COURT FILE NO.: 04-FP-297581-FIS
DATE: 20120301
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Lesley Joan Crisp
Applicant
– and –
William Owen Crisp
Respondent
Karen Ballantyne, for the Applicant
Dani Z. Frodis and Robyn Switzer, for the Respondent
HEARD: January 16, 17, 18 and 20, 2012
PENNY J.
[1] This is an motion by Owen Crisp to change the August 26, 2004 order of Backhouse J., seeking a retroactive variation of child and spousal support.
Background
[2] The parties were married in 1983 and separated in 2004. They lived together for a total of 24 years. The parties are both currently 57 years of age.
[3] Owen and Lesley had three sons who are now all over 18. E, the oldest, was born in July 1987, was 16 at separation and is now 24 years of age. He is engaged to be married and works full time. T was born in August 1990, was 13 at separation and is now 21 years of age. He is currently finishing a diploma in police foundations at community college. K was born in January 1993, was 11 at separation and is now 19 years of age. He is attending university in Quebec on a football scholarship.
[4] On August 26, 2004, Minutes of Settlement signed by the parties were incorporated into the final order of Backhouse J.
[5] Among other things, equalization was resolved in Backhouse J.’s order. In essence, Owen transferred his interest in the matrimonial home to Lesley in exchange for a payment of $110,000.00. He retained his RRSP, valued at about $100,000 at the time.
[6] Backhouse J.'s order contains provision for spousal and child support. Owen was required to pay Lesley $2,200 monthly, tax deductible to Owen, in spousal support. Owen was also required to pay $1,480 per month as the Table amount for child support. These support amounts were calculated on the basis of Owen’s income being $90,000 and Lesley's income being $25,000. The order contemplates that child and spousal support would be recalculated “as soon as” Owen obtained employment (Owen’s employment had been terminated at the beginning of 2004 and he was, at the time of the settlement, still on a severance package valued at $90,000 per year.) Lesley was once employed as a research analyst at the University of Toronto but, at the time of settlement, had not worked outside the home since 1987.
[7] The order requires that in June of each year the parties would each give full section 21 Guideline disclosure of their incomes for the previous year and that support would thereafter be recalculated if there were a change in accordance with the Family Law Act and the Child Support Guidelines.
[8] Special or extraordinary expenses are also in issue in this application and are dealt with in paragraphs 8 and 9 of the order:
The parties will share agreed upon extraordinary expenses [in] proportion to their respective incomes. For the time being, however, and pending the husband obtaining employment the wife will pay 30 (thirty) percent of such extraordinary expenses.
Extraordinary expenses currently include by agreement school trips, medical/dental not covered by insurance, soccer by agreement, French, baseball, volleyball, and basketball.
[9] Under the terms of the Order, the parties share joint custody of the children. The Order provides that the children would reside with Lesley subject to Owen's access to all three children. Owen was entitled to alternate weekends with T and K and to make ad hoc arrangements directly with E.
Issues
[10] There are a number of issues raised in this application:
(1) what is the commencement date of any retroactive adjustments?
(2) what are Owen and Lesley’s incomes for purposes of determining retroactive and ongoing support obligations?
(3) did Owen overpay child support? If so, by how much?
(4) did Lesley fail to pay child support? If so, by how much?
(5) what, if any, ongoing child support obligations exist and in what amount?
(6) what is the total amount of section 7 expense arrears? How are they to be apportioned?
(7) are there ongoing section 7 expense obligations? How should they be apportioned? What, if any, obligation is on the children to contribute?
(8) did Owen overpay spousal support? If so, by how much?
(9) does Owen have ongoing spousal support obligations? If so, in what amount?
(10) what, if any, insurance should Owen be required to maintain to secure his support obligations? and
(11) what, if any, arrears of support are owing by Owen?
Notice/Commencement Date
[11] The leading case on the question of when the retroactive variation clock starts to run is the decision of the Supreme Court of Canada in S. (D.B.) v. V. (S.R.) 2006 SCC 37, [2006] 2 S.C.R. 231. In this case, Bastarache J. adopted the date of “effective notice” as the general rule for when retroactive adjustments may commence. Effective notice refers to “any indication by the recipient parent that child support should be paid, or if it already is, that the current amount of child support needs to be renegotiated.” Effective notice does not, therefore, require a party to take formal legal action. It does, however, require that the potential for variation be broached with the other party in a manner that clearly and unambiguously puts the other party on notice of potential legal consequences.
[12] This principle is subject to the further qualification, however, that even if effective notice has been given, “it will usually be inappropriate to delve too far into the past.” Thus, it will usually be inappropriate to make a support award or variation retroactive to a date “more than three years before formal notice was given.”
