit of $1,000.00 from her insurance company; it also cost him about $8,000.00 in legal fees;

e) Many of the disputes over the other children's orthodontic expenses, summer camp, extracurricular activities and other extra expenses sought by the mother were a result of her failing to consult with him in contravention of the terms of the separation agreement;

f) Shortly after the separation agreement was executed, the children were asking him to buy them thing like clothes and shoes; he consulted his counsel as to his options as he was also paying spousal support at the time and having a hard time financially; he followed the advice of his counsel and bought the children what they wanted and kept track of these expenses; he did not regret doing so as he knew the children appreciated what he had done for them over the years;

g) The father maintained that he provided the mother with copies of his personal and corporate tax returns annually as required by the separation agreement; he testified that whenever he received his returns from his accountant he put them in a sealed envelope and gave it to one of the children to give the mother when he picked up the children for an access visit;

h) He denied that he had deliberately misled the mother regarding his income in 2004 and 2005 as he thought he could deduct dividends he received and could also deduct a capital loss of $18,664.00 as he had used the funds to pay for the children's orthodontic expenses and other expenses he had;

i) He maintained that he and the mother agreed in 2006 that he would not pay increased support based on the new Child Support Guidelines and would continue to pay child support based on the separation agreement on the basis that he would not seek a re-adjustment for overpayment of support for 2004 and 2005;

j) He denied he had deliberately misled the mother in 2010 when they tried to negotiate a reduction of support when Michael moved into his home; he blamed the mother for not providing him with proof her income and just followed what he thought was the correct calculations and apologized if he made a mistake;

k) He felt he had made up for any mistakes he made in not paying the correct amount of child support based on the extra amount of money he has spent on the children; he submitted a chart of the money he spent from 2004 to 2010 that totals $44,671.00;

l) He denied the mother's allegations regarding his failure to properly remit or otherwise comply with the requirements of the separation agreement regarding insured health care expenditures; and

m) He admitted that he had not complied with the requirement to provide the mother with 12 post-dated cheques; he maintained that as the cheques were from his business account for bookkeeping reasons it was more convenient and practical to supply 6 post-dated cheques and the mother agreed to this but then when there was a dispute she would bring it up and through counsel demand 12 post-dated cheques; however, he had always paid the support, paid on time and no cheque was ever dishonoured.

4.4 The Mother's Financial Circumstances

[35] At the time of the separation the mother had not been employed outside of the home. The terms of the separation agreement provided that she receive $1,500.00 per month as spousal support for three years. The mother testified that she felt the limitation was not fair although she agreed she had legal counsel at the time. When this line of questioning was queried by me, counsel for the mother confirmed that he was not suggesting the agreement was unfair or seeking to overturn it and did not pursue the issue further.

[36] In 2001 the mother married Mark Hornby and they separated in 2008. From 2004 to 2008, the mother earned from about $35,000.00 to $39.000.00 and Mr. Hornby earned about $31,000.00 to $34,000.00. In 2004, the mother was required to increase the mortgage on the home she bought after the separation.

[37] The mother was able to resolve her financial issues with Mr. Hornby amicably and was only required to pay him $7,500.00. She was again required to re-arrange the financing on her home to pay him out and managed to maintain the same level of mortgage payments by stretching out the amortization periods. The home is currently worth $300,000.00 with outstanding liability of $200,000.00.

[38] The mother began residing with her common law spouse Rudolph Boucher in 2009. He was laid off from his employment about 6 months after moving in and has been meeting expenses from his employment settlement that ended in March 2012. He has been unable to contribute any funds to their household since that time.

[39] The mother is employed as what she described as an intermediate accountant. In 2009, she finished her university degree at York University.

[40] The mother provided proof of her income for the years 2006 to 2011 as follows:

Year	Income
2006	$35,057
2007	$37,180
2008	$39,029
2009	$43,588
2010	$42,515
2011	$48,806

4.5 The Father's Financial Circumstances

[41] After the separation the father lived in his parents' home as he could not afford to buy a new home. He invested about $27,000.00 being his share of the proceeds of sale of the matrimonial home into a mutual fund. In 2005, he needed to cash in his mutual funds to pay for the children's orthodontic expenses and his other expenses. As a result he suffered a capital loss of $18,664.00.

[42] The father married Brenda Nicols in 2002. She earned about $80,000.00. Ms. Nicols had two children who resided with her and the father. There was no evidence as to whether or not she received child support or if so, the amount. The father and Ms. Nicols separated in 2008 and the father incurred extra expenses in 2009 and 2010 to pay for his divorce and related expenses.

[43] The father has been a produce broker since about 2000. He represents various suppliers and brings their produce to the Ontario Food Terminal. The father receives income through his numbered company.

[44] At the time of the separation, the father was essentially an employee of the Nevard, Van Bentham Brokerage Company, although he was required to have a holding company so that he could be paid as an independent contractor. The partnership paid his numbered company about $100,000.00 and the father was required to pay his own expenses and he took a draw of $93,600.00 as a salary.

[45] In 2003, he re-negotiated the contract and he received $6,000.00 per month as a draw and a share of the profit. His interest gradually increased and in 2010 he became a full partner and the name of the partnership was changed to, The Produce Guys. He is one of 3 equal partners. The father's compensation, which continues to be paid through his holding company, consists of a draw of $6,000.00 per month and if there are further funds available for distribution it is paid by the partnership as a bonus or dividend. The company pays agreed upon general expenses and then each partner, through their respective holding companies, pays for individual expenses.

[46] Mr. Stacey has been the father's accountant since about 2000 or 2001. His firm has been the accounting firm for the partnership since its existence. He prepares the statements for the father's numbered company and the partnership. At the end of the year, he allocates any personal expenses to the father's salary.

[47] The father was not able to explain the claims for office expenses or promotion expenses except for one entry of $10,000.00 for the purchase of Maple Leaf hockey tickets in 2009 that he testified he purchased to increase his business. He testified that the relied on his accountant to prepare his statements and that his accountant would be able to explain the various expense deductions.

[48] However, Mr. Stacey could not explain how the amount for office and general expenses was arrived at throughout the years since 2004 but did volunteer that a portion of that expense was an allocation for the father's home office. He did not offer any explanation as to any advertising or promotion expenses that were incurred prior to 2009 and then, except for the hockey tickets in 2009, ceased thereafter.

[49] Mr. Stacey testified that a corporation generally has some retained earnings to finance the purchase of equipment, for outstanding accounts payable or for other financing needs but there was no specific evidence, from either the accountant or the father, as to any specific amounts that the partnership or the father's numbered company was required to retain.

[50] Mr. Stacey agreed, in cross-examination, that the father's numbered company had no reason to retain earnings for any capital purchases. Although he did not agree that the numbered company had no payables for which it was necessary to retain some earnings, he did not provide any evidence that this had ever been necessary.

[51] The father agreed that he had withdrawn funds in 2004, 2005 and 2010 from his numbered company as a dividend when he needed extra funds.

[52] The father's income from 2000 to 2011 is as follows:

Year	Line 150 Income	Explanations
2000	$93,800
2001	$94,170
2002	$93,750
2003	$93,750
2004	$100,650	includes dividend of $12,650
2005	$95,120	includes dividend of $10,121
2006	$85,000
2007	$87,000
2008	$97,000
2009	$130,000	on consent excludes RRSP of $23,691
2010	$140,625	includes dividend of $10,625
2011	$123,000	Salary per year-end statement

4.6 Children's Circumstances

[53] According to the evidence of the mother, Melanie suffers from anxiety, depression and had to attend a sleep disorder clinic. She also has an auditory processing disorder that causes her to have difficulty filtering out background noise in order to process oral communication.

