COURT FILE NO.: FC-15-1431 DATE: 2018/11/20 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MADELEINE JO LINKRUUS Applicant – and – SVEN ANTON LINKRUUS Respondent
Counsel: Blake R. Lyngseth, for the Applicant Mimi Marrello, for the Respondent
HEARD: November 29, November 30, December 1, December 4, December 5, December 6, 2017
REASONS FOR DECISION
D. SUMMERS, J.
Introduction
[1] The primary issue to be determined in this case is the income earned by the Applicant, Ms. Linkruus (Ms. Coté), as a self-employed massage therapist. There are two aspects to the income issue. The first turns on the differing opinions of the parties’ experts. The second is the Respondent’s, Mr. Linkruus, contention that Ms. Coté should have additional income imputed beyond what either expert concludes. Once these issues are addressed, child support and the proportionate sharing of s.7 expenses can be determined. The parties agree that monthly child support will equal the set-off amount - the difference between the parties’ respective table amounts under the Federal Child Support Guidelines (Guidelines). [1] Ms. Coté also seeks retroactive child support and Mr. Linkruus asks for retroactive adjustments to s.7 expenses. Ms. Coté’s claim for spousal support is disputed.
[2] All claims are made under the Divorce Act. [2]
[3] Parenting and property issues were resolved prior to trial. The parties signed Partial Minutes of Settlement and a draft order was submitted.
The Issues to be Determined
(i) Ms. Coté’s annual income in 2012 to 2017. (ii) The amount of child support to be paid. (iii) Retroactive child support including s. 7 expenses. If ordered, what is the effective date of the obligation? (iv) Ms. Coté’s entitlement to spousal support. If there is entitlement, what are the grounds and what amount should be paid? (v) Retroactive spousal support. If ordered, what is the effective date of the obligation?
Background Facts
[4] The parties met in Toronto in 1996. Ms. Coté was 25 years of age. She had completed a Bachelor of Arts degree in linguistics and was studying to be a registered massage therapist (RMT). Mr. Linkruus was 23. He had graduated from Queen’s University and was taking a year away from school to work.
[5] In 1997, Mr. Linkruus moved to Halifax to take a four year combined Bachelor of Law and Masters in Public Administration program at Dalhousie University. By then, Ms. Coté had completed her RMT training. She moved to Halifax to be with Mr. Linkruus. Each lived on their own until May, 1998, when they moved in together.
[6] It was in Halifax that Ms. Coté began her career as a massage therapist. Mr. Linkruus went to school. He had summer employment and worked part-time one year as a teaching assistant in the Public Administration program.
[7] On November 21, 1998, Ms. Coté and Mr. Linkruus were married.
[8] In 2002, after Mr. Linkruus completed his articles with a Halifax law firm, the parties moved to Ottawa. Mr. Linkruus began his career with the Federal Government in the Accelerated Economists Training Program. Ms. Coté found work as a massage therapist.
[9] Ms. Coté and Mr. Linkruus have two children. Their first child, Oskar Stewart Linkruus, was born October 20, 2004. His brother, Thomas August Linkruus, was born two years later on August 30, 2006. Oskar was 13 years of age and Thomas was 11 at the time of trial. After separation, the parties shared parenting. Overall, the boys spent between 40% and 50% of their time with their father. The rest of the time was spent with their mother. The parties continue to share parenting time and responsibility for their children.
[10] Ms. Coté operated her own business from September, 2010 until the end of 2016. It was known as Marketplace Massage Therapy Clinic (MMTC). On January 1, 2017, she sold the clinic for $5,000.00. She continues to work as a self-employed massage therapist.
[11] In October, 2010, Ms. Coté told Mr. Linkruus that she wished to separate. They lived separate and apart in the matrimonial home until Thanksgiving of 2011 when Mr. Linkruus moved out. He rented accommodation until his condominium purchase closed. Ms. Coté paid Mr. Linkruus approximately $106,000 for his joint interest in the home and took over the existing mortgage. For purposes of equalizing their net family property, they agreed to use January 1, 2011 as their date of separation.
[12] Ms. Coté still lives in the former matrimonial home and Mr. Linkruus in his condo. She is now 46 years old. He is 44.
[13] Mr. Linkruus remains an employee of the Federal Government. He is a financial policy analyst with Finance Canada.
[14] The parties are not divorced.
Issue #1: Ms. Coté’s Annual Income for Each of 2012 to 2017
[15] The first part of the income issue turns on the opinions of the experts for the years 2012 up to and including 2015.
2012 to 2015
[16] Both parties retained an expert to provide an opinion on the income available to Ms. Coté for support purposes under the Guidelines. Mr. Linkruus engaged Stephan Savage of BDO in the spring of 2016. His report was released September 6th, 2016. Ms. Coté subsequently retained Dave Clark of Collins Barrow. His report is dated November 21, 2016.
[17] Both experts testified at trial. Their qualifications to provide opinion evidence were not challenged. Both are Chartered Business Valuators and very experienced in their field.
BDO Report
[18] Mr. Savage expressed his conclusions in two separate calculations.
Available Income
| Year | Available Income |
|---|---|
| 2012 | $59,409 |
| 2013 | $64,630 |
| 2014 | $51,140 |
| 2015 | $48,157 |
Available Income Including Potential Personal Expenses
| Year | Available Income Including Potential Personal Expenses |
|---|---|
| 2012 | $60,737 |
| 2013 | $66,265 |
| 2014 | $53,139 |
| 2015 | $49,734 |
Collins Barrow Report
[19] Mr. Clark came to a different opinion. These are his conclusions.
Guidelines Income
| Year | Guidelines Income |
|---|---|
| 2012 | $45,101 |
| 2013 | $41,015 |
| 2014 | $33,127 |
| 2015 | $28,681 |
| Average | $36,981 |
[20] Both Mr. Savage and Mr. Clark agreed that there were discrepancies between the income stated in Ms. Coté’s business records and HST returns and that shown in her personal tax returns. Both experts noted her use of the Quick Method rather than the Regular Method to calculate HST and both reviewed the business expenses she deducted in the calculation of income. Each expert dealt with the income discrepancies differently as they did the questions that arose in relation to expense deductions.
