QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2009 SKQB 514 Date: 2009 12 31 Docket: D.I.V. 96/2007 Judicial Centre: Regina BETWEEN: PETER LORAN and DONNA LORAN Counsel: Ian D. McKay, Q.C. for the petitioner James J. Vogel for the respondent FIAT WILSON J. December 31, 2009 [1] The petitioner father and the respondent mother are the parents of two children, namely, Adam Loran, born April 25, 1995 and David Loran, born March 11, 1992. The parties attended pre-trial conference in May, 2008 and, to their credit, were able to reach an agreement with respect to the issue of child support for the two children. The party’s agreement was finalized by way of consent order dated September 26, 2008 granted by Gunn, J. [2] The mother has filed a motion in this matter requesting an order quantifying child support arrears which she says are due and owing pursuant to the Gunn J. order of September 26, 2008. In addition, she requests that the court determine the ongoing child support amount to be paid by the petitioner father. During the hearing of this matter, questioned whether this application was more in the nature of variation of the Gunn J. order. The mother took the position that her application was not variation and that it was more in the nature of an accounting exercise. However, it is clear that there has been change since September, 2008 with respect to the residency of one of the children of the marriage, namely, David. As the Gunn J. order is premised on the child, Adam, residing with the mother and the child, David, residing with the father, and David no longer lives with either parent, clearly some variation is warranted both with respect to quantifying arrears and ongoing support. [3] The September 26, 2008 child support order is complex and, in my view, allows for unfortunate ongoing conflict between the mother and father regarding the issue of child support. The applicable paragraphs of the order read as follows: 1. IT IS HEREBY ORDERED THAT child support shall be paid by the Petitioner, Peter Loran to the Respondent, Donna Loran for the support of Adam Loran, born April 25, 1995 and by the Respondent, Donna Loran to the Petitioner, Peter Loran for the support of David Loran, born March 11, 1992. Child support shall be payable in accordance with the provisions of the order. 2. IT IS FURTHER ORDERED AND JUDGED THAT for purposes of the child support obligation set out herein, the income of the Respondent, Donna Loran shall be deemed to be the greater of $61,500.00 and actual income earned for the period of time June 1, 2008 to April 30, 2009. Commencing May 1, 2009 and thereafter, the income of the Respondent, Donna Loran, shall be deemed to be the greater of $75,000.00 and the actual income earned. 3. IT IS FURTHER ORDERED AND JUDGED THAT support for the children will currently be set in accordance with the split custody provisions of The Federal Child Support Guidelines. Commencing June 1, 2008 and until April 1, 2009, the child support payment of the Respondent to the Petitioner shall be based on an income of $61,500.00 or $529.00 per month. The child support payment of the Petitioner, Peter Loran to the Respondent shall be based on an income of $117,000.00 and shall be set at $999.00 per month. The Petitioner, Peter Loran, shall pay to the Respondent, Donna Loran set off amount of $470.00 per month commencing June 1, 2008, to be adjusted as set out herein. 4. IT IS FURTHER ORDERED AND JUDGED THAT on May 1st of each year, child support shall be recalculated for the preceding 12 months based on the actual Guideline income for the Petitioner and the Respondent’s imputed income or actual income as set out in the preceding paragraph. Any required payment to adjust support for the preceding 12 months for Section Guideline support and Section support shall be made within 30 days of May 1st. That the Petitioner and the Respondent shall provide the other with copies of their income tax returns by April 30th of each year and copies of Notices of Assessment or Reassessment from Canada Revenue Agency once received. 5. IT IS FURTHER ORDERED AND JUDGED THAT the Section expenses shall be prorated as set out herein and adjusted in accordance with paragraph 4. The allowable section expenses shall be for the following: (i) Medical and dental expenses, excluding insurance reimbursement over $100.00 per annum; (ii) water polo; (iii) drums; (iv) Camp Monahan; (v) Art classes; (vi) Football; (vii) Lacrosse; and (viii) And any other activities agreed to between the Petitioner and the Respondent. 