[54] Both parties agreed that Melanie was the child most affected by the marital conflict. However, the father testified that he was not aware that Melanie ever attending a sleep disorder clinic. He agreed that Melanie suffers from anxiety and depression and he felt badly for her. But he blamed the mother as she involved Melanie in their marital dispute.

[55] Melanie was attending Trent University but failed some of her third year courses. She is now attending a full-time program at a community college for which she receives more supportive services. Melanie continues to live away from home and returns on holidays. The mother testified that in 2009 that she approached the father about how much debt Melanie would be incurring for her first year of university but the father would not commit to any contribution to the cost of Melanie's post-secondary expenses.

[56] The father denied that the mother had requested he contribute to the cost of post-secondary expenses. It was his understanding that Melanie received student assistance through OSAP of $13,000.00 a year which was interest free and that she needed to pay back $7,000.00. He further understood that Melanie had earned $3,000.00 working in the summer of 2011. However, he agreed that her OSAP loan would be increased to $28,000.00 by April 2013. He testified that as this was an interest free loan, he had hoped once it became due that he would be able to assist Melanie in paying her loan. But as a result of this litigation, all his funds have been used for legal fees.

[57] He testified that the mother had only requested that he pay for Melanie's rent but it was his understanding from Melanie that OSAP paid for this and although the mother had written post-dated cheques to cover Melanie's rent, she was reimbursed. He testified that he helped out Melanie by buying groceries, paying for her food plan and cell phone and anything else she needed. He also testified he gave Melanie a cheque for $1,100.00 in October 2009 but was only able to produce a cheque payable to himself which he thought he deposited to Melanie's bank account. But the mother produced proof that no such cheque had been deposited to her account.

[58] In 2008, he also paid the full cost of $1,692.00 for the extraction of Melanie's wisdom teeth which he thought the mother would be contributing to but she did not.

[59] Michael left the mother's home in early December of 2010 without the mother's consent. At one point she testified that she commenced these proceedings because she still had legal custody of him and wanted the court to determine his custody. He finished high school by the end of January 2011; he then worked full-time and began college in September 2011. There was no evidence about what he earned or the cost of his education.

[60] He is currently attending an arts program at Humber College. The mother bought him a piano for $1,192.00 for his program and also contributed other funds related to his post-secondary education.

[61] Michelle is currently in high school and there was no evidence of any specific concerns or special needs for her.

4.7 Children's Expenses

[62] The father produced a detailed accounting of monies spent on the children since 2003. He was cross-examined extensively on these expenditures. Generally, the amounts spent were for items purchased for the children such as toiletries, clothing, books, musical equipment, computers, electronics and other equipment or items the children wanted. He included the cost of entertainment while the children were with him, his contribution to expenses for various extra-curricular activities and lessons, his contribution for summer camps and cash given to the children.

[63] The mother testified that the father purchased extravagant items for the children or computers or electronic equipment that was not needed or that some of the amounts he claimed were for Christmas presents. Further she testified that the list of expenses included monies he was in any event required to pay in addition to his child support as his share of the children's section 7 expenses.

[64] From 2004 to 2010, the amounts the father claims to have spent a total of about $44,671.00. Most of the funds were spent in the years 2008, 2009 and 2010. In those years respectively he spent $9,472.00, $14,310.00 and $10,156.00. He also spent a further $1,510.00 in 2011.

[65] In cross-examination the father agreed that most of the purchases of clothing were to meet the children's wants and wishes not their needs, that he would have supplied the children with what they wanted, to the extent he was financially able to do so and that he would have done so even if he was paying the full table amount of support. However, at other times he testified that he needed to spend more on the children's clothing in 2009 and 2010 than in previous years because they needed more and the mother was not buying the children adequate supplies and other things.

[66] The father agreed that the mother had never asked him to give the children cash or buy them things instead of paying the proper amount of child support.

[67] The mother also provided a list of expenditures in addition to amounts she would have spent to meet their day to day needs such as clothing, toiletries, gifts, entertainment and cash. Her expenditures include amounts paid for the children's secondary school uniforms, contribution to Melanie's university costs, purchase of a piano for Michael's college program, health care costs and her contribution to camps and extracurricular activities. Her list totals $33,973.21.

[68] The mother submitted that she also expended funds for the children's health care in 2004 for which the father did not contribute. She totals these expenses at $5,176.50. The mother also submitted that she spent $7,415.14 for the children's elementary and secondary school costs, driver training, trips, passports and camp. She claims the father's proportionate share of the total of $12,582.63, based on his average income over 5 years to be $9,210.50.

5. Positions of the Parties

[69] The mother is seeking that the father pay child support, both the table amount and special expenses, based on his "actual" income that is, she is seeking that income be imputed to the father. It is also submitted that his prospective child support obligation be paid on the basis of an average of his last 3 years of income as his income has fluctuated.

[70] The mother also seeks an order for child support for two children in accordance with the Child Support Guidelines, that is, for Michelle who resides with her full-time but also for Melanie who resides away from home attending school but resides with her on holidays. With respect to Melanie, the mother also seeks ongoing child support to continue until she completes her college program that will extend beyond her 23rd birthday despite the provision in the separation agreement that support for a child ceases at 23 years of age.

[71] In the submissions filed, the mother seeks a retroactive re-adjustment of support to 2004 based on the father's blameworthy behaviour. It is her position that the father failed to provide financial disclosure as required by the terms of the separation agreement; he was on notice in 2006 that she was seeking a re-adjustment of support and that she had a reasonable excuse for not initiating court proceedings earlier.

[72] The father is seeking to vary the terms of the separation agreement to the extent that he should only pay the mother support for one child and that the mother pay him child support as of January 2011 for Michael, who is in his care. It is his position that Melanie has resided away from home since September 2009 and therefore was not entitled to support since that date.

[73] The father opposes any retroactive adjustment on the basis that he had not engaged in blameworthy behaviour but if the court is considering any retroactive adjustment that the monies he has spent on the children in excess of his child support obligation should be considered.

[74] The father submits that there is no basis for imputing income to him by adding back any income to his taxable income either for expenses he has deducted from his corporation or for any retained earnings, pre-tax corporation profit or his partnership equity. It is submitted that there is no material change of circumstances as at the time the parties negotiated their separation agreement, these deductions were accepted and any retained earnings of his corporation were not included in the calculation of his income for child support.

6. Applicable Legal Principles

6.1 Motion to Change

[75] Section 35 of the Family Law Act, R.S.O. 1990, c. F-3, as amended ("the Act"), provides that a party to a domestic contract can file that contract with the court and that a provision for support may then be varied under section 37 of the Act as if it were an order of the court.

[76] "Dependant" is defined in section 29 of the Act as a person to whom another has an obligation to provide support under Part III of the Act.

[77] Section 31 of the Act establishes the obligation of a parent to support a child, as follows:

31.(1) Every parent has an obligation to provide support for his or her unmarried child who is a minor or is enrolled in a full time program of education, to the extent that the parent is capable of doing so.

(2) The obligation under subsection (1) does not extend to a child who is sixteen years of age or older and has withdrawn from parental control.