[21] Mr. Savage and Mr. Clark were both aware that Ms. Coté had relied on an independent third party tax preparer during the years in question.
Discussion
[22] Mr. Savage said he was unable to reconcile the inconsistencies between Ms. Coté’s business records and her personal tax returns. He also noted that she collected more HST than she remitted. The discrepancies were treated as unreported income and he concluded that Ms. Coté’s income was higher than reported.
[23] When looking at Ms. Coté’s business expenses, Mr. Savage said he was unable to find support in her records for all amounts claimed. Undocumented expenses were dealt with as additions to her income. Other deductions were reduced to allow for only a portion of the expense claimed. The remainder was treated as personal and added to income. One such expense was for Ms. Coté’s home internet.
[24] All adjustments made by Mr. Savage were grossed up to reflect the corresponding tax savings that Ms. Coté had received. The results of these adjustments are set out in BDO’s first chart above.
[25] The second calculation that Mr. Savage prepared reflects his opinion of Ms. Coté’s income if certain expenses are found to be wholly personal. Based on the information made available to him, he said he was unable to conclude with any certainty one way or the other.
[26] Mr. Savage was dissatisfied with the disclosure received from Ms. Coté and said he found her uncooperative. When she advised that she did not keep a general ledger, Mr. Savage asked for receipts and other documents to support her records. Ms. Coté was unwilling to produce what was requested. She said the request was excessive. She proposed a compromise and offered to produce supporting documents for a sample of her expenses categories. The sample was to be selected by BDO. Mr. Savage held only one meeting with Ms. Coté and her accountant. He described it as a difficult meeting and no further efforts were made to communicate with her.
[27] Mr. Clark found that Ms. Coté’s records disclosed HST compliance issues. He noted not only the use of the Quick Method to calculate HST but also that the formula itself had been improperly applied. The result was that Ms. Coté remitted less HST than she collected. In Mr. Clark’s opinion, it was the flawed methodology that accounted for at least some of the HST discrepancies identified by Mr. Savage.
[28] Mr. Clark was instructed to address the compliance issues and file amended HST returns. As a result, Ms. Coté was assessed with a significant tax debt to the Canada Revenue Agency (CRA).
[29] Mr. Savage was asked if the amended returns addressed the adjustments he made to Ms. Coté’s income for HST discrepancies. He said they did.
[30] The largest discrepancy between Ms. Coté’s business records and personal tax returns found by Mr. Savage was in 2013. The difference was approximately $36,000. Mr. Clark agreed there was a large variance that year. He speculated that Ms. Coté’s former tax preparer missed her 2013 T4 earnings from the Ottawa Heart Institute and the Children’s Hospital of Eastern Ontario.
[31] Other points of departure between the two experts were less significant. For example, Mr. Savage was of the view that Ms. Coté’s business provided opportunity for cash transactions. Mr. Clark disagreed. He took the view that direct payments from insurance companies plus the preference of clients to pay with credit, debit and e-transfer, left little opportunity to collect unreported income. The experts also held different opinions regarding the extent of the documents required by CRA to support a business expense. According to Mr. Savage, CRA will not allow any unsupported expense whereas Mr. Clark was of the opinion that unsupported expenses such as parking costs may be allowed if reasonable in the circumstances.
[32] To address some of challenges made by BDO to her expenses and reduce argument over small amounts, Ms. Coté instructed Mr. Clark to remove questionable expenses from his calculations.
[33] Mr. Clark said that the most efficient way for him to determine Ms. Coté’s income under the Guidelines was to start by amending and re-filing her personal income tax returns according to her business records. The result was another significant debt to CRA. Mr. Savage was provided with copies of the amended HST returns and T1 Adjustments.
[34] Ms. Coté received her Notices of Reassessment just prior to trial confirming her substantial tax debt. She testified that she borrowed to make her initial repayment of approximately $23,000 and said a second payment of $7,000 was due in two weeks. The child tax benefits received by Ms. Coté were also reassessed. That debt is being recovered monthly as a deduction from her current benefits.
[35] Mr. Savage was asked if he still stood by his income conclusions. He said he did and added that his report was done in September, 2016. That was not the first time that Mr. Savage specifically referenced the date of his report when answering a question. I interpret the emphasis on the date to mean that he stood by the conclusions based on the information that was available to him at the time.
[36] There was no evidence to indicate that Mr. Savage had been instructed to reconsider his report in light of Ms. Coté’s belated tax compliance.
[37] I find the remedial steps taken by Mr. Clark were appropriate and necessary to address Ms. Coté’s tax compliance concerns and to help bring clarity to her income issues. Mr. Clark had no complaint with the disclosure received. He said Ms. Coté’s business records were fairly complete and well organized.
[38] Another difference between the two experts’ opinions is Mr. Savage’s use of an income survey. He denied venturing into the realm of an earnings capacity assessment and said he looked at the survey to cross check to his conclusions only, not to inform them.
[39] Mr. Clark did not consider the survey. He described the preparation of an income report under the Guidelines as a fairly mechanical exercise. He said surveys tend to be used more when the issue is imputing income.
[40] The survey in question was done in 2013 by the Registered Massage Therapists’ Association of Ontario (RMTAO). Ms. Coté testified that the RMTAO is not the governing body for massage therapists nor is membership mandatory. The RMTAO is a body concerned with marketing and raising awareness about the profession.
[41] The RMTAO survey was conducted in Central Ontario and based on 1,131 participants. The total number of RMT’s in Ontario was not stated. The average participant was female, with 7 to 10 years of experience. The average number of “hands on” direct patient care hours worked each week was reported to be 21 with the average volume of patients reported at 19.3 per week. For 2012, the average income reported was $42,771. Only 54% of the survey participants said they were satisfied with their pay.
[42] On its face, the survey is more in line with Mr. Clark’s income opinion than BDO’s. Mr. Savage addresses the difference between the survey income and his conclusion with a number of assumptions. In particular, he noted that: Ms. Coté operated in Ottawa – a market that he considered strong; she had 19 years of experience; she had an undergraduate degree; and she had three subcontractors in her clinic to generate profit for her. Mr. Savage said these factors supported the addition of $10,000 to $15,000 to the annual survey income which resulted in an income comparable to the $57,500 average he found for Ms. Cote.
