B.M.D. v. C.N.D.

2010 BCSC 1785 B.M.D. v. C.N.D.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: B.M.D. v. C.N.D., 2010 BCSC 1785 Date: 20101213 Docket: E54508 Registry: Nanaimo Between: B. M. D. Plaintiff And C. N. D. Defendant Corrected Judgment: The text of the judgment was corrected at paragraphs 195, 196, and 198 on January 26, 2011, and paragraphs 194 and 198 on January 28, 2011. Before: The Honourable Madam Justice Maisonville Reasons for Judgment Counsel for the Plaintiff: B. Vining Counsel for the Defendant: B. Kaine Place and Date of Trial/Hearing: Nanaimo, B.C. May 10-14, 17-20, and June 17, 2010 Place and Date of Judgment: Nanaimo, B.C. December 13, 2010 1. OVERVIEW.. 3 2. ISSUES. 3 3. CHRONOLOGY OF EVENTS / EVIDENTIARY SYNOPSIS. 3 (a) Separation Agreement 8 (b) Events Post Separation Agreement 12 (c) Income of the Parties Before Separation. 14 4. SUBMISSIONS OF THE PARTIES. 15 (a) Plaintiff's Position. 15 (b) Defendant's Position. 15 5. ANALYSIS. 16 (a) Jurisdiction. 16 (b) Custody and Guardianship. 23 (c) The Divorce. 23 (d) Child and Spousal Support 24 (i) Child Support 24 (ii) Spousal Support - Entitlement 25 6. DETERMINATION OF INCOME. 29 (a) Defendant's Income. 29 (b) Plaintiff's Income. 30 (c) Issues. 33 (d) Non-Arm's Length Transactions. 33 (i) S.N. 34 (ii) S.N. Lease. 34 (iii) S.N. Employment 36 (e) Analysis:Were the wage and lease payments made to S.N. at arm's length? 39 (f) Capital Cost Allowance.

44 (i) Analysis: What approach should be taken to the amortization of the fixed assets?. 47 7. EFFECT OF THE SEPARATION AGREEMENT. 48 (a) Child Support 48 (b) Spousal Support 50 (c) Child Support - Quantum.. 52 (d) Spousal Support - Quantum.. 54 8. SUMMARY. 55 9. COSTS. 55 1. OVERVIEW [1] Originally from Manitoba the parties moved to Vancouver Island in the mid 1980s. Hoping for a new life, the parties lived happily for some years with sons, D.L.D., born in 1985, and W.J.D., born in 1995. The parties now seek a divorce. While the property issues have been settled by means of a separation agreement, the plaintiff seeks to have the spousal support agreed to in the separation agreement cease, and to reduce the child support agreed to. The defendant seeks child support and indefinite spousal support. Also in issue is the determination of the parties' income for the purposes of paying child and spousal support, specifically the corporate income available to the plaintiff.

2. ISSUES [2] The issues are: (a) Child custody and maintenance (b) Spousal support entitlement (c) Assessment of income (d) Child maintenance and spousal support, including arrears (e) Grounds for divorce 3. CHRONOLOGY OF EVENTS / EVIDENTIARY SYNOPSIS [3] Both parties at the time of trial were 54 years of age. [4] The parties separated on October 1, 2004. In total the parties were together 27 years. They married two years after they commenced living together. They met just before they turned 16 years of age. In so far as it is relevant to the issue of spousal support, I will outline the roles each party performed in the marriage and their relationship with each other. [5] B.M.D. and C.N.D. met at high school in Winnipeg, Manitoba, and were high school sweethearts. While the defendant C.N.D. completed high school, B.M.D. was a few courses short. [6] In 1976, B.M.D. started work as an airline mechanic. The defendant C.N.D. obtained employment as a clerk after high school for a Winnipeg company, Inter City Gas. She followed this with full-time employment with Air Canada as a finance clerk, from September of 1975 until the birth of their first son. In 1977, B.M.D. also started work with Air Canada as an airline mechanic. The defendant moved into the plaintiff's rental accommodation in October of 1977 in Winnipeg, Manitoba and they commenced their life together. At that time the

parties admit to having no assets of significance. [7] In 1978, the plaintiff and the defendant purchased their first home together, on Rannock Avenue in Winnipeg, for approximately $35,000. The down payment of $1,800 came from the proceeds of an accident claim involving the plaintiff. [8] On March 2, 1985 the parties were married at Winnipeg, Manitoba, and on July 17, 1985, C.N.D. gave birth to their eldest son, D.L.D. She returned to work at Air Canada after her maternity leave. From 1987 to 1990, however, C.N.D. was out of the paid workforce while she stayed home and looked after D.L.D. Around that time B.M.D. had found work as a motorcycle mechanic. [9] The defendant gave evidence that while on the Rannock Avenue property in Winnipeg, and before the children came along, she worked hard and looked after their home, particularly in the yard when the plaintiff was out of town working. I find that the plaintiff also performed significant additional work to the Rannock Avenue house, which included fencing, siding, installing a swimming pool, and adding a second storey to the house which increased the square footage from approximately 1,000 to 1,600 square feet. This included the addition of a third bedroom, a modified kitchen, and an additional bathroom. The defendant contributed where she could to the renovations. The plaintiff also testified that his father worked in a window