[13] In this case, Owen seeks a retroactive adjustment of child and spousal support reaching back to November 1, 2005. To give effect to this retroactive claim, Owen relies on the following facts:
(1) by the end of 2005 it was “obvious” that he was not earning $90,000 per year;
(2) in November 2005, E began reside residing with Owen, such that Lesley was no longer entitled to child support with respect to E and, indeed, was obliged to pay child support to Owen;
(3) in March/April 2006, Owen's lawyer raised the issue of an adjustment to child support because E was no longer living with his mother;
(4) in October 2006, Owen's lawyer made specific demand for an adjustment to child support (based on overpayment by Owen and unpaid contributions by Lesley) based on E’s change of residence;
(5) Owen’s delivery of annual financial information to Lesley which, he says, made it “clear” he was not earning $90,000 per year at any time; and
(6) allegations of “blameworthy conduct” against Lesley (essentially Lesley's continued receipt of child support for children she “knew” were no longer living with her and failure to re-negotiate child and spousal support based on his “actual” income).
[14] Mr. Frodis was retained around the beginning of 2009 and sent a letter to Lesley's counsel on January 30, 2009 alleging arrears of child and, for the first time, spousal support owing to Owen. This motion was not commenced until August 2009. Owen testified that he did not pursue the motion earlier because of financial limitations, claiming he had depleted his “settlement account” (the $110,000 equalization payment made to him) and his RRSP.
[15] Mr. Frodis argues that the provision of Owen’s financial information showing a discrepancy from the imputed numbers embedded in the order of Justice Backhouse is, by itself, notice sufficient to trigger entitlement to a retroactive adjustment. For this proposition, Mr. Frodis relies on a sentence from para. 121 of the S (DB) case which says: “By “effective notice,” I am referring to any indication by the recipient parent that child support should be paid, or if it already is, that the current amount of child support needs to be re-negotiated.”
[16] I do not think this sentence or, for that matter, the entire discussion of notice in S (DB) requires the conclusion that the mere provision of financial information, of itself, constitutes effective notice sufficient to start the retroactivity clock. The facts of this case constitute a perfect example of why this is so. Owen was not paying any amount toward section 7 expenses; the issue of his income is highly controversial and has been throughout; whether E’s or T’s departure from Lesley’s home required a net adjustment was, and remains in this trial, an issue in dispute. Following the sentence relied on by Mr. Frodis, Justice Bastarache went on to say: “Thus, effective notice does not require the recipient parent to take any legal action; all that is required is that the topic be broached. Once that has occurred, the payor parent can no longer assume that the status quo is fair, and his/her interest in certainty is less compelling.” In my view, in the circumstances of this case at least, “broaching” the subject of an adjustment to child and spousal support required more than simply providing copies of prior year’s tax returns/assessments. Conduct required to start the retroactivity clock must at least put the other party on clear notice that changes to their respective legal obligations would be sought.
[17] That said, I am satisfied that, on the facts of this case, effective notice of Owen’s intention to seek a variation of his child support obligations was given in March 2006. In light of that notice, and the reasons for it, no additional notice concerning child support for T was necessary when T moved in with Owen a few years later.
[18] This still leaves the question of delay in the commencement of this application and whether the three year limit described by Bastarache J. should apply. Ms. Ballantyne argues that Owen should not be entitled to seek arrears of child support to March 2006 on account of his delay in taking legal action. There should, she argues, “be some sort of consequence for this delay.”
[19] I accept that delay is not presumptively justifiable. But, as the Supreme Court of Canada said in S (DB), courts must be sensitive to the practical concerns associated with child support applications. A reasonable excuse for delay may well exist where, for example, the applicant lacked the financial means to bring an application. Both parents’ behavior should also be considered in determining the appropriate balance between certainty and flexibility in a given case, including the question of delay.
[20] In this case, Lesley was put on notice, clearly and unambiguously, that Owen would be seeking a reduction in child support in March 2006. Lesley concedes, in fact, that E was living with Owen as of November 2005 and that T was living with Owen from January to June 2009. She also concedes that no child support was properly payable for T from July 2009 to August 2010 when he was not in school. Owen’s evidence, not really challenged in cross examination, was that he did not bring legal proceedings sooner because he wanted to avoid the legal expense and hoped the matter could be resolved without litigation.
[21] While I would not necessarily characterize Lesley's conduct as “blameworthy” (as that term is used in the cases), given the ongoing dispute over Owen's failure to contribute to section 7 expenses etc., Lesley did accept payments on account of child support when she knew that support was not properly payable. I do not think it now lies in Lesley's mouth to complain that Owen delayed his application for retroactive variation of his child support obligations.