[43] I am not persuaded of the accuracy of the assumptions made by Mr. Savage. No evidence was provided to support the assumption that eastern Ontario or Ottawa, in particular, represented a stronger market for massage therapists than Central Ontario where the survey was conducted. No basis was offered for the assumption that Ms. Coté’s undergraduate degree in linguistics or additional experience as an RMT would increase her earnings or the rate charged to clients. Finally, no support was offered for the assumption that subcontractors necessarily enhance the owner’s profit in these circumstances. While that may be the goal, it may also be far from the owner’s reality.
[44] In my view, the survey cannot simply be a corroborative tool. It was used by BDO in their report and is, therefore, a foundational document. Although the survey is hearsay and no evidence was called to prove the contents, no objection was taken to its admissibility. I attach little weight to the survey itself and find the extent to which it was used teeters uncomfortably toward an attempt to persuade.
[45] For these reasons, I prefer Mr. Clark’s opinion.
Should additional income be imputed to Ms. Coté?
[46] The second part to the determination of Ms. Coté’s income is Mr. Linkruus’ claim that a minimum income of $65,000 should be imputed to her effective 2012. He makes two arguments. He says that Ms. Coté is under-employed and that she has unreasonably deducted expenses from her income.
[47] In addition to the BDO report and the RMTAO survey, Mr. Linkruus relies on his personal analysis of Ms. Coté’s business records. He says he spent approximately one hundred hours in the spring of 2015 reviewing receipts, invoices and revenue statements. He came to two conclusions: that Ms. Coté had been earning between $64,000 and $65,000 annually; and that she was working less than full time hours. Mr. Linkruus contends that Ms. Coté was not and is not working to capacity. If she were, he says she could earn $65,000 and possibly as much as $75,000 annually.
[48] Ms. Coté denies these allegations.
[49] Mr. Linkruus admits that Ms. Coté never earned anywhere close to $65,000 a year during the marriage.
The Applicable Law
(i) Under-employment
[50] Under s. 19 of the Guidelines allows the court can impute income in appropriate circumstances. One such circumstance exists when the parent or spouse is intentionally under-employed or unemployed unless the needs of a child or the reasonable educational or health needs of the parent or spouse require it. [3]
[51] The leading case in Ontario on imputing income in situations of under-employment is Drygala v. Pauli. [4] There the court said that a claim to impute income is assessed by answering three questions. The first question is whether the spouse or parent is intentionally under-employed or unemployed. This means that the person must have chosen not to work when otherwise capable or chosen to earn less than otherwise capable of earning. The burden of proof rests with the party seeking to impute income.
[52] If the answer to the first question is yes, the court must then determine whether the unemployment or under-employment is required by a child or the spouse or parent’s reasonable health or educational needs. At this stage, the onus of proof shifts to the spouse who claims the benefit of the exceptions.
[53] Finally, if there is no reasonable excuse for under-employment or unemployment, the third question to be answered is what amount of income is properly imputed in the circumstances?
Discussion
[54] As the owner-operator of MMTC until the end of 2016, Ms. Coté had many tasks over and above direct hands-on patient care. She described numerous administrative duties such as payroll, ordering supplies, marketing, responding to inquiries on the clinic website, attending meetings with the landlord and staff. She also did the clinic laundry for a time until she contracted with a linen supply service. Ms. Coté testified that she tried to perform 20 to 25 hours of hands-on therapy each week in the early days of owning the clinic. She soon found it to be too much and cut back. In this regard, I note Ms. Coté’s evidence around her ultimate decision to sell the clinic. She said when she learned of her tax compliance issues and thus what she was actually earning, she decided that it was not enough to justify the extra stress and responsibility of being a business owner. She said she was confident that she could earn as much or more by focusing only on direct patient care.
[55] Ms. Coté says she tries to work 20 hours a week when client demand allows. She still sees clients through MMTC under its new ownership. She continues to see clients at the Ottawa Heart Institute and in her home. She points out that the number of appointments hoped for in a week does not always translate to the desired number of hours. Some clients book for an hour. Others elect for shorter treatments.
[56] Ms. Coté testified that due to the physical demands of a massage therapist’s work, 20 hours of direct, hands-on therapy is considered full-time. She also says that 19 years in the business has taken its toll on her. She has developed bilateral carpel tunnel syndrome, tendonitis and some arthritic joint pain. She says she knows she must pace herself and be mindful of the potential for developing permanent limitations if she hopes to work as a massage therapist for another 5 to 10 years.
[57] With the onset of repetitive strain injuries, Ms. Coté said she also realized that a “Plan B” was needed. In late 2017, she secured a part-time position as a recruiter/interviewer with a Toronto company known as Massago at $30.00 an hour. Ms. Coté says she hopes to earn approximately $750.00 a month in this role.
[58] I accept Ms. Coté’s testimony that she is working full-time as defined by her profession and the physical demands of the work and I reject Mr. Linkruus’ self-styled analysis that she can reasonably earn at least $65,000 annually. I find that Ms. Coté was not and is not now underemployed.
(ii) Unreasonable Expenses Deductions
The Applicable Law
[59] The court can also impute income under the Guidelines where a spouse unreasonably deducts expenses in the calculation of income. [5] The reasonableness of the deduction is not governed solely by whether it is permitted under the Income Tax Act. [6]
Discussion
[60] A number of Ms. Coté’s expenses were challenged by Mr. Linkruus. The amounts in question were not significant. I found the explanations given by Ms. Coté in response were direct and credible.
[61] The only expense deducted by Ms. Coté that I find unreasonable in the circumstances is the rental loss deducted from her income in 2014 and 2015. The subject property is owned by Ms. Coté and her boyfriend. To the extent that the operating costs currently exceed the rental income, the losses are incurred in pursuit of capital wealth. As a result, I find it unreasonable to deduct those losses in the calculation of income for support purposes.
