Court File and Parties

Newmarket Court File No.: FC-05-22628-01 Date: 2017-03-29 Ontario Superior Court of Justice – Family Court

Between: Leonard Abelman, Applicant – and – Revital Abelman, Respondent

Counsel: Applicant, Self-represented Respondent, Self-represented

Heard: February 22, 23 and 24, 2017

Before: McGee J.

Reasons for Decision

Overview

[1] This is the respondent mother’s November 14, 2014 Motion to Change terms of child support. But for its initial stages, the parties have been self-represented. Their respective approaches and personal views of entitlement have posed both evidentiary and legal challenges.

[2] The mother truly thought that it would be an easy and simply process for a Judge to sort out what she should be paid. During trial she constantly reiterated her angst – and genuine disbelief - at being required to present her case at trial. She was disorientated by the need to state the amount of child support sought. She didn’t have a set figure in mind, and had no real sense of its calculation.

[3] This changed as the trial wore on, perhaps as a result of a hallway discussion. At the end of her evidence in chief, she testified that the child support arrears ought to be set at $100,252 less the $9,151 already paid pursuant to a July 2, 2015 consent order. She asked for ongoing monthly payments of $639 when both sons reside at home, and $397 a month when the oldest returns to university for September to April. She also asks that the father pay $11,305 to her for past section 7 expenses.

[4] The father truly thought that it would be an easy and simple process for a Judge to dismiss the mother’s claims. Over ten years ago they had agreed that neither would pay the other child support. If the wife’s circumstances had changed, it was not his concern. He now had other financial responsibilities.

[5] And if he absolutely had to pay support on his earnings, it should be limited to the table support payable on the draw paid to his personal services corporation, by a partnership, with some adjustments for the expenses paid by his corporation; and then set off by monies he had calculated as owed to him by the mother for section 7 expenses.

[6] Neither party prepared any SupportMate calculations, or had any sense of what qualified as a section 7 expense under the Federal Child Support Guidelines.

[7] So easy and simple. Not.

[8] Were this any other sort of claim for money, it could be dismissed if the moving party did not evidence the requisite legal tests. But child support is a special kind of claim. It is the claim of a non-party: the child. Financial provision is a parent’s statutory obligation to a child that cannot not be lost through that parent, or the other parent’s conduct – and ought not be lost through a parent’s inability to present a case in court.

[9] With real limitations in the evidence, I must do my best to determine whether there has been a change of circumstances, and when, what each of the parent’s income is for support purposes; and whether there is an adjustment to the father’s income per section 12 of Schedule III of the FCSG. From there, I calculate the respective table amounts of child support and section 7 expenses payable for 2014 and 2015, and give directions for supplemental determinations of 2016 support and payment of section 7 expenses.

Background Facts

[10] The Abelmans separated in February of 2004 after eight and a half years of a fairly successful marriage. Each was working fulltime, in a career that generated a similar range of income to that of the other parent. Their young sons were 6 and 3 years of age.

[11] Life went on. By the summer of 2005 they each had new partners. On August 18, 2005 they signed a fill-in-the-blank separation agreement that divided their modest finances, released spousal support; and provided for week about residency and joint custody of their sons, with no monthly payment of child support. Their signatures were witnessed by their new partners. The agreement was incorporated into the Divorce Order of January 16, 2006.

[12] The mother married her new partner soon after the divorce was granted - the fellow for whom she had originally left the marriage. They co-founded and jointly operated an internet service. Their website detailed impressive bios for each of them, and their operations team. The mother and her husband lived in a large six bedroom home, purchased in the husband’s name on June 30, 2005. They employed a nanny for their alternate weeks with the boys, did extensive renovations to the home, travelled on their own and with the boys, and drove a luxury car. They appeared to be doing quite well.

[13] The father married his new partner. They struggled as he plugged away at his career as an architect, while he supported her emotionally and financially through an exhausting, high conflict dispute with her ex-husband.

