ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 685-2011
DATE: 2013/10/10
BETWEEN:
Cindy Wylie
Applicant
– and –
Robert Sheehan
Respondent
Julie Audet, counsel for the Applicant
Christian Pilon, counsel for the Respondent
HEARD: September 27th, 2013
RULING ON MOTION
LALIBERTE, J.
[1] The issues raised in these proceedings revolve around the respondent father’s historical and present obligation to pay child support for the two children of the union.
[2] The litigation originates from a Motion to change under Rule 15 of the Family Law Rules brought by Cindy Wylie (moving party) on October 19th, 2012. She is seeking to change “… the agreement for support between the parties dated March 20, 2008 filed with the court on October 19, 2012.”
[3] The affidavit evidence establishes that the parties had signed a separation agreement on March 20th, 2008 and that same was filed with the court on October 19th, 2012. By operation of sections 35 and 37 of the Family Law Act, the terms of the said domestic contract dealing with child support can be varied as set out in section 37(2.1) of the said Act provided:
“…there has been a change in circumstances within the meaning of the child support guidelines…”
[4] The court notes that a “Change information form (Form 15A)” setting out the particulars of the change of circumstances upon which the motion is predicated was not filed with the court.
[5] The order sought by the moving party is articulated as follows:
“…that child support for the parties’ two children…be adjusted retroactively to January 1st, 2011 in accordance with the Federal Support Guidelines and based upon the parties’ income as determined by the court.”
[6] While the court can retroactively discharge, vary or suspend child support, it can only do so if there has been a change in circumstances as defined under the support guidelines. In essence, there has to be some important fact or circumstance that has changed since the date of the agreement sought to be varied was entered into by the parties. Depending on whether or not the amount of support was established in reference to the guidelines, section 14 of the Child Support Guidelines talks in terms of:
Any change in circumstances that would result in a different order
Any change in the condition, means, needs or circumstances of either parent or spouse or of any child
[7] The most obvious change in circumstances since the signing of the domestic contract on March 20th, 2008, is that the children began living with each parent on alternating weeks. It is impossible for the court to know when this change occurred based on the contradictory and untested evidence filed by the parties by way of affidavits. However, whether the parenting arrangement was changed in September 2009 (as suggested by the moving party) or in May 2008 (as suggested by the respondent), this change amounts to a material change in circumstances. It is on that basis that the court will rule on this motion.
[8] Less obvious to the court is whether there has been a material change in circumstances based on changes to the parties’ respective income. On balance, the court cannot come to any conclusion on this issue for the following reasons:
It is difficult if not impossible for the court to ascertain the parties intention as to the basis upon which the amount of support to be paid by the respondent was to be calculated;
From 2008 to 2011, the parties agreed to vary the amount of support on three occasions.
[9] The reality is that these proceedings were not triggered by the material change in the parenting regime agreed upon by the parties. This change was managed by the parties from 2008 to 2011 within the framework of the separation agreement. However, in December 2011, the respondent chose to unilaterally stop paying child support. In an e-mail sent to the moving party, he sets out his position as follows:
“I will not be paying anything more. As we are now 50/50, I think it should be 50/50 for all of the activities and anything else but other than that I don’t see it as you do. I pay for them when they are here and you for them when they are there.”
[10] True to his word, he stopped paying child support from December 2011 to February 2013 following an interim order issued by Justice Smith.
[11] At first glance, it seems to the court that these proceedings border “enforcement” as opposed to “variation”. Rule 15 is not aimed at enforcing support obligations. As stated by Justice Perkins in Colt v. Colt [2009] O. J. no. 5814 at paragraph 6:
“...rule 15 of the Family Law Rules specifies the procedure by which certain kinds of claims – those seeking to change either an agreement for support or a final order – are brought. It does not purport to create the right to any such remedy or the jurisdiction of the court to entertain the claim…”
[12] At paragraph 13 he states:
“…nor is it appropriate for a claim to enforce a separation agreement. Those claims are all properly made in an application, defended in an answer… and proved… by oral evidence at trial…”
[13] However, as indicated the court will rule on the basis of the change in the parenting arrangement. In assessing the effect of this change on the respondent’s historical and present child support obligations, the court will divide the periods as follows:
March 20th, 2008 to December 2011;
January 2012 to December 2012.
