QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2007 SKQB 51 Date: 2007 02 01 Docket: FLD No. 330 of 2005 Judicial Centre: Saskatoon, Family Law Division BETWEEN: EVAN GAVELIN and NEVADA PATEMAN Counsel: T. Turple for the petitioner D. Revering for the respondent FIAT RYAN-FROSLIE J. February 1, 2007 1) The respondent, Nevada Pateman, applies for an interim order granting her sole custody of the parties’ two children and child support, including s. 7(a) child care expenses retroactive to the date of separation, being October, 2005. The petitioner, Evan Gavelin, requests joint custody with specified access. While he acknowledges an obligation to pay child support, there is an issue as to his income and whether the interim order should be made retroactive. Custody/access 2) The parties, who were never married, lived together “off” and “on”. They had two children, namely, Marie Gavelin, born February 28, 2003 (age 3) and Nolan Evan Gavelin, born December 28, 2004 (age 2). The parties separated for the last time in October, 2005. Following the separation, the children remained with their mother. Both parties reside in the same district, approximately 35 kms. apart. Mr. Gavelin, who is employed by drilling company, works two weeks and then has one week off. 3) Following the separation, the parties entered into verbal agreement that Mr. Gavelin would have parenting time with the children every third weekend from Saturday to Tuesday during his week off. Mr. Gavelin’s contact with the children terminated on March 28, 2006 and he has not seen the children since that date. Mr. Gavelin alleges this is because Ms. Pateman refused to allow access, except on her terms. Ms. Pateman alleges it was Mr. Gavelin’s choice not to see the children. Whatever the truth may be, it is uncontroverted that Mr. Gavelin has not seen the children for ten months. When he last saw the children, Kayden was barely two years of age and Nolan, just 15 months. 4) Mr. Gavelin wants joint custody, with the children being in his care on his week off for period of five days. His next week off commences February 1, 2007. Mr. Gavelin also attests that he will be laid off for the months of April and May, 2007 and during that period he would like to have the children alternating weeks. 5) Ms. Pateman works as hotel supervisor Tuesdays through Saturdays from 4:45 p.m. to 11:30 p.m. She wants sole custody with Mr. Gavelin having access every third weekend from Saturday to Tuesday as per their verbal agreement. 6) Section of The Children’s Law Act, 1997, S.S. 1997, c. C-8.2 provides for presumption of joint custody where parents of child have cohabited after the birth of the child. That is the situation here. There is nothing in the evidence before me sufficient to rebut that presumption on an interim basis. The purpose of interim orders is to establish temporary parenting arrangement pending trial or final resolution of the matter. In making such orders, Courts try to disrupt the lives of the children as little as possible and, for that purpose, often adopt the “status quo” subject always to that arrangement being in the best interests of the children. The status quo in this case is represented by the verbal agreement which the parties entered into following their separation, that is, that Mr. Gavelin would have the children during his week off from Saturday to Tuesday. Given the age and circumstances of the children, this appears reasonable on an interim basis. The verbal agreement, however, did not address the fact that Mr. Gavelin would be laid off for two months in the spring. It is reasonable that, during this period, his contact with the children should be increased. 7) Mr. Gavelin has not seen his children for significant period of time. The children, particularly, Nolan, may have limited memories of him and, accordingly, he must be “reintroduced” into their lives. phase-in period is required. 8) There shall be an interim order that the petitioner and respondent have joint custody of the children, Kayden Marie Gavelin, born February 28, 2003 and Nolan Evan Gavelin, born December 28, 2004, with primary residence and day-to-day decision-making to be with Ms. Pateman. 