[14] The mother’s marriage ended in November 2013. Today she styles a pre-separation downward spiral of financial abuse and isolation during its final years. She hints that the father should have known, and offered her rescue.

[15] He did not know, nor would he have much cared if he did. She appeared to him to be living in far better circumstances. The boys wanted for nothing. That said, he was happy enough to have the boys stay with him for extended periods and to cover off certain additional expenses as the mother sorted out problems that in his view, were of her own making. He had his own responsibilities, and took a view that his obligations to his second wife and her three sons were just as important as those to his sons from his first marriage.

[16] In 2013, the father accepted an offer to be admitted to the partnership of his architectural company through the purchase of 35 partnership units. There are three levels of partnership governed by the number of units owned. 35 units is a minority partner. Each grouping of units is owned by an independent corporation controlled by a qualified architect. In this manner, the company operates as a partnership of corporations.

[17] The father’s purchase of 35 units was effective January 1, 2014, cost him $500,000, and gave him a 9% ownership in the partnership. It was financed through a $150,000 down payment (which he secured through a conventional banking loan with monthly payments) and a running capital account for the balance. Any annual earnings declared in excess of his annual draw of $122,000 were required to be credited towards this capital account, until it was paid in full.

[18] It was a brilliant opportunity that would secure his future. But it came with an early period of limited cash flow, as the top portion of his income was required to be directed to the payment of his share purchase, through the liquidity of his capital account.

[19] Meanwhile, the mother was able to mediate terms of settlement with her second husband. In Minutes of Settlement dated April 24, 2014 she received a lump sum, inclusive of equalization and a spousal support release. The portion attributed to spousal support within the lump sum was $35,000 (non-taxable.) No child support was payable by the husband towards her two sons.

[20] Over the summer and fall of 2014 the mother reassessed her circumstances. Despite working very hard in the banking sector, she found that she was unable to meet her monthly expenses from income. She grew resentful that she was unable to provide their sons with the same standard of living that they appeared to now enjoy at their father’s home. She wanted to be able to contribute to her oldest son’s education costs.

[21] She dusted off the old 2006 Order, called up her lawyer on the mediation and instructed him to vary the terms of her first divorce. This Rule 15 Motion to Change was issued November 14, 2014.

What These Reasons Do Not Decide

Custody

[22] Although the father’s 15B Response to the mother’s Motion to Change seeks an order for sole custody, he confirmed in his opening submission that he was no longer asking for that order. This leaves in place the 2006 final order for joint custody of their youngest son. Their oldest is now 19 years of age.

Parenting Schedule

[23] The youngest continues to reside with his parents on a week about schedule. The oldest started university in September 2015 where he resides during the school year. He alternated residences when home over the summer of 2016. His 2017 summer schedule is unknown.

Section 9 of the Federal Child Support Guidelines

[24] Neither of the parties acknowledge having read Section 9 of the FCSG. [1] Both assume that it provides for a set off of their respective table amounts. No orders were sought, or evidence led to assist the court in determining an amount of child support, but for a set off of their respective table support obligations. It is the manner in which they resolved a temporary payment of child support at the conference of July 2, 2015. This Decision shall continue that methodology. The court has been given no basis to find that it does not meet the children’s financial needs.

Claim for Hardship

[25] Both parents present their claim under an umbrella of hardship, without invoking any basis for statutory relief under the FCSG. The father made a number of references to being the main support for his three step-children – who are supported by their biological father, and their mother – who is employed through Mr. Abelman’s corporation, as well as the owner of her own small business.

What These Reasons Do Decide

Has There been a Change in Circumstances, and if so, When?

[26] Section 17(4) of the Divorce Act, R.S.C. 1985, c. 3 requires the mother to demonstrate a change of circumstances since the making of the Final Order of January 16, 2006. The focus is on the best interests of the particular children at the centre of the litigation, not the interests of the parents. Absent a change in circumstances, the terms of the Final Order continue.

