ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: FC-00-3270-3
DATE: 2013/07/24
BETWEEN:
TINA SINCLAIR
Applicant
– and –
AHMED AL-HAYDERI
Respondent
Joel Louis Cohen, for the Applicant
H. Hunter Phillips, for the Respondent
HEARD: July 4, 2013
REASONS FOR JUDGMENT
KERSHMAN J
Introduction
[1] This motion involves the issues of child support, retroactive child support and whether the child support should be based on the Father’s pre-tax income or taxable income.
Factual Background
[2] The Applicant, Ms. Sinclair (“Mother”), and the Respondent, Mr. Al-Hayderi (“Father”), were married in October 1994. They separated on September 4, 1998 and divorced on May 6, 2002. There are two children of the marriage namely Omar Al-Hayderi, born May 23, 1989, and Zaid Al-Hayderi, born May 7, 1992.
[3] The parties entered into a separation agreement dated April 11, 2002. Changes to child and spousal support were subsequently negotiated from time to time as a result of changes in the employment of both parties.
[4] Mr. Al-Hayderi began working in Dubai for Dragonwave in October, 2008.
[5] Through until December 2011, Mr. Al-Hayderi was paying Ms. Sinclair $3,056.00 a month for child support for two children under the Federal Child Support Guidelines, S.O.R./97-175, as am., (“Guidelines”), table amount based on a salary of $238,000.00 plus an amount to cover the wire transfer by which he made the payments.
[6] The evidence is that Mr. Al-Hayderi was paying Ms. Sinclair additional lump sum child support payments as and when he received commission income, the amount of which was determined by the Guidelines. Mr. Al-Hayderi made all of his payments in U.S. dollars.
[7] Child support was paid for two children until December 2011, when Omar, the eldest son, completed his studies. Since January 2012 the Father has been paying child support for Zaid only. In addition, he has paid a lump sum adjustment in each year based on the Guidelines amount for the increase in his annual income generated by commissions as and when they were received.
[8] At the motion, the Father’s counsel stated that his client would pay child support for Zaid from January 1, 2012 going forward at the rate of $4,085.00 plus the appropriate lump sum based on his commissions as and when received.
Issues
Issue 1 - For child support purposes, should income be imputed to the Father based on his pre-tax income or should it be based on his taxable income as if he was paying income tax?
Issue 2 - When should retroactive child support commence?
Issue 3 - If income is imputed to the Father on a pre-tax basis, how much should be paid for the two children to December 31, 2011?
Agreement Between the Parties
[9] Both parties agree that:
a) the Father’s pre-tax income is as set out below:
YEAR
2008
2009
2010
2011
2012
2013 (before commissions)
PRE-TAX INCOME
$424,700
$666,800
$582,900
$512,700
$531,400
$405,900
b) if the Father’s pre-tax income is used, the calculations for child support are as set out in the Mother’s affidavit in the Continuing Record at Tab 11, Exhibit H.
Position of the Parties
(a) Mother’s Position
[10] The Mother argues that income should be imputed to the Father based on his pre-tax income since he pays no tax in Dubai and as a non-resident, and he does not file income tax returns with the Canada Revenue Agency.
[11] Based on the calculations at Tab 11, Exhibit H of the Continuing Record, the Mother calculates a total amount of child support arrears owing using his pre-tax income from 2008 through 2013 before his 2012 commissions is $154,609.00.
[12] The Mother argues that in addition to the expenses of raising the two children she has incurred significant expenses including repairs and renovation to her home to adequately maintain her two sons. She has also had to incur expenses for repairs and replacement of a motor vehicle which is driven in part by the sons.
[13] The Mother argues that pursuant to s. 19 (1) of the Guidelines, the Court may impute income in certain circumstances including: (1) where a spouse is exempt from paying Federal and/or Provincial taxes; (2) where a spouse lives in a country whose effective rates of income tax are significantly lower than in Canada; (3) where there is blameworthy conduct on the part of the payer spouse.
[14] She relies on the D.B.S. v. S.R.G., [2006] S.C.C.A. No. 100, case which allows for retroactive child support and argues that Court should not hesitate to take into account Father’s blameworthy conduct in considering the propriety of a retroactive award (para. 106, 107).
[15] The Mother also argues that pursuant to s. 4 of the Guidelines if a payor’s income is in excess of $150,000 that he should pay child support in accordance with the Guidelines for the excess amounts.
(b) Father’s Position
[16] The Father’s position is that while he is not paying income tax while living and working in Dubai, his tax advisors have expressed the opinion that he will “likely” be deemed to have been a Canadian resident while employed in Dubai and will be required to pay Canadian income tax on his return to Canada.
[17] The Father’s counsel argues that there should be no retroactive award because based on the D.B.S. case: (1) Omar is no longer eligible for child support; (2) it is not always appropriate to order retroactive child support D.B.S. (para. 95); (3) in the present circumstances, the children have reasonable lifestyle and retroactive child support would not benefit them D.B.S. (paras. 133 and 116); (4) there would be hardship occasioned to the Father by the payment of retroactive child support D.B.S. (para. 114); 5) the question of the retroactive award does not fit the circumstances D.B.S. (para. 128).