9) Mr. Gavelin shall have parenting time with the children, specified as follows: (i) Friday, February 2, 2007 from 4:00 p.m. to 8:00 p.m.; (ii) Saturday, February 3, 2007 from 4:00 p.m. to 8:00 p.m.; (iii) Tuesday, February 6, 2007 from 10:00 a.m. to 4:00 p.m.; (iv) Wednesday, February 7, 2007 from 10:00 a.m. to 4:00 p.m.; (v) Friday, February 23, 2007 from 4:00 p.m. to 8:00 p.m.; (vi) Saturday, February 24, 2007 from 10:00 a.m. to 4:00 p.m.; (vii) Tuesday, February 27, 2007 from 10:00 a.m., overnight to Wednesday, February 28, 2007 at 10:00 a.m.; (viii) Friday, March 16, 2007 from 4:00 p.m. to 8:00 p.m.; (ix) Saturday, March 17, 2007 from 10:00 a.m., overnight to Sunday, March 18, 2007 at 10:00 a.m.; (x) Tuesday, March 20, 2007 from 10:00 a.m., overnight to Wednesday, March 21, 2007 at 10:00 a.m.; (xi) Thursday, April 5, 2007 from 4:00 p.m. to 8:00 p.m.; (xii) Friday, April 6, 2007 at 10:00 a.m., overnight to Sunday, April 8, 2007 at 5:00 p.m.; (xiii) Tuesday, April 10, 2007 at 10:00 a.m. to 4:00 p.m.; (xiv) Commencing Saturday, April 28, 2007, every third Saturday from 10:00 a.m., overnight to Tuesday at 4:00 p.m.; (xv) During July and August, 2007, the respondent shall be entitled to take the children for up to two non-consecutive periods consisting of no more than five overnights each; (xvi) Mr. Gavelin shall have reasonable telephone contact with the children at all reasonable times; (xvii) Should Mr. Gavelin not work for the months of April and May, 2007, he shall have additional parenting time with the children every week (other than the weekend he exercises regular access), from Thursday at 4:00 p.m., overnight to Saturday at 10:00 a.m.; (xviii) Mr. Gavelin shall be entitled to such other reasonable parenting time as agreed to by the parties; (xix) Changes may be made to the times and dates specified in this order, but all such changes must be made in writing and signed by both parties; and (xx) Mr. Gavelin shall be responsible for arranging the pickup and return of the children during his parenting time. Child support 10) Mr. Gavelin has worked for the same drilling company for approximately six years. His line 150 income, according to his last three tax returns and/or notices of assessment, was as follows: 2003 $88,426 2004 $103,102 2005 $86,870.57 According to his sworn financial statement, his gross income in 2006 was $112,064. This is verified by his year-to-date income statement from his employer. 11) Mr. Gavelin argues his Line 150 income should be reduced for child support purposes to take into account expenses incurred by him as result of his employment. Mr. Gavelin attests that in 2006 he received “living allowance” which he claims is reflected on his pay stubs. He argues this living allowance ($9,600), which includes expenses for his truck, fuel, vehicle maintenance and meals, should be deducted from his Line 150 income to arrive at his current income for child support purposes. Ms. Pateman opposes any such reduction. 12) The Family Maintenance Act, 1997, S.S. 1997, c. F-6.2 applies to the within application. That Act provides that maintenance is to be set in accordance with the Federal Child Support Guidelines [Divorce Act Regulations, SOR/97-175]. Pursuant to s. 16 of those Guidelines, as general rule, income for child support purposes is determined using the sources of income set out under the heading “total income” in the T-1 General form used by Canada Revenue Agency and adjusted in accordance with Schedule III of the Guidelines. Section of Schedule III provides for the deduction of certain employment expenses as provided in s. of the Income Tax Act, R.S.C. 1985, c. (5th Supp.), which includes travel and vehicle expenses under certain circumstances. 13) Mr. Gavelin attests that the $9,600 in issue is “living allowance”. It is impossible on the evidence provided to determine whether the $9,600 falls within Schedule III, Part of the Guidelines, being permitted deduction pursuant to s. of the Income Tax Act or whether it is in fact “living allowance” as contemplated by s. of the Income Tax Act. Living allowances, pursuant to s. of the Income Tax Act are neither income nor expenses and would have no effect on Mr. Gavelin’s Line 150 income (See: Kyle v. Kyle (1998), 1998 CanLII 13659 (SK QB), 164 Sask. R. 52 (Q.B.) and Jordan v. Jordan, 2005 SKQB 129 (CanLII), (2005), 260 Sask. R. 188 (Q.B.)). In the circumstances, am not prepared on an interim basis to deduct the $9,600 from Mr. Gavelin’s 2006 income. leave it open to the trial judge who will have the benefit of Mr. Gavelin’s 2006 tax return and notices of assessment and, hopefully, better evidence of the expenses and their purpose to review this issue and make any retroactive adjustment they deem necessary. 