COURT FILE NO.: FC-14-2569-2
DATE: 20230131
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: David Northcott, Applicant
AND:
Suzanna Ersoy, Respondent
BEFORE: Regional Senior Justice Calum MacLeod
APPEARING: David Northcott, in person
Suzanna Ersoy, in person
HEARD: November 3, 2022
DECISION AND REASONS
[1] This is a motion to change the amount of child support paid by the Respondent mother to the Applicant father for the support of their 12-year-old son using the offset method adopted in their December 3, 2013, separation agreement. The agreement was filed for enforcement on January 12, 2014. The parties obtained an uncontested divorce at the request of the Respondent mother on May 4, 2016. It does not appear there have been previous adjustments to the child support. The Applicant father seeks a retroactive adjustment from January 1, 2017.
[2] The parties agree that their incomes have changed and an adjustment is required. They disagree about the extent of retroactivity and the nature of the retroactive adjustment. Each challenges the amounts included in their respective incomes for purposes of calculating the table amounts of child support and percentage of s. 7 expenses.
[3] When this proceeding commenced, and at various times thereafter, the parties each had the assistance of legal counsel, but when the matter came on for a hearing, they both represented themselves. I commend the parties for well organized materials, for uploading them successfully to CaseLines and for reasonably succinct and focused submissions.
[4] I reserved to give a written decision.
Background
[5] The parties were married in August of 2004, separated in October of 2013 and a divorce was granted in May of 2016. They have one child together, born in 2010, and they share the parenting time equally. The separation agreement was signed on December 3, 2013.
[6] The Applicant father seeks a child support variation order fixing support based on the current incomes of each of the parties. He also seeks a retroactive adjustment and an order fixing support arrears owed by the Respondent mother. He also seeks a similar adjustment for (s. 7) extraordinary expenses as well as an award of costs. The Applicant argues that the adjustment should be retroactive to 2017 because the Respondent failed to make the financial disclosure required by the separation agreement.
[7] The Respondent mother, for her part, states that neither party asked for an adjustment of support until 2019 when she suffered a period of unemployment. Since then, she indicates that she has offered to settle and reach agreement continuously. She suggests that the Applicant father is using the court process to harass her. At the same time, she indicates her belief that the Applicant father has been underemployed since at least 2012. She does not agree that her own income has ever been under reported.
[8] The Respondent mother also raises parenting issues and seeks the appointment of a third-party to complete a custody and access assessment for their child. The mother also seeks a change to the method of communication. She wants communication between the parties to be conducted by a third-party or parenting application. Those parenting issues were not the issues that were before the court for adjudication at the hearing. These reasons deal only with support and not with other parenting issues.
The Issue
[9] The request of the Applicant to readjust support is summarized in Exhibit N to his affidavit and is attached as Appendix A to these reasons. This is a very helpful chart which sets out the income of the parties for each year according to their income tax returns, proposes adjustments to those income figures for support purposes and sets out the resulting calculations.
[10] The controversial issue about the chart is that the Applicant father seeks to impute income to the Respondent mother in some years and he disagrees with her declaring a loss on her tenancy income. I will describe this at greater length below.
[11] There are two approaches to retroactivity. One is to simply adjust the table amount of support for each year based on the declared income of each party for that year. This will also affect the percentage of s. 7 expenses. As I will discuss, simple annual adjustments based on line 150 on the T1 tax return is consistent with the separation agreement and with the Ontario Child Support Guidelines.[^1]
[12] A more complicated retroactive adjustment would involve a forensic evaluation of the accuracy of the income figures for each year. This would include the demand by each party to impute income to the other, evidence about income that was not reported and an examination of the expenses each has clamed against rental income.
[13] Any retroactive adjustment to child support will result in a requirement for one parent to compensate the other but it is important to recognize that the purpose of child support is to ensure the child is adequately cared for. As with all matters to do with the law of children, the governing principle is the best interests of the child and child support is intended to ensure that the child has a similar standard of living in each household. While fairness between the parents is also important, retroactive adjustments are not always ordered.