[27] If a material change is found, an analysis to determine the appropriate quantum of support from the date of the change follows.

[28] The mother seeks to vary the set off amount of child support as of February 2011, or alternatively, November 2011. She proposes that certain segments lifted from text message strings exchanged during each of those periods can be interpreted as demonstrating a need for child support. The father disagrees. I accept his position. The segments touch primarily, if not exclusively on parenting schedule disputes.

[29] What is more, the mother conflates the demonstration of effective notice required within the decision of S. (D.B.) v. G. (S.R.), 2006 SCC 37, 31 R.F.L. (6th) 1 (S.C.C.) [D.B.S.] with the Section 17(4) test for a change in circumstances.

[30] Neither parent framed their case around a date of changed circumstances. Both conducted their case on the assumption that circumstances had changed, without ever identifying when. From that mutual assumption the mother attempted to push back her variation date to a period during which the shared parenting had been troublesome; while the father attempted to hold her to her 2005 bargain.

[31] I am persuaded that there has been a change in circumstances. On my own analysis, I find that date to be January 1, 2014:

a. The terms of the 2005 agreement, incorporated on consent into the 2006 Divorce Order were made at a time during which the mother’s financial affairs were inextricably intertwined with those of her second husband. That state of financial merger marked the whole of her second marriage. Income and expenses – some personal, some corporate - were paid through a joint bank account and joint credit facilities, the details of which were never fully disclosed. What was available at trial held many contradictions. For example, the mother denied knowing that she was a shareholder in her own company until shown the document. It is simply not possible on the record before me to determine her individual income for support purposes prior to the November 2013 end of that marriage. b. Although the mother had been working full time at the bank since 2011, she maintained the website profile as a co-founder of their company, with a Chief Technology Officer, a Product Manager and an Advisory Board. She testified that she continued to have a few clients, who produced some unreported income until the marriage ended. c. The father’s employment income from 2006 until the end of 2013 was not shown to have varied significantly. A comparison of lifestyles during that period would have favoured the mother, although it is also clear that the parents had different priorities. For example, the father testified that much of his disposable income was used to fund his wife’ litigation dispute. d. It was only when the father incorporated a company in December of 2013 to purchase partnership units effective January 1, 2014 that his income changed. At almost the same time, the mother was transitioning out of her second marriage and her individual circumstances became transparent. Each of those two events crystallized a material change as contemplated by section 17(5) on January 1, 2014.

[32] With a finding that circumstances changed at the start of the calendar year in which the Motion to Change was issued [2] it becomes unnecessary to conduct the analysis required by D.B.S. The analysis now moves to an assessment of income.

What is the Mother’s Income for Support Purposes?

[33] The mother has been a fulltime T4 bank employee since 2011. The father asserts, rather weakly, that the mother’s income ought to be $75,000 a year. He pulls this figure from her October 10, 2014 affidavit in which she deposes that in 2006 she “was persuaded by my second husband, ..to give up my $75,000 a year job to go to work in his business and to build up and promote his internet based business.” The mother testified at trial that she did earn $75,000 in 2006, but from three different employment positions, none of which remained available after that year.

[34] I accept her evidence on this point, and her testimony that after December 2013 the additional benefits (both direct and indirect) generated by the company which she had co-founded became unavailable. I find her employment income to be that set out at line 150 of her T1 general: 2014 $43,167; and 2015: $40,000.

[35] Not addressed by either party is the effect of the mother’s receipt of lump sum, non-taxable spousal support from her husband, which increases her income on which table support is measured. On my own volition, I will allocate the non-taxable income at the rate of $7,000 per annum for 5 years ($35,000) rather than include all of it in 2014. Her support settlement arises out of an eight year relationship and I find that it would create an inequitable result to allocate all of it to the first year following her separation.