[78] The test to be applied on a motion to change a the child support terms of a separation agreement under the Act and the powers of the court on such a motion are set out in sections 37 (2.1) and (2.2) as follows:

37 (2.1) In the case of an order for support of a child, if the court is satisfied that there has been a change in circumstances within the meaning of the child support guidelines or that evidence not available on the previous hearing has become available, the court may,

(a) discharge, vary or suspend a term of the order, prospectively or retroactively;

(b) relieve the respondent from the payment of part or all of the arrears or any interest due on them; and

(c) make any other order for the support of a child that the court could make on an application under section 33. 1997, c. 20, s. 6.

37 (2.2) A court making an order under subsection (2.1) shall do so in accordance with the child support guidelines. 1997, c. 20, s. 6.

[79] Section 14 of the Child Support Guidelines sets out the circumstances that may permit a variation in a child support order:

14. For the purposes of subsection 37 (2.2) of the Act and subsection 17 (4) of the Divorce Act (Canada), any one of the following constitutes a change of circumstances that gives rise to the making of a variation order:

15. In the case where the amount of child support includes a determination made in accordance with the table, any change in circumstances that would result in a different order for the support of a child or any provision thereof.

16. In the case where the amount of child support does not include a determination made in accordance with a table, any change in the condition, means, needs or other circumstances of either parent or spouse or of any child who is entitled to support.

17. In the case of an order made under the Divorce Act (Canada) before May 1, 1997, the coming into force of section 15.1 of that Act, enacted by section 2 of chapter 1 of the Statutes of Canada, (1997).

18. In the case of an order made under the Act, the coming into force of subsection 33 (11) of the Act. O. Reg. 391/97, s. 14 ; O. Reg. 446/01, s. 3.

6.2 Retroactive Variation

[80] Section 37(2.1) of the Act authorizes the court to vary a child support Order retroactively.

[81] The Supreme Court of Canada dealt definitively with retroactive child support in the four cases of 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 (S.C.C.). ("DBS") Justice Bastarache, speaking for the majority stated, at paragraph 4-5:

"... the ultimate goal is to ensure that children benefit from the support they are owed at the time they are owed it. Any incentives for payor parents to be deficient in meeting this obligation should be eliminated."

[82] While retroactive awards should not be presumed, they are not to be regarded as exceptional orders to be made in exceptional circumstances.

[83] A retroactive child support order does not impose an obligation on the payor that did not exist at the time when support is being claimed, since the obligation to support a child exists independently of any court order that may have been ordered in the past. Therefore, even if a payor has made child support payments in accordance with an existing court order, the payor may be found to have not met their child support obligations if the payments did not increase as they should have according to the applicable law at the time. As stated by Bastarache, J., at para. 68:

Thus, the support obligation of a payor parent, while presumed to be the amount ordered by a court, will not necessarily be frozen to the amount ordered by a court. It is the responsibility of both parents to ensure that the payor parent fulfils his/her actual obligation, tailored to the circumstances at the relevant time. Where they fail in this obligation, a court may order an award that recognizes and corrects this failure. Such an award is in no way arbitrary for the payor parent. To the contrary, it serves to enforce an obligation that should have been fulfilled already.

[84] In DBS the court held that a claim for retroactive child support can apply not only to court orders but also to any previous agreements between the parties. The court held that in most circumstances, agreements reached between the parties should be given considerable weight. Courts should recognize that these agreements were likely considered holistically by the parties and it is often unwise to disrupt the equilibrium achieved by parties.

[85] However, as the court is dealing with children and child support that must remain the main focus. Therefore, where circumstances have changed and the actual support obligations of the payor have not been met, the court may order a retroactive award as long as the applicable statutory regime allows it.

[86] Section 56.1 of the Act provides as follows:

56. (1) In the determination of a matter respecting the education, moral training or custody of or access to a child, the court may disregard any provision of a domestic contract pertaining to the matter where, in the opinion of the court, to do so is in the best interests of the child. R.S.O. 1990, c. F.3, s. 56 (1) ; 1997, c. 20, s. 10 (1).

[87] In DBS, the court set out the factors that a court should consider and balance in considering a request for a retroactive increase in child support. Those factors are as follows:

1. Whether there was a reasonable excuse for delay in applying for support
2. The conduct of the payor parent
3. The circumstances of the child
4. The hardship occasioned by a retroactive award

[88] The court provided further guidance in considering these four factors as follows:

1. Reasonable excuse for the delay in applying for retroactive support:

A delay will generally be unreasonable when the recipient knew higher support payments were warranted but decided not to apply. However, the court should not hesitate to find a reasonable excuse for the delay where the recipient spouse harbored justifiable fears of the payor's reaction, the recipient lacked the financial or emotional means to bring an application or the recipient was given inadequate legal advice.

2. The Conduct of the Payor:

The court should take an expansive view of what constitutes blameworthy behavior on the part of the payor. Blameworthy conduct can be characterized as anything that privileges the payor's own interests over the children's right to an appropriate amount of support and includes hiding income and intimidating the recipient. The payor cannot mislead a recipient into believing that the child support obligations are being met when they are not being met. On the other hand, a payor who does not automatically increase support payments is not necessarily engaging in blameworthy conduct. A reasonably held belief by the payor that he was meeting his obligations is a good indicator that there is no blameworthy conduct. However, the more material the increase in the payor's income, then the less likely the payor will be presumed to believe he was meeting his obligations. Positive behaviour by the payor can also militate against a retroactive order. For example, a payor who has contributed to his children's expenses beyond his statutory obligations to do so may have met his increased support obligation indirectly.

3. The Circumstances of the Child:

The court must consider both the present and past circumstances of the child. A child who went through hardship due to not being properly supported may be compensated. However, the argument is less convincing when the child has already enjoyed all of the advantages they would have enjoyed if the payor had been properly supporting them. Further, a child currently enjoying a high standard of living may benefit less from a retroactive award than a child currently in need.

4. Hardship for the Payor:

In determining whether a retroactive award will cause hardship for the payor, the court needs to consider more than the payor himself, and must also consider his children from a second family, if any. The court should be careful to craft a retroactive award in a way that minimizes hardship.

[89] None of the above factors are decisive or take priority and all should be considered in a global analysis. In determining whether to make a retroactive award, a court will need to look at all the relevant circumstances in front of it. The payor's interest in certainty must be balanced with the need for fairness and flexibility.

[90] Once a court decides to make a retroactive award, it must then determine the amount. There are two elements to this decision: first, the court must decide when the order should be retroactive to and second, the court must decide the amount of support that would adequately quantify the payor's deficient obligations during that time.

[91] The court should generally make the award retroactive to the date the recipient gave effective notice to the payor that support was being sought or the current amount needs to be renegotiated. Effective notice is defined as any indication by the recipient parent that child support should be paid, or if it already is, that the current amount needs to be renegotiated. All that is required is for the subject to be broached. Once that has been done the payor can no longer assume that the status quo is fair. However, once the issue is raised, the recipient must still be responsible in moving the discussion forward. If she does not, legal action should be contemplated.

[92] It will usually be inappropriate to make a support award retroactive to a date more than three years before formal notice was given to the payor, subject to the exception for blameworthy conduct. However, where the payor has engaged in blameworthy conduct, the date when circumstances changed materially will be the presumptive date of the award. It will then be open to the court to determine the quantum.

[93] The principles set out in the D.B.S. cases regarding retroactive child support apply to section 7 expenses as well. See Selig v. Smith, 2008 NSCA 54, 266 N.S.R. (2d) 102, 851 A.P.R. 102, 56 R.F.L. (6th) 8, [2008] N.S.J. No. 250, 2008 CarswellNS 307 (N.S.C.A.), paragraphs [25] and [26]. The court in the D.B.S. cases makes no distinction between the table amount of child support and section 7 expenses for child support.