business and supplied the young couple with windows and building materials, for which they paid a minimal amount. The plaintiff, in his evidence, noted they equally contributed their finances for the renovations. [10] In 1981 through 1982, the plaintiff continued his employment as an airplane mechanic working variously for the Flying Fireman in Victoria B.C., and in Dryden, Ontario. In October 1982 he obtained employment with the Provincial Government of Manitoba, in Winnipeg, again as an airplane mechanic. [11] In that same year, he invested approximately $6,000 in two one-acre lots in the Turks and Caicos Islands. He believes that in approximately 1989 or 1990 both these lots were sold for approximately US$30,000, which went into the family savings. [12] After traveling to Nanaimo in the summer of 1986 for a holiday, both parties mutually agreed to give up their employment in Manitoba. They sold their house in Winnipeg. They purchased their second home, in Ladysmith, British Columbia, on Yellowpoint Road, in or about the month of January 1987, which became the family home ("the family home"). It is lakefront property, and was purchased for approximately $100,000, using the sale profits their Manitoba home. The plaintiff believes that they put approximately $60,000 to $80,000 into the $100,000 purchase, leaving them approximately $20,000 to $40,000 in savings. [13] B.M.D.

still lives in the family home. [14] The defendant testified that the parties both wanted to have more children and the plaintiff told her that as a result of the move and the betterment of their overall financial situation that she could now stay home as a mother. Regrettably, the defendant testified she was unable to conceive until she became pregnant with W.J.D. many years later. [15] Both parties appear to have collected unemployment insurance from the time they arrived in Ladysmith in 1987 and continuing through 1988. The plaintiff testified that he had a pension with the Manitoba government, which was converted to mutual funds, but eventually cashed in for family expenses. [16] The plaintiff then found work at a Harley Davidson shop as a mechanic for a few months. He then found work, in early 1989, with McCully Aviation, which later became known as Air Rainbow. [17] In 1992, the plaintiff testified that he suffered from a herniated disc in his back for which he had surgery. Approximately 30 days after the surgery, however, he was involved as a passenger in a motor vehicle accident, for which he eventually received an $18,000.00 settlement. It was not an insignificant accident. The motor vehicle, in which the plaintiff was in, completely overturned. The plaintiff suffered a concussion, as well as soreness in his head, neck and back. [18] The plaintiff maintains that while

working for Air Rainbow in 1990 until approximately the end of that year, he became involved in other lines of work. He purchased a small portable sawmill for approximately $5,000, with which he would cut wood privately for other people. He eventually acquired a tractor with $5,000 he received from his father's estate. With the tractor he would plough people's driveways. [19] In 1990, the defendant, through a neighbour, obtained employment for a few months at the Omega Restaurant, and in that same year she obtained employment at Ocean Cement on an on-call basis, from September of 1990 to August of 1994. However, her priority was to look after D.L.D. and to ensure that her work stayed part-time so she could care for her son and husband. [20] C.N.D. testified, and I find, that D.L.D. had a learning disability. While not severe, it nevertheless required the defendant to spend extra time with D.L.D. and to ensure that his school treated him in such a way as to accommodate his learning style. She did this successfully long before this became an accepted practice in the community. [21] B.M.D. had a good eye for real estate. In 1993, B.M.D. noticed a good piece of waterfront property on Ruxton Island. He negotiated with the owner and as a result, the owner took a mortgage back on the property enabling the parties to purchase the property for $35,000. [22] In 1994, according to the

plaintiff, he severed off .78 of an acre from the south end of the family home property, and moved their house from Ladysmith and placed it on the .78 acre. He maintains that he had problems with the Regional District of Nanaimo, and it took approximately three years to complete the subdivision. Once the approvals were in place, they sold the house, the .78 acre, and netted approximately $100,000 for the family. [23] Meanwhile during this time, in late 1994 and early 1995, the defendant also worked outside the home doing some work with Midland Walwyn as an office worker. [24] C.N.D. then became pregnant with their second son. It was a difficult pregnancy and she was hospitalized twice due to complications, first in late 1994 and then again in 1995. On May 31, 1995, the parties' second son, W.J.D., was born. At the time of trial he was 14 years old. Following his birth, the defendant looked after him and the family full time. This enabled B.M.D. to work on the house renovation as well as some work he was carrying on using his sawmill. [25] C.N.D. did not formally work on a regular basis following the birth of W.J.D. until 1999 when she began at Vehicle Mounted Air Compressor ("VMAC ") where she worked two days a week. She started on the front desk and gradually began other tasks. [26] In 1996, the plaintiff purchased his first used crane truck, which was approximately 20 years

old at the time. He utilized this truck to haul logs back to his portable sawmill on the Yellowpoint Road property. By this time he had begun to use a proprietorship name of D Enterprises, for his business. [27] Commencing in 1997, according to B.M.D., the parties began living separately in the house. Under cross-examination, the plaintiff resiled from this position and agreed that the living arrangements in the household were sporadic. He would spend some time in the basement and then return to the living area upstairs. This was a change from his earlier evidence of C.N.D. having slept in the master bedroom and him having slept in the basement. C.N.D., in her evidence, disagreed with the plaintiff's version of their living arrangements, stating they did not really commence separate lives until much later, in the fall of 2004. She produced concert tickets from previous years as evidence that they still did activities as a couple until 2004. [28] B.M.D. alleged the defendant would confront him from time to time. On two occasions he states she made a fist and hit him in the face. In late September 2004, there was a confrontation in which he testified that she "egged him on" and so he had to "choke her and he shook her". [29] C.N.D. left the next day on October 1, 2004 taking W.J.D. with her. I accept the evidence of C.N.D. respecting both this incident which caused her to leave

