ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: FC-07-1271-2
DATE: 2013/02/27
BETWEEN:
Craig Thomas Sobczak
Applicant
– and –
Catherine Michelle Evraire
Respondent
Sarah L. Coristine, for the Applicant
David Sinclair, for the Respondent
HEARD: November 26-27, 2012 and further materials filed January 21, 2013
REASONS FOR DECISION
Annis J.
Introduction
1The parties entered into a Separation Agreement (“Agreement”) fixing child support in 2008 and 2009 for their two children. As it turned out, the Agreement reflected a significantly undervalued income of the respondent mother, Catherine Michelle Evraire.
2The applicant father, Craig Thomas Sobczak, brings this motion to vary child support. Ms. Evraire consents to a variance in child support, including s. 7 expenses, retroactive to January 1, 2010. Disagreements remain over the methodology and calculation of child support payable.
3The issues are defined by the orders sought by the parties. The father asks the court for the following orders:
(a) to determine Ms. Evraire’s income, pursuant to s. 17 of the Federal Child Support Guidelines, S.O.R./97-175 (“Guidelines”), on the basis of a three year average of her income;
(b) to impute income to her by grossing up tax deductions, and
(c) to apply the factors under s. 9 of the Guidelines in accordance with the analysis of the Supreme Court of Canada in Contino v. Leonelli-Contino, 2005 SCC 63, [2005] 3 S.C.R. 217.
4In turn, by way of a cross-motion, Ms. Evraire requests the court to impute income to the applicant on the grounds that he is intentionally under-employed.
5I find for both parties on the orders they seek, although Ms. Evraire is significantly more successful in the final outcome. My reasons and resulting orders follow.
Facts
6The parties were married on September 5, 1998. They have two children; Brad Sobczak, born on June 21, 1999 (13 years old), and Derek Sobczak, born on December 30, 2002 (10 years old). They separated on January 1, 2007, and divorced on October 25, 2008.
7The parties entered into a final separation agreement on June 4, 2008. It resolved all issues arising from the breakdown of the marriage. They agreed to joint custody and equal shared residency of the children.
8The Agreement explicitly stated that the parties agreed to disagree on each other’s income. In retrospect, this is understandable given that the respondent paid table child support of $1,587 for 2008 and 2009 on her agreed income of $180,000. Her actual income for those years was $335,455 and $447,237, respectively. The Agreement prevented any variance of child support until January 2010.
9In addition, Mr. Sobczak accepted an imputed income of $50,000. He had never earned more than $12,500 during the years that the parties had been married.
10Mr. Sobczak stated that he was forced to compromise his position by agreeing to impute a higher income for himself in exchange for securing an agreement that had Ms. Evraire move out of the matrimonial home.
11Ms. Evraire responds that she provided the applicant with a generous lump sum spousal support payment and significantly compromised in order to reach a settlement on the issue of net family property.
12Since 2010, Mr. Sobczak made repeated requests for Ms. Evraire’s income disclosure in order to adjust child support. The respondent’s failure to respond resulted in this motion to vary. Notwithstanding litigation, repeated requests and a court order, I find that Ms. Evraire delayed in providing her income disclosure.
13The father claims that he was the primary caregiver for the children during the marriage and since separation. He says he had the children in his care approximately 60 per cent of the time from 2007 until 2010. Since 2010, he claims to have had the children in his physical custody just under 60 per cent of the time. Ms. Evraire acknowledges that the applicant has had the children at least 55 per cent of the time.