[36] The mother’s income for support purposes is thus:

a. 2014: $54,681 [3] ($43,167 T4 + $7,000 grossed up) b. 2015: $50,360 ($40,000 T4 + $7,000 grossed up)

What is the Father’s Income for Support Purposes?

[37] The mother asks the court to find that the father has an income approaching $300,000 per annum. She chanced upon a number of approaches, none of which she could fully articulate. That said, there are three clear issues within a determination of the father’s income. All are the father’s responsibility to address, and he did so responsibly.

First Issue: Can the Father Influence the reporting of Partnership Income to his Corporation as Contemplated by Section 18 FCSG?

[38] I find that the father has no ability to influence the reporting of his share of the partnership profits due to his company. He produced a copy of the partnership agreement, and called the partnership’s chief financial officer who testified that the father is a minor partner who has no input into any aspect of the partnership’s calculation of income or allocation of benefits.

[39] The evidence of the CFO rings true. The father does not serve on the management committee which makes all financial decisions for the partnership. The management committee is controlled by fully capitalized major shareholders. The father is neither a major shareholder, nor has he had sufficient time to capitalize (fully repay) his January 2014 purchase of 35 units. In fact, his ownership percentage decreased from 9% to 7% following a July 2015 entry into the partnership of two additional corporations.

[40] I accept the allocation of partnership income as the father’s pre-tax corporate income.

Second Issue: What Expenses are Properly Deducted from the Father’s Pre-Tax Corporate Income, and What is the Resulting Income?

[41] The father acknowledges that once the partnership income is assessed to his personal corporation, he does have control over how he organizes income and expenses. He and his wife each draw a salary from the corporation, for which a T4 is issued. He has never issued dividends. He deducts expenses such as group health insurance, employee benefits, travel and meals; as well as expenses not covered by the partnership: such as 407 fees and conference expenses.

[42] He reasonably accepts that certain of these deductions are proper for tax purposes, but ought to be added back when determining his income for support purposes. The figure proposed was $19,795 + $12,000 for his wife’s salary. (Reduced from the $30,000 T4 issued to her for tax purposes.)

[43] The salary to his wife was the only expense seriously contested by the mother. She argues that no amount should be allowed – it is only income splitting.

[44] The father argues $12,000 per annum is an amount that reasonably reflects the fair market value of his wife’s part time services prospecting opportunities for the corporation, researching applicable bylaws and performing administrative errands. I accept the father and his wife’s testimony in this regard and agree that a salary of $12,000 is properly deducted from available pre-tax corporate income.

[45] Calculation of the $19,795 is a more challenging task. The father did not use a correct methodology in speaking of “add-backs” during submissions, nor did he identify how the figures input into a SupportMate calculation. Using an October 13, 2015 letter from the partnership’s CFO, and the oral testimony of the father as to the hybrid nature of certain expenses, I calculate $26,046 of expenses inclusive of the wife’s salary. [4]

[46] As a result, I find the father’s 2014 income for support purposes to be $248,702, calculated as follows: [partnership profit of $258,255 (i.e pre-tax corporate earnings) - $26,046] + car allowance of $9,879 + $6,614 bonus. [5]

[47] This figure does not take into account the tax benefits enjoyed by the father – such as income splitting and deduction of home office expenses – as a result of flowing partnership profits through a corporation, or some of the additional expenses of operating a corporation - such as accounting fees. Without more fulsome evidence and submissions, I am unable to proceed further with the analysis, and I decline to guess.

[48] At the same time, I am satisfied that the above methodology provides fairness in the calculation of income for support purposes. It may also provide some certainty. The corporation’s expenses did not significantly change in 2015, so the formula can be repeated.

[49] In 2015 the partnership assessed $110,139 of profit to the father’s corporation. Using the same formula, his 2015 income for support purpose is $94,007 (pre-tax corporate income of $110,130 less expenses of $26,046, plus car allowance of $9,914. [6])

Third Issue: Should the amount paid to Father’s capital account in 2014 be Deducted from his Income per Section 12 of Schedule III of the FCSG?