[22] Hardship is also an issue to be taken into account. Retroactive awards, for example, disrupt the parents’ management of their financial affairs in a way that prospective awards do not. However, for reasons that will be outlined in more detail below, I do not think giving effect to Owen's application to vary child support back to March 2006 will result in any substantial hardship.
[23] For all of these reasons, I find that effective notice of Owen’s intention to seek a variation of his child support obligations was given in March 2006. That is the date from which any calculations should be made.
[24] The issue is different with respect to Owen’s spousal support obligations. This is because, unlike the case of child support, no direct notice of any kind was provided to Lesley of Owen’s intention to seek a retroactive adjustment of spousal support until January 2009. As noted above, I do not think the mere provision of annual income information, in the circumstances of this case, is sufficient to constitute effective notice of an intention to seek retroactive adjustment of spousal support. This is particularly the case when, for several years after the original consent order was entered into, Owen made it clear in written correspondence that he intended to continue paying support based on $90,000, even though, as he points out now, his net income was never that high after 2004.
[25] Accordingly, with respect to spousal support, I find effective notice of Owen's intention to seek a variation was first given in January 2009.
The Parties’ Incomes
Owen’s Income
[26] The issue of Owen's income is important in this case because it is the cornerstone for most of his arguments in support of retroactive adjustment of his support obligations. In essence, Owen's argument is that his assumed annual income, for purposes of support under the consent order, was $90,000. The 2004 order contemplated an adjustment once he started working again. Owen's position is that he has never had a net income as high as $90,000 since 2004. He seeks, therefore, an adjustment based on his actual income.
[27] Owen’s line 150 income in 2003, the last full year of employment prior to separation, was $125,496.01. Owen lost his job in January 2004 and the parties separated later the same day.
[28] Owen testified that following separation and the loss of his job he applied for two positions. When he did not get full time, regular employment, he decided to return to consulting work as a marketing consultant. Initially, he did consulting work for two firms, Arthur’s Juices and Mackenzie Trade. By September 2005, Owen was seeing Andrea Mackenzie, the principle of Mackenzie Trade, socially. Soon, Mackenzie Trade was Owen’s only “client.” Owen lost his consulting contract with Mackenzie Trade in 2011. He is presently unemployed but continues to pursue opportunities he hopes to capitalize on through two corporations he owns, Everyday Oil and Extraordinary Snacks.
[29] Owen testified that, following his separation and the termination of his employment, he did not want a full time job because he wanted to spend time on his private business ventures, Everyday Oil and Extraordinary Snacks. That, he said, is why he “stayed on contract with Andrea.” Owen’s billings and receipts as a consultant were run through Everyday Oil. Apart from his consulting with Mackenzie Trade, however, very little income or expense was generated by the business of Everday Oil. Everday Oil was incorporated in 2002. It has yet to generate a profit. Extraordinary Snacks is a more recent venture. It has yet to generate any revenue at all.
[30] For the years 2005 to 2011, Everyday Oil’s gross revenue, before cost of sales and expenses, has been, for the period ending on March 31 of each listed year:
2005: $25,354.00
2006: $109,025.00
2007: $87,917.00
2008: $112,975.00
2009: $90,000.00
2010: $92,500.00
2011: $90,000.00
[31] Since 2004, Owen’s line 150 income has been as follows:
2004: $82,192.15
2005: $59, 130.36
2006: $67,811.84
2007: $75,090.09
2008: $75,000.00
2009: $75,000.00
2010: $75,000.00
2011: $56,000.00 (estimate)
[32] The major expense, by a considerable margin, that is deducted from Everyday Oil’s gross revenues, to get to the amount paid out in income to Owen, is a vehicle expense claim of roughly $15,000-$19,000 per annum. The majority of this expense is made up of mileage charges for travel between Mississauga, Ontario, where the “office” of Everyday Oil is, and Beaverton, Ontario where Andrea Mackenzie lives and conducts her business.
[33] For purposes of his application to vary support, Owen uses his line 150 income from 2005 to 2011. He claims that his business ventures are legitimate and that the expense of travel (largely to his only client, Mackenzie Trade) was legitimately incurred in pursuit of income.
[34] Lesley submits that Owen did not make reasonable efforts to obtain comparable employment after his termination in 2004. Instead, she argues, he chose to work part-time at his new girlfriend’s company and to pursue risky, and unprofitable, business opportunities. Accordingly, Lesley submits that Owen has been intentionally under-employed.
[35] Furthermore, Lesley submits that Owen has artificially reduced his income by using his company, Everyday Oil, to deduct unreasonable, and essentially personal, expenses from the gross revenues of his business as a marketing consultant. The most obvious item Lesley objects to is the travel expense for driving to and from Beaverton, where Owen’s girlfriend lives and works. Lesley emphasizes the fact that Owen’s consulting with Mackenzie Trade has been his only source of income for the last three financial years.