Analysis
1. Ms. Evraire’s Income
Section 17 of the Guidelines: Pattern of Income
14Mr. Sobczak seeks to average the mother’s income for the years 2010 to 2012, pursuant to s. 17(1) of the Guidelines which reads as follows:
If the court is of the opinion that the determination of a spouse’s annual income under section 16 would not be the fairest determination of that income, the court may have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years. [emphasis added]
15Ms. Evraire’s income since 2008, as presented to the court , and averaged for 2010, 2011 and 2012, as agreed to by the parties, is as follows:
Year
Income
Averaged Income
Agreed to by the Parties
2008
$335,455
2009
$447,237
2010
$348,815
$377,383
2011
$307,041
$373,164
2012
$298,000
(projected)
$323,252
16Section 17 is intended to meet the s. 1(a) Guidelines objective of establishing, “a fair standard of support for children that ensures that they continue to benefit from the financial means of both spouses after separation.” Three-year income averaging to determine actual income may be resorted to where it is “fair and reasonable” to do so, based upon patterns of income that fluctuate or represent the receipt of a non-recurring amount during those years.
17In Marinangeli v. Marinangeli (2003), 2003 27673 (ON CA), 66 O.R. (3d) 40 (C.A.), the Ontario Court of Appeal stated that while the courts have differed in their approach when dealing with non‑recurring income, the recurring theme is that the children should benefit from a sudden increase in lifestyle and money available to the family.
18Ms. Evraire argues that it is not fair to use averaging where the payor is in a situation of a steadily declining income. She cites MacDonald & Wilton’s Child Support Guidelines Law and Practice, 2nd ed. (Toronto: Thomson Carswell, 2004), and the decision of Pollitt v. Pollitt (2001), 2001 28156 (ON SC), 22 R.F.L. (5th) 193 (Supt. Ct.) in support of her submission.
19I reject the application of a declining income argument in these circumstances for several reasons. Firstly, the application of an average of a declining pattern of income must be demonstrated to be unfair to the payor. An example of this clearly arises in Pollitt, supra. It was noted by Benotto J., in Pollitt, that the decline in the payor’s income had predated separation. He was supposedly ill and losing customers who were retiring, such that there was no evidence of a likely turnaround in his capacity to attain past income levels.
20Ms. Evraire is an account manager employed by Microsoft whose main the client is the Federal Government. She had an exceptional year in 2009 as a result of the injection of funds into the economy to ease the impact of the economic recession, while the years following showed some decline.
21However, there is no evidence that this will be a long-term trend. Microsoft and its products continue to maintain a ubiquitous presence in offices everywhere and the respondent has not produced any evidence to suggest that she is in a situation of serious decline in income because of economic circumstances beyond her control. All of this is simply to say, her situation with Microsoft does not compare with that of Mr. Pollitt in the case cited.
22Secondly, the mother does not appear to recognize that the trends in her income viewed from the perspective of 2010 and 2011 are different from that in 2012.
23Had this application been brought in 2010, the three-year average ($335,455, $447,237 and $348,815) presents a pattern of significant fluctuation and showing no decline. I find that the mother was far from forthcoming in divulging her income, another pattern that appears to extend back in time, knowing full well the substantial differential between the Agreement and actual income amounts. On the basis of the financial information now before the court, income averaging would be the fairest manner to determine her income for the years of 2010 and 2011.
24Nevertheless, I am prepared to recognize that, by 2012, a significant pattern of decline in Ms. Evraire’s income had occurred. Accordingly, using her reported income to calculate child support, starting in 2012 and going forward, is fair in all the circumstances.
25Thirdly, in terms of proportionality, the respondent’s income determined by three-year averaging is relatively small in comparison with the income not included to determine child support because the parties had agreed in the Agreement to set it at $180,000 for 2008 and 2009. By the Agreement, $422,682 ($155,445 and $267,237) of her income was not considered for the purposes of paying child support. In comparison, income averaging will result in increased income amounts of $92,395, for the years 2010 and 2011, upon which to base payment of child support.
26Finally, the Agreement specifically made allowance for a possible variance commencing in 2010. It did not specifically prohibit income averaging applying years covered by the Agreement where the requirements of s.17 are met, which I view as necessary if the parties were attempting to contract out of the Act. It follows therefore, that where situations of non-recurring income occur such that the use of annual reported income is not the fairest determination, income may be based upon three-year averaging in those circumstances.
