Court File and Parties
COURT FILE NO.: 34696/02 DATE: 2016-06-17 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: Mandy Louca, Applicant – and – Stelios Ioannou Louca, Respondent
Counsel: Tania Harper, Counsel for the Applicant Maciej (Matt) K. Milczarczyk, Counsel for the Respondent
HEARD: May 17, 18, 19 and 20, 2016
Reasons for Decision
THE HONOURABLE MR. JUSTICE D.J. GORDON
[1] The sole issue requiring determination in this trial is child support. The applicant mother commenced this proceeding in 2002. The child was then 4 years of age. Temporary orders were granted in 2002, 2005 and 2012. In 2016, the parties decided to proceed to trial. Their son is now 18.
Background
[2] Mandy Louca is 56 years of age. Stelios Louca is 58. They married on June 30, 1984. Separation occurred on July 1, 2002. A divorce was granted on November 16, 2009. One child was born to the relationship, N.S. in 1998.
[3] N.S. has resided with his mother in her primary care since separation. He has had regular access with his father. There have never been any parenting issues requiring court intervention.
[4] Ms. Louca commenced this proceeding in 2002. Multiple claims were advanced by both parties. The property issues were resolved over time. The temporary orders dealt primarily with child support, most being on consent.
[5] N.S. will be completing his high school education in June 2016. He has been accepted for a post-secondary program at Wilfred Laurier University; however, he has not yet decided whether to enroll or to attend a “victory lap” year at high school.
Prior Orders – Child Support
(i) October 17, 2002
[6] A consent order was granted by Crane J. requiring father to pay base child support of $385 monthly, commencing November 1, 2002, on “extrapolated income” of $45,000 per annum. In addition, father was to pay $215 monthly for daycare expenses, based on his income as above and mother’s income of $28,000, and also contribute proportionately to the child’s medical expenses.
(ii) December 9, 2005
[7] Matheson J. directed father to pay child support of $489 monthly, commencing December 1, 2005, on income of $57,694. The case was also to be placed on the trial list.
(iii) September 20, 2012
[8] In response to father’s motion to change the above orders, a consent order was granted by Campbell J. requiring father to pay child support of $245 monthly, commencing October 1, 2012 on his “projected income” of $30,000. The prior daycare expense provision was terminated and enforcement of any arrears suspended.
Other Matters
[9] The provision for annual income disclosure set out in the temporary orders was ignored. The case was not placed on the trial list as directed in 2005. It appears the parties were content with the earlier child support orders. That changed in 2011 when father’s employment came to an end. In 2012, he was diagnosed with cancer. His motion to change followed, notwithstanding no final order had been granted.
Income of the Parties
[10] Determination of the child support issues requires findings regarding the incomes of each party.
(i) Line 150
[11] The parties have each reported Line 150 income as follows:
| Year | Mother’s Income | Father’s Income |
|---|---|---|
| 2001 | $29,405.00 | $52,409.00 |
| 2002 | $28,167.00 | $47,916.00 |
| 2003 | $31,728.00 | $64,238.00 |
| 2004 | $31,927.52 | $57,692.00 |
| 2005 | $34,694.31 | $59,395.00 |
| 2006 | $37,209.00 | $55,496.00 |
| 2007 | $39,445.00 | $64,690.81 |
| 2008 | $57,137.04 | $61,614.00 |
| 2009 | $51,188.35 | $54,750.00 |
| 2010 | $54,231.85 | $59,305.00 |
| 2011 | $57,462.65 | $29,494.00 |
| 2012 | $60,742.07 | $10,159.00 |
| 2013 | $62,605.56 | $31,542.35 |
| 2014 | $65,699.29 | $12,998.00 |
| 2015 | $64,981.18 | $39,810.62 |
(ii) Father’s Employment
[12] Mr. Louca was constructively dismissed by his employer in 2011. He then received employment insurance benefits for a period of time. Mr. Louca had some other employment income in 2012 and 2013. A claim was advanced regarding the dismissal and, in 2013, a settlement of $15,000 was received.
(iii) Father’s Health
[13] Mr. Louca began to experience pain in late 2012 and was subsequently diagnosed with cancer. Several surgeries took place in 2013 and 2014 along with other forms of treatment. I understood Mr. Louca to say that he is now waiting on the doctors to determine the next course of action as the cancer remains problematic.
