Court File and Parties

COURT FILE NO.: FS-18-3225 DATE: 20190502 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Bogdan Chmielewski Applicant – and – Agueda Gallego Gonzalez Respondent

Counsel: Audrey Shecter, for the Applicant Gillian Hayes, for the Respondent

HEARD: April 11, 2019

C. Gilmore, J.

Ruling on Motions

Overview

[1] This is the second of two motions heard on April 11, 2019. The father’s motion related to a request that the children of the marriage, G.G. aged 5 and S.G. aged 3, attend Rosedale Day School in September. That decision was released on April 17, 2019. The relief sought by the father was granted for the reasons given in that ruling.

[2] The mother’s cross motion for support and arrears of support was argued but the decision was delayed as a result of the court requesting further information concerning the father’s income. That information has now been received and an agreement reached on how that income is to be treated for support purposes.

[3] This ruling will therefore deal with a determination of the father’s 2017 income, and arrears of child support and section 7 expenses. Costs for the November 2018 motion, the school related motion and this motion will be dealt with by way of written submissions following the release of this ruling.

Background

[4] The parenting arrangements and general background to this matter has already been set out in the April 17, 2019 decision and will not be repeated.

[5] The issues to be determined in this motion are as follows:

a. What is the father’s 2017 income for support purposes? b. How should arrears and ongoing child support between the parties be calculated? c. What Section 7 expenses are owed?

Issue One: What is Father’s Income for Support Purposes?

[6] The parties’ separation agreement does not provide clear guidance as to how the father’s income is to be calculated for support purposes. A formula must be established to avoid future litigation and some clarity and certainty for the parties.

[7] The father is self-employed in the tech industry. Historically, his corporate income has been in the range of $150,000 per year.

[8] The parties agree that the father’s income should be calculated as per the Child Support Guidelines. The mother submits that the father’s income for support purposes for the period of August 2018 to July 2019 should be $183,407.

[9] The father submits that his income for 2017 should be $153,387. This was confirmed by the mother’s previous counsel in a letter dated January 31, 2017.

[10] The mother’s position is that the father’s income should be based on his employment income, corporate pre-tax income plus dividends and reasonable expenses with a gross up.

[11] For 2017 the parties agree that the father’s employment income was $97,091 and his corporate pre-tax income was $39,901. They differ on whether the father should have included a dividend of $18,678 (the mother says it should be added in, the father says it is already captured in his employment income) and what amount of grossed up business expenses should be added back to his income.

[12] The father submits that 50% of his business expenses should be grossed up and added back. The mother’s position is that 50% of his office and accounting expenses should be added back but 100% of his office, meals and entertainment, amortization, travel, rent and interest expenses should be added back and grossed up. The mother’s total of “add backs” for expenses is $14,902 (before gross up) plus the dividend of $18,678.

[13] The father’s position is that expenses of $8,898 (before gross up) should be added back to his income and that adding back the dividend would be “double counting” because it is already included in his employment income. The father’s position is that the 50% amount he used to calculate the add back is already 50% of his actual expenses. Therefore, the amount used for support purposes is really only 25% of his actual expenses. He submits this is more than reasonable.

[14] After a consultation with the father’s accountant and a telephone conference which I arranged with counsel, the parties have agreed that for the purposes of this motion that 50% of the grossed up dividend income of $18,678, or $9,339, is to be added back to the father’s income for support purposes for 2017.

[15] The parties are therefore apart approximately $6,004 with respect to the expenses to be added back to the father’s income for support purposes.

Analysis and Ruling on the Father’s Income

[16] Section 19(2) of the Child Support Guidelines make it clear that the reasonableness of an expense deduction for support purposes is not governed by whether or not it would be allowed under the Income Tax Act. The court has the discretion to “add back” and gross up expenses which may be considered the type of expense which would personally benefit the self-employed person.

[17] The mother seeks to add back 100% of certain of the husband’s business expenses. This position does not reflect that the father must incur expenses as a self-employed individual in order to earn income. Rather, the mother’s view is that all of meals, travel, rent and interest expense are entirely personal and therefore must be added back to his income.

[18] A similar approach was used in Oliver v. Oliver 2018 ONSC 712, in which a 50% add back was used for a self-employed lawyer who admittedly did not entertain many clients and whose car was only partially used for business. Therefore, the sum of $8,898.50 should be added back to the father’s 2017 income (before gross up) and this approach should be used to calculate the father’s income pending trial.

[19] Using this formula, the father’s income for support purposes for 2017 would be $160,752.

Issue Two: How Should Arrears and Ongoing Child Support be Calculated?

[20] The parties’ separation agreement dated October 19, 2016 stipulates (at paragraph 3.1) that child support should reflect the gradually increasing time afforded to the father by way of access. Full support was payable until the end of Stage 3 of the agreement. Once at Stage 4, commenced the father was to pay 50% of Table support, at Stage 5 he was to pay 30% of Table support and at Stage 6, set off Table support would be paid.