A) March 20th, 2008 to December 2011
[14] On March 20th, 2008, the parties to this motion entered into a Separation Agreement. They agreed to terms relating to child support. Section 54 of the Family Law Act provides as follows:
- Two persons who cohabited and are living separate and apart may enter into an agreement in which they agree on their respective rights and obligations, including…(b) support obligations.
[15] The parties also agreed that they would try and resolve any differences stemming from the contract by “negotiation between themselves personally”. They also agreed that court proceedings would be a last resort so to speak. Such court proceedings could only be resorted to once all reasonable possibilities of resolution were exhausted. Much to their credit, the parties were able to operate within the framework of their contract from March 2008 to December 2011. This is evidenced by the following:
They agreed to a 50/50 parenting arrangement;
Child support was varied on three occasions;
The contract was not filed with the court before October 19th, 2012;
There were no court proceedings before October 19th, 2012.
[16] Both parties are, in effect, asking the court to “re-visit’ the period of 2008 to 2011 and credit them for “overpayments” and “underpayments”. Specifically, the respondent is asking the court to credit him for an overpayment of $13,638.00 for the period of 2008 to 2011. The moving party is asking the court to order the payment of $6,912.00 for 2011 based on an imputed income of $123,151.00.
[17] The court is mindful of the suggestion that the parties agreed to vary child support based on limited financial disclosure. It is very likely that a complete analysis of the parties’ financial situation would result in amounts of child support different from what they agreed on. However, this would also require findings of reliability and credibility. This cannot be done in the context of a motion based on contradictory and untested affidavit evidence.
[18] On balance, the court comes to the conclusion that the period of March 20th, 2008 to December 2011 is governed by the terms of the agreement and the parties were able to resolve the issue of child support. Therefore, the court will not retroactively credit the respondent for an overpayment of $13,638.00 for the period of March 2008 to December 2011. Nor will the court order the respondent to pay $6,912.00 as “underpayment’ for 2011.
B) January 2012 to Present
[19] As already discussed, in December 2011, the respondent decided to stop paying child support. In doing so, he breached his contract and statutory obligation towards his children. Leaving aside for now the issue of imputation of corporate related money, at a minimum the respondent must pay the sum of $7,212.00 to the moving party for 2012. This is based on his stated income of $90,693.00 (T1 General 2012 indicates $90,588.00) and her income of $47,350.00.
[20] The more complex issue is whether the court should exercise its discretion and gross-up the respondent’s income as requested by the moving party.
[21] At page 3 of her factum, the moving party suggests that “…Mr. Sheehan’s income be adjusted by adding only those expenses which she submits ought to be added to his income by the court without any further inquiries…” She then goes on to identify three types of expenses that should be added without “any further inquiries”:
Net income after expenses (even if not taken out as dividends the year it was earned)
Occupancy costs
Depreciation
[22] However, in the course of submissions, the court was asked to adjust the respondent’s income on a somewhat different basis, namely:
Vehicle expenses ($6,093.00)
Depreciation ($6,744.00)
Occupancy costs ($1,200.00)
Retained earnings ($58,108.00)
[23] Looking at the numbers for these expenses, the court would add $72,145.00 to the respondent’s 2012 income for a total imputed income of $162,733.00. The court is of the view that such an amount is not reasonable from a “guideline” perspective.
[24] The process by which the court can exercise its discretion to impute income is designed to address the unfairness which would result if a payer was able to artificially manipulate his income through a corporation and thereby reduce child support obligations. The court cannot, as suggested by the moving party in her factum, add certain types of expenses without any further inquiries. To do so would be to act arbitrarily or speculate. As stated by the Ontario Count of Appeal in Drygola v. Pauli 2002 41868 (ON CA), [2002] 61 O.R. (3d) 711:
“Section 19 of the Guidelines is not an invitation to the court to arbitrarily select an amount as imputed income. There must be a rational basis underlying the selection of any such figure. The amount selected as an exercise of the court’s discretion must be grounded in the evidence.”