[36] Now that Owen has lost his contract with Mackenzie Trade, Lesley says, he is still pursuing risky, and unprofitable business ventures as opposed to looking for regular, full time, employment or new, full time, work as a marketing consultant. Lesley’s position is that Owen has support obligations. If he wishes to pursue a risky business venture, especially considering his lack of success in the past, his wife of 24 years and his children should not have to suffer financially.
[37] For the purposes of determining Owen’s income for support purposes, Lesley proposes to use the total amount he received as consulting income for any given year. On a go forward basis, Lesley is seeking support based on an imputed income of $90,000.
Analysis
[38] In this analysis, I have been guided by the following principles.
[39] Section 19(1)(a) of the Federal Child Support Guidelines provides that a court may impute income as it considers appropriate when a spouse is intentionally under-employed.
[40] Section 19(1)(g) of the Guidelines also provides that a court may impute income if a spouse unreasonably deducts expenses from income. Section 19(2) clarifies that the reasonableness of an expense deduction is not solely governed by what is permitted under the Income Tax Act.
[41] The courts may impute income to parties in circumstances where it is determined that they are not reasonably using their resources, or have not reasonably explained why they have no income or are underemployed, see K. (V.) v. S. (T.), 2011 ONSC 4305, 2011 CarswellOnt 9144, para. 254.
[42] There is a duty on the part of the payor to actively seek out reasonable employment opportunities that will maximize his or her income potential so as to meet the needs of their dependants. Parties will not be excused from their support obligations where they have persisted in un-remunerative employment or where they have pursued unrealistic or unproductive career aspirations. A self-induced reduction of income is not a basis upon which to avoid or reduce support payments. If a party chooses to pursue self employment, the court will examine whether this choice was a reasonable one in all of the circumstances. The court may impute income if it determines that the decision was not appropriate having regard to the party’s support obligations (K. (V.) v. S.(T)), supra, para. 255(c) to (e)).
[43] While the court should respect the right of self-employed persons to run their business as they see fit, the court may question whether particular expenditures ought to be indirectly subsidized by lower support obligations. It is appropriate to adjust income if personal expenses are deducted or if the expenses cannot be said to have been reasonably incurred to earn income, see Osmar v. Osmar, 2000 ONSC 22530, 2000 CarswellOnt 1928, paras. 4 and 5.
[44] A self-employed person has the onus of clearly demonstrating the basis of his net income. Such payors have an inherent obligation to put forward not only adequate, but comprehensive records of income and expenses, from which the recipient can draw conclusions and the amount of child support can be established. The onus rests upon the parent seeking to deduct expenses from income to provide meaningful supporting documentation in respect to those deductions, failing which an adverse inference may be drawn, see Wilson v. Wilson, 2011 ONCJ 103, 2011 CarswellOnt 1630, para. 22.
[45] Where a person is engaged in a work activity at one location only and goes there every day to provide services through which he earns his income, simply driving from his home to that one location and back is a personal expense, not a business expense, and the cost of transportation is not deductible. This applies even when a person is an independent contractor, see Zolghadr v. R, 2008 CarswellOnt 4590, para. 15.
[46] Having regard to these principles, I do not think it is appropriate to use Owen’s line 150 reported income as his “income” for support purposes. In my view, his imputed income should remain at $90,000. I come to this conclusion for essentially two reasons.
[47] First, I find that Owen has been intentionally under-employed since separation. He did this quite explicitly because he wanted time to pursue his entrepreneurial ventures. However, he has been operating Everyday Oil for 10 years and it has yet to make a profit. This is a classic case, in my view, of a party who has persisted in un-remunerative employment or pursued unproductive career aspirations. A self-induced reduction of income of this kind is not a basis upon which to avoid or reduce support payments.
[48] Second, Owen has not justified the most significant deduction - travel - from his gross marketing income. For several years, his only client has been his girlfriend’s business. His trips to and from Beaverton (Owen admitted that he often stayed with Ms. Mackenzie overnight or for the weekend) are, in my view, more in the nature of personal expenses, not business expenses.
[49] I am not satisfied that there is any basis to change the imputed income of $90,000 used in the consent order for support purposes. Owen’s 2003 income may well have been an aberration although it represents, perhaps, the upper limit of what Owen might potentially earn. His more recent, declared income of $75,000 rounds up to $90,000 when his Beaverton travel expenses are added back. I have no doubt some of the other expenses claimed are legitimate reimbursements, which is why I do not adopt Lesley's proposal of using the total gross income in each year.
