J. 2004 SKQB 417 A.D. 1997 No. 687 J.C.R IN THE QUEEN’S BENCH JUDICIAL CENTRE OF REGINA BETWEEN: BRENT GORDON MARZOLF and CATHY LYNN MARZOLF RESPONDENT R. Bradley Hunter for the Petitioner Marilyn L. Elliott for the Respondent JUDGMENT PRITCHARD J. October 21, 2004 [1] Each party has applied for a variation of the judgment granted by Madam Justice E.J. Gunn on April 30, 1999. The judgment incorporates the terms of an Interspousal Contract dated April 26, 1999 which provides for basic child support to be paid by Mr. Marzolf in the amount of $1,411.00 per month. The Interspousal Contract states that the specified child support is payable for the two children of the marriage and was calculated under the Guidelines based on Mr. Marzolf’s expected annual income of $110,000.00. [2] The parties separated in 1997 and shortly thereafter Mr. Marzolf moved to Calgary, Alberta. The 1999 judgment was registered in that province and through her Alberta solicitor, Ms. Marzolf commenced formal negotiations in November 2002 for retroactive upward variation of child support. Negotiations proceeded slowly and Mr. Marzolf ultimately countered with an application for variation to this court in March 2004. He seeks to have child support reduced for Kimberly born April 2, 1992 and entirely discontinued for Ashley born April 4, 1984. Mr. Marzolf acknowledges that he has unilaterally terminated support for Ashley on the basis that she is over 18 years of age and not in full time attendance at school. Ms. Marzolf has responded with her own application for variation to this court. She seeks an upward variation of ongoing child support for Kimberly on the basis that Mr. Marzolf’s income is significantly higher than $110,000.00. On the same basis she also seeks a retroactive variation of support paid for both girls. Variation of On-going Support for Kimberly [3] This matter is before the court largely because the parties cannot agree on the method of calculating Mr. Marzolf’s income for child support purposes. The parties agree that much of his income since separation has included significant amounts of non-recurring income in the form of capital gains, stock options and severance pay. Mr. Marzolf argues that these amounts should not be considered as part of his income for child support purposes. His argument rests solely on the fact that the amounts are non-recurring. In effect, he argues that this fact alone renders it unfair that they be included. [4] The relevant portions of the Guidelines provide: 16. Subject to sections 17 to 20, spouse’s annual income is determined using the sources of income set out under the heading “Total income” in the T1 General form issued by the Canada Customs and Revenue Agency and is adjusted in accordance with Schedule III. 17.(1) If the court is of the opinion that the determination of spouses’s annual income under section 16 would not be the fairest determination of that income, the court may have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of non-recurring amount during those years. (2) Where spouse has incurred non-recurring capital or business investment loss, the court may, if it is of the opinion that the determination of the spouse’s annual income under section 16 would not provide the fairest determination of the annual income, choose not to apply sections and of Schedule III, and adjust the amount of the loss, including related expenses and carrying charges and interest expenses, to arrive at such amount as the court considers appropriate. [5] For the most part and in accordance with s. 16 of the Guidelines, payor’s income for child support purposes is determined based on total income (adjusted in accordance with Schedule III) as shown on his or her income tax return. The court can deviate from this only if it is satisfied that such amount would not represent the fairest determination of income. Mr. Marzolf has provided no compelling reason to exclude any of his non-recurring income. To the contrary, this is the fairest way of proceeding. review of Mr. Marzolf’s income since separation discloses that non-recurring income can realistically be anticipated in the future as it has constituted significant portion of his income in four of the last five years. [6] Mr. Marzolf’s income has fluctuated quite dramatically in each of the five years during which he has paid child support. As his income for any given year cannot be accurately estimated in advance, the fairest method of determining the appropriate level of child support payable for the calendar year 2004 is by calculating it based on his income during the previous year. [7] Mr. Marzolf’s line 150 income on his 2003 income tax return was $199,922.00. This includes $114,454.00 of non-recurring capital gain income from the sale of shares in Poplar Hill Resources. It does not include the non-taxable portion of that capital gain in the same amount. Pursuant to Clause of Schedule III referred to in s. 16 of the Guidelines, this non-taxable amount is to be included as an adjustment to income. This results in Mr. Marzolf’s 