6. IT IS FURTHER ORDERED AND JUDGED THAT the section expenses shall be adjusted in accordance with paragraph 4. For the period of time June 1st, 2008 to April 1, 2009, the Petitioner shall, at first instance, pay 66% of the section expenses and the Respondent shall pay 34%. The Petitioner shall pay the expenses for David at first instance and the Respondent shall pay the expenses for Adam at first instance. Thereafter they shall provide the other with copies of the actual receipt. The person not paying such expense shall be required to pay their proportionate share within 15 days of receiving the receipt from the other. [4] As set out in the order, support was to be paid by the father on the basis of split custody arrangement and based on certain set incomes for the father and mother for the June 1, 2008 to April 1, 2009 period. In accordance with paragraph of the order, the parties were to recalculate the amount for the preceding 12 months, as at May 1, 2009, based on the actual Federal Child Support Guidelines (SOR/97-175, as am) (the “Guidelines”) income for the father which income would obviously be determined after income tax returns were exchanged. [5] There is no dispute that the child, Adam, has continually resided with the mother since the child support order was made on September 26, 2008. With respect to the child, David, there is no dispute that he resided with the father from March, 2008 to September, 2008 and then moved to the home of the mother where he resided from October, 2008 to August 31, 2009. In September, 2009, David moved out of the home of the mother into friend’s home. The father says that he has been providing funds for David in the sum of $175.00 per week. The mother says that she also contributes to David’s care but not in set weekly or monthly amount. She says she provides laundry services, some meals and assists with car payments, cell phone bills and the like. [6] The other substantial change which has occurred is with respect to the husband’s employment. At the time the order was made, the parties were working from the husband’s income for 2007. At that time the husband was working for Conexus and had gross annual salary in the sum of $117,000.00. In 2008, the father’s employment with Conexus was terminated and he was paid severance amounting to 15 months of salary. The severance was the total sum of $128,250.00 and is reflected on the father’s 2008 income tax return. [7] The father was able to locate employment in the financial services field within two months of his termination. He located consulting job with Paradigm in High River, Alberta. The father says that the money he received as severance from Conexus went to cover legal costs and to establish home in High River, Alberta. [8] am being requested by the mother to establish the father’s 2008 income so that the appropriate recalculation can be made in accordance with the order in this matter. The father’s 2008 income tax return reflects the following: Employment income $141,899.97 Interest and other investment income 160.84 Taxable capital gains 31,886.11 Other income $128,250.00 Total $302,196.92 [9] As set out previously, the order requires the parties to base support, for the preceding 12 months, on the “actual guideline income” for the father. The parties do not define how such Guideline income is to be determined. The father’s unusual 2008 taxation year has lead to the parties taking very different positions as to how the father’s income should be calculated. The father argues that it would be most appropriate to average the father’s income for the years 2006, 2007 and 2008 to determine an appropriate income. The father says this would lead to determination of the father’s 2008 income as being the sum of $185,000.00. The mother argues that his income is as set out on line 150 of his tax return. She argues that his total income is the sum of $302,196.00 for the 2008 year and that she is owed substantial amount of arrears for the time period from June 1, 2008 to April 1, 2009. [10] The position of the father with respect to averaging income is not sustainable. If the parties had intended to calculate the father’s income based on an averaging, they would have said so in the order of Gunn J. It is clear upon review of the order that the income established for the father at the time of the order was based solely on his 2007 tax year and not an averaging of his previous three years. [11] Although not specifically argued by the father, it appears he is, by inference, arguing that all or part of the severance he received in 2008 should not be included as income. [12] It is well established law that severance pay represents an acceleration of income that would have been paid over a period of months. Further, it is well established that income for the basis of calculating child support should be determined on the basis of severance package pay plus whatever other earnings the payor may have. [13] The Saskatchewan Court of Appeal in Scory v. Scory (1999), 1999 CanLII 12314 (SK CA), 180 Sask. R. 152 dealt with the issue of severance package income. At para. 21, Cameron J.A. states as follows: ... This is especially so in light of the fact that what he had received under his severance package amounted in large part to income. Indeed the amount he received, apart from that which was attributable to savings and other things, was the equivalent of 18 months salary. It was calculated and paid to him on that basis. And he took this amount into income thereafter