[14] I note that during the litigation, the Respondent mother has shown herself reluctant to comply with her disclosure obligations in a timely manner. For this reason, costs were awarded against her at the case conference held before Justice Mackinnon. The Applicant asserts that the Respondent has still not provided all of the disclosure she is obliged to provide and suggests that negative inferences should be drawn as appropriate.
[15] I have not found it necessary to draw such inferences or to order a trial of the accuracy of the income figures for a number of reasons. One reason is proportionality. There is no evidence that the child has suffered deprivation. The amounts in dispute would not justify the expense of now litigating the income figures for the past five years. Another reason is fairness. The Applicant father earns less than the Respondent mother and it is for this reason that she pays him child support. The separation agreement provided for annual adjustments based on tax returns. It also provided a mechanism for either party to ask for more detailed accounting information but neither did so.
[16] I begin with the question of imputing income because that occupied much of the attention of the parties during the argument of the motion.
Imputed Income
[17] Ms. Ersoy argues that Mr. Northcott is underemployed. He works as an employment counsellor with an approximate earned income of $55 thousand per year. The Respondent alleges that the Applicant took a higher paying job and then returned to his current lower paying job. The Applicant has refuted this. He took a six-month secondment in 2018 to work in a similar organization for essentially similar pay and then returned to his home position.
[18] The Respondent says that with degrees in criminology and teaching, the Applicant could find more lucrative employment. That may be true, but the employment he holds is the employment he has held since 2008 and throughout these proceedings. There is no evidence that he left a more lucrative post to take a lesser paying job or that he has failed to pursue promotion or other opportunities that are readily available to him.
[19] The phrase "intentionally underemployed" is found in s. 19 (1) (a) of the Ontario Child Support Guidelines. I am conscious that a finding of underemployment does not require evidence of bad faith or a specific purpose to avoid a child support obligation.[^2] In many cases where a parent has taken lower paying employment or has reduced his or her hours for legitimate personal reasons, the court has nonetheless imputed income. This is because the guidelines do not permit a parent with a support obligation to make a personal choice to abandon employment or reduce the payor's income at the expense of the children.[^3]
[20] In my view, however, the guidelines do not require that a parent quit the employment they have always held in order to seek out more lucrative employment that they have never held before. Imputing income under the guidelines is not automatic or mandatory. It is a discretionary power to be used in the circumstances set out in the guidelines where it is necessary to avoid unfairness.
[21] In order to be fair and balanced, I also reject the Applicant father's suggestion that income be imputed to the Respondent mother. The Respondent now works for the federal government. She now earns $112,900 per year but she had a period of unemployment in 2019 and 2020. Prior to that she had worked for the Standards Council of Canada. In 2018 she took an unpaid leave from that employment to pursue a volunteer overseas placement. She believed it would enhance her prospects of finding new employment as she anticipated she might have to do due to a pattern of layoffs and downsizing at the Standards Council.
[22] The period of unemployment appears to be entirely legitimate. While the unpaid leave could meet the test for imputing income under the guidelines for that year, I decline to do so. The Respondent still earned $68,852. If that issue stood alone, it would be reasonable to ask the court to impute her $99,085 regular full-time income for that year but it is not a singular issue. In the context of a retroactive calculation and the Respondent's eventual success in obtaining more lucrative employment, I will base the calculations on the table amounts using the actual earned income of both parties for the years in question without imputing increased employment income for either of them.
[23] The parties each have additional income from rental properties or from renting out space in their own residence. Each questions the accuracy of the numbers filed by the other and the deductions claimed for income tax purposes. The Respondent also claims that the Applicant father has undeclared income for certain years because he was renting out his basement. The evidence is not persuasive. I will base the calculations on the declared profit or loss as set out in their tax returns.
Retroactivity
[24] Both parties agree there should be a retroactive adjustment. The Respondent asks that the adjustment take place only to June of 2020 when she became reemployed in the federal public service. As noted above, the Applicant is asking for a review going back to 2017. The motion to change was brought in August of 2020.