the family home, and her denial of having struck B.M.D. at any time with a closed fist. She did acknowledge having slapped him once, and that his response was to laugh at her. I accept her version of the circumstances of their living arrangements and the confrontations. I find that the parties did not start living separate and apart until she left the family home on October 1, 2004. (a) Separation Agreement [30] During the time the parties were together, they had a joint account into which each deposited their paycheques and earnings. This carried on even after the parties were living separate and apart until B.M.D. discovered that some $54,000 had been taken out of the account. The amount taken out was gradual, month by month, over a period of time, evidencing C.N.D. was using the account to live on. In her testimony she said "I only took enough to live on... I didn't clean it out." I accept her evidence on this point, and it is corroborated in the banking documents. [31] The parties entered into the Separation Agreement on March 17, 2006 (the "Separation Agreement"), which resolved all issues at the time. For the purposes of that agreement, B.M.D.'s income was $80,000 under the Federal Child Support Guidelines, SOR 97-175 (the "Guidelines") and C.N.D.'s was $27,851.00. C.N.D.'s income was assessed as if she were working fulltime; however, she was, in fact, only working two

days a week. [32] B.M.D. agreed to pay $637 per month for child support from the date of the agreement of March 17, 2006 in accordance with the Guidelines. It was agreed that payment would be increased to $739 on May 1, 2006. [33] B.M.D.'s evidence is that the end result of the Separation Agreement was that C.N.D. received more than 50% of the assets. C.N.D. argues she obtained significantly less. In any event, neither party seeks to set aside the agreement on the asset allocation. In so far as it is relevant to the needs of the parties it is important to note that B.M.D. retained the family home. W.J.D. was the only "child of the marriage" as of the Separation Agreement, pursuant to the provisions of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.). His primary residence was with C.N.D. [34] Both parties were represented by counsel in the negotiation of the Separation Agreement. I find that both parties agreed to and were fairly treated under the Separation Agreement. This is not a situation where it is appropriate for the court to set aside the Separation Agreement on the basis that it was unfair. [35] It is important to underscore several key provisions of the Separation Agreement: WHEREAS: A. The parties married on March 2, 1985, at Winnipeg, Manitoba. B. The parties have been living separate and apart since on or about October, 2004, and intend to continue to do so. ... G.

[B.M.D.] and [C.N.D.] each intend this Agreement to be: (a) A settlement with respect to guardianship, custody, and support of [W.J.D.] and access to him, (b) The final settlement of (i) spousal support (whether contractual, compensatory, or non-compensatory), (ii) their respective rights in or to the property of the other and the property held by them jointly, (iii) their respective rights in the estate of the other, (iv) adjustments respecting 1. disabilities or advantages and disadvantages arising out of the marriage or otherwise between the parties, and 2. the needs of each of them to become and remain economically independent and self-sufficient, and (v) all issues otherwise arising out of their marriage. [36] There was additionally a clause as follows: [C.N.D.] has foregone economic opportunities as a result of the marriage and staying at home to raise [W.J.D.] which have been taken into account in this Agreement in the arrangements relating to division of property and the payment of support. [37] Each party warrants the truth of the statements of fact contained in the agreement. [38] The Separation Agreement contemplates that C.N.D. had foregone economic opportunities as a result of the marriage by staying at home to raise W.J.D. and looking after the plaintiff. This loss of opportunity is evident in the arrangements relating to division of property and the payment of

support, which both parties agreed to and acknowledged in the Separation Agreement. [39] The parties agreed to split special and extraordinary expenses for W.J.D. B.M.D. was to pay 75%, and C.N.D., 25%, including amounts exceeding the health benefit plan. C.N.D. has a benefit plan at her work. To the extent the coverage does not meet the expenses, the costs were to be divided. As well, by the terms of the Separation Agreement she was to maintain that coverage until W.J.D. was no longer a child of the marriage. Provisions were made for child tax credits, and by January 31st of every year, B.M.D. was to contribute $600 into a Registered Education Plan each for D.L.D. and W.J.D. [40] Review of the Separation Agreement could occur every second year. The first review would have been May 31, 2008. [41] Clause 13 of the Separation Agreement stated in part: 1) The parties may review Child Support and, if necessary, revise it to ensure that it accords with the requirements of the Federal and British Columbia Child Support Guidelines by May 31st of every second year from the making of this Agreement, with the first review to be completed by May 31st, 2008.

2) If the parties do not review the Child Support as provided under subclause (1), or review the Child Support and do not vary it in writing, both parties are deemed to consider that the Child Support continues to satisfy the requirements of the Federal Child Support Guidelines.

3) Any adjustments to Child Support on a review under this clause will not apply retroactively, but will be in effect from the date of review.

4) Despite subclause (1) (outlining every 2 years for the review) in the event that there is a material change in circumstances, either party may make a written request of the other for a review of Child Support.