[21] The mother now complains about this provision claiming that it simply does not make sense. That is, she would receive more support at Stage 6 by way of set off than she received when S.P. has been in her care full time. The mother asks the court to set aside this provision of the agreement and order support in the “normal” way such that she would receive full support for S.P. and set off support for G.P. Alternatively, the mother submits that there has been a material change since the parties entered into the separation agreement and a variation is justified.

[22] Based on the findings in this ruling, Table support for two children at $160,752 would be $2,206. 50% of that amount is $1,103. During the period of August 1, 2017 to July 31, 2018 the father paid child support of $641 per month. The father owes the difference of $462 for those 12 months or $5,544.

[23] Stage 5 of Partial Parenting Agreement began on August 1, 2018 and continues until July 28, 2019. During Stage 5, the father is to pay 30% of Table support. As the parties have not been able to agree on the father’s income for 2018 (and all information for 2018 was not fully available at the time of hearing the motion), support should continue to be paid on his 2017 income until an adjustment can be made in July 2019. 30% of Table support is $661. The father paid $635 per month commencing August 1, 2018. He should pay the difference between August 2018 and May 2019 being $260 ($26 x 10 months). The father should continue to pay $661 per month until his 2018 income can be finalized.

[24] It is conceded that both children were in the father’s care for a period of approximately one month in January/February following the mother’s criminal charges, therefore the father should receive a credit of $635 for that period.

[25] The total child support arrears owed by the father for the period of August 1, 2017 to May 1, 2019 would therefore be $5,169 ($5,544 + $260 - $635). This amount is subject to further adjustment depending on the father’s 2018 income.

[26] I decline to calculate support other than as set out in the partial parenting agreement. Both parties had independent legal advice from experienced counsel in relation to that agreement. Without a trial, it is impossible to determine if the parenting agreement should be set aside. While the child support is lower than the Guideline amount, there may have been many other considerations about which the court is not aware that went into formulating the parenting agreement.

[27] Further, I agree that in Willick v. Willick, [1994] 3 SCR 670 (SCC), the Supreme Court was clear that parties cannot bargain away their children’s support entitlement. However, this is not a clear case of the children living solely with one parent or the other. The father submits that the children have been spending significant time with him such even at Stage 4 of the parenting plan G.G. was spending more than 40% of the time with him. Therefore, if the agreement is set aside, he should not pay full Table support for G.G. The mother denies that this is the case. A finding cannot be made on such an issue at this stage. As such, the parenting agreement should be followed until the court is in a position to determine if it should be set aside and, if so, how much time the children were/are spending in each party’s household.

Issue Three – What Section 7 Expenses are Owed?

[28] Based on the DivorceMate calculation in Appendix “A”, the father should pay 63% of the daycare expense and the mother 37%.

[29] In my previous ruling in this case released on April 17 2019, I determined that S.G. should remain at Purple Tree daycare until she begins Rosedale Day School in September 2019. As such, the parties shall share the cost of the daycare proportionally and the mother shall pay her 37% share of the $4,085 ($1,511.45) paid by the father thus far as per his March 12, 2019 affidavit.

[30] The father agrees that he owes his share of daycare for S.G. and G.G. in 2017. Those total costs were $3,450. The father paid 61% of those daycare costs or $2,104.50. He should have paid 63%. The difference owed by him is $69.

[31] The mother owes 37% of G.G.’s karate which was $1,609 from July 2017 to January 2019 or $595.33.

[32] The father owes 63% of missed daycare days or $318.70.

[33] With all of the additional adjustments, the father would owe the mother $2,502.29 for support and s.7 expenses between August 1, 2017 and May 1, 2019. This number does not account for any additional karate costs after January 2019, any adjustment for support based on the father’s 2018 income, any tax credits available to the father for daycare or additional costs for Purple Tree after March 2019. As such, counsel may need to adjust this number further with more recent information available to them.

Orders

[34] The applicant shall pay arrears of support and s.7 expenses of $2,502.29 for the periods of time and expenses set out in this ruling. This amount is subject to adjustment as per paragraph 34 of this ruling.

[35] Section 7 expenses for daycare and karate are payable in the proportion of 63% by the applicant and 37% by the respondent.

[36] The applicant’s income for 2017 is $160,752 for the purposes of calculating support in that year.

Costs

[37] If the parties cannot settle costs they may provide written submissions of no more than three pages in length exclusive of any Bill of Costs or Offer to Settle. Costs shall be due on a 7 day turnaround commencing the day following the release of this ruling, and starting with the respondent.

[38] Costs submissions shall include the appearance on November 30, 2018, this motion and the father’s motion for a change of schools to Rosedale Day School.

[39] Costs submissions shall be submitted electronically to my assistant at Patrizia.Generali@ontario.ca.

C. Gilmore, J.

Released: May 2, 2019