[25] The reason the Respondent believes that a retroactive adjustment to June of 2020 is fair is because she claims that she overpaid support during her time of unemployment. According to her evidence, she agreed with the Applicant father that even though she was unemployed, she would pay support as if her income was equal to his. While she attests that she made this agreement under duress, she is willing to live by it if the court only adjusts the support for the time after she found her new employment. On the other hand, if the court adjusts the support back to 2017 then the Respondent argues that she should be entitled to the full reduction she would have been entitled to during the period of unemployment.
[26] This is misguided. The period of unemployment straddled two calendar years and in each of those years, the Respondent mother still earned more than the Applicant father. So, using the actual annual income for each party is fair to both. The Respondent would still have owed the Applicant a small amount of child support for each month once the numbers are annualized.
[27] For his part, the Applicant asks to have support varied retroactively to 2017 because he says the Respondent failed to disclose an increase in her remuneration she received shortly after the separation agreement was signed and failed to produce her tax returns annually as required by the separation agreement. The Respondent denies this. She says that for the four years post separation, neither party produced tax returns and no one suggested an adjustment to support. One reason she attests that this occurred was because notwithstanding increases in her income, the Applicant was receiving rental income from renting out his basement.
[28] The Respondent also seeks stability and suggests that there should be no adjustment in future unless one or other party has a change in income of more than 20 percent. The parties could agree to such a term but when it comes to calculating child support using a setoff method, the court cannot impose it. The separation agreement does not contain such a provision.
The Separation Agreement
[29] The separation agreement contained important clauses. One (paragraph 5.13) provided that once per year "if either party asks in writing" the parties would review the child support arrangements and it also provided that they would use the "dispute resolution" procedure set out in the agreement if they were unable to resolve the issues. There was a similar provision for financial disclosure (para 5.14) which provided that upon a written request for disclosure, the parties would produce tax returns and make various other forms of financial disclosure as set out in the agreement and provided in the Child Support Guidelines. There is no evidence that either party made such demands in writing prior to 2019.
[30] Despite those specific provisions about notice in writing, however, there is another provision in paragraph 5.16 of the agreement which reads as follows:
5.16 The parties will adjust the Table amount of child support paid each calendar year based on the parties' actual incomes for that calendar year. By no later than May 1st of each year, the parties shall exchange copies of their income tax returns, as filed, for the applicable calendar year. The parties shall then determine the appropriate Table amount of their child support obligation for the applicable calendar year, In accordance with the Child Support Guidelines. If the parties do not agree about the adjustment to be made, they will use the section of this Agreement entitled "Dispute Resolution" to resolve the issue.
[31] Paragraph 5.17 states that in addition to a yearly review, either party may seek a change in child support in case of a material change in circumstances. There follows a list of items which should be considered to be material change. I note that nowhere in the document is material change tied to a figure such as 20 percent.
[32] Agreements on child support are not binding on the court because the right to support is the right of the child and not the right of the parents to bargain away. But the agreement is certainly relevant in determining what is fair and in making discretionary orders such as the extent of retroactivity.
[33] In reading these provisions together, the agreement provides for annual adjustment based on the incomes of the parties as set out in their tax returns. It also provides that upon demand, the parties would make more comprehensive disclosure and also upon demand they would seek to resolve support issues by negotiation and then by dispute resolution. As discussed, there is also a material change provision which was to operate in addition to these support adjustment provisions.
[34] In my view, in the absence of written demands or the absence of either party raising the issues using the processes in the agreement, it would be inappropriate to now engage in a retroactive forensic analysis of the income figures reported by the parties during the years 2016 to 2019. Issues such as the legitimacy of expenses deducted against rental income or whether all rental income was recorded during those periods would likely require a trial of an issue. This is not justified by the amounts that are in dispute and it would be disproportionate.
[35] On the other hand, now that the tax returns for all of those years are before the court and the table amounts and percentage contributions to s. 7 expenses can be calculated, particularly given my determination that imputing income is not appropriate, there is no good reason not to hold the parties to paragraph 5.16 of the agreement and perform the retroactive adjustment based on their declared incomes (line 150).
[36] In performing that calculation, I have used the actual income of the Respondent during the years where she was unemployed and not a deemed or imputed income.