6.3 Determination of Income Under the Child Support Guidelines

[94] Section 2(3) of the Child Support Guidelines requires a court to determine income based on the most current income information available.

[95] Section 15 provides that a court is required to determine income for child support purposes in accordance with sections 16 to 20 and Schedule III of the Child Support Guidelines.

[96] Section 16 provides the annual income is determined using the sources of income set out under "Total income" in the T 1 General tax return (that is, line 150 of a taxpayer's tax return), subject to sections 17 to 20 and Schedule III.

[97] However, where a payor's annual income, determined in accordance with section 16, would not be the fairest determination of that income, the above-noted provisions provide the factors a court should consider in order to determine the payor's annual income for the purposes of child support.

[98] Sections 17 to 19 are relevant to the determination of the father's income in this case and provide as follows:

17. (1) If the court is of the opinion that the determination of a parent's or spouse's annual income under section 16 would not be the fairest determination of that income, the court may have regard to the parent's or 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. O. Reg. 446/01, s. 5.

(2) Where a parent or spouse has incurred a non-recurring capital or business investment loss, the court may, if it is of the opinion that the determination of the parent's or spouse's annual income under section 16 would not provide the fairest determination of the annual income, choose not to apply sections 6 and 7 of Schedule III, and adjust the amount of the loss, including related expenses and carrying charges and interest expenses, to arrive at such amount as the court considers appropriate. O. Reg. 391/97, s. 17 (2).

18. (1) Where a parent or spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the parent's or spouse's annual income as determined under section 16 does not fairly reflect all the money available to the parent or spouse for the payment of child support, the court may consider the situations described in section 17 and determine the parent's or spouse's annual income to include,

(a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or

(b) an amount commensurate with the services that the parent or spouse provides to the corporation, provided that the amount does not exceed the corporation's pre-tax income. O. Reg. 391/97, s. 18 (1).

(2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm's length must be added to the pre-tax income, unless the parent or spouse establishes that the payments were reasonable in the circumstances. O. Reg. 391/97, s. 18 (2).

19. (1) The court may impute such amount of income to a parent or spouse as it considers appropriate in the circumstances, which circumstances include,

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

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

(c) the parent or 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 parent's or spouse's property is not reasonably utilized to generate income;

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

(g) the parent or spouse unreasonably deducts expenses from income;

(h) the parent or 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 parent or spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust. O. Reg. 391/97, s. 19 (1) ; O. Reg. 446/01, s. 6.

(2) For the purpose of clause (1) (g), the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act (Canada). O. Reg. 391/97, s. 19 (2).

[99] Schedule III also provides various adjustments to income. In this case the relevant provision relates to the treatment of capital gains and capital losses namely, that any claim for taxable capital gains realized in a year are to be replaced by the actual amount of capital gains realized in excess of the parent's actual capital loss in that year.

7. Analysis

7.1 Motion to Change

[100] I find that both parties are seeking to change the provisions of the separation agreement. The moving party on a motion to change child support only needs to prove, on a balance of probabilities, that there has been a change in circumstances (not a material change as both counsel have submitted) within the meaning of the Child Support Guidelines or that evidence not available on the previous hearing has become available.

[101] I find that both parties have shown that there has been a change in circumstances that warrant a change in the child support arrangements set out in the separation agreement.

[102] Since the parties negotiated their separation agreement in 2001, the following changes have occurred:

a) As of September 2009, Melanie began university and lived in residence;

b) As of December 2011, Michael began to reside full-time with the father;

c) In 2000, the father was essentially an employee, although paid through his personal corporation, whereas commencing in 2003 he began to receive a portion of the profit of the partnership and became a full partner in 2010;

d) The mother's income increased over the years; and

e) The father's income increased over the years;

[103] The father's counsel's submitted that there was no change in circumstances that would entitle the mother to now request that the court impute income to the father. He submitted that at the time the separation agreement was negotiated both parties were represented by counsel, the father's income for child support was based only on his taxable income, that is on his line 150 income and did not include any pre-tax corporate income or retained earnings of his company and he was permitted to deduct expenses from his salary.

[104] Although I accept these submissions to the extent that it is accurate that the mother who was a shareholder and officer of the company was aware as was her counsel that the father's company had pre-tax corporate profits, retained earnings and deducted expenses, nevertheless that does not preclude the mother from now requesting that the court consider these factors in determining the father's income.

[105] Once the court determines that that there has been a change in circumstances the court is entitled to re-assess the needs of the child as a result of change in circumstances and embark on a fresh inquiry as to the appropriate amount of child support. See Willick v. Willick, [1994] 3 S.C.R. 670 paras. 26, 100, 102 and 109.

[106] As the mother's claim for a retroactive adjustment of child support is based on an allegation that the father engaged in blameworthy conduct because, in part, he failed to disclose and misled her about the increases in his income, it is convenient at this point to make findings about his income and how it should be calculated. Further, in assessing if a payor has engaged in blameworthy conduct, the court in DBS has indicated that a relevant factor is the amount of the increase in the payor's income.

7.2 What is the Father's Income for Child Support Purposes?

[107] As provided in the Child Support Guidelines, where a payor is a shareholder, director or officer of a corporation, all of part of the pre-tax income of the corporation or any related corporation can be included in the payor's income.

[108] Further, expenses that are paid by a corporation for personal expenses can be added back to the payor's income for child support purposes. The Guidelines expressly provide in s.19 (2) that the determination as to whether an expense is reasonably deducted from a payor's income is not governed by whether it is properly deducted for income tax purposes. A support payor bears the onus of justifying that any deduction for business expenses is, indeed, for legitimate business purposes. See Whalen v. O'Connor, 2006 CarswellOnt. 2581 (S.C.J.); Osmar v. Osmar, [2000] O.J. No. 2058 (S.C.J.).

[109] The law is clear that it is not necessary for the court to find a parent payor acted in "bad faith" before it has the discretion to impute income that is, a court does not need to find that there was a deliberate attempt to evade child support obligations before it can impute income. See Riel v. Holland, [2003] O.J. No. 3901 (C.A.).

[110] In this case, the mother submits that the deductions for expenses for advertising and promotion, office and general expenses and bank charges should be added-back to the father's income. It is also submitted that the increase or decrease in the pre-corporate profits of the father's corporation and increases or decreases in his partnership equity should also be imputed to the father. In calculating the father's income in 2005, it is also submitted that he should not be permitted to deduct his capital loss.

7.2 (a) Business Expense Deductions

[111] The father's personal corporation has consistently deducted expenses. The father testified that he just relied on his accountant to prepare his year-end statements and tax returns and could not explain any of the deductions except for a promotion expense in 2009 for hockey tickets.

[112] The father's corporation does not carry on any active business. The father's corporation held its partnership interest in NVWB and later in The Produce Guys. Based on the testimony and the corporate statements that were filed, it is clear that The Produce Guys has an office and incurs expenses for rent, general office expenses, salaries, bank charges and advertising and promotion expenses.

[113] Based on the evidence of the father and his accountant, I find that the office and general expenses deducted from the father's income relates to a deduction for rent for a portion of his home and that there were no other office expenses that should be deducted from his income.