[62] Subject to this one exception, am I not persuaded that Ms. Coté has unreasonably deducted expenses. My income findings for her are summarized and explained below.
| Year | Income |
|---|---|
| 2012 | $45,101 |
| 2013 | $41,015 |
| 2014 | $34,923 |
| 2015 | $28,931 |
| 2016 | $27,129 |
| 2017 | $38,000 |
[63] Ms. Coté’s income in 2012 and 2013 is taken from the Notices of Reassessment issued after her taxes were re-filed by Mr. Clark. For 2014, I used her Notice of Reassessment Line 150 income and adjusted it by $1,797 for the rental loss claimed. The same was done for 2015 only the rental loss adjustment was $250. Mr. Clark did not make these adjustments in his report. In 2016, the rental loss added back was $69. For 2017, Ms. Coté’s income is the amount estimated at trial based on her year-to-date records.
Issue #2: The Amount of Child Support to be Paid
(i) Ongoing Monthly Table Amount
[64] Based on their shared parenting agreement, the parties agree that child support should be the set-off between their respective table amounts. They do not wish to enter into a detailed means and needs analysis.
[65] It was also agreed that Mr. Linkruus’ income for 2017 would be based on his year to date paystubs. After adjusting for union dues, and subject to receipt of his Notice of Assessment for 2017, his income is $119,348. The corresponding table amount of child support for two children under the Guidelines is $1,708 per month. With consideration to the potential income tax credits that may be associated with shared parenting, this is the amount to be paid to Ms. Coté each month commencing January 1, 2018.
[66] Subject to the requirement below for Ms. Coté to produce her 2017 Notice of Assessment, I accept her estimated income for 2017 in the amount of $38,000. The corresponding table amount of support is $571.00. For the same tax considerations mentioned above, this is the amount to be paid by Ms. Coté to Mr. Linkruus each month effective January 1, 2018.
[67] For clarity only, the set-off amount of child support is $1,137 per month.
[68] Within 15 days of the release of these reasons, each party shall provide the Court with copies of their 2017 Notice of Assessment and Reassessment, if any. If their incomes are not as stated, I reserve the right to make the necessary adjustments to child support.
(ii) Ongoing Section 7 Expenses
[69] Both parties’ pleadings seek an order that special and extraordinary expenses under s. 7 of the Guidelines be shared in proportion to their respective incomes provided neither of them incurs an expense for which a contribution is sought without first obtaining the other’s consent. The ongoing expenses referred to at trial were piano, soccer fees, gym memberships and the health care costs that exceed insurance reimbursement.
The Applicable Law
[70] Section 7(1) of the Guidelines allows the court to order an amount to cover all or part of child care expenses, the portion of medical and dental insurance premiums related to the child, health related expenses that exceed insurance reimbursement by at least $100 annually, post-secondary school expenses, extraordinary expenses for primary or secondary school education and extraordinary expenses for extracurricular activities. The court must consider the necessity of the expense in relation to the child’s best interests and the reasonableness of the expense in relation to the means of the spouses and the child and to the family’s spending pattern prior to the separation. Subsidies, benefits, income tax deductions or credits relating to the expense must also be taken into account. Generally, the expense in question will be shared by the spouses in proportion to their respective incomes after deducting any reasonable contribution to be expected from the child. For purposes of s. 7 expenses, each parties income is calculated by including and deducting spousal support, as the case may be.
[71] Both boys play soccer. When the parties testified about how soccer expenses had been shared in the past, Ms. Coté said it was agreed that they would take turns paying in alternate years. Mr. Linkruus disputed any such agreement but said it would be satisfactory to him to take turns going forward. Accordingly, I make that order.
[72] The boys have gym memberships. The current annual cost for both boys is approximately $670. This expense has been paid by Ms. Coté without request for contribution from Mr. Linkruus.
[73] Oskar began studying piano in 2016. His lessons cost approximately $1,100 annually. Mr. Linkruus has not contributed to this cost. His primary complaint is that he was not consulted.
[74] Neither party questioned whether these activity expenses fall within the meaning of extraordinary as defined by the Guidelines.
[75] I find these expenses are necessary to the best interest of the children and reasonable considering the parties’ means. They are to be shared in proportion to income effective January 1, 2018 and reconciled monthly with payment to follow within 15 days. Future expenses should not be incurred by either party without the consent of the other if contribution is expected. Consent is not to be unreasonably withheld.
[76] Mr. Linkruus provides extended health care coverage for the boys. To the extent that their uninsured expenses exceed $100 annually, they are also to be shared as set out above.
Issue #3: Should retroactive child support be ordered? If so, what is the effective date of the obligation?
(i) The Table Amount
[77] Ms. Coté’s application seeks retroactive table support for the children commencing July 1, 2012. At trial, she took the position that support should be retroactive to the date of separation. Mr. Linkruus argues that he overpaid support from the beginning and should be reimbursed accordingly. His submission is premised on income being imputed to Ms. Coté in the amount of $65,000 each year starting in 2012.
[78] The parties agree that retroactive support should be based on the set-off method.
[79] Mr. Linkruus paid support voluntarily after he moved from the matrimonial home. His first payment was made in November, 2011. From time to time, he adjusted the amount to reflect income changes and the amount he calculated as Ms. Coté’s contribution to daycare and other s.7 expenses. Mr. Linkruus paid 2/3 of the cost and Mrs. Coté paid the remaining 1/3.
[80] The question now is whether the correct amount of table support was paid. If not, how far back should a retroactive order reach?
The Applicable Law
[81] The D.B.S. decision is the leading authority on retroactive child support. [7] It states that the court’s decision to exercise its discretion under s.15.1 of the Divorce Act to make a retroactive order for child support involves consideration of two guiding principles and four factors. The first principle is that both parents have an obligation to ensure that their child receives proper support in a timely manner. The second principle signals the court to balance the support payor’s interest in the certainty of the status quo with the need for fairness and flexibility. [8] I turn now to consider the four factors.
Discussion
1. Reasonable Excuse for the Delay Requesting Payment
[82] The manner in which the parties have calculated support indicates that both were aware of their obligations to support their children in accordance with their respective incomes from the beginning. No request for payment was needed. During the first few years after separation, the parties were able to communicate about support and, at least to some extent, reconcile their payment obligations. With time, the frustration with their ad hoc process grew and proposed payments were accepted with the proviso of a future reconciliation. That did not happen. Each party now seeks to recover retroactive child support from the other. Under these circumstance, I find no concerns with the notice each gave to the other regarding their respective claims.
