IN THE SUPREME COURT OF NOVA SCOTIA (FAMILY DIVISION) Citation: Woods v. Gates, 2008 NSSC 358 Date: 20081015 Docket: 1201-060295 Registry: Halifax Between: Lana Dawn Wood v. Andrew William Gates Respondent LIBRARY HEADING Judge: The Honourable Justice Leslie J. Dellapinna Heard: October 14, 2008 in Halifax, Nova Scotia Oral Decision: October 15, 2008 Written Decision: October 15, 2008 Subject: Application by former wife to vary the child support terms of the Corollary Relief Judgment, pursuant to Section 17 of the Divorce Act. Summary: The parties were married in November 1993. They had two children, aged 12 and 7. They separated in October 2004 and were divorced in March 2007. Their Corollary Relief Judgment incorporated an agreement that the parties would share joint custody of the children and share parenting of the children approximately equally. The parties also agreed that child support would be based on the difference between what the husband would otherwise pay to the wife for the support of the two children and what the wife would otherwise pay to the husband if the shared custody arrangement did not exist. Because of the significant discrepancies in their income, the husband agreed to pay to the wife $1,268.00 per month in child support. In November 2006 the former wife applied to vary child support. Because of the husband’s increased income, the child support, based on the same formula, was increased $1,506.00 per month. The former wife now seeks to again increase the level of child support based on the former husband’s increased income and a decline in her income. The former wife operated her own business which produced negligible income. However, in each of the four years prior to the application she had withdrawn from her RRSP between $10,000 and $14,000. She argued that her RRSP income should not be considered when calculating her contribution to the support of the children. She also asked the Court to review the amount of child support paid by the Respondent going back to when the parties first separated and asked that he be ordered to pay any deficiency between what he did pay and what the Court considers he should have paid. Issue: Should the child support amount be varied? Should the former wife’s RRSP income be taken into account for determining the quantum of child support? Should the Court review the child support paid back to the date of the parties separation and should retroactive award be granted? Undue Hardship, the imputing of income for child support purposes. Result: The previous variation order was a consent order. Both parties agreed to its terms and both parties had legal advice prior to agreeing to its terms. The order was approved by the Court and was not appealed. Under those circumstances the Court was not prepared to retroactively vary the terms of the Corollary Relief Judgment or the terms of the last variation order effective on a date prior to the date of the last order. There were, however, changes of circumstances since the granting of the last order. The Court was not asked to change the method or formula used by the parties and their original agreement when calculating the amount of child support to be paid. The monthly amount of child support was therefore increased. The former wife’s RRSP income was considered in the calculation of child support. It was a recurring income figure over the past four years, including 2008. It is income that forms part of Line 150 and is not an adjustment contemplated by Schedule III. The Court was also asked by the former wife to increase the level of child support based on undue hardship. The Court did not conclude that she would suffer undue hardship as result of the level of the child support ordered. The former Husband asked the Court to impute income to the former wife because in his view she was intentionally underemployed by continuing to operate a business that failed to produce a reasonable level of income rather than obtain employment. The Court did not impute income to the Wife. Most businesses require time to become established. If in the near future the former wife could not draw a reasonable level of income from the business it would be open to the Court at that time to reconsider that issue. Costs of $1,000.00 were ordered payable to the former Husband (to be paid within 60 days). THIS INFORMATION SHEET DOES NOT FORM PART OF THE COURT'S DECISION. QUOTES MUST BE FROM THE DECISION, NOT THIS LIBRARY SHEET. IN THE SUPREME COURT OF NOVA SCOTIA (FAMILY DIVISION) Citation: Woods v. Gates, 2008 NSSC 358 Date: 20081015 Docket: 1201-060295 Registry: Halifax Between: Lana Dawn Wood v. Andrew William Gates Respondent Judge: The Honourable Justice Leslie J. Dellapinna Heard: October 14, 2008, in Halifax, Nova Scotia Written Decision: October 15, 2008 Counsel: Lana Dawn Wood, Self-Represented Andrew William Gates, Self-Represented By the Court: [1] This is an application by Ms. Lana Wood to vary the child support terms of the Corollary Relief Judgment herein as varied by way of consent order dated May 1, 2007. The parties were married on November 19, 1993 and have two children, Dylan who is now 12 and Julianna who is now 7. They separated on or about October 31, 2004 after almost 11 years of marriage. [2] With the assistance of counsel they signed separation agreement dated February 9, 2005 by which they settled the various issues arising out of their separation including the division of their assets and debts, the parenting of their children, spousal support and child support. Among other things, the agreement provided that the parties would share joint custody of the children, that each would have relatively equal time with the children and each would contribute financially to the support of the children. Specifically, paragraphs 15 (a) (b) (c) and (e) of the Agreement reads as follows: (a) The parties agree that the income of the Wife is approximately $5000.00 per annum and the income of the Husband is approximately $102,500.00 per annum. (b) The Husband covenants and agrees to pay child support to the Wife pursuant to the Federal Child Support Guidelines and in accordance with the Nova Scotia table in the amount of $1,268.00 