for the purpose of paying both income tax and living expenses, as well as for the added purpose of meeting his financial obligations generally. As we noted moment ago, his total income for tax purposes in 1996 exceeded $90,000. His total income income for tax purposes in 1997 amounted to just over $59,000. [14] Similarly in L.R. v. D.T. (1998), 1998 CanLII 13814 (SK QB), 178 Sask. R. 115, McIntyre J. states at para. as follows: The Alberta Court of Appeal dealt with the matter of severance pay in the context of child support obligation in MacDonald v. MacDonald, (1997) 1997 ABCA 409 (CanLII), 209 A.R. 178. agree with their observations that severance pay represents an acceleration of income that would have been paid, in this instance, over period of 11.6 months. Severance pay is intended to be or to replace an ongoing stream of income as if the respondent would have been working. The legal obligation on an employer is to give adequate notice of cessation of employment. Severance pay is simply payment in lieu of that notice. The court in MacDonald found that income for the basis of calculating child support should be determined on the basis of severance pay plus whatever other earnings the payor may have. [15] The fact that the father spent his severance funds on legal fees and to set up his new home in Alberta is, in my view, irrelevant. As argued by the mother, the mother also had substantial legal fees to pay as result of the court proceedings in this matter which included an intense pre-trial conference. For all of these reasons, the severance is included as part of the father’s income. [16] With respect to the capital gain shown on the father’s 2008 income tax return, I have determined that the capital gain is a non-reoccurring amount which should not be included in the determination of the father’s 2008 income. It is clear on the evidence before me that the father agreed, as part of the distribution of the family property between the parties, to assume responsibility for the capital gain on the real estate he was receiving as part of the family property division. This gain does not reflect income actually received by the father and there will be no “year to year” capital gain unless the father has gains on other property. In making my decision, reviewed the decision of Cowan J. from the British Columbia court in Andersen v. Andersen, 1997 CanLII 1163 (BC SC), [1997] B.C.J. No. 2496; (1997), 32 R.F.L. (4th) 177. Cowan J. states at paras. 29 and 30, as follows: 29 The second issue which arises, utilizing the respondent's 1996 total income figure or his 1996 tax return, is whether there should be deducted therefrom the taxable capital gains of $45,247.50 received by him in 1996, leaving an income for the purposes of the Guidelines of $78,943. This capital gain arose when the respondent transferred his interest in the company which he formerly utilized to carry on his practice to his present company. 30 agree that this deduction should be made as it is "non-recurring amount" which the court is entitled to consider in making fair determination of the respondent's annual income in accordance with s. 17(1)(c) of the Guidelines. [17] Having concluded that the father’s 2008 income includes his severance package, his income with his new employer, but not the capital gain, the father’s income for 2008 is set at the sum of $270,300.00. [18] The mother provided chart showing the amount of s. support that should have been paid in accordance with the party’s consent order. In preparing the chart, the mother has recognized that Adam resided with the mother at all times since the date of the order but that David lived initially with the father, then with the mother, and then with friends. As shown on the chart, for the time period from June 1, 2008 through to and including April 1, 2009, the total amount of support due and owing to the mother, under s. of the Guidelines, is sum of $19,721.00. This is based on the father’s income of $270,300.00. accept this figure and order that the father pay to the mother the aforesaid sum forthwith. [19] With respect to the issue of s. expenses, the mother says that if the father’s income is determined to be the sum of $270,300.00 and her income is set out as being $61,500.00, the appropriate proportionate sharing of the s. expenses is 81% for the father and 19% for the mother. agree with this assessment. For the time period from June, 2008 to April, 2009, the mother says the father paid $3,887.00 when he should have paid $4,805.00. The father shall pay the difference, being the sum of $918.00 forthwith. [20] The remaining outstanding issue is with respect to the amount the father should pay commencing May 1, 2009. The mother suggests that, in accordance with the party’s consent order, that the father must continue to pay support from May, 2009 to at least April 30, 2010, based on the 2008 income of the father. This would mean that the father is paying support on an income which have now determined to be the sum of $270,300.00. There