2. Conduct of the Payor Parent
[83] In July, 2015, Mr. Linkruus unilaterally reduced his monthly child support to $621 with only a month’s notice. This change represented a drop of over $250 and prompted Ms. Coté to start this action. Mr. Linkruus’ revised payment was based on his assessment of Ms. Coté’s income and his lay opinion that she had been earning between $64,000 and $65,000 each year. His child support payment has not changed since then. I find that Mr. Linkruus began to prefer his own interests over those of his children when he chose to reduce his child support payment based on his own beliefs about Ms. Coté’s income.
3. Circumstances of the Child
[84] Ms. Coté described some of the ways in which she has managed expenses since separation. To save on hydro, she does not use a clothes dryer or a dishwasher. She makes food from scratch when she can and does her own household renovations when possible. She does not have cable t.v. or a home phone. She drives an 11 year-old car and shops at Value Village when she can. Mr. Linkruus expressed his concern about the ill-fitting and worn clothes available to the boys and shared a photo showing a hole in one of their boots. At no time did Mr. Linkruus demonstrate an awareness that his concerns about the boys’ clothing could be related to inadequate support payments.
[85] Oskar and Thomas are 13 and 11 years of age. I am satisfied that they have felt the impact of fewer financial resources in their mother’s home than in their father’s home. I find they would benefit from retroactive support.
4. The Hardship To the Payor of a Retroactive Award
[86] Mr. Linkruus has secure employment and earns just under $120,000.00 per year. I have reviewed his Financial Statement and considered his testimony. I am satisfied that retroactive child support order would not visit a hardship on him.
Effective Date
[87] Retroactive child support should be paid. The question now is what the effective date of the obligation should be. In D.B.S., the court said that if a retroactive award is appropriate, there will be four choices for the commencement date: the date the application was made to the court; the date when formal notice was given to the support payor; the date when effective notice was given to the payor parent; or the date when the amount of child support should have increased. The general rule is that support should commence on the date of effective notice. That is the date when it was made known that support should be paid or renegotiated. In some instances, an earlier date may be appropriate if there is blameworthy conduct by the payor. Generally, that date should not be earlier than three years before notice was given. [9]
[88] Here, the effective date of notice was November, 2011. I find the parties made it clear to each other that child support was expected to remain commensurate with income. Since Ms. Coté’s application specifically sought support retroactive to July 1, 2012, the obligation shall be effective that date.
The Table Amount to be Paid
[89] Considerable time was spent at trial trying to distinguish between the table amounts and the s. 7 amounts paid or deducted historically. I did not find that exercise helpful. I have taken a different approach. With Ms. Coté’s income determined, the set-off support that should have been paid over the years can be calculated. Mr. Linkruus is to be credited with the amounts he paid. The difference between the two amounts is the retroactive amount to be paid.
[90] Section 7 expenses will be addressed separately.
[91] The following chart summarizes the parties’ incomes and my findings for the child support paid and the amount owed. With the exception of Mr. Linkruus’ income for 2017 which was based on his paystubs, all other amounts reflect his Line 150 income in his Notices of Assessment and Re-assessment less the Schedule III adjustment for union dues under the Guidelines. [10]
| Year | Mr. Linkruus’ Income | Ms. Coté’s Income | Support Paid | Set-Off Support Owed |
|---|---|---|---|---|
| 07/2012 | $105,106 | $45,100 | $5,027 | $4,827 |
| 2013 | $131,997 [11] | $41,015 | $10,294 | $14,484 |
| 2014 | $112,773 | $34,923 | $10,108 | $12,780 |
| 2015 | $112,856 | $28,931 | $9,126 | $13,812 |
| 2016 | $112,856 | $27,129 | $7,452 | $14,100 |
| 2017 | $119,348 | $38,000 | $7,452 | $13,303 |
| TOTAL | $49,459 | $73,351 |
The Amount to be Paid by Mr. Linkruus to Ms. Coté = $23,892
(ii) Section 7 expenses
[92] Extra expenses were incurred by both parties for the boys in the years after separation. Although not raised in his pleading, Mr. Linkruus seeks to reconcile those expenses under s. 7 of the Guidelines. Ms. Coté answered the claim at trial without objection. Accordingly, I make the necessary amendment to Mr. Linkruus pleading.
[93] Mr. Linkruus kept very detailed records over the years following separation. Ms. Coté did not. She said she did not realize there would be such a thorough accounting of the smaller expenses they each incurred. She submits that it would now be very difficult to fairly reconcile all of the s.7 expenses incurred since separation. She submits that the expenses paid to date be considered “a wash”.
Applicable Law
[94] First, I must first determine whether the expenses in dispute fall within s. 7 of the Guidelines. [12] If they do, the principles and factors in D.B.S. must be considered to determine whether a retroactive order is appropriate in the circumstances. [13]
Discussion
[95] The expenses in dispute are mainly for daycare, summer camps arranged by Mr. Linkruus, piano lessons arranged by Ms. Coté, and soccer. These expenses fall within the parameters of s. 7. With the exception of daycare, the primary objection raised by both parties to sharing these costs is the lack of notice and agreement.
[96] Mr. Linkruus prepared a very detailed breakdown of his extra expenses. His list includes the costs noted above plus entries for clothing items and one large entry for the land transfer tax paid when he purchased his condo. I disregard these latter costs. They do not fall within s. 7.
Daycare and Camp
[97] For the first few years following separation, Mr. Linkruus’ conflated his monthly child support with Ms. Coté’s share of daycare costs by first determining the set-off table amount to be paid and then deducting the amount he regarded as Ms. Coté’s proportionate share of the daycare. It is unknown whether he took into account the income tax deductions related to daycare before determining the amount to be shared. Mr. Linkruus now seeks to reconcile daycare plus camp costs. Ms. Coté said she was aware that the boys went to camp but was not asked to pay and should not be asked to do so now.