per month, payable in two installments of $634.00 each on the 1st and 15th of each month, commencing December 1, 2004. (c) The parties covenant agree to share, in proportion to their respective incomes the net cost of child care expenses incurred for the children of the marriage taking into account any subsidies, benefits or income tax deductions or credits relating to the childcare expenses. ... (e) The parties agree to exchange Income Tax Returns by July 1st of each year, commencing July 1, 2005. The parties agree that the amount of child support payable shall be adjusted as of September 1st of each, commencing September 1, 2005, and shall be set out in accordance with the Federal Child Support Guidelines, Nova Scotia table. The amount of child support payable shall be calculated by calculating the difference between the amount that each party would otherwise pay if the child support order were sought against each of the parties based on each party’s Line 150 Total Income as disclosed in his or her Income Tax Return from the previous year. [3] The Respondent, Andrew Gates, also agreed to pay spousal support of $500.00 per month to the Applicant with the amount and duration of the spousal support reviewed as of September each year, beginning September 1, 2005. [4] The parties were divorced on March 7, 2006 and the Corollary Relief Judgment, granted the same day, incorporated the terms of their separation agreement. [5] In November 2006 the Applicant applied to vary the child and spousal support terms of the Corollary Relief Judgment. That application was resolved by way of consent order dated May 1, 2007. By way of that Order, the Respondent transferred to the Applicant by way of RRSP spousal rollover $40,000.00 and in return the Applicant waived her entitlement of spousal support. Regarding child support, clauses 15 (c) and (e) to which have referred earlier were repealed and replaced with the following: 5(a) With the exception of private school tuition, the parties covenant and agree to share, in proportion to their respective incomes for the previous calendar year, Section expenses pursuant to the Child Support Guidelines as they relate to the children of the marriage, taking into account any subsidies, benefits or income tax deductions or credits relating to any such expenses. 5(b) With regard to private school tuition, the father agrees that he shall assume full responsibility for tuition costs for each of the two children for the school years 2007-2008, 2008-2009 and 2009-2010. Private schooling shall continue for the children beyond the 2009-2010 school year only if there is agreement by both parents and an agreement with regard to funding of this expense in future years. 5(c) The parties acknowledge they have exchanged income tax returns as of July 2006 and the amount of child support for the period September 1, 2006 to August 1, 2007 has been calculated such that the father pays to the mother $1,506.00 per month ($753.00 paid on the 1st and the 15th of each month). The parties shall continue to exchange income tax returns by July 1st of each year and child support shall be adjusted as of September 1st of each year based upon the previous calendar year incomes of the parties. These incomes shall be based on the income tax return, line 150 Total Income of each party, plus or minus such adjustments as are appropriate pursuant to the Child Support Guidelines. The amount of child support payable shall be calculated by determining the difference between the amount that each party would otherwise pay if child support order was sought against each of the parties based upon their incomes for child support purposes. [6] The Applicant now seeks to vary the child support terms of that order. The Applicant submits that as of September 1, 2007 the Respondent’s net child support payment to her should increase for number of reasons including that his income increased, that her contribution to child support should decrease because other than her RRSP income, she has no other income for child support purposes, and she argues that the RRSP income should not be considered when calculating her contribution. It is also argued that if the RRSP income is to be considered then her contribution to the support of the children should be reduced as the amount that she would be required to pay under the Variation Order and the Child Support Guidelines, that is to say the amount set off against the Respondent’s contribution, would cause her undue hardship. She has also asked the Court to review the amount of child support the Respondent should have paid going back to when the parties first separated. [7] Subsections 17 (1) (a) and (4) of the Divorce Act read as follows: 17 (1) court of competent jurisdiction may make an order varying, rescinding or suspending, prospectively or retroactively, (a) support order or any provision thereof on application by either or both former spouses (4) Before the court makes variation order in respect of child support order, the court shall satisfy itself that change of circumstances as provided for in the applicable guidelines has occurred since the making of the child support order or the last variation order made in respect of that order. [8] The Court is to determine if there have been changes in circumstances as provided for in the applicable guidelines since the making of the last variation order when considering further variation order. [9] Section 14 of the Child Support Guidelines says: For the purposes of subsection 17(4) of the Act, any one of the following constitutes change of circumstances that gives rise to the making of variation order in respect of child support order: (a) in the case where the amount of child support includes determination made in accordance with the applicable table, any change in circumstances that would result in different child support order or any provision thereof; (b) in the case where the amount of child support does not include determination made in accordance with table, any change in the condition, means, needs or other circumstances of either spouse or of any child who is entitled to support; and (c) in the case of an order made before May 1, 