Lesley’s Income
[50] Since 2003, Lesley’s line 150 income (exclusive of spousal support) has been as follows:
2003: -$4,275.26
2004: $4,270.64
2005: -$2,722.49
2006: $8,118.
2007: $5,941.03
2008: $28,325.35
2009: $38,589.11
2010: $37,021.76
2011: $37,554.92 (estimate based on pay stub)
[51] Lesley has worked part-time since separation. She gradually increased her part-time working hours and took computer courses to enhance her employability. In mid-2008, she was able to obtain full-time employment and her income increased above her imputed income of $25,000 for the first time.
[52] For the purposes of calculating support, Lesley has proposed to use her imputed income of $25,000 per annum up to and including 2007, and her actual income from 2008 onwards. I did not understand Mr. Frodis to take issue with that position. For these purposes, I accept the amounts quoted above and find Lesley’s 2011 income to be $37,554.92.
Overpayment of Child Support
[53] Both parties agree there was some overpayment of child support by Owen to Lesley. They disagree, however, about the amount of the overpayment. Owen calculates the total amount of child support overpayment at $33,680. Lesley calculates the total overpayment at $21,273. The main differences between them appear to come from two sources: 1) timing differences in when support obligations ended or were suspended; and 2) the incomes used.
[54] Income has been resolved. The appropriate income to use for purposes of Owen’s child support obligations is $90,000.
[55] As to timing, the calculation of overpayment should reflect my findings of fact that:
(i) Owen had no child support obligations with respect to E as of March 2006;
(ii) Owen did not have any child support obligations with respect to T from January 2009 to September 2010. Once T was enrolled in community college, Owen’s support obligation should be reduced by two thirds from the Table amount to reflect the fact that T was away at school but resided with his mother from time to time on weekends and in the summers of 2010 and 2011. All child support obligations with respect to T will come to an end in June 2012;
(iii) K moved to Montréal to attend college in September 2011. K, therefore, only qualifies for one third of child support attributable to him since he is not living at home but is likely to reside with his mother in the summers until graduation.[^1]
[56] Since I have changed almost all of the assumptions underlying both parties’ calculations of overpayment of child support, I must ask the parties to recalculate these numbers based on my findings of fact. It is to be hoped the parties will agree on these calculations, which can be submitted along with a draft order embodying those numbers. If, however, the parties are unable to agree, their positions should be summarized in written material (which shall be submitted to me) and a date should be arranged for an attendance before me to resolve the outstanding disputes.
Lesley’s Child Support Obligations
[57] Although Owen maintains that he was the custodial parent of both E and T for a total of over 14 months, Owen is not pursuing a claim for retroactive child support (which Owen values at about $4,000) from Lesley.
Ongoing Child Support Obligations
[58] As noted in paragraph 55 above, child support obligations in respect of E are at an end. Child support obligations in respect of T will cease at the end of June 2012. Child support obligations are ongoing with respect to K, reduced to one third to reflect the fact that he is not living with his mother while in full-time attendance at university in Montréal.
[59] In the event that T is not enrolled in a full-time postsecondary institution by September 15, 2014, Owen's obligation to pay child support for K shall terminate as of October 1, 2014. In the event that T is enrolled in a full-time postsecondary institution by September 15, 2014, Owen's obligation to pay child support for K shall terminate on May 1, 2016. [^2] In any event, Owen's obligation to pay child support for K shall terminate on the earlier of the aforementioned events or the date K has obtained his first postsecondary degree or is no longer in full-time attendance at a postsecondary institution.
[60] Consistent with this finding, it is appropriate to order that Owen shall pay his proportionate share of T and K’s medical, dental and extended health expenses not covered under insurance for so long as child support is payable for them. His consent for these expenses will not be required for individual items/services costing less than $200. Owen’s consent will be required for expenses over $200 and requests for consent shall be delivered via counsel. If Owen does not respond to a request for consent within 14 days of the request being made, consent will be deemed to have been provided.
Section 7 Expenses
Arrears
[61] Lesley has submitted a list of section 7 expenses for which she is seeking repayment from Owen. These amount to approximately $17,000.00.
[62] Owen does not accept that all of these expenses are truly special and extraordinary expenses as contemplated by the Guidelines. Owen also took the position during his evidence that Lesley had to have his express consent before incurring any of these expenses.[^3] Nonetheless, in argument Owen said that he is prepared to pay his proportionate share of the expenses listed.
[63] On the question of his proportionate share, however, Owen argues that, including the spousal support payments Owen has made to Lesley since 2005, the parties’ incomes have been close to equal. As such, Owen argues that he should only be responsible for 50% of the listed expenses.