Piano
[98] Beginning in 2016, Ms. Coté arranged and paid for Oskar to have piano lessons. Mr. Linkruus says he was not consulted and opposes the request to pay a share now. Ms. Coté acknowledges that she did not consult with or ask Mr. Linkruus for payment at the time. She said she did not know what the correct proportionate share should be and, in any event, it was too difficult to discuss money with him.
Soccer
[99] Ms. Coté said she thought they had agreed to share the costs by each paying the full cost in alternate years. Mr. Linkruus denies such an agreement. He said he paid in 2014, 2015 and 2017. Ms. Coté paid in 2016. The amount she paid was significantly higher than the amounts paid by Mr. Linkruus in the other years. No explanation was provided for this discrepancy.
[100] Considering the factors set out in D.B.S., I find daycare is the only s. 7 expense that should be adjusted retroactively. As was the case with monthly child support, the parties understood from the beginning that they were obliged to share daycare costs proportionately. Now that Ms. Coté’s income has been determined, the correct after tax ratio can be calculated and paid.
[101] Based on the income findings above and my decision on retroactive spousal support below, the parties shall share s.7 expenses for their children in the following proportions:
| Year | Ms. Coté | Mr. Linkruus |
|---|---|---|
| 2012 | 30% | 70% |
| 2013 | 24% | 76% |
| 2014 | 24% | 76% |
| 2015 | 20% | 80% |
| 2016 | 20% | 80% |
| 2017 | 24% | 76% |
| 2018 | 39% | 61% |
Issue #4: Ms. Coté’s entitlement to spousal support. If there is entitlement, what are the grounds and what amount should be paid?
[102] Ms. Coté seeks spousal support on both compensatory and needs based grounds. She says she supported Mr. Linkruus while he went to school in Halifax and that her career was secondary during their life together. She further states that she cannot now provide for herself at a level that is comparable to the lifestyle enjoyed during the marriage or that which Mr. Linkruus continues to enjoy.
[103] Mr. Linkruus denies entitlement. He challenges Ms. Coté’s claim that the marriage was in any way economically advantageous to him or disadvantageous to her. He argues that their current lifestyles are comparable and they each have similar means and needs. In the alternative, Mr. Linkruus submits that if spousal support is awarded, it should be at the low end of the range indicated by the Spousal Support Advisory Guidelines (SSAG) and time limited to two years.
[104] Mr. Linkruus has not paid any spousal support since separation.
The Applicable Law
[105] Section 15.2(4) of the Divorce Act requires the court to look at certain factors when making a support order. It must consider the condition, means, needs and other circumstances of each spouse including:
(a) the length of time the spouses cohabited; (b) the functions performed by each spouse during cohabitation; and (c) any order, agreement or arrangement relating to support of either spouse. [14]
[106] These factors must be considered in light of the stated objectives of spousal support under the Divorce Act and “exercise his or her discretion in a manner that equitably alleviates the adverse consequences of the marriage breakdown.” [15] Some factors may loom larger than others depending on the facts of the case. [16]
[107] The objectives of a spousal support order are found in s.15.2(6) of the Divorce Act. An order should:
recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown; (d) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage; (e) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and (f) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time. [17]
[108] No one objective is entitled to more weight than the other. [18] I turn now to consider each objective.
Discussion
1. Recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown
[109] Here, the parties were married for 12 years after a brief 6 month period of cohabitation. At the beginning, Ms. Coté worked while Mr. Linkruus studied and obtained two further degrees – one in law and one in public administration. The parties bought their first home while living in Halifax. Although Mr. Linkruus contributed to the financial needs of the household through various jobs, Ms. Coté generally earned more in those years. According to his income tax returns, his tuition fees were in the range of $5,000.00 per year. Based on the record before me, I conclude that Mr. Linkruus had only minimal student debt when he graduated from Dalhousie. It was an economic advantage for him to start his career without the burden of large student loans.
[110] As Mr. Linkruus completed his articling year in Halifax in 2002, his employer made him an offer to return to the firm. He asked to defer the offer for 2 years so he could pursue a 2 year economists’ training program with the Federal Government in Ottawa. The firm agreed.
[111] Mr. Linkruus insisted that the move from Halifax to Ottawa was by mutual agreement whereas Ms. Coté testified that she did not want to leave Halifax. She said she was happy there. She said the clinic where she worked was in a dream location and she had developed a good practice with a good clientele. She did not have friends or family in Ottawa.
[112] Nevertheless, the parties moved to Ottawa in the summer of 2002. Mr. Linkruus went to work for the Federal Government in the Accelerated Economists Training Program. Ms. Coté started over to build a clientele in a new city. Her earnings were depressed that year but recovered in 2003.
[113] Mr. Linkruus referred to their move as a 2 year trial. Consistent with this, he met with his Halifax law firm in November, 2003. After some discussion, he declined the offer to join them. He said a government career offered a better work life balance.
[114] Since re-locating to Ottawa, Mr. Linkruus’ income has exceeded Ms. Coté’s income.
[115] I am satisfied that Mr. Linkruus’ career took priority over that of Ms. Coté. The fact that the move to Ottawa came with the possibility of a return to Halifax in two years meant the disruption to Ms. Coté’s career was potentially twofold – first with the move to Ottawa in 2002 and second, with the possibility of returning to Halifax in 2004.
[116] After Oskar was born in October, 2004, Ms. Coté remained at home with him for the first two months. As a self-employed person she did not have benefits. When she returned to work, Mr. Linkruus took parental leave for 37 weeks. The same thing happened after Thomas was born in 2006. Then, until the boys were in school, Ms. Coté restricted her work to 7 or 8 hours each week.
[117] Mr. Linkruus said he did not recall Ms. Coté reducing her work hours, however, her tax returns confirm lower earnings during those years. With less income came lost savings opportunities. Ms. Coté’s tax returns for the years before Oskar’s birth disclose a pattern of RRSP contributions that did not continue after his birth.