2003 income for child support purposes being $314,376.00. However, in examining documents provided by Mr. Marzolf regarding his previous year’s income, it is apparent that he incurred net capital losses in 2002 of $65,424.00. As later explained, have imputed $150,000.00 of income to Mr. Marzolf for the year 2002 despite this net capital loss and his line 150 income being only $2,410.00. It is therefore reasonable that this capital loss be deducted from the non-taxable portion of the capital gain he realized in 2003. This results in only $49,030.00 of the non-taxable portion of the 2003 capital gain being added to income for total income of $248,952.00. [8] Based on the Guidelines and an annual income of $248,952.00 realized in the Province of Alberta, child support of $1,186.00 would be payable on the first $150,000.00 of income and a further amount of $742.00 would be payable on the balance for total child support of $1,928.00. [9] The court has discretion as to whether the Guideline amount or some other amount should be used to calculate child support on income in excess of $150,000.00. This discretion is to be exercised having regard to the “conditions, means, needs and other circumstances of the children who are entitled to support and the financial ability of each spouse to contribute to the support of the children”. [10] During the same year that Mr. Marzolf was enjoying income in excess of $248,000.00, Ms. Marzolf’s income for herself and the two children was only $24,345.25. It is self-evident that Mr. Marzolf has a substantially greater ability to provide financial support for Kimberly than does Ms. Marzolf. [11] Ms. Marzolf deposes that she has not had the resources to provide lifestyle for the children similar to the one they enjoyed prior to their parent’s separation. They have not been able to take vacations or participate in activities they might otherwise have chosen to experience. Approximately one year after the granting of the judgment sought to be varied Ms. Marzolf found she was unable to maintain the mortgage on her existing home which she sold and replaced with much smaller one acquired at purchase price of $70,000.00. Ms. Marzolf deposes that this new residence still requires lot of renovations and that it has been necessary for her to undertake many of them herself in order to save costs. [12] Although Mr. Marzolf’s income in 2003 was significantly higher than what he earned when the parties were together, it is apparent that since separation the children have not experienced the standard of living they enjoyed while the parties were together let alone what they could have experienced with reasonable percentage of their father’s significantly increased income. However, given the unpredictable, variable and to some degree speculative aspect of much of Mr. Marzolf’s post-separation income (including his 2003 income) it would be imprudent, even if the parties were together, to enhance Kimberley’s standard of living on the basis of child support calculated as percentage of all of her father’s 2003 income. Nevertheless, given Ms. Marzolf’s limited means, Kimberly does require significant support from her father just to raise her standard of living to level approaching what she might have expected if she were residing with him. In the circumstances, it is appropriate that one-half of the Guideline amount for Mr. Marzolf’s income in excess of $150,000.00 be payable as child support. Accordingly, effective January 1, 2004, Mr. Marzolf shall pay monthly child support for Kimberly of $1,557.00. Child Support for Ashley [13] Ashley was born April 4, 1984. She is currently 20 years of age and is no longer attending school. The parties agree that she is not now child within the meaning of the Divorce Act, R.S.C. 1985, c. (2nd Supp.). They disagree as to when this occurred. [14] Ashley did not complete grade 12 until June 2003. In the normal course, she would have graduated in June 2002 but she was short some classes. The required classes were not available in September 2002 so she did not return to school until the new semester in January 2003. Mr. Marzolf takes the position that no child support was payable between July 1, 2002 and December 31, 2002 when Ashley was over 18 years of age and not in full-time attendance at school. The applicable provisions of the Divorce Act and the Guidelines read: The Divorce Act: 5.2(1) “child of the marriage” means child of two spouses or former spouses who, at the material time, (a) is under the age of majority and who has not withdrawn from their charge, or (b) is the age of majority or over and under their charge but unable, by reason of illness, disability or other cause, to withdraw from their charge or to obtain the necessaries of life; The Guidelines: 5.3(2) Child the age of majority or over (2) Unless otherwise provided under these Guidelines, where child to whom child support order relates is the age of majority or over, the amount of the child support order is (1) the amount determined by applying these Guidelines as if the child