[64] Since I have rejected Owen’s argument on the income which should be attributed to him for support purposes, I find that the proportionate amount of the section 7 expenses attributable to him should be the 70% contemplated by the 2004 consent order until the end of 2007 and the proportion generated under the Guidelines using their incomes, as determined above, thereafter.
Ongoing
[65] A good deal of time was spent during the trial and in argument on the question of the postsecondary school expenses of T and K.
[66] Leslie provided budgets for T and K in her evidence. With respect to T, she budgeted a total of $18,730 in 2010/11, arguing that T should be responsible for one third (to be taken from the family RESP) and that she and Owen should be responsible for the balance in the proportion of 42% to her and 58% to him. Similarly, for 2011/12, Lesley budgeted $19,605, less one third from the RESP, and proposed that the parties share the balance in the same proportions.
[67] Lesley’s budget for K for 2011/12 was $18,580, less K's share of one third from the RESP, the balance to be shared by the parties, again in the same proportions.
[68] On this approach, Lesley claimed that Owen would owe $21,997.
[69] With respect to T, Owen’s position is that, upon graduation in June 2012, T will no longer be a child of the marriage and will no longer be entitled to any form of support. Owen took the position that:
(a) T’s expenses should be calculated after recourse to the family RESP account;
(b) T's budget is inflated and should be reduced to $16,000 (less $6,000 from the RESP);
(c) T should contribute $3,500 from some combination of his savings, summer earnings or student loans; and,
(d) Owen should be responsible for only $4,550 per year or $380 per month until June 2012.
[70] With respect to K, Owen's position is that:
(a) K should have recourse to the RESP first;
(b) K’s budget is inflated and should be reduced;
(c) K should make a one third contribution from his own savings, summer earnings or loans, in addition to the use of the family RESP; and
(d) Owen should contribute only $1,866.66 per year or $155 per month from September 2011 until K completes his fourth year of university.
[71] There are three main issues in dispute. First, what are the appropriate budget amounts? Second, how should the RESP funds be used and allocated. Third, what, if any, contribution beyond the RESP funds should T and K make to the cost of their education?
Budgets
[72] I find the annual school budgets proposed by Lesley to be, by and large, reasonable. In my view, the budgets for T should be fixed, for 2010/11 and 2011/12, in the amount of $18,000. The 2011/12 budget for K should also be fixed in the amount of $18,000.
RESP
[73] There was approximately $66,000 available in the family RESP at the beginning of the 2010/2011 school year. Originally, Lesley thought that T would be going to school for two years and K would be going to school for four years. As such, she budgeted 1/6 of the RESP ($11,000) for each year of school. This approach to the use of the family RESP has been complicated, however, by the fact that K is now going to be in school for five years, not four, and uncertainty about whether T will pursue further postsecondary education after obtaining his community college diploma. As a result, Lesley proposes now to allocate half of the 2010 RESP amount ($33,000) to each.
[74] In my view, the RESP must be used first. That is what these funds were designated for, and it is appropriate that recourse be had to them before looking to other sources of support for this expense. It is not necessary, however, to finally resolve now how much of the RESP should be allocated to K and how much to T to achieve the objective of ensuring that the RESP funds are all utilized. K is clearly going to be in school for several years and it will be sufficient for the parties to know by September 2014 whether T intends to pursue additional education. For the moment, it seems to me appropriate to adopt Lesley’s approach of budgeting 1/2 of the original RESP amount to each of T and K ($33,000 each). If T does not return to school in the near future, he will have the capacity to work and save for any future education on his own. In that event, the balance of the RESP should and can still be used to fund the balance of K’s undergraduate education.
[75] Accordingly, the original $66,000 shall be apportioned as follows:
(1) one half the amount ($33,000) shall be used by K and applied in equal proportions towards his five year degree. This equates to $6,600 per annum.
(2) one half the amount shall be used by T. $6,600 shall be applied to each year of his current two year program. The remaining amount, $19,800, shall be used to cover T’s further education in the event that he enrolls in a program for a second degree. If T does not go back to school by September 2014, then the $19,800 shall be applied towards K’s remaining two years of school.
[76] On this basis, Owen’s obligation to contribute to T’s postsecondary education expenses shall cease in June 2012. Owen’s obligation to contribute to K’s postsecondary education expenses shall cease in accordance with the timetable in para. 59 above: in the event that T is not enrolled in a full-time postsecondary institution by September 15, 2014, Owen's obligation to contribute to postsecondary education expenses K shall terminate as of October 1, 2014. In the event that T is enrolled in a full-time postsecondary institution by September 15, 2014, Owen's obligation to contribute to postsecondary education expenses for K shall terminate on May 1, 2016. [^4] In any event, Owen's obligation to contribute to postsecondary education expenses for K shall terminate on the earlier of the aforementioned events or the date K has obtained his first postsecondary degree or is no longer in full-time attendance at a postsecondary institution.