14) Mr. Gavelin recently incorporated company, Prime Rentals Ltd. (Hereinafter referred to as “the company”). He is the sole shareholder and director of that company which runs an equipment rental business. Its year end is April 30 and it recently filed its first financial statement which was for the period ending April 30, 2006. Mr. Gavelin attests he has not received any income from the company which is in its startup phase. Ms. Pateman points out the company’s April 30, 2006 financial statements show that it grossed $30,257 and had net income after tax of $24,720. There were also retained earnings in the company of that amount. She argues this amount should be added to Mr. Gavelin’s 2006 income for child support purposes. 15) Section 18 of the Guidelines provides that where an individual is shareholder, director or officer of corporation and the Court is of the opinion their Line 150 income does not “...fairly reflect all the money available...” for child support, the Court may attribute “...all or part of the pre-tax income of the corporation...” to the individual. In determining whether to exercise its discretion pursuant to s. 18, the Court must be satisfied additional money is actually available and that it can be paid to the shareholders without endangering the financial viability of the company. When making such determination, looking at the “retained earnings” of the corporation is of limited assistance. Retained earnings are shareholder’s “equity” in the corporation (its assets less its liabilities). They do not reflect the cash available for distribution. In order to make that determination, wide range of factors must be considered, including: (1) the nature of the business involved. (For example, is it capital intensive or service oriented business? Is it subject to seasonal fluctuations or economic cycles?) (2) the corporate share structure, including any obligations imposed by shareholder agreements; (3) the financial position and general operations of the company. (What are the company’s operating requirements, its inventory, accounts receivable and accounts payable? Are there bank covenants which may affect payment out of funds? Is there necessity to upgrade equipment, etc.?) and, (4) is the company well-established one or merely in its startup phase? These are only few of the factors which may be relevant to determination of whether cash actually exists which may be available for child support. Simply because company makes profit does not mean cash is available for distribution. 16) The company in issue here is in its startup phase. There is insufficient evidence to establish what cash is available and whether it could be withdrawn without impeding the ongoing operation of the company. The corporate cash flow statement shows very little cash is actually available. In the circumstances, am not prepared, on an interim basis, to attribute additional income to Mr. Gavelin from the company. This issue should be left for determination by the trial judge. 17) find Mr. Gavelin’s current income for child support purposes to be $112,064, representing his total income from employment for 2006. There shall be an order that Mr. Gavelin pay support for his children, Kayden Marie Gavelin, born February 28, 2003 and Nolan Evan Gavelin, born December 28, 2004 of $1,531 per month commencing February 1, 2007 and continuing on the first day of each and every month thereafter for so long as the children remain children within the meaning of The Family Maintenance Act or until further order of this Court. Section expenses 18) Ms. Pateman claims contribution from Mr. Gavelin for her s. child care expenses which she attests are $370 per month ($4,400 per year, before tax). Other than the assertion that her present income is the same now as it was in 2005, there is no documentation to verify her income for 2006 or 2007. 19) The Court notes that the parties’ youngest child was born on December 28, 2004 and that according to her 2005 income tax return, significant portion of Ms. Pateman’s income for that year came from employment insurance. She is now employed full time as hotel supervisor. In the circumstances, this Court is not satisfied that Ms. Pateman’s 2005 income is an accurate reflection of her current income. 