[114] With respect to any expenses claimed for advertising or promotion, I accept the father's evidence that he had a legitimate expense of $10,000.00 in 2009 for hockey tickets. There was no explanation for any expenses prior to that year, which were not excessive in any event, and no expenses were claimed for any subsequent years.

[115] Counsel for the mother also submits that since the father used his corporation to pay personal expenditures that, at the end of the year would be attributed to his income, and the corporation paid his bank charges, half of this expense should be attributable to his income. He then stated that as this expense is minimal he has not added it back. In view of the minimal amount of this expense, I would not, in any event, have added this expense back to the father's income.

[116] I therefore find that any expenses allocated in the father's corporation for advertising and promotion, except in 2009, and for office and general expenses should be added back to his income.

7.2(b) Pre-tax Corporate Profit and Retained Earnings and Partnership Equity

[117] Although the father's accountant testified that generally it is important for a company to retain earnings, there was no specific evidence from either the father or his accountant as to the necessity or the amount of retained earnings that his corporation needed to retain. The father consistently has received a draw of $6,000.00 per month from the partnership and there was no evidence of any delays in payment or that the partnership was undercapitalized.

[118] The father confirmed in testimony that he was able to withdraw funds in 2009 and 2010 from his corporation.

[119] It is also submitted that the father's equity from his partnership account should be attributed to his income as there was no evidence offered by the father or his accountant as to the amount of equity the partners needed to capitalize their business and it appears from the partnership statements that the equity has fluctuated and the father was able to access his equity.

[120] Other than submitting that the mother should not now be able to impute income to the father because this was not done at the time of the separation agreement was negotiated, the father's counsel has not provided any response to these submissions.

[121] The onus is on the payor who has retained earnings in his or her company to convince the court that there are valid business reasons for leaving the money in the company. In Nesbitt v. Nesbitt [2001] M.K. No. 291, the Manitoba Court of Appeal at paragraph 19 quotes with approval the following passage which I adopt as the correct statement of law regarding the attribution of corporate income to a payor for child support purposes:

19 Particularly helpful is Professor James McLeod's annotation to the decision in Fost v. Hood (2000), 2000 NSCA 34, 2 R.F.L. (5th) 399 (N.S.C.A.), in which the author comments on the decision of Adams v. Adams (2000), 5 R.F.L. (5th) 9, 2000 ABQB 153, and opines (at p. 401):

One of the more common allegations made by payees to convince a court to impute income is that a payor has retained earnings in his or her business that he or she refuses to take as income in order to reduce child support. In Adams v. Adams Rowbotham J. noted that retained earnings represent money that the business has earned and the shareholders can take out as income. A spouse who controls the business and chooses to leave the money in the business must be prepared to explain why his or her decision is reasonable from a business point of view.

Sometimes a company's creditors insist that the business retain a minimum amount of money as security for financing, or a company may carry on substantial cash operations and require a business "float" to maintain access to liquid funds. Whatever the reason alleged for retaining earnings in a business, most courts assume that a spouse should take as much money as is available as income from his or her business and a spouse who does not do so is trying to avoid his or her family obligations. The onus is on a payor who has retained earnings in his or her company to convince the court that there are valid business reasons for leaving the money in the company. In Adams, Rowbotham J. was satisfied that the husband could justify leaving part but not all of the retained earnings in the company for business reasons and imputed income pursuant to the Guidelines.

[122] Many cases have also noted that an attribution of corporate income should not result in an unwarranted interference in the internal management of a corporation. (See for example, Kendry v. Cathcart, [2001] O.J. No. 277 (Sup.Ct.Jus.) Polson v. Polson, [2002] B.C.J. No. 2050, 2000 BCSC 1477, Stephen v. Stephen (1999), 183 Sask.R. 106, 1999 SKQB 52, and Baum v. Baum (1999), 7 R.F.L. (5th) 231 (B.C.S.C.).

[123] These cases also take the view that the plain wording of sec. 18 encompasses situations where the party's income, as determined by the usual rules under sec. 16, simply does not "fairly" reflect all the money available to the spouse for payment of support.

[124] Applying these concepts to facts in this case, although I find that the father has not intentionally left money in his corporation for the purpose of avoiding his child support obligation, nevertheless I find that these funds should properly be available for child support. The father is the sole shareholder and is in total control of his corporation and he has previously withdrawn funds when he needed to do so. Also there is no evidence of any valid business reason that justifies the need to leave the pre-tax profits or the retained earnings in his corporation.

[125] I agree with the submission of the mother's counsel that it is the pre-tax net corporate profit or losses of the corporation that should be added to the father's income since this is income available to him that is not drawn out as a salary or bonus.

[126] Counsel for the mother is not requesting that any retained earnings be added back to the father's income. The retained earnings in the corporation had been drawn down to only $3,360.00 by the end of 2010. In previous years as the retained earnings were paid as dividends they were included in the father's taxable income and any further retained earnings that are drawn out of the corporation will be included in his personal income.

[127] On the other hand, the father's corporation has only a third interest in the partnership and he is therefore not in control of that company. The partnership is the entity that carries on the actual produce brokerage business and has significant expenses.

[128] I do not find that the father has deliberately deferred the distribution of his partnership equity to defeat his child support obligation. In examining the partnership statements, all of the partners have retained or withdrawn the same amount of equity in various years. This leads me to the logical inference that joint decisions are made by all of the partners regarding the amount of earnings that are needed to be retained by the partnership. I also note that the partnership as always maintained some retained earnings although the amount has fluctuated. I am also mindful that attributing income to the father from his interest in the partnership may unduly interfere with the operation of the partnership.

[129] Although I acknowledge that there is a paucity of evidence on the amount of retained earnings the partnership requires, I nevertheless find that the income earned in the partnership should not be imputed to the father.

[130] Fairness is the overall test to be applied in determining the amount of pre-tax income, if any, that should be included in a payor's income for child support purposes. I find that by attributing the father's pre-tax income from his corporation but not from his interest in the partnership that balance is achieved.

[131] I have not dealt with the effect of the different year-ends of the father's corporation and the partnership. This issue was not pursued in the evidence and no submissions were made on this issue.

7.2 (c) Capital Loss in 2005

[132] It is also submitted by the mother that the father was not entitled to deduct his capital loss in 2005 from his income. The mother relies on this issue as an example of blameworthy conduct by the father.

[133] The father prepared and filed a chart of his income, child support paid and expenses he paid for the children. In that chart, he states that he incurred a capital loss of $18,664.00 and if this is applied to his 2005 net income pursuant to section 17 (2) of the Child Support Guidelines, his income becomes $76,519.36.

[134] When the father testified he explained that he had to cash in the mutual funds he held as he had expenses and as a result suffered a capital loss. He acknowledged that he told the mother that he was entitled to deduct this loss from his income but then acknowledged that he now understood he was mistaken.

[135] Although counsel for the father then conceded that for income tax purposes a capital loss can only be deducted from a capital gain and could not be used to reduce the father's 2005 income, in his written submissions he stated that this was unfair. He submitted that the father was being discriminated against because if he was wealthy and had other investments which would generate capital gains he could then use his capita loss to reduce his income. There is no merit in this submission.

[136] For child support purposes, I find that the father's income should not be reduced by his capital loss. This does not impact on the retroactive claim for support or impact on the determination of the father's income for the years since 2005 as he has not incurred any other capital losses.

7.2 (d) Summary

[137] In summary, based on these findings, I find that the father's income for child support purposes should include the amounts paid by his corporation for office and general expenses and advertising and promotion as these expenses have been unreasonably deducted or have a personal component. These amounts should be grossed up to reflect the pre-tax income that would be necessary to be earned to cover such expenses from after tax income. I also find that the pre-tax corporate income from his corporation should also be included in his income for child support purposes.