is, however, very clear evidence before me that the father will not earn the sum of $270,000.00 in the 2009 taxation year. The father has only one source of income, being his new employment position. In light of the fact that the 2008 year was an extraordinary year for the father given his severance package, it would be unfair to have the father continue to provide support on the basis of an income in the sum of $270,300.00 when the evidence is clear he will earn income of approximately $100,000.00 less than that amount. If the parties were to proceed in accordance with their own agreement and consent order, the father would be forced to pay on his inflated 2008 income. However, the mother would then be forced to remit back to the father the overpayment. [21] As at May 1, 2009, am determining that the father’s income is the sum of $160,000.00, based on the evidence before the court at this time. The father should make payments, commencing May 1, 2009, under both s. and s. of the Guidelines based on his income in the sum of $160,000.00 and the mother’s income of $75,000.00. Although recognize that the father’s income in 2009 may end up at higher amount, the parties will, as their consent order sets out, do re-adjustment as at May 1, 2010, if required. The father is obligated to pay the required amount for two children, based on an income of $160,000.00 for the months from May, 2009 to August, 2009. Commencing September, 2009, and continuing on the first day of each and every month thereafter, the father is required to pay for only one child. am not prepared to downward adjust the father’s payments for Adam, as result of his contributions towards David. It appears that the mother is also assisting David and that David may, in fact, not be child under the law when he turns 18 years of age in March, 2010. [22] have not prepared the calculation of arrears, of both s. and s. support, now due and owing by the father for the time period from May, 2009 to the end of December, 2009. trust the parties will, given my determination of income, be able to calculate what arrears are owing, if any. If the parties cannot do so, leave is granted to return the matter to me for further consideration. [23] With respect to the issue of costs, the mother shall have her costs of this motion which set in the sum of $600.00 payable forthwith. [24] As final comment, would encourage the parties to make every reasonable effort to negotiate and determine the appropriate recalculation of support each May, in accordance with their agreement and consent order. Alternatively, if the parties find themselves unable to perform that recalculation from year to year, the parties should consider amending their support agreement so as to avoid these costly court proceedings. J. D. L. WILSON
FIAT: The respondent mother filed a motion asking for an order quantifying child support arrears which she claims are due and owing pursuant to the order of Gunn, J. in September, 2008. She also asks that the Court determine the ongoing child support amount to be paid by the petitioner father. The Court questioned whether this application was more in the nature of a variation of the Gunn, J. order. It is clear that there has been a change since September 2008 with respect to the residency of one of the children.HELD: 1) The father's unusual 2008 taxation year has led to the parties taking very different positions as to how the father's income should be calculated. The father argues that it would be appropriate to average the father's income for 2006 to 2008. The mother argues that his income is the sum set out on line 150 of his tax return. She argues that his total income is the sum of $302,196 for the 2008 year. The father's argument is that the severance he received in 2008 should not be included in his income. It is well established that severance pay represents an acceleration of income that would have been paid over a period of months. It is also well established that income for the basis of calculating child support should be determined on the basis of severance pay plus whatever other earnings the payor may have. The severance is included as part of the father's income. 2) The capital gain which shows on the father's 2008 income tax return shall not be included in his 2008 income. The father agreed as part of the distribution of family income to assume responsibility for the capital gain on the real estate he was receiving as part of the family property division. The gain does not reflect income actually received by the father and there will be no 'year to year' capital gains. See Andersen v. Andersen (1997), 32 R.F.L. (4th) 177. 3) The father's income for 2008 is $270,300.  4) If the parties were to proceed in accordance with their own agreement and consent order, the father would be forced to pay on his inflated 2008 income. However, the mother would then be forced to pay back to the father the overpayment. As of May 2009 the father's income is the sum of $160,000. 5) The mother shall have her costs of $600.