27For all the foregoing reasons, Ms. Evraire’s income for the years 2010 and 2011 will be calculated in accordance with s. 17 of the Guidelines on the basis of a three year rolling average, while her income for 2012 will be calculated pursuant to s. 16 as follows:
Year
Income
2010
$377,383
2011
$373,164
2012
$298,000 (est.)
Ms. Evraire’s Imputed Income
28Under s. 19 of the Guidelines, the court may impute to a parent’s income such amounts as it considers appropriate, where it concludes that unreasonable deductions have been made from income for expenses.
29The applicant claims that Ms. Evraire’s income should be grossed up for her employer’s automobile allowance, automobile expense deductions, employer’s contribution to her RRSP, and for improper deductions for legal fees in respect of this matter, among others.
30Pursuant to s. 1(d), para. 8(1)(f) of Schedule III of the Guidelines, “sales expenses,” as defined under the Income Tax Act, R.S.C. 1985, c. 1, may be deducted for the purpose of calculating Total Income, which, in the case of the respondent, may include automobile expenses.
31I agree that the employment expense for automobile use should not be permitted under the Schedule III deduction when the employee is reimbursed mileage, unless demonstrated that the reimbursement does not cover all expenses for the use of the vehicle for employment purposes. Specific information on this issue was not provided to the court. However, it would appear that mileage contributions would be approximately $2,200. This amount, added to the annual car allowance of $6,540, does not seem excessive. Similarly, there is no basis to exclude her employer’s automobile allowance which is a taxable benefit and already accounted for in her income.
32While an employer’s contribution to an employee’s RRSP account is a taxable benefit, it may be deducted by the employee from income, in effect making it a wash. There is no basis therefore to gross up these contributions for the purpose of determining child support payments.
33On the other hand, legal fees incurred by the payor in litigation involving support claims are not deductible. See Bergeron v. R. (1999), 99 DTC 1265 (T.C.C.). Accordingly, these amounts should be added back into the respondent’s income for the purposes of her 2010 and 2011 income re-calculations. No deduction should be made in the respondent’s 2012 income tax returns for legal fees incurred in this matter.
2. Mr. Sobczak’s Imputed Income
34Under s. 19 of the Guidelines, the court may impute to a spouse’s income such amounts as it considers appropriate where it concludes that the spouse is intentionally under-employed.
35A parent is intentionally under-employed if that parent chooses to earn less than he is capable of earning. There is no requirement of bad faith on the part of the parent. The parent cannot pursue an improvident career path at the expense of the children. A parent must earn what he or she is capable of earning and will not be excused from his or her child support obligations in furtherance of unrealistic or unproductive career aspirations or interests. The fundamental obligation of a parent to support his or her children takes precedence over the parent’s own choices. See Drygala v. Pauli (2002), 2002 41868 (ON CA), 61 O.R. (3d) 711 (Ont. C.A.), Evans v. Gravely (2000), 2000 22593 (ON SC), 14 R.F.L. (5th) 74 (Ont. Sup. Ct..), Duffy v. Duffy, 2009 NLCA 48, 73 R.F.L. (6th) 233 (Nfld. C.A.).
36I am in agreement with the respondent’s submission that the applicant is intentionally under-employed within the meaning of s. 19 of the Guidelines.
37He is a skilled auto mechanic trained to work on all makes of American vehicles. He also possesses impressive handyman talents demonstrated in carrying out renovations to the matrimonial home and the construction of a cottage.
38Moreover, he has managed to acquire a net worth of over $1 million without any demonstrable income for over 20 years.
39The applicant has previously earned higher income than currently earned as a mechanic. I am satisfied that he has structured his affairs and employment in a manner which prevents him from earning a reasonable income as a mechanic or otherwise to exploit his considerable talents, both physical and mental. Maintaining a small rental property cannot be an excuse for making limited use of one’s skills and abilities.
40His children are in school, not to mention that they are with the mother every second week. He points to recent arrangements whereby he is responsible for the children after school and claims additional parenting activities prevent him from engaging in full-time work. I disagree. He is capable of balancing work and home responsibilities, as do many working parents with children.