[138] Counsel for the mother has submitted, as part of his written submissions, a summary chart outlining the father's income (with the above adjustments) and calculated the underpayment of child support with the supporting Divorcemate calculations.

[139] The following chart outlines includes the father's underpayment of child support based on his taxable income from 2004 to 2010 and his underpayment of child support based on the father's imputed income, for the years 2004 to 2010:

Year	Line 150 Income	Underpayment	Imputed Income	Underpayment
2004	$100,650	$1,128	$104,496	$2,284
2005	$95,120	$(240)	$100,236	$1,620
2006	$85,000	$36	$105,167	$4,368
2007	$87,000	$1,116	$95,053	$3,396
2008	$97,000	$3,000	$108,652	$6,240
2009	$130,000	$9,084	$131,657	$9,936
2010	$140,625	$10,956	$140,379	$11,316
Total underpayment of child support		$25,080		$39,160

7.3 Retroactive Child Support Claim

[140] Based on the principles of DBS, I make the following findings as they relate to the four factors a court is required to consider.

(a) Reasonable Excuse For Delay

[141] I find that the mother unreasonably delayed in her application for increased child support. The mother relied extensively on the history of the relationship between the parties as evidence that the father had controlled, bullied and intimidated her. In support of this position she relied on correspondence between counsel for the parties in 2001 to 2004 as they bickered about their respective share of the costs for the children's orthodontic expenses.

[142] The mother testified about the problems with the father processing her claims for health related expenses for the children but then testified that by 2003 she had her own extended health insurance and therefore did not give the father any claims. I also note that none of the letters between counsel refers to this as being an issue of concern.

[143] The mother relies on the father's refusal to provide her with 12 post-dated cheques as an example of his controlling behaviour. There is no dispute that the father did not comply with this term of the agreement and only provided 6 cheques at a time. It is also clear that during the disagreement about the orthodontic expenses, the mother's lawyer requested these cheques and the father in rather colourful and inappropriate language refused to provide the cheques. I find that whenever there was a dispute about another issue, the mother would then bring up the issue of the post-dated cheques. The father was never late or defaulted on a support payment. If the mother was truly concerned about the method of payment she had the option, at no cost to her, to simply file the separation agreement for enforcement through the Family Responsibility Office and received child support through that office.

[144] I t is admitted that in 2006 the mother approached the father about the change in the Child Support Guidelines as of May 2006 and to determine the father's new support obligation. It is further not disputed that the father took the position that his income had declined, that he had overpaid support, that he was entitled to a reduction both on a retroactive and ongoing basis. The father also claimed he was entitled to a deduction for his capital loss in 2005 and for his dividend income. The father continued to pay the amount as agreed in the separation agreement. As the mother did not pursue the issue, it is understandable that the father would have been lulled into assumed that she agreed this arrangement.

[145] However, based on the mother's evidence that the father did not provide her with the required disclosure and that she did not agree with the father continuing to pay the amount of child support in the separation agreement, she should have taken some further action. Despite all of the correspondence entered into evidence, there are no letters from counsel for the mother or even the mother herself demanding the father pay child support in the amount required.

[146] I have considered that mother's evidence that she did not pursue court proceedings as she had just spent an inordinate amount of money in trying to resolve issues regarding the sharing of the costs of the children's orthodontic expenses and was worn out and on medication. I have also considered that the father's counsel did not challenge the mother in cross-examination about her evidence regarding her history of stress, anxiety and depression or the medication she was prescribed. I also accept the submissions of mother's counsel that the father's counsel never requested any medical reports or records and therefore I put no weight on his submission that the mother never produced any medical documents.

[147] The parties again discussed financial issues in 2008. It is the father's position that the parties agreed to continue support pursuant to the terms of the separation agreement. Based on the father's income for the preceding years (based on his line 150 income) there had not been a great fluctuation in his income and it is reasonable to infer that the mother determined that it was not worth pursuing a change in child support through the courts. Further, it was during this time the mother was also dealing with the dissolution of her second marriage and therefore may have again determined that it was not worthwhile for a variety of reasons to pursue increased child support.

[148] Although there is evidence there was animosity between the parties especially from the time of the separation up to 2004 and some extremely inappropriate and childish comments by the father, I do not find that the relationship was such that the mother was controlled or bullied by the father to the extent that it prevented her from 2004 to 2010 from pursuing a court application for both disclosure and an increase in child support.

[149] I note that when the mother did begin this court application that she did so on her own without the benefit of counsel. I find that she could have done so earlier and that her delay until January 2011 was unreasonable. However, that is only one factor to consider.

(b) Conduct of the Payor

[150] Although I have found that the mother did not have a reasonable excuse for the delay in commencing a court action, I find that the father engaged in blameworthy behaviour.

[151] I find that the father engaged in blameworthy behaviour by not providing all of the financial disclosure that was required by the terms of the separation agreement.

[152] The father testified that every year he provided the mother with both his personal and corporate tax returns by putting them in a sealed envelope and giving them to the children. The mother testified that the father provided her with some not all of the required information. It is noteworthy that in her Application she requests "full and frank" disclosure from 2006 but does not state that the father provided no information and in her evidence she admitted that in some years he gave her his T-4 and corporate returns but not his tax return or Notice of Assessment or the financial statements the company.

[153] In June 2006, when the mother approached the father about the new Child Support Guideline tables, the father provided the mother with a handwritten note regarding his calculations for 2004 and 2005 with his T-4s showing his salary of $88,000.00 and $85,000.00 respectively. The calculations he prepared indicate he overpaid support and the note states he used his dividends in 2004 and 2005 to pay for the children's expenses and further that he can deduct his capital loss in 2005. By his calculations his income in 2004 was $88,000.00 and in 2005 it was $66,399.36 being $85,000.00 less $18,600.64.

[154] I draw the reasonable inference that the father did not provide the mother with his personal tax returns or Notices of Assessment for those years because if he had produced those documents it would have been abundantly clear to the mother that the dividends he received were included in his income and that the capital loss was not deducted from his income. Even if the father honestly believed his calculations were accurate, I do not find his evidence credible that he produced all the required disclosure to the mother and that she agreed to continue to accept the amount of support in the separation agreement so he would not pursue an overpayment for the proceeding years.

[155] The father was aware that in 2008 his income increased to $97,000.00 and in 2009 to $130,102.00 and should have been aware that he was not meeting his child support obligations even if he was contributing to the children's other expenses. I do not accept the father's evidence that he provided full disclosure to the mother especially with respect to his 2009 income as his personal tax return and Notice of Assessment would have indicated an income of $153,808.00 as it would have included his RRSP of $23,664.00. It is not credible that the mother would not have queried such an increase in the father's income and corresponding entitlement to an increase in child support even if she was prepared to accept that the RRSP income should be deducted.

[156] I also find that the father's conduct in unilaterally reducing child support at the beginning of 2011, just after his son moved in with him, is blameworthy conduct. The provisions of the separation agreement required that if there was a dispute regarding child support, the parties were required to negotiate and if they were unable to agree then a court proceeding was necessary.

[157] The mother produced 2 text messages that the father agreed he sent on the day after Michael moved in with him that state:

"You will get $1,000 or you can spend money like you did with Mels ortho on a lawyer and get screwed."