Children’s Contribution
[77] Owen takes the position that T and K should both contribute to the cost of their postsecondary education and should borrow, if necessary, to finance that contribution. Lesley argues that the children should not have to go into debt to obtain their education and that both she and Owen have an obligation to contribute toward their children's postsecondary education.
[78] Both children received gifts from their maternal grandparents when they reached the age of 18. T used his money to cover his expenses during a “gap” year between high school and college which he spent living in Vancouver. K still has some of his money and uses it “as necessary.” In addition, there was evidence of T’s capacity to work. He had employment income in 2010 of over $9,000 but, again, he used that money to cover his expenses for the first eight months of the year. Both children certainly have the ability to work during the summer.
[79] The parents are not wealthy people. The children are fortunate to have generous grandparents. I do not think it is unreasonable to require T and K to make a substantial contribution to their postsecondary education and to borrow, if necessary, to do so. In my view, after deductions for the RESP allocations and scholarships, the balance of their educational costs should be allocated one third to the child, with the balance being divided between Owen and Lesley proportionate to their incomes as found by me in these Reasons.[^5]
[80] Again, I have changed various assumptions used by both parties and must, therefore, ask the parties to recalculate the numbers based on my findings. My comments about potential calculation disputes noted in para. 56 above apply to the parties’ contributions to postsecondary education as well.
Overpayment of Spousal Support
[81] Owen claims that he has overpaid spousal support in the amount of $120,013. The backbone of this argument is that the “wrong” income was used for the calculation of his spousal support obligations. Since I disagree with Owen about his imputed income, his claimed calculation of support overpayment clearly cannot stand. However, it is equally clear that spousal support should be adjusted to reflect Lesley's income since January 2008 as well as other relevant changes in circumstances regarding the children. I would again, therefore, ask the parties to recalculate their numbers on the question “overpayment” of spousal support based on my findings.
Ongoing Spousal Support
[82] Owen proposed to waive his claim for $120,000 overpayment of spousal support in exchange for the termination of all future spousal support obligations. Since I have found that his claim for $120,000 of spousal support overpayment is not justified, the question of Owen’s obligation to pay ongoing spousal support remains.
[83] Mr. Frodis points to a number of circumstances which he says justify a termination or reduction of spousal support. He argues that:
(1) as a result of alleged overpayments of support to Lesley since 2005, Owen has been left with only minor assets, and presently has a net worth of -$38,046.67. Owen has completely depleted the large equalization payment he received from Lesley in 2004. He lost most of the value of his RRSP in 2008 when the stock market plummeted, and has been depleting the remainder since Mackenzie Trade stopped contracting for his services in August 2011. Owen owns no other assets;
(2) Lesley is the sole owner of the home on Banff Road, in the affluent Bayview and Eglinton neighborhood – a home she estimates to be worth approximately $600,000. There is no mortgage on Lesley’s home. Mr. Frodis says she can downsize to a condominium, reduce maintenance and other ongoing costs and realize a capital gain on the sale;
(3) as of the date of separation, Lesley’s RRSP was worth approximately $22,000. It is presently worth about $45,000. As a result of her employer’s matching plan, Lesley expects her RRSP to continue to grow. Lesley also holds over $5,000.00 in mutual fund investments and has no significant arm’s length liabilities;
(4) since separation, Lesley has received over $215,000 from her parents to satisfy her equalization obligation (thereby gaining sole ownership of her home), make repairs to her home and pay the legal cost of bringing this matter to trial. She is presently under no obligation to repay any of these funds; and
(5) Lesley’s income has exceeded the imputed value of $25,000 since 2008 and continues to do so.
[84] Although Owen’s net worth decreased by approximately $200,000 since the parties entered into their consent order, he has admitted that about half of this amount was lost through making risky investments in his self directed RRSP. He has also admitted that another $50,000 or so of this amount was spent on legal fees. There is, as well in my view, much to be said for Lesley’s argument that the remaining deficit is the result, in significant part, of Owen’s choice to pursue only part time consulting work with his girlfriend’s company and manifestly unprofitable business ventures since the date of separation.
[85] Lesley is the owner of the matrimonial home but that is the direct result of the bargain struck in 2004, in consideration for which Owen received a very substantial equalization payment. It is difficult to conceive how Lesley’s equity in the matrimonial home could have been unforeseen in 2004.