1997, the coming into force of section 15.1 of the Act, enacted by section of chapter of the Statutes of Canada, (1997). [10] The last variation order was consent order. Both parties agreed to its terms and both parties had legal advice prior to agreeing to its terms. The Order was approved by the Court and was not appealed. There is no evidence that the terms of that Order had been obtained by fraud or misrepresentation or for any other reason should be disregarded by this Court. There is no reason for the Court not to accept the terms of that Order or the Corollary Relief Judgment before it as being appropriate at the time. The Court is therefore not prepared to retroactively vary the terms of the Corollary Relief Judgment or vary the terms of the last variation order effective on any date before the date of the last Order. [11] The Court is satisfied however, that there have been changes in the incomes of the parties since the last variation order which would permit the Court to consider variation of the last variation order. [12] The Consent Variation Order addressed the issue of child support up to and including August 2007. The amount of support would then be subject to change as of September 1, 2007 based on the parties’ income earned in 2006, and reviewed again on September 2008 based on their incomes earned in 2007. [13] The Court has not been asked to change the method by which the child support is to be calculated each year other than the respondent has asked for some kind of certainty being put into the Court’s order to minimize, if not eliminate, the possibility of ongoing disputes between the parties each summer, of the child support that is to be paid the following year. The methodology agreed to by the parties with the assistance of their lawyers is reasonable and sound and it conforms with the Child Support Guidelines. [14] The Court cannot predetermine years in advance the income of either of the parties. The Court should not prevent either party from exercising their right to apply to the Court to vary child support in the appropriate circumstances. If either party abuses that right the Court can sanction their conduct, at the time, appropriately. [15] The calculation of the Respondent’s income for the support that is to commence in September of 2007 is relatively straight forward. In 2006, his line 150 total income was $126,874.00 including dividends that were grossed up for tax purposes from $2,000.00 to $2,500.00. That $500.00 gross up is to be adjusted pursuant to Schedule III of the Guidelines. He also had professional fees, which is another Schedule III adjustment, of $515.00. After adjusting his income for child support purposes, his income was $125,859.00 in the year 2006. The table amount for two children based on that amount of income is $1,643.00 per month. In 2007 his total income on line 150 of his tax return was $145,344.31. Again, that is to be adjusted by the $500.00 gross up of his dividends and $481.04 for professional fees, leaving him with total income figure for child support purposes of $144,363.27 which would require child support payment for two children of $1,850.00. The Court is satisfied that the Respondent’s tax returns accurately reflect his actual income. should mention though that included in the Respondent’s income in most years, including 2007, was his bonus income paid based on the performance and profitability of the engineering firm for which the Respondent works and in which he is shareholder. Many years, including 2007, the Respondent, like other shareholder/employees in this firm, is required to spend all or part of his net or after tax bonus money on the purchase of shares in the firm, thus receiving no added funds in his hands in spite of his bonus. Sometimes he can even be required to spend more on the purchase of shares than he received in net after tax bonus income. The firm requires that of all their employee/shareholders in order to buy out retiring members or to keep the business adequately funded. Therefore, there are years when the Respondent is paying child support based on level of income significant portion of which he does not actually have at his disposal. 2007 was one of those years. [16] The Applicant’s income for child support purposes is also fairly easy to calculate. In 2006 her line 150 total income was $25,793.00 including $6,000.00 in spousal support, $12,500.00 in RRSP income and $1,200.00 being her universal child care benefit. The spousal support and UCCB should be deducted as an adjustment pursuant to Schedule III. She asked the Court not to include her RRSP income as it is non-recurring item. There are no reasons in the Court’s view not to include her RRSP income for child support purposes. It is in fact recurring income figure according to her tax returns. She deregistered between $10,000.00 and $14,000.00 in RRSP income in each of the last years, including 2008. She relies on this income as part of her household revenue. It is income that forms part of line 150 and is not an adjustment contemplated by Schedule III. The Court is aware of the cases where RRSP funds were not included in income for the purposes of calculating child support but those cases can be distinguished from the Applicant’s circumstances. So, after adjusting her line 150 by deducting spousal support and the University Child Care Benefit received in 2006, her income for child support purposes in that year was $18,593.00 which would require child support payment pursuant to Section of the Guidelines for two children of $277.00 per month. The applicant asked the Court to reduce that amount based on undue hardship. Section 10 of the Guidelines says (1) On either spouse’s application, court may award an amount of child support that is different from the amount determined under any of sections to 5, or if the court finds that the spouse making the request, or child in respect of whom the request is made, would otherwise suffer undue hardship. [17] Subsection lists number of circumstances which may cause spouse or child to suffer undue hardship and that list is not exhaustive. am not convinced that the Applicant would suffer undue hardship by having her share of