Analysis
Issue 1 - For child support purposes, should income be imputed to the Father based on his pre-tax income or should it be based on his taxable income as if he was paying income tax?
[18] The Father argues that child support should be based on his taxable income as if he were paying tax. The Court does not accept that argument.
[19] The evidence is that the Father was only supposed to be working in Dubai for Dragonwave from October 2008 through October 2010. After two years, his contract was renewed for another three years, being a total of five years. The evidence before the court is that his contract will expire soon and will probably be renewed for an additional five years. If renewed, he will have stayed in Dubai for a total of 10 years.
[20] If the Father had returned to Canada after two years he may have been considered a non-resident for the two year time frame. In fact he did not return. He stayed for an additional three years and has not filed income tax returns for 2011 and 2012 claiming non-residency status. He did file an income tax return in 2010 to deal with a capital gains tax issue.
[21] It would appear that the longer that he remains outside of Canada, the longer he will be claiming non-residency status and will not be paying tax.
[22] He argues that based on the opinions from his tax advisors including his accountant and a tax lawyer, it is “likely” that he will be considered a Canadian resident and have to pay tax when he returns.
[23] The Father argues that he has numerous ties to Canada including his RRSPs, his children and his employment with Dragonwave.
[24] The Court finds that the Father’s only true tie to Canada is his RRSPs.
[25] While it is acknowledged that he does work for a Canadian company, he has lived and worked outside Canada for five years and could do so for 10 years.
[26] The Father has no OHIP card or any other property in Canada. He has filed to be a non-resident with the Canada Revenue Agency and has not filed income tax returns for 2011 and 2012.
[27] On the aforesaid basis, the Court finds that the Father’s ties to Canada are minimal and that child support should be calculated on his pre-tax income as opposed to his after tax income.
[28] Based on his pre-tax income, the calculations of child support are as set out at Tab 11 Exhibit H of the Continuing Record.
Issue 2 - When should retroactive child support commence?
[29] The Mother argues that retroactive child support should commence in January 2008 because it was in that year that the Father knew that he would be working in Dubai and earning non-taxable income. At that time, the parties negotiated through counsel an adjustment to child support effective October 1, 2008.
[30] The court notes a letter in the Continuing Record dated October 21, 2008 from Mr. Hunter to Mr. Robert Montague, the then solicitor for Ms. Sinclair. In the first paragraph Mr. Hunter says “I acknowledge receipt of your letter of October 14, 2008 and acknowledge Ms. Sinclair’s entitlement to seek an adjustment if Mr. Al-Hayderi’s income is ultimately taxable.” The Mother commenced her application in December 2011. At that time, both children were considered children of the marriage and at that time child support was being paid for both children.
[31] The Father argues that there should be no retroactive child support and that child support for Zaid should commence in January 2012.
Analysis
[32] The leading case on retroactive child support is the Supreme Court of Canada’s decision in D.B.S.
[33] Bastarache, J. stated that there were several factors for the court to consider when determining whether to order retroactive child support. He stated that retroactive child support should not be seen as exceptional as it is providing child support to the childrend to which they were entitled.
[34] Bastarache J. said the court should consider four factors in a holistic manner, no one factor being paramount:
- Whether there is Reasonable Excuse for Why Support was Not Sought earlier.
In this case, child support was sought in October 2008. At that time, Mr. Hunter, solicitor for the Father indicated that Ms. Sinclair would be entitled to seek an adjustment if Mr. Al-Hayderi’s income was ultimately non-taxable, based on him being gone for two years and then returning.
In fact, he has been gone for five years with a potential extension for a further five years. Whether he comes back now or another five years, there is no confirmation that Canada Revenue Agency will consider him to be a resident and tax him accordingly.
As such, the court does not find that there was any delay on the part of the Mother in seeking the support.
- Conduct of the Payor Parent.
Bastarache J. said that the where a payor parent has engaged in blameworthy conduct, their interest in the certainty of their position becomes less compelling. He found that the court should give an extensive definition of what constitutes blameworthy conduct, which could include “anything that privileges the payor parent’s own interest over his/her children’s right to an appropriate amount of support.” However, where a court order or an agreement was in place and the parent was living up to their obligations under the order agreement, the payor parent should be presumed to be acting reasonably. It is assumed that a previous order was valid. That presumption may be rebutted where a change in the circumstances is sufficiently pronounced that it is no longer reasonable for the payor parent to rely on the terms of the order.
In this case, the court does not find that the Father’s conduct constituted blameworthy conduct. There was a court order in place; he had been living up to paying child support. The court finds that while he took a different perspective as to the quantum of child support that should be paid, he was on time with paying the child support and paid further amounts as requested by the Mother.
Therefore, the Court does not find any blameworthy conduct on the part of the Father.
- The Circumstances of the Child
Bastarache J. said that the Court should consider both present and past circumstances of the child. Where a child enjoys a relatively high standard of living, that child may benefit less from a retroactive award than a child in need. He went on further to say that just because the reward was retroactive, the circumstances of the child that the support should have been paid are also relevant. A retroactive award would be more appropriate for a child who underwent hardship in the past than a child who enjoyed all the privileges he or she would have enjoyed if both parent been supporting him or her.