[86] I also do not think the disparity in their RRSPs justifies any adjustment to spousal support. Lesley, by dint of her own hard work and prudence, has managed to increase her RRSP from $22,000 to $45,000. Owen, through risky and highly speculative investments, has caused the severe depletion of his RRSP.
[87] While it is true that Lesley received some financial help from her parents after separation, the evidence was that these funds were, in effect, inter vivos gifts against her future inheritance. Given her parents’ own financial needs and the needs of her very ill brother, these gifts are unlikely to be forthcoming in the future and Lesley’s remaining inheritance is likely to be very modest.
[88] I also note that, according to the Court of Appeal in Bak v. Dobell, 2007 ONCA 304, 2007 CarswellOnt 2324, para. 74, the Legislature intentionally did not include the receipt of gifts given in presumptive income, or as an example of an appropriate circumstance under s. 19 of the Child Support Guidelines to impute income. In this case, the funds were given on an irregular basis when Lesley needed assistance. While the parties were given some funds from time to time during the marriage, they were usually required to pay them back. For example, the Crisps paid back loans from Lesley’s parents for a car and a business franchise. Other loans, such as the money to purchase their home, were, when ultimately forgiven, specifically offset against Lesley’s future inheritance.
[89] This couple lived together for 24 years. It was, for the most part, a traditional marriage in which the husband was the bread winner and the wife was a “stay at home” mom. Although Lesley worked before bearing children, she ceased doing so when E was born and did not return to the workforce for many years. Even when she did, it was for minimal remuneration. It is to her credit that Lesley sought out retraining and obtained permanent employment, with benefits, since 2008.
[90] I do not think the circumstances warrant the termination of spousal support at this time. I do agree that Lesley’s current income represents a material change and should be incorporated into any recalculation of Owen’s current support obligations.
[91] I am also persuaded that the midpoint calculation under the SSAG is the appropriate one in the circumstances of this case.
[92] Otherwise, I do not think Mr. Frodis’s arguments warrant a departure from the guidance provided by the SSAGs.
[93] It appears to me that the Divorcemate calculation provided by Ms. Ballantyne at Tab 13 of her Closing Statement represents the most applicable calculation. However, I again ask the parties to recalculate the numbers in accordance with my findings and provide me with their views, in accordance with the directions outlined previously in these Reasons.
Insurance
[94] In my view, some amount of life insurance is appropriate to secure Owen’s remaining spousal support obligations. The parties shall seek to reach agreement on the appropriate amount of this insurance, failing which submissions may be made in a future attendance.
Arrears of Support
[95] Exhibit 1, Tab 44 is a printout from the Family Responsibility Office, current to March 10, 2011, which shows Owen owing support arrears of $16,080. An October 19, 2011 statement of the FRO was introduced which shows arrears of $5,580. In his evidence in chief on January 16, 2012, Owen testified that he was current to the end of 2011 but that he had not yet made the January 2012 payment. The FRO record which shows arrears of $5,580 was confirmed by Owen in his cross examination.
[96] There is a dispute between the parties about whether the FRO record reflects a payment Owen made directly to Lesley. Lesley says she advised the FRO of the direct payments she received. Owen, as I understand it, believes the FRO has made a mistake and has failed to record the alleged direct payment.
[97] On the evidentiary record before me, I am simply unable to make any determination about the current status of Owen’s account with the FRO. Accordingly, I am not prepared to make any order in this regard.
Costs
[98] The parties shall exchange bills of costs within two weeks and seek to agree on the appropriate disposition of costs. If they are unable to do so, brief written submissions, not to exceed two typed pages together with a bill of costs, may be submitted within 30 days of the release of these Reasons.
Penny J.
Released: March 1, 2012
[^1]: This disposition is tied to K’s obligation, explained below, to make a significant contribution to his postsecondary education. I have assumed that K can avoid the need to pay rent in the summers by living, while working in the summer, with his mother. It is unlikely he would be able to do so if Lesley had to move out of the matrimonial home into a small condominium, as urged by Owen.
[^2]: This timing reflects my disposition of the RESP issue outlined below.
[^3]: I should point out that, had it been necessary to do so, I would have found that the section 7 expenses claimed are appropriate and that Owen’s express consent to each expenditure was not required. I would have come to this latter conclusion on the basis that the consent order already embodied his consent to reasonable expenses of the type in issue and on the basis that there must be an implied term, even if his consent were required, that his consent would not be unreasonably withheld.
[^4]: This timing reflects my disposition of the RESP issue outlined below.
[^5]: The obligation on K to contribute assumes that he is able to earn money in the summer and that he will not need to pay rent because he can live with his mother. This in turn assumes that his mother maintains the Banff Road home. This is the main reason for my order providing for continued child support for K during the summer months.