[50] The Partnership Agreement requires that any profit earned in excess of a partner’s annual draw of $122,000 be paid to the partner’s capital account, until his units are fully capitalized. For the father, fully capitalized means that the difference between the purchase price of his shares ($500,000) less the initial capital contribution ($150,000) has been remitted.

[51] The partnership has a calendar year end. Profit for the year is determined late in the first quarter of the next year. As of the date of this trial, 2016 partnership income had not yet been assessed.

[52] In 2014 the father’s corporation was assessed profit of $258,255 against drawings of $122,000. The difference, $136,255 was directed to his capital account. In 2015 the profit of $110,139 was assessed against the same amount of drawings – resulting in the father’s capital account being overdrawn.

[53] 2015 was not as strong a year for the partnership. The father explained that a number of big projects had come to a close, and the income assessed to his 35 units in the third and fourth quarters of 2015 had been reduced by 2% due to the admission of new partners.

[54] The father seeks a ruling that his 2014 payment to his capital account be deducted from his income for support purposes. He relies on a literal reading of section 12 of Schedule III to the FCSG:

Partnership or sole proprietorship income

12. Where the spouse earns income through a partnership or sole proprietorship, deduct any amount included in income that is properly required by the partnership or sole proprietorship for purposes of capitalization.

[55] The father did not address the fact that it is his corporation that earned the income from the partnership rather than he personally – as contemplated by the section. The distinction can be relevant. The section contemplates a direct relationship between the payor spouse’s draws from a partnership and its liquidity – not unlike the business purposes test that has developed under section 18(1)(a) of the FCSG.

[56] To be successful, the father must persuade the court that $136,255 [7] of his income was properly required by the partnership for purposes of capitalization. This might be possible, even for a corporation. For example, the entry of a corporation into a partnership might generate funds required for its ongoing solvency, or to relieve it of debilitating debt.

[57] The father cannot be successful if the $136,255 is simply a structured payment pursuant to an agreement that allowed him to purchase an asset valued at $500,000, with only $150,000 down, the balance payable over time without interest, and in amounts reflective of the partnership’s year over year success. For example, he does not seek a deduction for the principal portion of the $150,000 bank loan.

[58] In support of his position, the father points to a September 25, 2013 Memorandum from the partnership’s management committee. The Memo details the terms and incidentals to his purchase of partnership units. It provides much useful advice, such as the manner by which the management committee will determine profit, a suggested bank for the financing of the initial $150,000, an ideal structure for a limited liability corporation, suggested professionals to assist, and the necessary deduction of tax and CPP contributions from any salaries paid by the corporation.

[59] At page 2 of the letter is a paragraph subtitled “Equity contribution.” It begins with the sentence, “[t]he partnership needs working capital to run its business.” The father makes much of this line – which is not found in the Partnership Agreement.

[60] At page 3 of the Memo is a lengthy paragraph subtitled “Income tax implications.” It begins, “[e]ach year, your share of the partnership income will be allocated to your company as of December 30, the firm’s financial year end. Your company is a taxable entity.” The paragraph goes on to identify the two different rates at which corporate income is taxed, how taxable income is determined within a corporation and the opportunity to distribute dividends at a preferential rate.

[61] Despite all this preparatory information, the father did not plan for the resulting tax implications of his purchase. His corporation was assessed taxes and interest of $31,905 in 2014. That assessment is still a source of surprise to him. He was unable to pay the taxes. Money had not been set aside, he had no significant savings and no credit facility. [8]

[62] He beseeched the partnership for assistance. The management committee agreed to a short term advance of $70,000 from his capital account to help him pay his taxes and smooth out some personal debt. That advance was later characterized by the management committee as a promissory note. [9] It was repaid October 11, 2016 from the father’s house sale proceeds.

[63] He and his wife now reside in rental premises. He is absolutely panicked by the prospect that he may also be responsible to pay child support on the whole of his 2014 income, a portion of which was never available to him as liquid funds.