5) If the parties have not reached agreement within 30 days after the notice under subclause (4) is received, the parties will attempt to resolve the issue through mediation, failing which either party is at liberty to apply to a Court of competent jurisdiction. [42] Spousal support was provided for in clause 15 which set out: (1) Commencing March 1st, 2006 [B.M.D.] will pay [C.N.D.] for [C.N.D.]'s support $650.00 on the 1st day of each month; and he will provide [C.N.D.] with a series of 12 post-dated cheques in February of each year, commencing with February, 2006. (2) All Spousal Support paid since March 1, 2006 will be (a) included in calculating [C.N.D.]'s income for the years [C.N.D.] received it, and (b) deducted in calculating [B.M.D.]'s income for those years. [43] Variation of spousal support was addressed at clause 16: 1) Neither party may seek to vary Spousal Support unless there is a material change in circumstance that affects the financial needs or abilities of either party, whether or not the change in circumstances was foreseeable or causally connected to the marriage.

2) Before applying to vary Spousal Support, the party seeking the variation must provide the other with written notice of the variation sought. If the parties are unable to agree on a variation, they will attempt to resolve the issue through [mediation] before making any Court application. [44] B.M.D. released C.N.D. from any claim for alimony or spousal support either pursuant to the provisions of the Family Relations Act, R.S.B.C. 1996, c. 128, or the Divorce Act: regardless of any change, no matter how catastrophic in the condition, means, needs or other circumstances of either or both parties, or for any reason whatsoever, whether such change arises from the marriage or the breakdown of the marriage and whether such change was foreseeable or not. [45] Additionally, at clause 25 it was recognized that in compensation for B.M.D. keeping the family home, an equalizing payment of $110,000 was provided to the defendant, recognizing "the needs of each of them to become and remain economically independent and self-sufficient." [46] Around the time the parties entered into the Separation Agreement, the plaintiff bought the defendant a Mazda truck for $12,000 to replace her vehicle which had been involved in a motor vehicle accident and was written off by ICBC with a value of $3,000. The plaintiff also purchased a Ducatti 999 motorcycle for himself. [47] I find that the

circumstances in which the Separation Agreement was entered into were fair. While the plaintiff raises Miglin v. Miglin, 2003 SCC 24, where the Supreme Court of Canada set out a two-stage analysis by which the court might set aside the provisions of an agreement with respect to spousal support, I find this analysis unnecessary in this case. In argument, it was clear that the plaintiff does not seek to set aside the Separation Agreement, but rather to vary it according to its own terms, namely by establishing there has been a material change in circumstances that requires a re-examination of both child and spousal support. (b) Events Post Separation Agreement [48] The plaintiff made payments of child support and spousal support to the defendant according to the terms of the Separation Agreement until July 31, 2008. [49] Prior to ceasing payment, the plaintiff sought a review of the Separation Agreement by a letter he sent to the defendant dated June 30, 2008. From July 31, 2008 forward, the plaintiff has made no payments to the defendant for child or spousal support. [50] In the letter, entered into evidence, the plaintiff stated that by his estimation W.J.D. is spending more time with him, he wrote "47.9% of the time, 39.2% of the time with [C.N.D.] and the other 12.3% he is in other places." As a consequence of this, he saw no "reason to pay child support any longer." [51]

With respect to spousal support, the plaintiff wrote: I have paid spousal support to you since March 1st, 2006 in the sum of $650.00 per month and because it has been well over two years and with the assets you have accumulated during that time and the extra revenue you receive from your two rentals, I feel it is unnecessary to support you any longer. By the two rentals, the plaintiff was referring to the areas of the house C.N.D. lets out. [52] As was noted in the final argument of the plaintiff, in cross-examination he stated that he signed the Separation Agreement to enable the defendant to obtain bank financing, for the purchase of 2071 Grieve Road, for her and their son. I find that he was aware accordingly that she intended to purchase a home. This is not a material change in her circumstances and does not accordingly result in assets or income being accumulated by her that have taken him by surprise. [53] Respecting the calendar of W.J.D.'s time with each parent, I find it was only sporadically maintained and that until the issue was mediated in February 2009, there is insufficient evidence that the custody arrangements had changed so significantly that would convince me to conclude that W.J.D. spent more than 40% of his time in the care of his father. [54] At trial the plaintiff had a new romantic partner, S. N. They met in the neighbourhood at a local market. This was

some two years after the parties separated and there was no suggestion that S.N. was in any way causally related to the breakdown between the parties. She has two children and is divorced. At the time of trial she was 46 years of age. The role of S.N. in this trial stems from her involvement with the plaintiff's company and will be explored further below. (c) Income of the Parties Before Separation [55] B.M.D.'s tax return in 2005, prior to incorporation in the calendar year of January 1 to December 31, 2005, showed that the total sales of D Enterprises, were $250,233.95. Deducting expenses, the net income was $89,335.48. In 2005, the parties engaged in income splitting. The defendant did bookkeeping duties for the company and continued to do so even after she left the matrimonial home. B.M.D.'s share of that income would be $44,667.74. A further deduction left him being taxed on $42,195.62. C.N.D. received half $44,667.74 for 2005, as the parties had always income split, as noted. [56] The plaintiff testified in his examination in chief that, in the early years of his trucking business, there was not much book work to be done, and as the years progressed, the defendant's interest in doing this type of work waned to the point where the plaintiff stated in his cross-examination that he was doing the invoicing, the banking, the mailing (he said she hated doing mailing), and the