[14] As the health problems prevented or limited his ability to work, Mr. Louca applied for Canada Pension Plan disability benefits. Such were granted in 2015, effective August 2014. The lump sum received was reported as 2015 income. The benefits, in all likelihood, could have started earlier. Mr. Louca said he was unaware of the disability pension prior to his application.
[15] N.S. receives the child benefit portion from Canada Pension Plan, due to the disability ruling regarding his father. The amount paid, being $235 monthly, is said by both parties to be their son’s money and does not factor into the child support calculations. I agree.
(iv) Father’s Rental Income
[16] Mr. Louca purchased real property in Waterloo in 2000 for $138,000, renting out the five units to university students. In 2009, significant renovations were made to the dwelling, financed by the bank and others. Mr. Louca resides in one unit with the remaining six rooms rented to students. The property is said to have a current value of $500,000.
[17] The following information was compiled from Mr. Louca’s income tax returns:
| Year | Gross Rental Income – Line 160 of the ITR | Rental Expenses | Net Income/Loss before CCA | Net Income/Loss after CCA – Line 126 |
|---|---|---|---|---|
| 2002 | $18,320.00 | u/k | ||
| 2003 | $11,120.00 | -$7,478.00 | ||
| 2004 | $13,640.00 | $1.00 | ||
| 2005 | $16,000.00 | $15,999.00 | $1.00 | |
| 2006 | $16,000.00 | $15,990.22 | $9.78 | |
| 2007 | $16,000.00 | $18,275.86 | -$2,275.86 | -$2,275.86 |
| 2008 | $16,000.00 | $15,999.00 | $1.00 | |
| 2009 | $16,000.00 | $21,489.36 | -$5,489.36 | -$5,489.36 |
| 2010 | $19,200.00 | $22,470.02 | -$3,270.02 | -$3,270.02 |
| 2011 | $19,200.00 | $19,368.58 | -$168.58 | -$168.58 |
| 2012 | $19,680.00 | $19,679.00 | $1.00 | $1.00 |
| 2013 | $27,560.00 | $20,866.00 | $6,694.00 | $5,513.35 |
| 2014 | $36,360.00 | $20,244.08 | $16,115.92 | $10,580.40 |
| 2015 | $41,920.00 | $20,583.57 | $21,336.43 | $20,580.81 |
[18] According to Mr. Louca, 84 per cent of the building expenses have been claimed for income tax purposes as he also resides in the building. He says all rental income is reported. Unfortunately, there are limited business records available for review of income and expenses.
Child Care and Other Expenses
[19] In her income tax returns, Ms. Louca has claimed child care expenses, including daycare, summer camp and other activities as follows:
| Year | Child care expenses as reported on Line 214 of Income Tax Return |
|---|---|
| 2002 | $6,370.00 |
| 2003 | $6,157.00 |
| 2004 | $4,897.41 |
| 2005 | $2,970.00 |
| 2006 | $3,175.00 |
| 2007 | $2,960.00 |
| 2008 | $2,065.00 |
| 2009 | $2,204.25 |
| 2010 | $1,199.00 |
| 2011 | $213.57 |
| 2012 | $242.95 |
| 2013-2015 | $0.00 |
| Total: | $32,454.18 |
[20] In this proceeding, she claims child care expenses of $31,211 from 2002 to the present and $8,614 for extracurricular expenses for the same time period. Daycare came to an end in 2009.
[21] Mr. Louca also reports contributing to or sole payment of extraordinary expenses, such as school trips, as well as other expenses for his son, such as a cell phone and clothing.
[22] Post-secondary expenses for H.S. are unknown at this time. N.S. has part-time employment plus Canada Pension Plan benefits. In 2015, his total income was $7,324. Both parties have contributed to Registered Education Savings Plans.
Positions of the Parties
(i) Ms. Louca
[23] Ms. Louca seeks an order on the following terms:
(a) Mr. Louca to pay prospective guideline child support of $363 monthly on imputed income of $40,264; (b) Mr. Louca to pay 50 percent of the child’s section 7 expenses; (c) each party to pay 35 per cent of the child’s post-secondary education expense and may each use the RESP funds held separately as part of his/her contribution; (d) Mr. Louca to pay $43,852 as retrospective guideline support and section 7 expenses.