In this particular case, the children did in fact enjoy a reasonable standard of life. It may not be considered to have been a high standard of life but if was a reasonable standard of life.
- The Hardship Occasioned by a Retroactive Award
The Court in D.B.S. found that retroactive awards are more likely to cause hardship than prospective awards as they are linked to a past situation rather than to what the payor could currently afford. The Court should attempt therefore to craft retroactive award that minimizes hardship.
In this particular case, there will be a potential hardship to the Father is the award goes back to 2008. The Court notes that the Father has paid for the children’s tuition and for other expenses incurred by them, as well as child support.
Based on the aforesaid, this Court finds that this is an appropriate case that the Father should pay retroactive child support retroactive to January 1, 2010.
The Court notes that the child support that should have been payable for 2010 in accordance with Tab 11, Exhibit H of the Continuing Record is based on the Father’s 2010 pre-tax income of $582,807.00 and his 2011 pre-tax income of $512,715.00.
Issue 3 - If Income is imputed to the Father on a pre-tax basis, how much should be paid for the two children to December 31, 2011
[35] The Court has already found that retroactive child support for two children should be paid from January 1, 2010 through to December 31, 2011.
[36] Sections 3(2) and 4 of the Guidelines reads as follows:
3(2) Unless otherwise provided under these Guidelines, where a child to whom a child support order relates is the age of majority or over, the amount of the child support order is
(a) the amount determined by applying these Guidelines as if the child were under the age of majority; or
(b) if the court considers that approach to be inappropriate, the amount that it considers appropriate, having regard to the condition, means, needs and other circumstances of the child and the financial ability of each spouse to contribute to the support of the child.
(4) Where the income of the spouse against whom a child support order is sought is over $150,000, the amount of a child support order is
(a) the amount determined under section 3; or
(b) if the court considers that amount to be inappropriate,
(i) in respect of the first $150,000 of the spouse’s income, the amount set out in the applicable table for the number of children under the age of majority to whom the order relates;
(ii) in respect of the balance of the spouse’s income, the amount that the court considers appropriate, having regard to the condition, means, needs and other circumstances of the children who are entitled to support and the financial ability of each spouse to contribute to the support of the children; and
(iii) the amount, if any, determined under s. 7.
[37] The Court is also guided by the principles set out by Kiteley J. in the case of of the case of Francis v. Baker, (1999) 1999 659 (SCC), 50 RFL (4th) 228 S.C.C., which states at para. 31:
31 The Supreme Court of Canada in Francis v. Baker, 1999 659 (SCC), [1999] 3 S.C.R. 250, 50 R.F.L. (4th) 228 and the Ontario Court of Appeal in R. v. R. (2002), 2002 41875 (ON CA), 58 O.R. (3d) 656 (C.A.) have established the following general principles:
trial judges have discretion either to increase or decrease the table amount if they consider that amount inappropriate and instead to order an amount that they consider appropriate;
the table amount, however, is presumed to be the appropriate amount. A parent seeking an order different from the table amount bears the onus of rebutting the presumption in s. 3 and must do so by "clear and compelling evidence". The sheer size of the table amount is not by itself an "articulable reason" for departing from it;
although the considerations relevant to an appropriate child support order will differ from case to case, the courts must at least have regard to the objectives of the Divorce Act, R.S.C. 1985 (2nd Supp.), c. 3 and the Guidelines and to the factors expressly listed in s. 4(b)(ii) of the Guidelines. The legislative objectives are intended to ensure "that a divorce will affect the children as little as possible" and the factors in s. 4(b)(ii) further that intent by emphasizing "the centrality of the actual situation of the children";
child support should meet a child's reasonable needs. For children of wealthy parents, reasonable needs include reasonable discretionary expenses. A paying parent who claims the table amount is inappropriate must, therefore, demonstrate that budgeted child expenses are so high that they "exceed the generous ambit within which reasonable disagreement is possible", in short that the budgeted expenses are unreasonable;
"inappropriate" must be broadly interpreted to mean "unsuitable".
[38] Based on the aforesaid, the Court determines that the appropriate amount that should be paid for child support is in accordance with the Guidelines, even for income in excess of $150,000.00.
[39] As such, the Court finds that the amounts set out in the Continuing Record Tab 11, Exhibit H are considered to be the appropriate calculations.
[40] The arrears shall be paid at the rate of $2,000 per month from September 1, 2013 until paid.
[41] The parties are encouraged to settle the matter of costs. If they are unable to do so, an appearance has been scheduled for August 7, 2013 at 9:30 a.m. to deal with the issue.
[42] Order accordingly.
Kershman J.
Released: 2013/07/24
COURT FILE NO.: FC-00-3270-3
DATE: 2013/07/24
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Tina Sinclair
Applicant
– and –
Ahmed Al-Hayderi
Respondent
REASONS FOR JUDGMENT
KERSHMAN, J.
Released: 2013/07/24