41An auto mechanic earns, on average, $40,000 per annum, which in conjunction with Mr. Sobczak’s annual rental income of $10,000, produces an annual income of $50,000 which I impute to the applicant. This amount is the same as agreed to in the Agreement.
3. Shared Parenting: Section 9 of the Guidelines
42Section 9 of the Guidelines requires the court to determine child support for the two children based on the parties’ shared custody arrangement after taking into account:
(a) the amounts set out in the applicable tables for each of the spouses;
(b) the increased costs of shared custody arrangements; and
(c) the conditions, means, needs and other circumstances of each spouse and of any child for whom support is sought.
43In Contino, at para. 39, the Supreme Court of Canada reaffirmed the trial court’s wide discretion in the application of s. 9 as follows:
The specific language of s. 9 warrants emphasis on flexibility and fairness. The discretion bestowed on courts to determine the child support amount in shared custody arrangement calls for the acknowledgment of the overall situation of the parents (conditions and means) and the needs of the children. The weight of each factor under s. 9 will vary according to the particular facts of each case.
44The court further emphasized that s. 9 was directed primarily at a comparative analysis of the standard of living of the children. The court elaborated on this point, at para. 51:
The court retains the discretion to modify the set-off amount where, considering the financial realities of the parents, it would lead to a significant variation in the standard of living experienced by the children as they move from one household to another, something that Parliament did not intend. As I said in Francis v. Baker, one of the overall objectives of the Guidelines is, to the extent possible, to avoid great disparities between households. It is also necessary to compare the situation of the parents while living under one roof with the situation that avails for each of them when the order pursuant to s. 9 is sought. As far as possible, the child should not suffer a noticeable decline in his or her standard of living. [Emphasis added]
45Contino, provides a step-by-step method for the calculation of child support in such cases as follows:
(i) Determine the incomes of the parties;
(ii) As a starting point, determine the simple set-off amount of child support. The “court will depart from the set-off amount or make adjustments to it if it is inappropriate in light of the factors considered under ss. 9(b) and 9(c)” (para. 41);
(iii) Review child expense budgets, considering both fixed and variable costs and the contributions of the parties relative to their ability to pay; and
(iv) Assess each parent’s ability to assume any increased costs of shared custody by considering income levels, disparity in incomes, and the assets and liabilities or net worth of each party.
Incomes and Set-off - Section 9(a)
46The parties provided DIVORCEmate calculations to determine monthly set-off child support payments by Ms. Evraire, NDI outcomes and total child support apportionment ratios. These calculations were based on the three-year average income of Ms. Evraire, with a gross up for legal fees and an imputed income of Mr. Sobczak of $40,000 and appropriate deductions.
Year
Child Support
NDI (Ms. Evraire)
CSG Apportioning (Ms. Evraire)
2010
$3,926
66.4 %
88.4 %
2011
$3,888
66.2 %
88.3 %
2012
$2,956
64.7 %
85.6 %
Child Expense Budgets - Section 9(b)
47The parties have filed children’s budgets, itemizing all expenses related to the factors of relevance under s. 9.
48Mr. Sobczak is claiming the monthly amount of $4,461 for the children’s expenses. These amounts are overstated inasmuch as they include legal fees of $773, taxes and insurance, repairs, etc. for a rental property, as well as attributing 66 per cent of cost to the children on many items. Backing out these amounts reduces his monthly allowance by approximately $2,000 to $2,500.
49Ms. Evraire also takes issue with his total monthly budget of $7,318 claimed. She submits, with considerable basis to do so, that these expenses are not sustainable on an income of $23,000, even taking into consideration her child support payments. There is no indication that the father has taken on debt to cover the obvious deficit. Indeed, it would appear that his net property value has increased slightly since the commencement of the litigation. I am satisfied that his children’s budget amount of $2,500 is appropriate.