were under the age of majority; or (2) if the court considers that approach to be inappropriate, the amount that it considers appropriate, having regard to the condition, means, needs and other circumstances of the child and the financial ability of each spouse to contribute to the support of the child. [15] It is not uncommon for class required for graduation to only be available in one semester of each school year. Although Ashley was not in full-time attendance in school during the last six months of 2002, she had not yet completed her basic education and had every intention of doing so. In these circumstances, she was not in a position to withdraw from her parents’ support. find that child support for Ashley was properly payable without interruption to June 30, 2003. Given Ashley’s limited ability to earn income during her short hiatus from school and considering the disparity in the ability of each of her parents to contribute to her support, it is appropriate that support for Ashley be the amount determined by applying the Guidelines as if she were a child under the age of majority. The calculation of that amount from January 1, 2000 to June 30, 2003 shall be based on the following determinations of Mr. Marzolf’s income for such periods. Retroactive Variation [16] The objectives of the Guidelines are set forth in s.1 which states: 1. The objectives of these Guidelines are (a) to establish fair standard of support for children that ensures that they continue to benefit from the financial means of both spouses after separation; (b) to reduce conflict and tension between spouses by making the calculation of child support orders more objective; (c) to improve the efficiency of the legal process by giving courts and spouses guidance in setting the levels of child support orders and encouraging settlement; and (d) to ensure consistent treatment of spouses and children who are in similar circumstances. These objectives can only be achieved if the parents promptly and candidly disclose the information necessary to allow proper calculations and adjustments to child support to be made. Section 25(1) of the Guidelines speaks to this requirement for ongoing financial information: 25.(1) Every spouse against whom child support order has been made must, on the written request of the other spouse or the order assignee, not more than once year after the making of the order and as long as the child is child within the meaning of these Guidelines, provide that other spouse or the order assignee with (a) the documents referred to in subsection 21(1) for any of the three most recent taxation years for which the spouse has not previously provided the documents; ... [17] In this case, written request by Ms. Marzolf for Mr. Marzolf to provide copies of his income tax returns is not required because the parties incorporated positive obligation to exchange tax returns in their Interspousal Contract. Clause of the Contract deals with child support. The final paragraph of clause states: Commencing in the year 2000, both Brent and Cathy shall provide the other with copy of their prior year’s income tax return on or before May 30th in each year and any notice of assessment or reassessment either receives. [18] Consistent with the objectives of the Guidelines and implicit in the above quoted provision of the Interspousal Contract the parties must have understood that Mr. Marzolf’s child support obligation could change if his income changed. And yet, Mr. Marzolf argues that he was under no obligation to provide financial information to Ms. Marzolf on an annual basis because firstly, she did not request it and secondly, because she did not provide him with her financial information. [19] This position is simply not tenable. The Guidelines are meant to ensure that children of separated parents “continue to benefit from the financial means of both spouses after separation”. Mr. Marzolf has deliberately defeated this purpose and thereby cheated his children from the substantial financial support he could have and should have been providing them. He was the only one that knew the extent of his increased income and pursuant to the Interspousal Contract, he had an obligation to inform Ms. Marzolf by providing her with copies of his tax returns. [20] Ms. Marzolf began the legal process of seeking variation of child support in November 2002. It is not surprising that she did not start sooner. As deposed to by her and as is clearly evident from her disclosed income, she did not have the financial means to formally pursue Mr. Marzolf for additional child support. But even more significantly, Mr. Marzolf approached her in March of 2001 seeking reduction in child support on the basis that he was unemployed. Incredibly, this request was made just months after Mr. Marzolf experienced his best financial year ever with line 150 income in 2000 of $345,432.00. Although when he made the request to reduce child support he may not have known how much income he would actually realize in the year 2001, as it turned out, he had an even