[25] On balance, the court comes to the conclusion that the moving party has not met her evidentiary burden of establishing a prima facie case that the respondent is unreasonably deducting income and/or diverting income. This conclusion is based on the following considerations:
The respondent’s 2012 T1 General 2012 Form (Income Tax) confirms that the sum of $45,000.00 was paid to him as dividends;
There is nothing unreasonable with the proposition that a corporation would retain earnings to re-invest in its core business or pay debt;
Corporations and business must operate with the reality that account receivables may not be forthcoming thus the need to retain earnings;
Depreciation is a valid expense for a business since assets will deteriorate with the passage of time and will need to be replaced if the business is to continue;
There is nothing unreasonable with the occupancy costs and vehicle expenses;
The court cannot reject the explanations provided by the respondent at paragraphs 22 to 26 of his affidavit dated September 24, 2013;
Therefore, based on the evidentiary record presented in this Motion, the Court cannot properly assess whether the Respondent’s income should be grossed-up as suggested by the Applicant.
[26] There are four remaining issues which need to be addressed, namely:
Disclosure
Special expenses
Child support to be paid costs
Costs
i) Disclosure
[27] It is clear that part of the reasons for this litigation stems from the respondent’s failure to provide full disclosure of his financial circumstances. In the end, this is likely why the moving party was unable to meet the required evidentiary basis on the issue of imputation of income. Through this order, the court’s intent is to ensure full disclosure of both personal and corporate financial interests to allow for a proper futur assessment of income under the Guidelines.
ii) Special Expenses
[28] Based on the income disclosed for 2012 the court’s intention is to apportion each parties’ share for the special or extraordinary expenses as defined under section 7 of the Child Support Guidelines as follows:
Cindy Wylie: 34 %
Robert Sheehan: 66 %
iii) Child Support
[29] On January 31st, 2013, the parties had agreed on a monthly payment of $400 for child support. Not knowing on what basis this amount was arrived at, the court will not disturb this amount for the period leading up to November 1st, 2013.
[30] Based on the respective income for 2012, the court will order the respondent to pay the set-off amount of $596.00 per month starting November 1st, 2013.
[31] In light of the respondent’s unilateral decision in December 2011 to stop paying child support, the court will order that the child support be paid through the Family Responsibility Office.
iv) Costs
[32] Parties shall provide the court with written submissions on the issue of costs on or before November 1st, 2013.
Final Order
[33] The court makes the following final order:
The respondent (Robert Sheehan) shall pay the sum of $7,212.00 to the moving party (Cindy Wylie) as retroactive child support for the year 2012, to be paid on or before April 18th, 2014.
The respondent shall pay the sum of $596.00 to the moving party as monthly child support on the 1st day of each month starting November 1st, 2013.
Unless the support order is withdrawn from the Family Responsibility Office, it shall be enforced by the Director and amounts owing under the order shall be paid to the Director, who shall pay them to the person to whom they are owed. A support dedication order will be issued.
Starting June 1st, 2014, and on the first day of June of every subsequent year until child support is payable, both parties shall provide the other with complete income information which shall include:
a) For the most recent taxation year, a copy of his or her personal income tax return, including any materials that were filed with the return and notice of assessment and if any, notice of reassessment;
b) The respondent shall disclose for the most recent taxation year, all necessary financial documentary materials to allow for the proper calculation of his annual income under the Child Support Guidelines which shall include:
The year-end financial statements, including balance sheet and income statement or statement of profit and loss, PVI Inc. corporation and any related corporations or subsidiaries;
A detailed statement of all personal expenses paid by the corporation;
An accounting of any earnings retained in the corporation and reason why retained;
An accounting of any depreciation claimed by the corporation, specifically for which assets;
An accounting or any vehicle expenses paid by the corporation for the respondent.
- The special or extraordinary expenses as defined under section 7 of the Child Support Guidelines shall be apportioned as follows:
Cindy Wylie: 34 %
Robert Sheehan: 66 %
- The costs for this motion shall be determined by the court once both parties have provided written submissions which are to be filed with the court on or before November 1st, 2013.
Justice Ronald M. Laliberté Jr.
Released: October 10th, 2013
COURT FILE NO.: 685-2011
DATE: 2013/10/10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Cindy Wylie
Applicant
– and –
Robert Sheehan
Respondent
RULING ON MOTION
Justice Ronald M. Laliberté Jr.
Released: October 10th, 2013