50Ms. Evraire has claimed $3,559 monthly for the children’s expenses. The applicant has not raised any serious challenge to most of these amounts, which do not appear to be in need of modification. Nevertheless, I have concerns about her attributing 50 per cent of the mortgage expenses of $2,068 to the children. Approximately $20,000 remains outstanding on the mortgage and it should be paid off within the year, meaning that proportionally the expense claimed is unnecessarily high in comparison with the principal outstanding which will terminate after one year. On a going forward basis, attributing $500 to the children’s budget seems more appropriate in the circumstances, lowering her monthly budget to $3,100.
51Decreasing amounts attributable to the children for the mother’s mortgage expenses also better reflects the actual comparative housing costs of the two parties in that Mr. Sobczak’s budget is kept artificially lower due to the assistance of his parents, who charge no interest on their loan of $270,000.
52An analysis of the two budgets shows that there is a fair amount of duplication of fixed costs and that the expenditures are not the same for both parties.
53To determine the fairness of the parties’ relative economic positions concerning childcare, the court is required to calculate the proportional amounts that ought to have been paid towards the children’s expenses in comparison with the amounts that were paid to consider the impact of the child support payments on the final positions of the parties. The Contino decision, at para. 78, demonstrates how this calculation is made:
They [the budgets] establish that expenditures are not the same for both parents, and that there is in fact a large amount of duplication with regard to fixed costs. Both of these factors point to the need for significant adjustments to the set-off amounts. The second step in the analysis consists of looking at the ratio of income between the parties of 56:44...; the father ought to be responsible for 56 percent of the total child related expenditures, $2,089.33, and the mother ought to be responsible for 44 percent of the total child-related expenditures, $1,641.62. Already contributing $1,814, the father would be required to pay the mother the sum of $275.33.
54Applying these directions to our circumstances, in respect of Ms. Evraire, for the years 2010 to 2012, demonstrates the extent of child support shortfall based on her contributions. These calculations use a total children’s budget of $5,600 ($2,500 + $3,100) to determine her share of the total children’s costs reflecting her income ratio, from which is deducted her support payments made to the father, producing the child support shortfall:
Year
Ratio
(Ms. Evraire)
of $5,600
Child support
Paid
Monthly Shortfall
2010
88.4 %
$4,950
$2,676
$2,274
2011
88.3 %
$4,944
$2,676
$2,268
2012
85.6 %
$4,794
$3,697
$1,097
55It is of further interest to note that if the mother’s attributed proportionate share of the total family income in 2012 of $4,794, in the above table, is used in the DIVORCEmate calculations, rather than the table amounts, Mr. Sobczak’s NDI share increases from 35.3 per cent to 45.3 per cent.
56I make this point because in a recent article co-authored by Jane Murray & Mackinnon J., “Eight Days a Week” Post-Contino: Shared Parenting Cases in Ontario (2012) 31:1 Can. Fam. L.Q. 113, the authors surveyed NDI outcomes in shared parenting cases in Ontario Superior Court of Justice decisions from January 1, 2006 to December 31, 2010. They identified a range where, in more than half of the cases, the recipient of support retained between 44 per cent and 50 per cent of the parents’ combined NDI. If the ranges were broadened to 43 per cent and 51 per cent, then 25 out of the 37 shared parenting cases were found in that range. The mean NDI retained by the recipient was 47 per cent, a figure the authors found approximated the 48.26 per cent observed in a previous survey for cases of shared or split custody decided in 2002 and 2003.
57This study, admittedly of cases where determinations were not made based on NDI, further supports Mr. Sobczak’s claim for increased child support payments above table amounts. If the mother pays her proportionate income-based share of the children’s expenses, the father achieves a NDI within the range normally awarded in similar cases in Ontario.
Ability to Bear the Increased Costs of Shared Custody and Standards of Living – Section 9(c)
58The Supreme Court of Canada stated, in Contino, that court should give special consideration to the standard of living of the children in each household and the ability of each parent to absorb the costs required to maintain the appropriate standard of living in the circumstances. The children should not experience a significant difference in the standards of living between their parents’ respective homes.