[24] The position advanced by Ms. Louca is that Mr. Louca has underpaid child support from the outset. As Mr. Louca never provided full and frank disclosure, a review is said to be appropriate from 2002 to 2016. No final orders were ever granted, the temporary orders cannot be considered determinative and delay ought not prejudice Ms. Louca.
[25] Ms. Louca also says income should be imputed to Mr. Louca for rental business operations, delay in seeking Canada Pension benefits and in not pursuing reasonable choices after the constructive dismissal.
[26] Lastly, Ms. Louca’s position regarding section 7 expenses is that all items ought be allowed, notwithstanding the challenge by Mr. Louca or the terms of the initial temporary order. She refers to the underpayment of child support by Mr. Louca, minimal tax benefit in the earlier years and waiving pre-judgment interest.
(ii) Mr. Louca
[27] In response to the order sought by Ms. Louca, Mr. Louca’s position is:
(a) he will pay prospective guideline child support on his Line 150 income; (b) there are no section 7 expenses at this time; (c) determination of post-secondary education expense for child is premature, N.S. not having yet decided what he is going to do; (d) he owes Ms. Louca $84.38 for medical expenses and $4,025 for child care expense, less the income tax credit, but has overpaid child support by $7,141, leaving him a credit of $3,032.62.
[28] Mr. Louca says there should be no review prior to 2006 as the temporary order was in place, including contribution to daycare expense, as agreed to by the parties. Further, many of the section 7 expenses claimed by Ms. Louca are said to not meet the established criteria.
[29] If Mr. Louca’s Line 150 income is accepted, he claims to have overpaid child support. He opposes imputing income, although Mr. Louca concedes the rental accounting is somewhat problematic. Mr. Louca says he mitigated his damages following the constructive dismissal and was genuinely looking for employment until his health declined.
Discussion and Analysis
(i) Delay
[30] I am not persuaded by the explanations for delay offered by the parties. As no final order was ever granted, the principles in D.B.S. v. S.R.G., 2006 SCC 37 do not automatically apply. However, in my view there must be some consideration in the calculations for delay. The parties negotiated the terms of several consent orders when represented by counsel. Now, 14 years after this case started, an incomplete evidentiary record is presented as documents have been destroyed, or otherwise unavailable, and memories fade.
[31] In result, any re-calculation will not be completely accurate.
[32] As both parties are responsible for the delay, neither ought unduly benefit. Prejudice is a different matter. This was a case that should have been resolved years ago. Nevertheless, it did not warrant a four day trial.
(ii) Imputing Income
[33] Mr. Louca accurately reported his income to Canada Revenue Agency, formerly Revenue Canada, or, at least, his reports were not challenged. Income for child support purposes is a different matter.
[34] Employment income from 2002 to 2011 is not in dispute. Despite the complaint of Ms. Louca, I am satisfied Mr. Louca made reasonable efforts to secure other employment following the constructive dismissal. Regardless his health declined and he was unable to work shortly thereafter. This was confirmed by the approval of his application for Canada Pension Plan disability benefits. But he could have applied sooner, perhaps a year earlier when he was undergoing treatment for cancer. I find it difficult to accept his explanation of being unaware of the pension benefits.
[35] The more difficult income component results from the rental business. Capital cost allowance must be included as income pursuant to the Federal Child Support Guidelines, SOR/97-175, Schedule III, para. 11. Further, I do not accept as accurate the reported income and expenses, particularly from 2002 to 2014.
[36] Other than income tax returns, Mr. Louca presented few documents to support his position regarding the rental business. While Mr. Louca has difficulty reading and writing English, there should be numerous documents available as to rental income and expenses.
[37] The income tax returns point out obvious discrepancies. Prior to the renovations in 2009, Mr. Louca had a modest investment in the property. There were five rental units. Students are well known to pay higher rent than elsewhere. Yet the gross income from 2002 to 2009 was less than one-half of 2015 when only one additional unit was available. Expenses were said to exceed gross income. Not believed. There was a profit, at least until the 2009 renovations.
[38] Gross income following those renovations increased minimally, until this case was known to be headed to trial. Now there is considerable profit. There always was. Income will, therefore, be imputed. The real problem is arriving at a reasonable amount.