better year then in 2000 with line 150 income in 2001 of $391,421.00. His levels of income in 2000 and 2001 are in stark contrast to Ms. Marzolf’s income in those years of $7,634.00 and $10,842.00 respectively. [21] have reviewed A.W. v. D.C., 2000 SKQB 495 (CanLII), and English v. English, 2002 SKQB 293 (CanLII), both of which deal with the circumstances in which it is appropriate for the court to award retroactive variation of child support. The considerations are enumerated in these judgments and need not be repeated here. Suffice it to say that this is clearly a case where a retroactive variation is warranted. [22] The Interspousal Contract and judgment are each dated April 1999. No variation can be considered for that year. As earlier stated, given the various sources of Mr. Marzolf’s income and the significant annual fluctuations in his income, it is appropriate to use his previous year’s income as the basis for calculation of child support payable in the subsequent year. In 1999, Mr. Marzolf’s line 150 income was $316,222.00. For the period January 1, 2000 to December 31, 2000 his Guideline obligation for child support for two children is equal to $1,878.00 on the first $150,000.00 and $1,942.00 on the balance. Consistent with my determination regarding Mr. Marzolf’s child support obligations on income he received in 2003 in excess of $150,000.00, the Guideline calculations will similarly apply only to one-half of the excess over $150,000.00 received by him in 1999. This results in monthly child support for two children from January 1, 2000 to December 31, 2000 of $2,849.00. [23] In 2000, Mr. Marzolf’s line 150 income was $345,432.00. This did not include net non-taxable capital gain of $87,418.00 realized on the sale of shares in Blue Sky Resources and other smaller investments. Including this amount results in total income of $432.850.00. On the same basis as determined above, find Mr. Marzolf’s child support obligations for each month in 2001 to be $3,518.50. In 2001 Mr. Marzolf’s line 150 income was $391,421.00. Again, using the same analysis, his support obligation for two children for the period January 1, 2002 to December 31, 2002 is $3,290.50. [24] In 2002, Mr. Marzolf’s line 150 income was only $2,410.00. He indicates that he realized net capital loss in 2002 of $67,834.00 but he has not provided Ms. Marzolf or the court with particulars of the losses. The court can therefore not determine what cash was available to him in 2002 as result of the disposition of the capital assets that gave rise to such losses. can only speculate that the sale of the capital asset generated sufficient income for Mr. Marzolf to comfortably support himself. This appears to be reasonable speculation since after disposing of these capital assets and earning only $2,410.00 of income in 2002, Mr. Marzolf still managed to retain significant assets. His property statement sworn just two years later on June 30, 2004 shows net assets of $729,000.00. am satisfied that even though Mr. Marzolf’s 2002 line 150 income was only $2,410.00 he nevertheless had significantly more than that amount available to him. [25] Given the pattern of Mr. Marzolf’s income in the three preceding years, along with the fact that he disposed of capital assets in 2002 that generated undisclosed cash flow and some two years later he nevertheless retains significant net assets, am satisfied that it is reasonable to impute additional income to Mr. Marzolf for 2002. impute income of $150,000.00 for child support purposes. This amount is reasonable based not only on the above factors but also because for child support purposes Mr. Marzolf has only been required to include one-half of his income in excess of $150,000.00 in all other years that his income exceeded that threshold amount. This results in child support payable for two children from January 1, 2003 to June 30, 2003 of $1,878.00 per month and the sum of $1,186.00 for one child for each month during the balance of the year. [26] Based on and as result of the foregoing, the parties should be able to determine the shortfalls in child support paid by Mr. Marzolf during each year and calculate the amount now owing to Ms. Marzolf. Any mathematical errors in the computations made herein may be corrected with the agreement of the parties failing which they should be brought to my attention. [27] Ms. Marzolf is entitled to her costs of this application which are hereby set at $2,600.00 which costs shall be paid forthwith.