59One factor referred to in Contino for the purpose of assessing the ability of each parent to assume any increased costs of shared custody, is the parties’ net worth in addition to the disparity in income levels.
60While each party has commented on the valuation of the other’s assets, I find that the residential living conditions appear to be relatively similar. Both parties have managed to acquire assets in excess of $1 million, with no debts to speak of, apart from the promissory note of the father’s parents.
61The father maintains a home and a cottage for the children’s use, while Ms. Evraire’s residence is nearby and appears to be generally of the same value. In addition, she has a residence in Florida.
62Nevertheless, the father argues that his variable costs are higher than those of the mother, caring for the children approximately 60 per cent of the time from 2007 until 2010. Since 2010, he deposes that he has had the children in his custody just under 60 per cent of the time, which Ms. Evraire acknowledges to the extent of 55 per cent of parenting time.
63It would appear that the time spent is likely closer to 60 per cent, given the detailed account provided by the father of occasions when the mother did not take physical custody of the children during her assigned time and his increased duties to care for the children as a result. I conclude that, in large measure, he has carried on being the primary caregiver for the children which reflects the significant difference in their time available for this purpose.
64While I did not accept all of Mr. Sobczak’s arguments that he was unable to sustain the expenses to support the children, I conclude that the disparity in the parties’ incomes, reflected in his lesser NDI available for the children, is persuasive evidence of a significant difference in the standards of living sufficient to justify an increase in support payable to the father above the Guidelines amount.
65In weighing the constellation of factors that create the difference in the standards of living of the parents in terms of the increased costs, income disparity, net worth and parenting time and roles, I conclude that a fair child support monthly payment by the respondent for the years 2010 to 2012 should remain unchanged at the amount paid of $4000.
66This adjusted amount provides the recipient father with 38.2 per cent of total family NDI in 2012 (as opposed to 35.3 per cent based on the table amount for incomes of $298,000 and $50,000), admittedly well outside the range and below the mean established in other cases in Ontario. The divergence however, is accounted for in large measure by how well the father has managed his finances and the general appearance that the actual gap in standards of living does not accurately reflect the significant disparity in income and contribution to the total children’s costs.
67I do not propose to finalize child support arrears. The parties should work this amount out on the basis of my retroactive child support order and include it in the final order to be taken out.
Orders
(i) For the purpose of determining child support, the imputed annual income of the applicant is determined to be $50,000;
(ii) The imputed annual income of the respondent for the years of 2010 and 2011 for the purpose of determining child support is reduced by an amount reflecting tax savings on the deductions of legal expenses to defend support proceedings;
(iii) The respondent’s income is $377,383 in 2010 and $373,164 in 2011 based on a three-year income averaging; her income for 2012 is the unadjusted amount of $298,000;
(iv) The respondent shall pay the applicant monthly child support for Brad Sobczak, born on June 21, 1999, and Derek Sobczak, born on December 30, 2002, in the amount of $4,000, for the years of 2010 to 2012 and thereafter, in addition to any arrears arising from this order; and
(v) The respondent shall pay her proportionate share of s. 7 expenses retroactive to January 1, 2010 based upon the incomes of the parties stated in sub-paragraphs (i) and (iii) above.
Costs
68If the parties are unable to agree on the issue of costs, I will entertain submissions not to exceed three (3) pages, in addition to a costs outline, from Mr. Sobczak within fifteen (15) days of the release of this decision and the response of Ms. Evraire fifteen (15) days thereafter. If a reply is thought necessary, it should be made within the following seven (7) days.
Mr. Justice Peter Annis
Released: February 27, 2013
COURT FILE NO.: FC-07-1271-2
DATE: 2013/02/27
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Craig Thomas Sobczak
Applicant
– and –
Catherine Michelle Evraire
Respondent
REASONS FOR DECISION
Annis J.
Released: February 27, 2013