[39] The following chart sets out my findings as to the income of Mr. Louca. The employment income is estimated in some years, based on documents presented where income tax returns were not tendered in evidence. Canada Pension Plan benefits are allocated to the time period as approved, namely from August 2014 forward. Rental income is imputed, being a reasonable assessment of gross income and actual legitimate expenses, from the evidence of Mr. Louca.
| Year | Employment and Other | Employment Insurance | Dismissal Settlement | C.P.P. | Rental | Total |
|---|---|---|---|---|---|---|
| 2002 | $46,960 | $956 | $6,000 | $53,916 | ||
| 2003 | $71,275 | $6,000 | $76,275 | |||
| 2004 | $57,151 | $6,000 | $63,151 | |||
| 2005 | $59,394 | $6,000 | $65,394 | |||
| 2006 | $55,487 | $6,000 | $61,487 | |||
| 2007 | $66,965 | $6,000 | $72,965 | |||
| 2008 | $61,613 | $6,000 | $67,613 | |||
| 2009 | $55,762 | $55,762 | ||||
| 2010 | $62,034 | $22,000 | $84,034 | |||
| 2011 | $11,150 | $17,971 | $22,000 | $51,121 | ||
| 2012 | $9,150 | $468 | $22,000 | $31,618 | ||
| 2013 | $4,872 | $5,616 | $15,000 | $22,000 | $47,488 | |
| 2014 | $5,685 | $24,000 | $29,685 | |||
| 2015 | $500 | $13,644 | $24,000 | $38,144 | ||
| 2016 | $500 | $13,848 | $24,000 | $38,348 |
(iii) Prospective Guideline Support
[40] Mr. Louca agrees with payment of guideline support regardless of whether N.S. attends high school or university. I have found his 2016 income to be $38,348 for child support purposes. The guideline amount is $339 monthly. Payment of this amount shall commence on July 1, 2016.
(iv) Retrospective Guideline Support
[41] Using the aforementioned income findings, the following chart shows the child support paid, the amount that should have been paid and the difference, or potential arrears owing. The child support paid is based on the orders in effect from time to time and on the assumption, until the end of 2011, the full amount was actually paid. The calculations end as of June 30, 2016.
| Year | Income | Guideline Support | Support Paid | Difference |
|---|---|---|---|---|
| 2002 | $53,916 | $996 | $770 | $226 |
| 2003 | $76,275 | $8,280 | $4,620 | $3,660 |
| 2004 | $63,151 | $7,020 | $4,620 | $2,400 |
| 2005 | $65,394 | $7,260 | $4,724 | $2,536 |
| 2006 | $61,487 | $6,840 | $5,868 | $972 |
| 2007 | $72,965 | $7,992 | $5,866 | $2,124 |
| 2008 | $67,613 | $7,500 | $5,868 | $1,632 |
| 2009 | $55,762 | $6,204 | $5,868 | $336 |
| 2010 | $84,034 | $9,012 | $5,868 | $3,144 |
| 2011 | $51,121 | $5,664 | $5,868 | ($204) |
| 2012 | $31,618 | $3,168 | $788 | $2,380 |
| 2013 | $47,488 | $5,136 | $0.00 | $5,136 |
| 2014 | $29,685 | $2,904 | $1,052 | $1,852 |
| 2015 | $38,144 | $4,044 | $2,940 | $1,104 |
| 2016 | $38,348 | $2,034 | $1,470 | $564 |
| Potential Arrears | $27,862 |
[42] There should be no dispute as to some underpayment of guideline support by Mr. Louca over the past 14 years. I will leave a determination as to the arrears, or retrospective amount, until after the analysis of the childcare and other extraordinary expenses.
(v) Childcare Expenses
[43] Childcare expenses are one component of section 7 expenses and can be addressed separately.
[44] Ms. Louca claims to have incurred expense of $31,214 from 2002 to 2012. The items documented include daycare (to 2009), summer camp and school trips. The initial court order, on consent, directed Mr. Louca to pay $215 monthly towards daycare. It appears he paid this amount until the end of 2010. The total paid would have been approximately $21,000.
[45] Based on the respective incomes of the parties, Mr. Louca should have paid an average of 61 per cent of this childcare expense, namely $19,040. He overpaid by $1,960. As well, there should be a further amount credited for a part of the income tax reduction received by Ms. Louca.
(vi) Extraordinary Expenses Other than Childcare
[46] Ms. Louca claims to have spent $8,614 on extraordinary expenses from 2002 to 2015. Items documented include medical expenses, sports programs, sports equipment and bus pass. This amount is not significant given the time period of 13 years. Children should be encouraged to participate in community activities for their social, emotional and physical development. Similarly, parents are expected to contribute to the financial cost of such matters to the greatest extent of their abilities.