the child support offset against the Respondent’s payment. She has not provided sworn statement of how she and her partner spend their income. She has not provided her statement of property and debts. She has not provided current sworn statement of her partner’s income, although the Court does have copy of his 2007 tax return. She and her partner only work part time. [18] Based on the evidence, the Court cannot say that the Applicant or her family would suffer undue hardship as contemplated by the Guidelines. They live in nice area. The children go to private school, paid for by the Respondent. The children take part in many activities. The Applicant’s business paid for the Applicant and her partner to travel to the Carribean number of times in the past year. The Court does not know of anything that they are doing without or may do without if the Applicant is required to pay her share of the child support. [19] Using the formula in the Variation Order, the Applicant’s contribution to the children’s financial support is modest and there is no reason to decrease it. [20] In 2007 her line 150 was $14,042.28 including UCCB of $700.00 and spousal support of $2,500.00. After adjustment of those two figures, her income for child support purposes is only $10,842.28 requiring child support payment of only $97.00 per month. For all of the same reasons am not prepared to reduce that amount. [21] The Applicant has her own business. It is incorporated and over the past four years it has shown profit at times but overall has been losing money. The Respondent has asked the Court to impute income to the Applicant. He argues that many of the company’s expenses benefit the Applicant-such as rent in her house and travel to the Carribean. He has also suggested that if the Company isn’t profitable it is time for the Applicant to get “real job” even it if it is part-time position. He argues that throughout their marriage, the Applicant worked and earned an income in the $30,000 to $52,000 range. [22] The Applicant says she is limited in what she can do because of an injury she suffered as result of motor vehicle accident in November 2004. She also says that if given another year, her Company can be profitable. [23] seriously considered imputing income to the Applicant. She claims she is limited in what she can do and yet she puts long hours into her business and apparently travels great deal as result of her business. She, in the Court’s opinion, is capable of working at least part-time. Still, every business needs some time to be established. [24] The Court is prepared to give the Applicant another year, that is to say until the end of her Company’s fiscal year in the Spring of 2010 to show meaningful profit, and by then, be in position to provide the Applicant with an income by way of employment income or dividends. If the Company is not profitable by then and if the matter is brought back before the Court, the Court may seriously consider imputing income to her if she doesn’t already by then seriously consider other options. [25] In summary, beginning September 1, 2007 to and including August 1, 2008, the Respondent shall pay to the Applicant net child support of $1,366.00 per month, calculated by deducting $277.00 from $1,643.00. Assuming he has paid $1,506.00 each of those months, he has overpaid by total of $1,680.00. [26] Beginning September 1, 2008 to and including August 1, 2009, the Respondent shall pay the net sum of $1,753.00 per month, calculated by deducting from $1,850.00 the Respondent’s contribution of $97.00 per month. Assuming in September and October of this year he paid $1,506.00 for each of those months, he has underpaid total of $494.00 for those two months, leaving net overpayment due back to him of $1,186.00 which overpayment can be deducted from the Respondent’s November child support payment. [27] Regarding Section expenses, will not be varying paragraph (a) of the Variation agreement that was incorporated into the Consent Variation Order, but for clarification purposes the orthodontic expenses that are being incurred for Dylan both past and future are to be shared by the parties proportionate to their incomes as and when those payments are due. The amount to be shared is the net amount after taking into account any insurance coverage or tax savings, if any. [28] Costs are awarded to the Respondent in the amount of $1,000.00 to be paid by the Applicant within 60 days of October 15, 2008. J.S.C. (F.D.) Halifax, Nova Scotia
The corollary relief judgment provided that the parties would share parenting of their two children approximately equally. Child support would be based on the difference between what each party would otherwise have paid if the shared custody arrangement had not been in effect. The wife now applied to have the amount paid by the husband increased due to his increase in income and a decline in her income. Following the divorce, the wife had opened her own business which only produced negligible income and in each of the past four years, she had withdrawn between $10,000 and $14,000 from her RRSP, which amounts she argued should be not considered when calculating her contribution to the children's support. She also sought to have the court go back to when the parties first separated to have the husband pay any deficiency which the court might find. The husband requested that the court impute income to the wife on the basis that she was intentionally underemployed by continuing to operate a business that failed to produce a reasonable level of income. Application granted in part; monthly amount of child support payable by the husband is increased based on his increased income; the wife's RRSP income was considered in the calculation of child support as it had been a recurring income figure over the past four years; no income imputed to the wife but if she could not draw a reasonable level of income from the business within the next year, it would be open to the court to reconsider this issue. Given that the previous variation order was a consent order and both parties had legal counsel at the time and had not appealed that order, the court was not prepared to retroactively vary its terms.