20) Both parties acknowledge they had verbal agreement following their separation that Mr. Gavelin would pay one-half of Ms. Pateman’s child care expenses. Mr. Gavelin has attached receipts to his material that confirm he has paid one-half of the child care costs up to and including December, 2006. Given the lack of financial disclosure by Ms. Pateman, am not prepared to vary the terms of that agreement. On an interim basis, there shall be an order that Mr. Gavelin continue to pay $185 per month directly to the child care provider which represents one-half of Ms. Pateman’s current child care costs (before tax considerations) for employment purposes. This order shall take effect January 1, 2007. Retroactive child support 21) Ms. Pateman claims child support from Mr. Gavelin “retroactive” to October, 2005 when the parties separated. “Retroactive” is used only in the sense that the child support payments requested are for period which pre-dates service of notice of this application upon Mr. Gavelin. Mr. Gavelin was served with the application on September 20, 2006. 22) Both parties acknowledge they had verbal agreement at the time of the separation that Mr. Gavelin would pay $1,200 per month in child support commencing October, 2005. Mr. Gavelin in fact paid this amount for the months of October, November and December, 2005. In argument, counsel for Mr. Gavelin pointed out that child support of $1,200 per month was consistent with Mr. Gavelin’s Line 150 income for 2004, based on Table support. His Line 150 income in 2004 was $103,102 and child support, based on the 1997 Tables at that time, for two children would have been $1,224. 23) In January, 2006 Mr. Gavelin unilaterally decreased his child support payments. He paid $860 in January, 2006 and $1,000 for each of the months of February, March and April, 2006. Mr. Gavelin did not make any child support payments (other than for child care) after April, 2006 until December, 2006 when he was ordered to pay $1,700 for the month of December, 2006 and further $1,700 in January, 2007. Since October, 2005 his income has increased and new Tables were adopted effective May 1, 2006. 24) The leading case on retroactive child support is the Supreme Court of Canada decision in D.B.S. v. S.R.G. et al, [2006] S.C.J. 37, 2006 SCC 37 (CanLII). Justice Bastarache, speaking for majority of the Supreme Court of Canada in that case confirmed the granting of “retroactive” child support order is discretionary. In exercising that discretion, court should consider the circumstances of the case, including: (i) Whether there is an existing court order or agreement; (ii) The status of the children; (iii) The reason for any delay in bringing the application; (iv) The conduct of the payor; (v) The financial circumstances of the child; and (vi) Any hardship. See also: Kelly v. Kelly, 2006 NSSC 323 (CanLII), [2006] N.S.J. No. 494 (N.S. S.C.) (QL) 25) Where retroactive award is made, as general rule, it will start when the payor was given “effective notice” that child support or change in child support was requested. Justice Bastarache, in D.B.S. v. S.R.G., supra, at para. 121, indicated that effective notice “...does not require the recipient parent to take any legal action, all that is required is that the topic be broached...”. It is noted that Justice Bastarache also discussed situations where the general rule would not apply, for example, where there is some blameworthy conduct on the part of the payor. 26) In this case, Mr. Gavelin lived up to the parties’ verbal agreement until January, 2006, at which time he unilaterally ceased paying the support agreed upon. By May, 2006 he had stopped paying child support altogether. He attests his reason for doing so is because he was not having access to his children. The obligation to pay child support is not contingent on payor’s ability to see their children. It is an independent obligation and Mr. Gavelin cannot justify his failure to provide support on that basis. It appears from the limited evidence before this Court that Ms. Pateman’s income was substantially less than that of Mr. Gavelin’s. The child support was necessary to meet the children’s basic ongoing needs. Mr. Gavelin knew he had an obligation to provide child support and there is no evidence a retroactive order would cause him undue hardship. There is evidence in both the petitioner and the respondent’s affidavit materials that request for change in child support preceded the commencement of this application. Mr. Gavelin attests at para. of his January 12, 2007 affidavit that the respondent refused to allow him parenting time if he “...did not agree to pay her the amount of child support she demanded”. I am satisfied in the circumstances that retroactive child support is warranted. 