[64] Though his circumstances merit commiseration, and were clearly not deliberate, the father cannot be successful under section 12 of Schedule III of the FCSG.

[65] Payments towards the purchase of a capital asset is not contemplated within section 12 of Schedule III. Such payment must not be confused with “capitalization.” Capitalization in section 12 refers to the cash needed to operate a business on a day to day basis. This is a settled point, see Grant v. Grant, 2001 NSSF 13, Ghosn v. Ghosn, 2006 NSSC 2, Gossen v. Gossen, 2003 NSSF 7, Murphy v. Bert, 2007 NSSC 376, C.R.E. v. K.L.E., 2011 BCSC 2 and CMS v. JRW, 2016 BCPC 425. All are cases in which a payor was not allowed to reduce his rental income for support purposes by his capital cost allowance and/or the mortgage/loan payments necessary to the purchase or improvement of an income producing property. [10]

[66] Justice Grist writes in T.L.B. v. R.B., 2010 BCSC 710 that “[t]he test for deducting sums retained for partnership capitalization is essentially the same as the test for deducting a corporation’s retained earnings.” I agree with this view. Whether determining the fairest amount of income within sections 16-20 of the FCSG, or applying terms within its Schedules; the exercise is to assess the income available for child support. Income does not become unavailable because it is paying for the income producing asset. Otherwise, dependent children would be involuntarily paying for their parent’s acquisition.

[67] In very similar circumstances to this case, the British Columbia Superior Court was asked to determine in Boniface v. Boniface, 2007 BCSC 1543 whether an architect’s income ought to be reduced by the cost of his entry into a partnership of corporations. Justice Melnick determined that “[t]he Guidelines do not intend that deductions from income should be made for the acquisition of an asset, such as an interest in a partnership,… that is then used… to earn income.” “The threshold question is whether the essential character of the contributions… were ‘capitalization’ in the sense intended by the Guidelines or ‘contributions to capital’ in the sense of the acquisition of equity in the partnership.” On the facts before him, he found the latter.

[68] Reviewing the totality of the evidence, I come to the same conclusion. I find that the amount of $136,050 is not a qualifying deduction against the father’s 2014 pre-tax corporate earnings, which is the profit allocation from the partnership.

a. The profit allocation assessed by the partnership is just that – profit. Profit is determined after all the day to day expenses, and priority obligations of the partnership are determined. Specifically, Article 6 of the Partnership Agreement subtitled ‘Profit and Loss Allocation” sets out a formula by which net profit in each fiscal year is allocated to each partnership unit. The formula includes a check on whether the gross net profit has been adequately reduced to accommodate all expenses, including retirement allowances due to former partners, outstanding interest obligations and any fixed allocations, such as motor vehicle expenses and benefits coverage. b. As a holder of 9%, and after July 15, only 7% of the equity in the partnership, it is highly unlikely that the father’s capital account is required in its day to day operating expenses. c. The value of the 35 partnership units is not static. It fluctuates based on the total amount of equity in the partnership’s capital account which may increase or decrease depending on cash flow. This suggests that the value of the partnership units is a function of the working capital, rather than the working capital being a product of one’s capital contribution. d. If the father’s capital account was necessary to the day to day operation of the partnership, then why was he not required to pay the amount overdrawn in 2015? Why was he able to draw $70,000 of funds from his capital account in 2015? The inescapable conclusion is that those moneys are not required for the day to day operation of the partnership. e. The chief financial officer for the partnership testified that in his 18 years of service, there has never been any call on the capital of the firm.

Table Support Payable from January 1, 2014

2014

[69] The parties agree that the boys primarily resided with their father for three months in 2014 while the mother’s home was being renovated. In each of those three months the mother owes the father table support of $812 on her income of $54,681. For the balance of the year the father owes the mother support of $2,325 a month; calculated as his table support of $3,137 for two children on income of $248,702 less her monthly amount of $812. Total owed by the father: $18,489.