[118] I am satisfied that Ms. Coté is entitled to compensatory support. The roles and responsibilities she assumed during cohabitation freed up Mr. Linkruus to pursue his education and his career. While in university, he had the benefit of her earnings. After he graduated, her willingness to follow his career meant interrupting her own. Once they started a family, her presence in the home largely alleviated childcare concerns. With the exception of parental leave, his career path has not been uninterrupted. Mr. Linkruus is now at the top of his pay scale. The next step will be into the executive ranks of the civil service. I find the circumstances of the marriage had economic value to Mr. Linkruus and came at an economic cost to Ms. Coté.
2. Apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage
[119] Although the parties characterize their parenting arrangement as equal, I find that the day-to-day schedule still requires more parenting time from Ms. Coté during the work week than from Mr. Linkruus. Specifically, the boys are with their dad for 12 days each month and 6 of these days fall on either a Saturday and/or Sunday. The remaining 18 to 19 days are spent with their mother.
[120] I also note two other parenting provisions that require more time from Ms. Coté than from Mr. Linkruus. The first one makes her responsible for scheduling and attending all medical and dental appointments. The second one obliges each party to take the boys to their activities during their parenting time. The stated activities are soccer, music lessons and extracurricular activities offered by their school. Considering the day-to-day parenting schedule, these provisions will require more time during the week from Ms. Coté than from Mr. Linkruus. While self-employment has the benefit of flexibility, time away from work is also unpaid time. I am satisfied that child care will have an ongoing financial impact on Ms. Coté.
3. Relieve any economic hardship of the spouses arising from the breakdown of the marriage
[121] This objective addresses post-marital need. When Mr. Linkruus began his career in 2002, his earnings were already greater than Ms. Coté’s. In 2012, a year after the marriage breakdown, her income was less than half of his and she earned more that year as a massage therapist than she did before or has since. As stated in Bracklow, the loss of the other spouse’s income that was formerly enjoyed during the relationship is encompassed in considerations of economic hardship on marriage breakdown. [19]
[122] The income disparity between the parties has continued to grow post-separation.
[123] Mr. Linkruus argues that Ms. Coté’s lifestyle is comparable to the marital lifestyle and to his. I’m not persuaded. He points to house repairs and renovations that she has done, trips taken, weekends spent on her boyfriend’s boat, and the rental property they purchased together as evidence of her lifestyle. Ms. Coté answers these allegations by describing her personal labour, use of travel points to take vacations with the boys, the fact that her share of the rental property is fully financed by a loan from her boyfriend and subject to a trust agreement in his favour, and the other frugalities needed to manage her budget. Even with cost cutting measures, Ms. Coté’s ability to meet expenses since separation has been at least partly illusory. The accounting and tax guidance she received prior to 2016 was flawed. It left her with extra money that she thought was hers to spend. It was not. As a result, she now has a significant tax debt to CRA.
[124] I find that Ms. Coté has need for spousal support stemming from the marriage breakdown. In the absence of support, I am satisfied that she cannot maintain the standard of living that she was accustomed to or the standard that is currently available to Mr. Linkruus.
4. Promote the economic self-sufficiency of a former spouse within a reasonable period of time, in so far as practicable
[125] I am satisfied that Ms. Coté is making all reasonable efforts to be as self-sufficient as she can be. In 2017, she re-focused her time away from being a business owner to being a full-time massage therapist. The historical evidence of her income indicates that decision is likely to bring her as much or more income than her business endeavours did in some years. She also secured part-time employment that she believes may offer the possibility of an alternative career path in the event her injuries prevent her from providing direct patient care in the future.
[126] The facts of this marriage and marriage breakdown give rise to considerations of compensatory support as well as need. Ms. Coté is entitled to spousal support on both grounds.
[127] I note as well that Ms. Cote’s equalization entitlement was small and satisfied by a $16,000 RRSP rollover. That payment does not impact the economic consequences of the marriage and its breakdown in any meaningful way.
The Amount of Spousal Support to Be Paid
[128] I turn now to the amount of spousal support to be paid and consideration of the Spousal Support Advisory Guidelines (SSAG). Based on shared parenting and my income findings for 2017, the “With Child Formula” produces a monthly spousal support range between $1,145 at the low end and $1,990 at the high end. The duration of support indicated is indefinite (unspecified) with a minimum of 6.5 years to a maximum of 13 years from the date of separation, subject to variation and possibly review. The maximum duration turns on the anticipated date that Thomas, the youngest child, will complete high school considering his age at separation. The calculation is also premised on each parties’ ability to claim the eligible dependent credit for one child and share the other child tax benefits.
[129] In addition to the SSAG and the parties’ respective means and needs, I have considered that their shared parenting is not equal. Ms. Coté has more time with the boys in her home and more responsibility for their needs. For this reason, the amount of spousal support should result in Ms. Cote having a greater than 50% share of the available net disposable income to meet the needs of her household. Accordingly, Mr. Linkruus shall pay spousal support in the amount of $1,800 per month effective January 1, 2018 subject to review at the request of either party on or after January 1, 2026. Payment in this amount, when combined with child support under the “With Child Formula”, leaves Ms. Coté with approximately 51.2 % of net disposable income.
Issue #5: Should retroactive spousal support be ordered? If so, what is the effective date of the obligation?
[130] In her application, Ms. Coté sought spousal support in her application retroactive to July, 2012. At trial, she argued for it to commence on the date of separation. Mr. Linkruus denies all entitlement to support but says if ordered, it should not start before January 1, 2018.
The Applicable Law
[131] The court in Kerr v. Baranow held that the factors applying to retroactive spousal support claims under the Divorce Act are similar to those set out in D.B.S. when the issue is retroactive child support except that the weight accorded to each factor will be different. It said that unlike child support, there is no presumptive entitlement to spousal support. The legal underpinning is different and a spouse is not under any legal obligation to look out for the other party’s spousal support interests in the way a parent is obliged to do for their child. Concerns around the extent of the notice given to the payor, the recipient’s excuse for delay and the payor’s misconduct will generally be given more weight when the claim is for retroactive spousal. [20]
Discussion
[132] On June 12, 2015, Ms. Coté’s lawyer wrote to Mr. Linkruus’ lawyer and stated her intention to pursue spousal support. There is no evidence of notice before that date. In July, 2015, Ms. Coté commenced her application. In spousal support matters, the date of the application is generally regarded as the effective date for the award. [21]
[133] I have considered Ms. Coté’s claim for spousal support prior to the date of her application. Although I am satisfied that she had need during that time, I have concern for Mr. Linkruus’ ability to pay a retroactive spousal support award in addition to the one he already faces for retroactive child support without experiencing hardship. For that reason, I decline to order spousal support for the period prior to July, 2015.