S. 7 Expenses
[37] I hope that with the benefit of a clear decision on the percentage to be paid by each party for each of the years in question, they are able to agree on the amounts owing for s. 7 expenses. I appreciate that this may not be the case and it may be necessary to determine what expenses are legitimately s. 7 expenses. I would not permit the parties to add claims for s. 7 expenses retroactively beyond the evidence already filed with the court but to the extent that this remains in issue, they may arrange a further attendance before me to either decide the matter or provide further direction.
Summary and Conclusion
[38] In conclusion, I find the incomes of the parties for each of the years in question to be the amounts set out in Appendix B. The income of the Applicant for support purposes is as shown in Column A, that of the Respondent in Column B, the table amount as in Column C and the percentage contribution to s. 7 expenses in Column D.
[39] On this basis, the Respondent owes the Applicant the sum of $4,359.72 for arrears of support to January 1, 2022. The Respondent's support obligation commencing January 1, 2022, is adjusted to $465.18 per month. The Respondent is responsible for paying 66% of s. 7 expenses legitimately incurred by the father and the Applicant is responsible for paying 34% of s.7 expenses legitimately incurred by the mother.
[40] These support payments will continue until they are adjusted. The parties are to exchange their tax returns and notices of assessment for 2022 as soon as they are available in 2023 and they are to continue to exchange their tax returns annually for as long as support is payable.
Costs
[41] Both parties seek to recover fees paid to their lawyers at earlier stages in this proceeding. I suggest they consider carefully whether that is something they should pursue. Success has been divided but there may be other factors (such as offers to settle) that I should consider. If the parties need to make costs submissions, I will hear what they have to say.
Justice C. MacLeod
Date: January 31, 2023
Appendix A
Northcott v. Ersoy
FC-14-2569-2
Child Support and Arrears Calculation – Submissions made by the Applicant father
David Northcott (DN)
Suzanna Ersoy (SE)
Annual child support owed by SE
Actual child support paid by SE
Amount owed to SE
Amount owed to DN
2022
$59,141 - DN Potential Gross Annual Income
$114,110 – SE Gross Employment Income
$3,311 ($473 x 7) *Jan - July
$1,645 ($235 x 7) *Jan - July
$1,666
2021
$59,141 – DN Gross Annual Income Net gain +$3,722 (total rental income for rental property
$114,110 – SE Gross Employment Income Net loss -$7,858 (total rental income for rental property
$5,676 ($473 x 12)
$4,280 *Cross-referenced with FRO website Schedule A
$1,396
2020
$60,465 – DN Gross Annual Income Net gain +$4,337 (total rental income, including rental property plus basement apartment)
$70,011 – SE Gross Annual Income (income including employment insurance) Net gain +$1,444 (total rental income for rental property)
$1,176 ($98 x 12) *Child support amount calculated based on SE’s Gross Annual Income including EI and DN’s Gross Annual Income
$1,410 *SE paid no CS while she was unemployed from Jan – June. Then July to December paid CS at $235/month x 6 months. Cross-referenced with FRO website Schedule A.
$234
2019
$56,469 – DN Gross Employment Income Net loss -$4,677 (total rental income, including rental property plus basement apartment)
$76,558 – SE Gross Annual Income Net gain +$7,984 (total rental income for rental property)
$2,304 ($192 x 12) *Child support amount calculated based on DN’s gross Employment Income and SE’s Gross Annual Income
$1,895 *SE paid no CS while she was unemployed from Oct – Dec. *Cross-referenced with FRO website Schedule A.
$409
2018
$51,009 – DN Gross Employment Income Net loss -$1234 (total rental income including rental property plus basement apartment)
$99,085 – SE Gross Employment Income Net loss -$5,461 (total rental income for rental property) Note: SE’s 3-month voluntary leave from work resulted in an approx. 25% decrease of gross employment income for 2018 from $99,085 to $74,313.
$5,186 ($432 x 12)
$2,820 *Cross-reference with FRO website Schedule A.