2015

[70] Their oldest son began residing out of the jurisdiction in September 2015 to attend university. The parents will be sharing his post-secondary education expenses proportionate to income, and each is maintaining a residence for him, with shared residency to continue during summers, should he chose to return home.

[71] In each of the eight months preceding his departure, the father owed the mother support of $594; calculated as the father’s table support of $1,342 on income of $94,007, less the mother’s table support of $748 on income of $50,360. For the remaining four months, the father must pay $378 a month for the son remaining at home ($832 - $454.) Total owed by the father: $3,398 ($4,752 + $1,512 less the $2,866 paid per the July 2, 2015 consent Order.)

2016

[72] 2016 is a dilemma, as the father’s share of the partnership profits had not yet been calculated as of the date of this trial, and may be quite different to that of 2015 - which the father acknowledged was a lower than average year.

[73] I make the Order set out below to calculate 2016 income as a continuation of this trial Decision. I will determine the amount of 2016 child support with the same methodology used within these reasons at paragraph 45 to 49.

[74] Until the father’s 2016 income for support purposes is determined, he shall pay the rounded monthly amounts of $450 for September through to April in 2016 and 2017, and $700 a month for May to August. These amounts shall be a credit to a final settlement or order.

Whether to limit the Mother’s Claim for Child Support to her Motion to Change:

[75] Before closing these reasons regarding table child support, I will address the father’s submission that the mother’s claim be limited to that articulated within her Motion to Change.

[76] I decline to do so. The mother did not have any disclosure when she sought “set off child support” based on the father having income of $120,000. As well stated in Frick v. Frick, 2016 ONCA 799, “[t]o require a party to plead material facts before financial disclosure would run contrary to the way family litigation is conducted, contrary to the Family Law Rules and contrary to basic fairness.”

Claims for Proportionate Shares of Section 7 Expenses

[77] The 2005 Agreement, later incorporated into the Divorce Order provided for additional expenses, on consent, to be paid in equal shares.

[78] The July 2, 2015 consent Order set a new formula: 66% payable by the father, 33% by the mother. On the incomes determined above, there shall be a final Order varying the proportionate sharing of section 7 expenses for 2014 and 2015 as follows:

a. 2014: 77% father, 23% mother b. 2015: 67% father, 33% mother

And a temporary Order for:

c. 2016: 70% father, 30% mother; pending determination of the 2016 income.

[79] Calculating the amounts owed for 2014 and 2015 cannot be done with any precision on the record before me. Neither of the parents had read Section 7 of the FCSG prior to trial. Although they were directed to do so during trial, it was too late to bring much legal organization to their respective claims. They had each misinterpreted what was a special expense and which expenses required prior approval. Neither calculates expenses as after tax values. Neither spoke to whether an expense was reasonable given their respective means. It was not uncommon during the evidence for the parents to remind each other directly what had and had not already been paid by one or both of them.

[80] What I can do, is to make findings as to what expenses in this case are eligible special expenses under section 7 of the FCSG.

(a) Expenses paid by the father: i. 2/7 [11] of Synagogue membership, being the amount of $26 ii. 2/7 of Schwartz Reisman Centre, being the amount of $46 iii. 2/7 of the after tax cost of health, medical and dental premiums, being the amount of $80 [12] iv. passports v. driving school and test (but not insurance)

(b) Expenses paid by each parent in shares that may need to be recalculated: i. school trips for which the other parent consents ii. summer camp iii. residence and tuition costs for university that a child is not able to cover through scholarship, RESP, bursaries and his own earnings iv. uninsured health medical and dental and orthodontics

[81] The parents shall recalculate their respective claims pursuant to the Orders that follow.

Final Order

[82] The applicant father shall pay the respondent mother the amount of $21,887 in satisfaction of all child support owing for the period of January 1, 2014 to December 31, 2015. Claims for child support for prior periods are dismissed.