[134] Mr. Linkruus argues against spousal support prior to January 1, 2018. He says that Ms. Coté had the right to seek interim spousal support; she did not do so and should not benefit from a large retroactive award now. I am not persuaded by a ‘use it or lose it’ argument. Endorsing it risks encouraging potentially unnecessary and unaffordable interim steps while waiting for trial. [22]
[135] Although the date of the application is generally regarded as the default date in spousal support claims, I am not persuaded to make that order here. My concern for the potential hardship to Mr. Linkruus remains. I also consider the uncertainty that arose in 2015 around Coté’s income and the fact that she did not move with any haste to provide reliable evidence, as she was obliged to do. This prevented the case from moving on to trial. I am not prepared to visit the consequences of that delay on Mr. Linkruus by ordering retroactive spousal support.
[136] For these reasons, Ms. Cote’s claim for retroactive spousal support is dismissed.
Disclosure
[137] Mr. Linkruus made numerous allegations that the disclosure provided by Ms. Coté throughout fell short of her obligations. She, on the other hand, regarded his ongoing disclosure requests as excessive and disproportionate to their dispute.
[138] The evidence indicates that Ms. Coté provided large amounts of disclosure. In the spring of 2015, she delivered a banker’s box of business records to Mr. Linkruss for his review. In the fall of 2015, substantial additional disclosure was sent to Mr. Linkruus’ lawyer. These efforts were followed up in early 2016 with an offer for Mr. Linkruus to sit down with and address his questions to Ms. Coté’s then accountant. The expectation was the Mr. Linkruus would cover the accountant’s $150 hourly rate. Mr. Linkruus did not pursue this offer. Again, in March, 2016, Ms. Coté said she would make her documents available to Mr. Linkruus and his accountant at her lawyer’s office. An appointment was never arranged.
[139] Overall, Ms. Coté produced a significant amount of disclosure. However, her efforts to satisfy her disclosure obligations did fall short when she failed to produce an independent income analysis after her earnings became a central issue in dispute and again when she failed to provide Mr. Savage with the documents he requested. Both decisions represent an unfortunate turn in what otherwise appears to have been a genuine effort to address her disclosure obligations.
My Order
(1) A divorce is granted. It shall take effect 31 days from the date of these reasons.
(2) Commencing January 1, 2018, Mr. Linkruus shall pay child support to Ms. Coté for Oskar Stewart Linkruus (d.o.b October 20, 2004) and Thomas August Linkruus (d.o.b. August 30, 2006) in the amount of $1,708 each month based on income of $119,348.
(3) Commencing January 1, 2018, Ms. Coté shall pay child support to Mr. Linkruus for Oskar Stewart Linkruus (d.o.b October 20, 2004) and Thomas August Linkruus (d.o.b. August 30, 2004) in the amount of $571 each month based on income of $38,000.
(4) Commencing January 1, 2018, the parties shall share s. 7 expenses proportionately including piano lessons for Oskar, and gym memberships for both boys. Mr. Linkruus’ proportionate share effective January 1, 2018 is 61% and Ms. Cote’s proportionate share is 39%. Soccer expenses shall be paid solely by one parent in alternate years. Whoever paid in 2018 shall not pay again until 2020. Neither party will incur an expense in the future for which a contribution is sought without first obtaining the consent of the other parent. Consent shall not be unreasonably withheld.
(5) Mr. Linkruus shall pay Ms. Coté retroactive child support in the sum of $23,892. Payment shall be made within 30 days.
(6) Within 30 days from the release of these reasons, the parties shall recalculate the proportionate sharing of after tax daycare costs retroactive to July 1, 2012 based on the income findings made for Ms. Cote. The payment owing between the parties shall be satisfied 30 days thereafter.
(7) Within 15 days of the release of these reasons, the parties shall deliver to the court their 2017 Notices of Assessment and Reassessment, if any. If their incomes are not as stated above, child support shall be amended accordingly.
(8) Effective January 1st, 2018, Mr. Linkruus shall pay spousal support to Ms. Coté in the amount of $1,800 each month subject to review upon request by either party on or after January 1, 2026.
(9) Ms. Cote’s claim for retroactive spousal support is dismissed.
(10) Mr. Linkruus shall maintain sufficient life insurance to fund his child and spousal support payments should he die while still having one or both support obligations. The amount of insurance needed to fund child support shall include consideration of their post-secondary education costs. Mr. Linkruus shall name Ms. Coté as the sole beneficiary of the amount of insurance required to fund spousal support and he shall name her as the beneficiary in trust for the children of the amount necessary to fund child support.
(11) Ms. Coté shall maintain sufficient life insurance to fund her child support obligations in the event of her death while the one or both children are still entitled to support. The amount required to fund child support shall include consideration of their post-secondary education costs. Mr. Linkruus shall be named as the beneficiary in trust for the children of the amount necessary to fund child support.
(12) Mr. Linkruus shall maintain extended health care coverage for the children for so long as they remain eligible and the coverage is available to him through his employment.
(13) The terms of the parties’ draft consent order approved November 28, 2017 in settlement of all parenting and property issues are hereby incorporated into this order.
(14) If the parties are unable to agree on costs, they may file written submission of no more than 5 pages, double spaced, in addition to any pertinent offers to settle and draft bills of costs. Ms. Coté’s submissions shall be delivered to my chambers within 21 days. Mr. Linkruus’ submissions shall be delivered within 21 days after that. If submissions are not delivered within this time frame, the parties will be deemed to have settled the issue of costs between themselves.
Madam Justice D. Summers
Released: November 20, 2018
COURT FILE NO.: FC-15-1431 DATE: 2018/11/20 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: MADELEINE JO LINKRUUS Applicant – and – SVEN ANTON LINKRUUS Respondent REASONS FOR DECISION MADAM JUSTICE D. SUMMERS
Released: November 20, 2018