Each party has applied for a variation of the judgment granted by Gunn J. in April 1999. The judgment incorporates the terms of an Interspousal Contract dated April 1999 that provides for basic child support to be paid by the petitioner in the amount of $1,411 per month. The calculation of child support in the Interspousal Contract was based on the petitioner earning $110,000. The petitioner seeks to have child support reduced for Kimberly and discontinued for Ashley. The petitioner has unilaterally terminated support for Ashley on the basis that she is over 18 years of age and not in full time attendance at school. The respondent seeks an upward variation of ongoing child support for Kimberly on the basis that the petitioner's income is significantly higher than $110,000. She also seeks a retroactive variation of support paid for both girls. HELD: 1) The parties agree that much of the petitioner's income since the separation has included significant amounts of non-recurring income in the form of capital gains, stock options and severance pay. In accordance with s. 16 of the Guidelines, a payor's income for child support purposes is determined based on total income, adjusted in accordance with Schedule III, as shown on his or her income tax return. The petitioner has provided no compelling reason to exclude any of his non-recurring income. To the contrary, it is the fairest way of proceeding. The petitioner's income since separation discloses that non-recurring income can realistically be anticipated in the future, as it has constituted a significant portion of his income in four of the last five years. The fairest way of determining the appropriate level of child support is by calculating it based on his income during the previous year. 2) The petitioner's line 150 income on his 2003 income tax return was $199,922. This includes $114,454 of non-recurring capital gain income from the sale of shares in Poplar Hill Resources. It does not include the non-taxable portion of that capital gain in the same amount. Pursuant to Clause 6 of Schedule III referred to in s. 16 of the Guidelines, this non-taxable amount is to be included as an adjustment to income. This results in the petitioner's 2003 income for child support purposes being $314,376. However, in examining documents provided by the petitioner regarding his previous year's income, it is apparent that he incurred net capital losses in 2002 of $65,424. The Court imputed $150,000 of income to the petitioner for the year 2002 despite this net capital loss and his line 150 income being only $2,410. It is therefore reasonable that this capital loss be deducted from the non-taxable portion of the capital gain he realized in 2003. This results in only $49,030 of the non-taxable portion of the 2003 capital gain being added to income for total income of $248,952. Based on the Guidelines, child support of $1,928 would be payable for Kimberly.  3) During the same year that the petitioner was enjoying income in excess of $248,000, the respondent's income for herself and the two children was only $24,345. It is self-evident that the petitioner has a substantially greater ability to provide financial support for Kimberly than does the respondent. In the circumstances it is appropriate that one-half of the Guideline amount for the petitioner's income in excess of $150,000 be payable as child support. Effective January 1, 2004, the petitioner shall pay monthly child support for Kimberly of $1,557.  4) Ashley did not complete grade 12 until June 2003. In the normal course, she would have graduated in June 2002, but she was short some classes. The required classes were not available in September 2002 so she did not return to school until the new semester in January 2003. Although Ashley was not in full time attendance in school during the last six months of 2002, she had not yet completed her basic education and had every intention of doing so. She was not in a position to withdraw from her parent's support. Considering the disparity in the ability of each of her parent to contribute to her support, it is appropriate that support for Ashley be the amount determined by applying the Guidelines as if she were a child under the age of majority.  5) A written request by the respondent for the petitioner to provide copies of his income tax returns is not required because the parties incorporated a positive obligation to exchange tax returns in their Interspousal Contract. Consistent with the objectives of the Guidelines and implicit in the Interspousal Contract the parties must have understood that the petitioner's child support obligation could change if his income changed. 6) This is clearly a case where a retroactive variation is warranted. No variation can be considered for 1999, the year of the Interspousal Contract and the judgment. Given the various sources of the petitioner's income and the significant annual fluctuations in his income, it is appropriate to use his previous year's income as the basis for calculation of his child support payable in the subsequent year. The Court went on to calculate the petitioner's income and the child support payable for each year. 7) In 2002 the petitioner's line 150 income was only $2,410. Given the pattern of the petitioner's income in the three preceding years, along with the fact that he disposed of capital assets in 2003 that generated undisclosed cash flow, and, some 2 years later, he nevertheless retains significant net assets, the Court imputed additional income to the petitioner of $150,000 for child support purposes. 8) The respondent was awarded costs set at $2,600.