remittances. In his words, "she was just writing cheques." This view, however, does not accord with the whole of the evidence. I find the defendant continued to work for the company doing the books even after the parties separated. When the relationship between the parties broke down, I find it was only after that point that the plaintiff began doing a greater share of the office work. During their relationship he relied on the defendant to maintain the records, and get the bills out. I accept her evidence on the work she did in this regard, including retrieving invoices from inside the trucks themselves. The plaintiff, given his other work, was not in a position to do that work at that time. [57] C.N.D.'s 2005 tax return shows the additional $11,478.02 that she made from her employment with VMAC. She did not file her 2005 Income tax return in 2006 or for some time thereafter. I accept her evidence that she did not file because she believed she could not file without having the monies to pay the amount owing in Income tax. I find that as soon as she did learn she could file without having the ability to pay the tax owing, she did. She now owes significant penalties and interest, which at the time of trial she had been unable to pay. [58] C.N.D. continued to do some work following the separation such as she continued to issue cheques from D Enterprises for expenses such as paycheques and fuel bills and the remittances to the government for employees' deductions such as Goods and Services Tax, Workers' Compensation Board and like payments.

4. SUBMISSIONS OF THE PARTIES (a) Plaintiff's Position [59] The plaintiff, B.M.D., states the issues are spousal support and child support, and he submits both should cease. He seeks a review and variation of the amounts set out in the Separation Agreement. He submits his income for the purposes of the Guidelines and the Spousal Support Advisory Guidelines, SOR/97-175, is not $80,000 as was set out in the Separation Agreement and which was entered into evidence. He says his income is much lower. [60] The plaintiff argued that the marriage was not a traditional one. Accordingly, he says, this should be taken into account by the court with respect to any award for spousal support. [61] At the trial of this matter B.M.D. pursued his claim for a divorce on both grounds of cruelty and living separate and apart. (b) Defendant's Position [62] Regarding a retroactive adjustment for child support, C.N.D. does not agree that the $739 for child support (in place by the Separation Agreement) should be retroactively adjusted. There are arrears as B.M.D. ceased paying any support in August of 2008. C.N.D., however, wanted the court to now assess her Guidelines income as if she were working full time and to include the amount of rental income she derives from renting out part of her home. Through her counsel she stressed her position that should child support be found payable by the plaintiff

the child support should be set-off by imputing income to her as if she were working full time. [63] Respecting spousal support, the defendant argues this was a long term marriage and claims spousal support indefinitely on both a needs and compensatory basis. She was not seeking a retroactive variation, but did want retroactive child and spousal support based on the Separation Agreement from the time the plaintiff ceased paying.

5. ANALYSIS [64] I will begin my analysis by examining my jurisdiction to hear any issue that might vary or replace the terms of the Separation Agreement. I conclude that I have jurisdiction to hear these matters as part of an originating application. While the Separation Agreement was registered with the Supreme Court, it is not an order of this Court. [65] I will then examine the issue of custody and guardianship. I will then discuss the divorce. These are the least complex issues before me. [66] Finally, I will turn to the issues of support, both child and spousal. I will begin with an analysis of whether the defendant is entitled to spousal support, and what the parties' responsibilities to each other are with respect to child support. I will determine what the income of the parties is for the purposes of determining the quantum of support where it is payable. (a) Jurisdiction [67] A preliminary issue arises as to which statutory provisions the parties are proceeding under respecting the jurisdiction of the court to vary or make orders relating to child and spousal support and any outstanding arrears. [68] Neither party objected to the jurisdiction of this Court to entertain the defendant's application for spousal support. Indeed reference was made to the provisions of the Separation Agreement itself. [69] Clause 34 of the Separation Agreement provided as follows: Unless

the parties otherwise agree (a) The law of British Columbia applies to this Agreement, and (b) subject to the requirement for the parties to attempt mediation prior to taking Court proceedings, the Supreme Court of British Columbia has exclusive jurisdiction over this Agreement. [70] Each party initially claimed relief pursuant to both the provisions of the Family Relations Act, R.S.B.C. 1996, c. 128 and the Divorce Act, R.S.C. 1985, c. 3 (2nd supp.). However, at the time final submissions were made, both parties sought relief pursuant to the provisions of the Divorce Act. [71] As noted, the parties' assets and debts were divided pursuant to the Separation Agreement with an equalizing payment going to the defendant of $110,000. The plaintiff remained in the family home. This has enabled him to continue to run his business from that location. [72] On August 12, 2008 the defendant filed the Separation Agreement in the British Columbia Supreme Court, pursuant to the provisions of the Family Relations Act, ss. 121 and 122. According to the defendant, when the plaintiff ceased paying spousal and child support ($650 and $739, respectively) pursuant to the Separation Agreement, it was then filed for the purposes of enforcement with the Family Maintenance Enforcement Program, pursuant to the Family Maintenance Enforcement Act, R.S.B.C. c.