27) am also satisfied that the parties based their October, 2005 verbal agreement for child support on Mr. Gavelin’s 2004 income. It is common for support provisions to be based on the prior year’s earnings, as the best evidence of income is often year end income statements and/or tax returns. am also satisfied that changes to the child support were discussed between the parties prior to March, 2006. A retroactive adjustment of child support to January 1, 2006 is warranted. The order should be based on Mr. Gavelin’s income for the preceding year as that was the basis for the original October, 2005 agreement. As of January 1, 2006, Mr. Gavelin should pay child support based on his 2005 income, being $86,870.57. As of January 1, 2007, child support should be increased to reflect his 2006 income, being $112,064. This order will result in child support arrears of $8,107, calculated as follows: Period Table Support Amount Due Amount Paid $86,871 Jan. 1, 2006 to Apr. 30, 2007 1997 Tables $1,055 mos. $86,871 May 1, 2006 to Dec. 32, 2006 2006 Tables $1,202 mos. $112,064 Jan. 1, 2007 2006 Tables $1,531 mo. 28) Mr. Gavelin shall pay the child support arrears of $8,107 at the rate of $500 per month commencing February 15, 2007 and payable on the 15th day of each and every month thereafter until the arrears are paid in full. 29) As the results of the within application are mixed, costs of this application shall be costs in the cause. J. J. A. Ryan-Froslie
FIAT: The respondent applies for an interim order granting her sole custody of the parties' two children and child support retroactive to the date of separation being October 2005. The petitioner seeks joint custody with specified access. The petitioner acknowledges an obligation to pay child support but there is an issue with respect to his income and whether the interim order should be retroactive. The children are ages 3 and 2.HELD: 1) Section 3 of The Children's Law Act 1997 provides for a presumption of joint custody where parents of a child have cohabitated after the birth of the child. That is the situation here. There is nothing in the evidence to rebut that presumption on an interim basis. In making interim orders, the Court tries to disrupt the lives of the children as little as possible. The status quo in this case is represented by the verbal agreement between the parties entered into after their separation. That is the petitioner would have the children every third week during his week off from Saturday to Tuesday. This seems reasonable on an interim basis. This agreement did not address the fact that the petitioner shall be laid off for two months in the spring. It is reasonable that during this period his contact with the children should be increased. The petitioner has not seen the children for 10 months. He will have to be re-introduced to them. A phase in period is required. 2) The petitioner has worked for the same drilling company for about 6 years. His gross income in 2006 was $112,064. This is verified by his year to date income statement from his employer. The petitioner attests that $9,600 of his income is a 'living allowance' paid to cover expenses for his truck, fuel, vehicle maintenance and meals and should be deducted from his Line 150 income to arrive at his current income for child support purposes. This is a matter for the trial judge who will have the benefit of the 2006 tax return and notice of assessment and better evidence of the expenses and their purpose and make any retroactive adjustment deemed necessary. The petitioner's income for child support purposes is $112,064. 3) The claim for retroactive child support is a claim for child support payments which pre-date service of the notice of this application. The petitioner was served with the application in September 2006. The petitioner lived up to the parties' verbal agreement to pay child support of $1,200 per month starting October 2005. He unilaterally stopped paying child support in January 2006. He attests that his reason for doing so was because he was not having access to the children. The obligation to pay child support is not contingent on a payor's ability to see their children.  The respondent's income is substantially less then that of the petitioner's. The child support was necessary to meet the children's basis ongoing needs. The petitioner knew he had an obligation to provide child support and there is no evidence that a retroactive order would cause him undue hardship. There is evidence that a request for change in child support preceded the commencement of this application. A retroactive adjustment of child support to January 2006 is warranted.