And another text that stated:

"Nope I am not paying your fucken games tell your boyfriend to get a job I am tired of supporting you and him. Mike is applying for school so you are getting 925 now you had a chance at $1000".

[158] The father testified that the mother had sent him texts of a similar nature but did not produce them. Even if I accept that the mother did send him text messages of a similar tone, he was still not justified in reducing support. The father continued to base obligation on his income in 2000, namely $93,600.00 and the 1997 child support tables but deducted child support based on the mother's current income and the 2006 child support tables. Further, he deducted child support for Michael on the basis that the mother was required to pay child support as Michael was in school but by February 2011 Michael was finished high school and working full-time and did not commence college until September 2011 but the father did not re-adjust the amount he paid the mother.

[159] The father should have expected that as his income increased his support obligations should have increased. He was also aware that when he spent extra funds on his children he would not be compensated nor should he have expected that spending those extra funds would reduce his support obligations.

[160] As a great deal of time was spent on various aspects of the father's behaviour, I wish to clarify that I did not find the following allegations to represent blameworthy behaviour:

a) the father's failure to provide the mother with 12 post-dated cheques in accordance with the terms of the separation agreement as he consistently provided 6 post-dated cheques and all support was made;

b) the fact that he stopped child support for Melanie when she turned 18 years old as when he was reminded of the terms of the separation agreement, he immediately replaced the cheque and continued to pay child support for her;

c) the failure to pay child support based on an imputed income as until this trial such a request had never been made; and

d) the failure to pay his proportionate share of any special expenses as the terms of the separation agreement did not require that he contribute to any section 7 expenses except for dental and medical expenses not covered by a health insurance plan.

(c) Circumstances of the Children

[161] Based on the respective incomes of the parties and their partners, I find that the children enjoyed a lower standard of living in the mother's home. In fact the father testified that he bought the children clothing and other necessities because the mother did not do so. The mother denied that she did not meet the needs of the children and complained that the father used his funds for extravagant spending and bought the children clothing and things they wanted, not things they needed. There is no basis in the evidence to find that the mother neglected or did not meet the essential needs of the children based on the funds she had available.

[162] Since the separation, the father has spent a considerable amount of money on the children and in that sense they have not been deprived. He has purchased many things for them and contributed to their special expenses. But as was clearly shown in the evidence many of the items the father bought were not necessary although they were wanted and appreciated by the children. Many of the expenditures the father documented were incurred for entertainment and meeting the needs of the children when the children were with him or for his share of the children's lessons, summer camps and other special expenses. I accept the father was generous and spent these funds as he loved his children and wanted to give them whatever they wanted if he could afford to do so.

[163] But the mother has also spent a considerable amount of her funds on meeting the children's day to day needs and for their special expenses. She has needed to refinance her home in part to meet the expenses of the children. If the father had met his obligation to pay child support in accordance with the increase in his income over the years, it is clear that the mother needed those funds and would have used those extra funds to meet the children's needs.

[164] I find that Melanie's needs in particular have not been met as she has a large student loan that will need to be paid when she graduates. I find that both parents did not deal with her needs appropriately. If the mother did approach the father about contributing to the cost of Melanie's post-secondary education, then it was incumbent on the mother to proceed to use the dispute resolution provisions of the separation agreement or proceed to court in September 2009 when Melanie began university to determine the amount of child support payable and how to share the costs of her schooling. If the father felt that he should not have been paying the full amount of child support as Melanie was not living at home then he had a corresponding responsibility to resolve the issue through negotiations or the court process.

[165] However, I do not accept the submissions of the father that any retroactive funds received by the mother would be a windfall. Any funds the mother receives will be available to reduce the debts she has incurred to meet the children's expenses, assist her in meeting Michelle's ongoing needs and to assist Melanie with her outstanding student debt.

(d) Hardship Occasioned by a Retroactive Award

[166] It is submitted by counsel for the mother that the father has not addressed the issue of any hardship a retroactive award would cause him either in his evidence or in his submissions. I accept this submission.

[167] The father's support obligation for Melanie will be terminated shortly so he will have more funds available monthly. Also the father has the ability to access funds to pay any retroactive award or to borrow such funds based on his income and business interests. The father does not have any financial responsibilities to any other dependents. Any hardship can be lessened by structuring the award.

(e) Conclusion

[168] Having reviewed and considered the relevant evidence as it pertains to the factors as required by DBS, I find that a retroactive award to 2008 balances the father's expectations of certainty with the need for fairness and flexibility. I find that an order retroactive to 2008 strikes a proper balance as prior to that year there was not a great variance in the father's income and although the mother did give the father notice in 2006 that she was seeking an increase in support she did not pursue the issue at that time and even when she commenced this trial she only sought support retroactive to 2006 rather than retroactive to 2004 which was the basis for submissions by her counsel.

[169] I also find that such an award should only include table child support based on the father's actual income and not include any special expenses that are now claimed by the mother.

[170] Until this court proceeding began the mother had never requested that the father pay child support on anything but his income as set out on his tax return. It is only in this trial that the issue was raised of imputing income and although I agreed that should be done for ongoing child support I see no basis for imputing such income prior to the commencement of these proceedings.

[171] With respect to the special expenses, there was no specific requirement in the separation agreement for the father to contribute to any such expenses. Throughout the years the parties have, albeit with some difficulty, been able to negotiate payment for those expenses. If the mother was not satisfied with the voluntary arrangements then it was incumbent on her to proceed to court. For the mother to now expect the father to pay his share of these expenses, namely $9,210.50, retroactively is not fair or reasonable. There was no evidence that the children were deprived of participating in any extracurricular activities, camps or other lessons and there was insufficient evidence provided for any accurate calculations to be made as to the costs or relative contributions by the parties.

[172] Although I acknowledge that there are special expenses for Melanie's post-secondary expenses, I find that there was no evidence that the mother specifically requested the father pay a share of her expenses and if this was the mother's expectation then the mother should have proceeded to court in September 2009 when Melanie began school. The mother also did not request that as of the date of her application that the father should pay his proportionate share of Melanie's post-secondary education costs. Further, the father continued to pay child support for Melanie although she was living away from home and therefore the mother was receiving some funds to meet Melanie's expenses as it is generally accepted that if a child is living away from home while attending university the father's obligation to pay child support would have been reduced.

[173] In his written submissions, mother's counsel requested that the issue of both parents' contribution to Melanie's student debt be addressed after this judgement is rendered. It is submitted that the debt should not be the obligation of Melanie alone. I am not prepared to permit the mother to raise this issue at this late date or in this manner or to re-litigate the issue which is essentially what is being requested.

[174] Therefore, I find that based on the actual income of the father in 2008, 2009 and 2010 the father should pay a retroactive award of $23,040.00 being the underpayment of support for those years.

7.4 Termination of Support for Melanie

[175] The mother seeks ongoing child support for Melanie despite the terms of the separation agreement that support terminates when a child completes his or her first undergraduate degree or becomes 23 years of age.

[176] The father seeks to terminate child support for Melanie and if a retroactive order is made that he be given credit for the time he paid child support on her behalf for the hiatus between finishing high school and starting university if the mother is not required to pay him child support for Michael for the same hiatus.

[177] It is trite law that child support is the right of the child and cannot be bargained away by a recipient parent to the detriment of the child.

[178] Section 33 (1) of the Act provides that when a court makes an order for child support is must be made in accordance with the Child Support Guidelines unless there are special provisions in the agreement that would result in that amount being inequitable. There are no special provisions in the separation agreement executed by the parties that would result in inequities if the father was required to pay table child support.