127. In evidence was the statement of arrears for the period October 28, 2008 to May 5, 2010. Owing as at May 5, 2010 was $30,576.00 plus $800 for the Provincial Government Summary. [73] Sections 121 and 122 of the Family Relations Act provide: Enforcement of agreement as court order 121(1) In this section: "child" means a person who is acknowledged in a written agreement filed under this section to be the responsibility of a party to the agreement and who is (a) under the age of 19 years, or (b) 19 years of age or older and, in relation to the party to the agreement, is unable, because of illness, disability or other cause, to withdraw from that party's charge or to obtain the necessaries of life; "parent" means a person who acknowledges in a written agreement filed under this section a responsibility for a child; "spouse" means a spouse as described in paragraph (a), (b) or (c) of the definition of "spouse" in section 1 (1) and includes a person who acknowledges in a written agreement filed under this section that he or she is or was a spouse of another person, whether or not they are or were married. (2) If a signed copy of a written agreement containing a provision respecting (a) the custody of or access to a child by a parent, or (b) the maintenance of a child by a parent or of a person by the person's spouse is filed in the Provincial Court in accordance with the

Provincial Court (Family) Rules, the provision is enforceable under this Act or the Family Maintenance Enforcement Act as if it were contained in an order made under this Act. (3) Subsection (2) applies in respect of (a) a written agreement made after June 30, 1995, and (b) a written agreement made before July 1, 1995, but only if a consent in the form prescribed by the Provincial Court (Family) Rules is filed with the agreement. (4) A provision that is referred to in subsection (2) and is contained in a written agreement filed under this section may, at any time, be varied or rescinded (a) by a new written agreement filed in the Provincial Court in accordance with the Provincial Court (Family) Rules, or (b) by the Provincial Court, on application and subject to sections 20 and 96. (5) The filing of a written agreement under this section does not (a) restrict or prevent a court from making an order for the same relief as is provided for in the agreement, or (b) prevent the agreement from being filed or enforced in the Supreme Court under section 122. (6) If a provision referred to in subsection (2) is contained in an agreement that was filed under this section before July 1, 1995, (a) the provision continues to be enforceable under this Act or the Family Maintenance Enforcement Act as if it were contained in an order made under this Act, and (b) subsection (4) of this section

applies. (7) A written agreement filed under section 2 of the Unified Family Court Act, S.B.C. 1974, c. 99, before March 31, 1979 is a written agreement under this section. Enforcement of agreements filed in Supreme Court 122(1) If a signed copy of a written agreement containing a provision respecting (a) the custody of or access to a child by a parent, or (b) the maintenance of a child by a parent or of a person by the person's spouse is filed in the Supreme Court in accordance with the Rules of Court, the provision is enforceable under this Act or the Family Maintenance Enforcement Act as if it were contained in an order made under this Act. (2) Subsection (1) applies in respect of (a) a written agreement made after June 30, 1995, and (b) a written agreement made before July 1, 1995, but only if a consent in the form prescribed by the Supreme Court Rules is filed with the agreement. (3) The filing of a written agreement under this section does not prevent the agreement from being filed, enforced, varied or rescinded in the Provincial Court under section 121. (4) If a provision referred to in subsection (1) is contained in an agreement that was filed under this section before July 1, 1995, the provision continues to be enforceable under this Act or the Family Maintenance Enforcement Act as if the provision were contained in an order made under this Act. (5) The definitions in

section 121 (1) apply in this section. [74] Given the express reference to variation by the Provincial Court in s. 122(3) some courts have construed the above provisions to mean that no jurisdiction exists with the Supreme Court to vary a separation agreement once filed with the court pursuant to that section. Conflicting authority thus surrounds the jurisdiction of the British Columbia Supreme Court to vary, pursuant to the provisions of the Family Relations Act, an agreement filed with the court. [75] Considering s. 121 of the Family Relations Act, Finch J., now C.J.B.C., in Cominetti v. Cominetti, [1993] B.C.J. No. 1486, (S.C.), discussed the effect of filing a separation agreement with the court. He held that the filing of a separation agreement allows it to be enforced as if it were a court order but does not convert it into a court order. He stated at paras. 36-37: 36 The first question appears to me to be the effect of filing a separation agreement under the provisions of the Family Relations Act in the Provincial Court. The contractual provision in respect of child maintenance is said only to be "enforceable" "as if the provision were contained in an Order made under [the] Act". The statute does not say that the filed agreement is an order or judgment of the court, nor that it is deemed to be an order or judgment. There is no judgment pronouncing the agreement valid or

enforceable, nor adjudging the petitioner entitled to the rights set out in the agreement. 37 The statute appears simply to provide a summary procedure for enforcing the parties' written agreement, without impairing or limiting any other remedies open to the parties to enforce it. ... [Emphasis added.] Although considering s. 121 rather than s. 122, the identical wording," as if the provision were contained in an order made under this Act", is in both sections. (See also: Loos v. Loos, 2000 BCSC 1413, at para. 27; and Simpson v. Derouin, 2009 BCSC 1263 at para. 47). [76] In K. v. K., 2009 BCSC 69, Garson J., as she then was, also considered this issue in the context of spousal support. She conducted a helpful review of other decisions on the issue, including the decision of Master Bolton in Drummond v. Laprise, [1999] B.C.J. No. 122 (S.C.) (In Chambers) in which he found, respecting interpretation of the two sections, that there was confusion concerning their application. As was noted by Garson J., at para. 24, he "decided to hear the application on the basis that it seemed the proper result would be to avoid putting up procedural roadblocks that would prevent the applicant from reaching a destination accessible by another route." Garson J. went on to state, at para. 25: [25] In this case, if the agreement had not been filed in the Supreme Court, L.K. could presumably have