[47] While the parties had the financial ability to pay all of the expenses identified, many of the items do not meet the standard of being extraordinary under section 7, Child Support Guidelines. Rather, they are ordinary expenses that are meant to be covered by the guideline child support. Permitting same as an extraordinary expense would result in double recovery. In this regard, community based or house league sports program expenses do not qualify. Nor does a bus pass.
[48] Some sports activities, special equipment for same, tournaments and medical expenses are appropriate. These items total approximately $3,900. Shared expenses are not included in this amount. Mr. Louca also paid certain extraordinary expenses although the amount paid was not clearly identified in evidence, many of his expenses being ordinary, such as clothing.
[49] In the circumstances, I conclude the net extraordinary expenses of Ms. Louca were $3,500 from separation in 2002 to 2015. Mr. Louca ought to have contributed $2,135, being 61 per cent.
(vii) Support Arrears
[50] I have determined Mr. Louca underpaid guideline support in the amount of $27,862 and that his share of extraordinary expenses was $2,135, for a total of $29,997. He is entitled to a credit of $1,960 with respect to child care expense and, as well, a further credit in some amount for part of the income tax deduction claimed by Ms. Louca. She claimed child care expenses of $32,454.18 from 2002 to 2012, receiving an income tax refund each year. While her income tax returns were not tendered in evidence, it is likely Ms. Louca received a 15 per cent tax reduction, approximately $4,868 in total for this time period. Mr. Louca should be given a credit in this regard of $2,970.
[51] In result, Mr. Louca would owe Ms. Louca $25,067 on a strictly mathematical calculation. Some adjustment is appropriate given the delay. While both parties must share the blame for the unreasonable delay in this case, it must be recognized that the support claim was presented by Ms. Louca. She was quite content not to pursue the claim and rely on the temporary order. It was only when Mr. Louca sought a reduction in his financial obligation after his dismissal and medical diagnosis, that Ms. Louca sought to pursue her retrospective claim. Now, Mr. Louca is faced with a payment on a much reduced income.
[52] In result, and in all of the circumstances, I conclude Mr. Louca should pay Ms. Louca $20,000 for retrospective child support, both guideline and extraordinary expense. I so order.
(viii) Post-Secondary Expense
[53] I agree with the position put forward on behalf of Mr. Louca. It is premature to determine apportionment of the post-secondary expense for N.S. The child has not yet made a commitment to enroll in post-secondary studies and no budget was presented.
[54] The following comments are offered to assist the parties in resolving the issue if and when their son pursues his education. On the assumption N.S. attends Wilfred Laurier University and lives with his mother, Mr. Louca would continue to pay guideline support. N.S. earned $7,324, including Canada Pension Plan benefits, in 2015, and, in result, should contribute one-third of the expense. On their present incomes of $64,980 and $38,348, Ms. Louca would contribute 63 per cent of the balance and Mr. Louca would be responsible for 37 per cent. Normally, RESP funds would be used first to fund the education expense. However, Ms. Louca has $33,000 on deposit and Mr. Louca has only $14,000. These savings were from a time period when Mr. Louca had a higher income. Therefore, in fairness, the RESP funds should be allocated to each parents’ financial responsibility.
[55] Should N.S. attend college or university out of town, the allocation and guideline approach would have to be altered as the expense would increase significantly.
(ix) Other Future Section 7 Expense
[56] There was no mention of other potential extraordinary expenses. Should such arise, the apportionment, at present, would be 63:37 as above.
(x) Summary
[57] For these reasons, a final order is granted on the following terms:
(a) the respondent shall pay guideline child support to the applicant in the monthly amount of $339, on his imputed income of $38,348, commencing July 1, 2016; (b) the respondent shall pay 37 per cent of future section 7 expenses to the applicant, commencing July 1, 2016; (c) the respondent shall pay $20,000 to the applicant for retrospective guideline child support and section 7 expenses to June 30, 2016; (d) support deduction order to issue.
[58] If the parties are unable to resolve the issue of costs, counsel are directed to deliver brief written submissions, together with any supporting documents, to my chambers in Kitchener within 30 days.
D.J. Gordon J.
Released: June 17, 2016