[179] The Child Support Guidelines do not provide any termination of child support when a child reaches a certain age rather child support is payable for a child that is over 18 years old as long as that child is in full time school attendance.

[180] In this case, Melanie will turn 23 years old in 2013 and will not have completed her college degree. When this separation agreement was negotiated the parties would not have predicted that Melanie would not complete her post-schooling by the time she was 23 years old. There was no dispute that Melanie was the child most affected by the parents' separation and that she had some learning difficulties. Therefore, I accept the evidence that she had some difficulty in completing her university program and that is was reasonable for her to change to her current program at a community college.

[181] I adopt the reasoning in the case of Mac-Afee v, Garnett (2009) 58 R.F.L. (6th) 400 (N.B.Q.B.) that held that the court was not bound by a similar termination clause in a separation agreement at paragraphs 40 and 41 as follows:

As both counsel in these proceedings are aware, the language employed in that section was historically used, but has since largely been changed as a result of the proclamation of the Federal Child Support Guidelines.

The court is no longer bound by agreements reached between parties concerning child support, particularly when those agreements do not reflect the statutory requirements of the Guidelines.

[182] I find that the court is not bound by the provision in the separation agreement terminating child support at the age of 23. I find that Melanie is entitled to ongoing child support and that such support should continue until she completes her current program of education.

[183] I do not accept the submission by the father that there should be any credit for an overpayment for Melanie. Between finishing high school and starting university there is evidence, which was unchallenged, that Melanie continued in school to upgrade her high school credits and worked part-time. With respect to Michael the only evidence is that after he finished high school he worked full-time until he began college and therefore the mother would not have been obligated to pay child support during that hiatus.

7.5 Amount of Ongoing Child Support

[184] Child support must now be calculated as of the date this application was commenced.

[185] Based on the undisputed finding that Michael has resided with the father since December 2010, as of January 1, 2011 the mother is required to pay child support to the father. I see no reason that her support obligation would not be based on her most current income for 2011 namely, $48,806.00. However, as of February 1, 2011, Michael was finished high school and did not commence college until September 2011. Therefore the mother's support obligation ceased in February and began again in September 2011 and will continue until he completes his undergraduate degree.

[186] With respect to the father's ongoing support obligation it should be based on his income as imputed as of January 1, 2011. I reject the mother's submission that the father's income should be based on an average of his last 3 years of income. Although his income has fluctuated this is mostly because of dividends that have been included in his income in some years. As there is now a clear formula for calculating his income, the most current and accurate information about the father's income is his 2011 income as imputed.

[187] The father's salary for 2011 is $123,000.00 as set out in the financial statement for his corporation which has a year-end of December 31, 2011. The financial statement indicates a net corporate loss of $4,329.00. He deducted $2,580.00 for office and general expenses. I have calculated his income to be $123,229.00. The father has paid the mother $925.00 per month since January 1, 2011 and will be credited this amount.

[188] There is no dispute that Michelle is entitled to table child support.

[189] I have also found that Melanie is entitled to child support but as an adult child who is attending school and living away from home, the issue is whether or not table amount of child support is appropriate. Section 3(2) of the Child Support Guidelines provides that for children over 18 years the table amounts are presumptively applicable unless the court considers that approach inappropriate. Based on the evidence provided, I am unable to find that the table amount is inappropriate as there was insufficient proof of Melanie's expenses, her contribution through any part-time employment or an accurate accounting of the contributions of either parent.

[190] The father has not requested the mother contribute to Michael's special expenses so there will be no order to that effect.

[191] The father's counsel requested that I also determine the amount of child support as of January 1, 2012 based on the father's 2011 income of $123,000.00. However, as I have found that income should be imputed to the father on an ongoing basis by adding back his pre-corporate net profit and various business expenses, I am unable to do so as the father's corporation year end statements were not available for 2012. Therefore, the amount of support will continue to be based on the father's 2011 income as imputed without prejudice to re-adjust that amount upon proof of the father's 2012 income. I am also not aware of the mother's 2012 income which is necessary to determine her child support obligation.

[192] However, if counsel are able to agree as to the calculations for child support owing for 2012 and the ongoing amount for 2013, a Form 14B can be submitted and I am prepared to include it in my order or if counsel cannot agree I am prepared to hear brief submissions on that issue alone.

Order

Based on the Applicant's income of $48,806.00 and the Respondent's income of $123,229.00 for 2011 and in accordance with the Child Support Guidelines:

1. The applicant will pay child support for Michael Christopher Ronco-Hornby born April 15, 1992 to the respondent for the month of January 2011 and the months of September to December 2011 in the amount of $439.00 per month for a total of $2,195.00.

2. The respondent will pay child support for Melanie Anne Kristin Ronco-Hornby born April 3, 1990 and for Michelle Kathleen Ronco-Hornby born April 5, 1996 to the applicant for January to December 2011 in the amount of $1,700.00 per month less credit of $925.00 per month (which is the amount he has been paying) for a total of $9,300.00.

3. For the year 2011, the amount owing by the applicant to the respondent of $2,195.00 shall be deducted from the amount of $9,300.00 owing by the respondent to the applicant and the respondent shall pay to the applicant $7,105.00.

4. As of January 1, 2012 and up to and including January 1, 2013 the respondent shall pay to the applicant child support of $1,261.00 per month (being $1,700.00 less $439.00) less a credit for $939.00 per month (which is the amount he has been paying) for a total of $322.00 per month.

5. As of February 1, 2013, the respondent shall pay to the applicant $1,261.00 per month.

6. The amounts payable for 2012 and each year thereafter are subject to the right of either party to claim a re-adjustment of the amount of child support based on their respective incomes for the preceding year.

7. The applicant and respondent shall immediately notify the Family Responsibility Office as soon as any child completes his or her post-secondary education and shall execute any necessary documents to vary the amount of child support accordingly.

8. The respondent shall pay to the applicant as retroactive support the amount of $23,040.00 such amount to be paid at a rate of no less than $1,000.00 per month.

9. The respondent will provide to the applicant or any solicitor she designates a copy of his personal tax returns and tax returns for any corporation or partnership in which he has an interest with all attachments and his Notice of Assessment by June 30th, 2013 or within 14 days of receipt of same and each year thereafter. The applicant or her solicitor shall provide a written acknowledgement to the respondent of receipt of these documents within 14 days of receipt.

10. If the applicant is seeking any future contribution from the respondent to any extraordinary expenses as defined in the Child Support Guidelines, she will provide a copy of her tax return with all attachments and Notice of Assessment to the respondent. The respondent shall provide a written acknowledgment to the applicant of receipt of these documents within 14 days of receipt. The applicant is only required to provide the respondent with her tax returns and Notices of Assessment if she is seeking the respondent contribute to any extraordinary expenses.

11. If the applicant is seeking a contribution from the respondent for any extraordinary expenses, she shall provide him with written proof of the anticipated cost and the respondent shall confirm in writing if he consents to the expense, such consent not to be unreasonably withheld. The applicant and respondent shall pay their proportionate share of any agreed upon expenses.

12. Support Deduction Order to issue.

[193] If there are any mathematical errors in this order or if counsel wish to address me as to the current arrears based on this judgement, an attendance can be arranged through the judicial secretary.

[194] If either counsel is seeking costs, brief written submissions with a Bill of Costs and any offers to settle can be submitted within 30 days.

Justice Roselyn Zisman

Date: January 31, 2013