commenced an originating application for spousal support under ss. 89 and 91 of the Family Relations Act. It seems completely illogical to hold that because the separation agreement was filed in the Supreme Court, L.K. is without remedy in this Court but must look to the Provincial Court for relief. [77] Garson J., accordingly, held that s. 122 was not a bar to an originating application for spousal support. In K. v. K. the facts were the same as those in the case that is the separation agreement had been filed with the Court. It was, in fact, a term of the agreement that it be so filed. In para. 28 Garson J. stated: [28] In my view, s. 122 is not a procedural bar to an application under s. 89 and s. 90 on an originating application for spousal support. I do not read s. 122 as depriving this Court of jurisdiction to entertain such an application because the agreement was filed under that section. To conclude that only the Provincial Court can hear an originating application for spousal support where an agreement has been filed in the Supreme Court seems illogical given that the Supreme Court and the Provincial Court have concurrent jurisdiction. [78] More recently in de Rooy v. Bergstrom, 2010 BCCA 5, Chiasson J.A. in concurring reasons stated at para. 76 in reference to the comments noted above in K. v. K. at para. 28: 76 I agree with her observation that filing a separation

agreement in the Supreme Court does not deprive the court of jurisdiction to entertain a support application it otherwise would have, but leave for another day the question whether the Supreme Court has the jurisdiction to vary a separation agreement, observing that on the plain language of s. 122, [of the Family Relations Act] the Supreme Court does not appear to have such jurisdiction. The provisions of the agreement are not made a court order. [79] In the matter before this Court, however, while pleading provisions of the Family Relations Act, relief is sought as well under the Divorce Act and thus not exclusively pursuant to the Family Relations Act. [80] The Court of Appeal, in de Rooy, left for another day consideration of the variation of a separation agreement. The provisions of the Family Relations Act, noted above, do not expressly preclude the Supreme Court from varying a separation agreement but rather confer jurisdiction on the Provincial Court. It would be "reading in" to construe those provisions as a bar to an application under a Federal Act particularly one where jurisdiction is asserted under the Divorce Act even though the agreement is filed to aid in enforcement under the provisions of the Family Maintenance Enforcement Act. In that regard, respecting variation and the effect of filing the agreement with the Court, the question is one of statutory interpretation. Accordingly, it is important to consider the language of the Supreme Court of Canada in Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42; [2002] 2 S.C.R.

559. As noted by Iacobucci J. at paras. 26 and 27: (1) Principles of Statutory Interpretation 26 In Elmer Driedger's definitive formulation, found at p. 87 of his Construction of Statutes (2nd ed. 1983): Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. Driedger's modern approach has been repeatedly cited by this Court as the preferred approach to statutory interpretation across a wide range of interpretive settings... 27 The preferred approach recognizes the important role that context must inevitably play when a court construes the written words of a statute: as Professor John Willis incisively noted in his seminal article "Statute Interpretation in a Nutshell" (1938), 16 Can. Bar Rev. 1, at p. 6, "words, like people, take their colour from their surroundings". This being the case, where the provision under consideration is found in an Act that is itself a component of a larger statutory scheme, the surroundings that colour the words and the scheme of the Act are more expansive. In such an instance, the application of Driedger's principle gives rise to what was described in R. v. Ulybel Enterprises Ltd., [2001] 2 S.C.R. 867, 2001 SCC 56, at para. 52, as "the principle of

interpretation that presumes a harmony, coherence, and consistency between statutes dealing with the same subject matter". [81] Read in context and in harmony and in their plain meaning, ss. 121 and 122 of the Family Relations Act confer jurisdiction on the provincial court and the filing of the Separation Agreement accordingly addresses only the jurisdiction at court. [82] The fact of the Separation Agreement does not pose a bar either with respect of an originating application for child support or spousal support as the law is well-established that parties may still seek an order and the court is not bound by the provisions in the agreement, nonetheless, "there are many policy and practical reasons for according considerable respect to agreements entered into freely and with appropriate legal advice." (see: T. (T. L. A.) v. T. (W.W.), (1996) 24 R.F.L. (4th) 51 (B.C.C.A.); [1996] B.C.J. No. 1577, at para.

39. This view was upheld by the Supreme Court of Canada in Miglin. [83] Both parties were represented by counsel throughout the negotiations of that agreement which lasted several months to its conclusion. With respect to entitlement to spousal support, as well as the quantum of both child and spousal support, the agreement expressly considered revisiting these issues where there has been a material change in the circumstances of one of the parties. While it is not a part of the analysis for an originating application, I am satisfied that both the change in the custody arrangement for W.J.D. and the change in the income of B.M.D. amount to a material change in circumstances, and thus the intent of the parties is not disturbed by revisiting these issues at this time. [84] As noted, at the end of the trial, the defendant pleaded the provisions of s. 15 of the Divorce Act and framed this matter as an originating application for spousal and child support under the Divorce Act rather than a variation of the existing agreement pursuant to provisions of the Family Relations Act. Given the comments of Chiasson J.A., in de Rooy, albeit obiter, no jurisdictional issue arises. (b) Custody and Guardianship [85] Both parties love and support their sons. They are to be commended as parents and for their ability to resolve the issues of custody and guardianship at mediation in February 2009.