Temporary Order

[83] Commencing January 1, 2016 the applicant father shall pay $450 a month in child support, except for the months of May, June, July and August when he shall pay $700 a month, provided that their oldest son returns home from university. Otherwise only the amount of $450 shall continue.

[84] This temporary Order shall replace that of Justice Kaufman dated July 2, 2015. Monies paid after January 1, 2016 pursuant to the July 2, 2015 Order shall be a credit to this temporary order.

[85] Within 10 days of the partnership assessing the profit to be allocated to the father’s corporation, the father must disclose the amount, with supporting documentation, and serve an Offer to Settle the amount of monthly child support commencing January 1, 2016.

[86] If the proposal is not accepted, the mother is to make a counter offer within 10 days. If the counter offer is not accepted, either party may schedule an appointment with a Dispute Resolution Officer at the earliest date available, on two weeks’ notice. Each party is to prepare a brief, with a copy of his or her Offer to Settle using the methodology set out in these reasons. If the matter does not resolve, it is to be placed before me as a 14B Motion. If the motion materials are insufficient, the matter may be returned to the trial list.

[87] Within 30 days of the above determination (which shall also determine their proportionate sharing of expenses for 2016) the parents are to exchange proposals in writing for the payment of the special expenses listed in paragraph 80 above. The proposals shall calculate the amount sought per calendar year, in each of 2014, 2015 and 2016. Amounts claimed shall be net of tax or other subsidy, in the proportionate shares found at paragraph 78 of these reasons, and shall set out the amounts already paid against the amounts, with supporting evidence if payment is disputed.

[88] If the parties cannot agree on the section 7 claims, they are to schedule a DRO attendance. If the matter is not resolved, the parties are to exchange Rule 18 Offers and schedule a Trial Scheduling Conference to prepare the matter to be tried on the next sittings. Costs shall be assessed per Rule 24 of the Family Law Rules.

Costs

[89] Costs on this trial shall be decided after the determination of the father’s 2016 income and child support payable for that year. The party seeking costs must do so on 14 days’ notice, and file his or her submissions in the Continuing Record with any applicable Offers to Settle and a Bill of Costs. Submissions are limited to three pages.

Justice H. A. McGee

Date: March 29, 2017

[1] Or section 17(6.2) of the Divorce Act.

[2] That analysis is most recently articulated within Punzo v. Punzo, 2016 CarswellOnt 19739

[3] This figure is not simply the sum of two numbers, as one is taxable income and one is non-taxable income. I have calculated the second figure, with gross-up within SupportMate.

[4] His wife’s salary: $12,000, CPP thereon $421; Group health Benefits: $7,437, Payroll Expenses: $500; Scotia Bank Loan interest $3,768 (the $150,000 down payment loan); Travel $880, Meals: $540 and miscellaneous $500.

[5] The father is annually issued a T4A from the partnership for his car allowance of $9,879 and in 2014 he received a bonus (T4 for 2013 performance) of $6,614.

[6] No bonus was paid after 2014.

[7] Or perhaps, some part of it – although no amount was ever proposed as a partial deduction.

[8] He testified that he was already making payments on the $150,000 and he could not qualify for another loan, because he was now self-employed through a corporation with no history of earnings (as it was brand new.)

[9] Causing no end of problems in this litigation – as it was misperceived by the mother and her advisors as a mischievous hiding of additional monies.

[10] Note that interest costs are routinely allowed as a deduction to income – and that I have provided for same within the deduction of $24,046.

[11] 2/7 is an appropriate fraction for the cost attributable to the parties’ two sons. The cost is the same for one or more persons. The benefits fully cover seven persons: the father, his two sons, his wife and her three sons.

[12] The pre-tax cost is stated by the father as $133. Used above is a rounded calculation of the after tax cost. The latter is the appropriate figure as each of the father’s taxable income and income for support purposes has already been reduced by the cost of the premiums.