$2,364
2017
$50,381 – DN Gross Employment Income Net loss -$20 (total rental income for basement apartment)
$98,905 – SE Gross Employment Income Net loss -$18,678 (total rental income for rental property) Note: The expenses and the income are the same because the property was vacant for the year and yet she claims expenses totaling $18,678
$5,244 ($437 x 12)
$3,040 *Cross-referenced with FRO website Schedule A.
$2,204
2016
$49,649 – DN Gross Employment Income Net loss -$330 (total rental income for basement apartment)
$92,170 – SE Gross Employment Income Net loss -$17,892 (total rental income for rental property)
$4,680 ($390 x 12)
$2,585 *Cross-referenced with FRO website Schedule A.
$2,095
Total:
$234
$10,134
• SE reported substantive net rental property investment losses in 4 out of 6 years (2016, 2017, 2018, 2021) totaling $49,889. Investment loss for 4 out of 6 years is not a "one-off" event. It is a pattern of predictable investment loss that reduces income taxes and child support obligations while building equity as house values appreciate.
• Child Support Arrears Owed (2017 to July 2022): $8,039 - $234 = $7,805 owed to DN for child support arrears. For the above child support arrears calculation, 2016 is not included because motion was for retroactive adjustment of child support to January 2017. SE's investment loss for 2016 is provided only to further demonstrate that pattern of predictable rental investment income loss that continued as recent as 2021.
Appendix B
Northcott v. Ersoy
FC-14-2569-2
Child Support and Arrears Calculation – Amounts determined by the Court
The income of the Applicant for support purposes (A)
The income of the Respondent for support purposes (B)
The table amount of support owed based on higher income contribution minus the lower income contribution (C)
Percentage contribution to s. 7 Expenses (D)
2022
$59,141
$112,900 (taken from Form 13 filed Oct 27/22)
A - $547.38
R - $1,012.56
$465.18/mos = $5,582.16 for the year
A – 34%
R – 66%
2021
$59,141
$106,252 (taken from T1 2021, Ex. P, Applicant)
A - $547.38
R – $959.86
$412.48/mos = $4949.76 for the year
A – 36%
R – 64%
2020
$60,463
$70,011 (taken from Ex. A, Master B26)
A - $560.63
R - $654.10
$93.47/mos = $1,121.64 for the year
A – 46%
R – 54%
2019
$58,153
$76,557 (NOA)
A - $537.47
R - $713.79
$176.32/mos = $2,115.84 for the year
A – 43%
R – 57%
2018
$49,829
$68,852 (NOA)
A - $459.30
R - $642.35
$183.05/mos = $2,196.60 for the year
A – 42%
R – 58%
2017
$50,361
$80,649 (NOA)
A -=$464.18
R - $754.49
$290.31/mos = $3, 483.72
A – 38%
R – 62%
TOTAL = $19,449.72
D. Northcott's yearly income is taken from the Notices of Assessment. The yearly income for 2022 is assumed to be the same as the previous year as income tax statements for 2022 are not available as of yet.
Monthly child support payment amounts calculated using this website:
https://www.justice.gc.ca/eng/fl-df/child-enfant/2017/look-rech.aspx
Notes:
According to table amounts as per guidelines, the Respondent owes the Applicant $19,449.72.
According to the Applicant, the Respondent owes him $22,897.
According to the Applicant, the Respondent has paid him $15,090. If that number is accurate, then according to the table amounts, the Respondent owes the Applicant a total of $4,359.72.
COURT FILE NO.: FC-14-2569-2
DATE: 20230131
SUPERIOR COURT OF JUSTICE, FAMILY COURT
RE: David Northcott, Applicant
AND:
Suzanna Ersoy, Respondent
BEFORE: Regional Senior Justice Calum MacLeod
APPEARING: David Northcott in person
Suzanna Ersoy, in person
decision and reasons
Regional Senior Justice Calum MacLeod
Released: January 31, 2023
[^1]: O. Reg 391/97 as amended pursuant to the Family Law Act. The provincial guidelines apply in this case because the separation agreement was filed for enforcement and there was no corollary relief order made at the time of the Divorce Order. For all practical purposes, the guidelines are identical.
[^2]: Lavie v. Lavie, 2018 ONCA 10
[^3]: Skinner v. Skinner, 2021 ONCA 658