It was agreed that W.J.D. would alternate weeks with his parents. I heard evidence from the plaintiff that this was the arrangement dating back to 2007. The defendant denied this in her testimony. I am not persuaded that there was an equal sharing of custody prior to the mediated agreement of 2009, such that s. 9 of the Guidelines would become relevant. [86] Since the agreement, the shared custody arrangement has proven very successful and the parties would like it to continue. There is no issue either as to guardianship, which is joint guardianship. [87] Both parties want a direction that if one parent is out of town then W.J.D. should stay with the parent remaining in town, and I make that direction. (c) The Divorce [88] The plaintiff seeks divorce on two grounds. He alleges a breakdown of the marriage pursuant to s. 8(2)(a) of the Divorce Act, that the plaintiff and the defendant were living separate and apart since October 1, 2004. In the alternative he seeks a divorce pursuant to s. 8(2)(b)(ii) alleging that the defendant has treated him with physical or mental cruelty of such a kind as to render intolerable the continued cohabitation of the spouses. [89] In my view, it is not necessary to decide whether there has been cruelty. In this case, there are other grounds for the divorce. Our Court of Appeal has said that a finding of cruelty "bears a stigma; it should be avoided

when no useful purpose is served": McPhail v. McPhail, 2001 BCCA 250 at para. 10 [McPhail]. [90] The divorce is granted on the basis that the parties have been living separate and apart since October 1, 2004, subject to s. 12 of the Divorce Act the divorce to take effect on the 31st day after the day of this judgment. (d) Child and Spousal Support (i) Child Support [91] W.J.D., the parties' son, is now 15 years of age. There is no question the starting point for the payment of child support is that each parent has a duty to support their child. [92] W.J.D. presently spends about 50% of his time with his father and 50% of his time with his mother. By the Separation Agreement, the parties had joint custody of W.J.D. and neither seeks to vary or set aside that provision. [93] Where the child spends roughly equal time with each parent, s. 9 of the Guidelines must be considered: Shared custody 9. Where a spouse exercises a right of access to, or has physical custody of, a child for not less than 40 per cent of the time over the course of a year, the amount of the child support order must be determined by taking into account (a) the amounts set out in the applicable tables for each of the spouses; (b) the increased costs of shared custody arrangements; and (c) the conditions, means, needs and other circumstances of each spouse and of any child for whom support is sought. [94] The

plaintiff submits that if the income of the parties is relatively equal, then no support should be paid. The defendant submits that her income should be set off against what she submits is the higher income of the defendant. I take both parties as agreeing in general that a set-off is appropriate, they only differ as to what their relative incomes are and the consequences that flow from that determination. [95] The starting place to assessing income with respect to child support is the Guidelines. One of the principal issues before the Court on this point is what amounts, if any, of the pre-tax corporate income of the plaintiff's company, should be included in his annual income for the purpose of calculating child support, pursuant to s. 18 of the Guidelines. In my view it is also appropriate to consider this figure in determining the appropriate amount of spousal support. In a recent decision of this court, Aelbers v. Aelbers, 2010 BCSC 1574, Fenlon J. said this: [12] A payor's obligation to a spouse may be less compelling than his or her obligation to a child, but that difference is reflected at the entitlement and quantum stage of the analysis, not at the fact-finding level of determining a payor's income. In Murray v. Murray, [2003] O.J. No. 3350, Croll J. wrote at para. 57: [T]he income calculation provisions found in sections 15 through 19 of the [Child Support]

Guidelines should apply to the calculation of [the payor's] income for spousal support purposes as well. As Justice Linhares de Sousa recently noted in Brophy v. Brophy (2002), 32 R.F.L. (5th) 1 at para. 35 (Ont. Sup. Ct.), "In essence, both situations relate to a paying spouse's ability to provide support to a dependent." [13] This approach is both logical and practical. Whether spousal or child support is in issue, the task is to determine an income level that fairly reflects the compensation available to a spouse or parent. Where, as in this case, a spouse controls a company, the company's pre-tax income is a relevant consideration (emphasis added.) (ii) Spousal Support - Entitlement [96] Before the court analyzes the quantum and duration of support under the Spousal Support Advisory Guidelines, it first must find entitlement to spousal support. [97] In Moge v. Moge, [1992] 3 S.C.R. 813, the Supreme Court of Canada adopted a clean break analysis in particular emphasizing the goal of self sufficiency. The court resiled from the position of a clean break significantly in Bracklow v. Bracklow, [1999] 1 S.C.R. 420, where the court recognized three conceptual bases for support, compensation, need, and contract. This approach has been adopted by our Court of Appeal in Tedham v. Tedham, 2005 BCCA 502 and Chutter v. Chutter, 2008 BCCA 507 (reconsideration denied 2009 BCCA 177, leave

to appeal refused, [2009] S.C.C.A. No. 41 (QL)). In Chutter, Rowles J.A. noted at paras. 50-51: 50 Compensatory support is intended to provide redress to the recipient spouse for economic disadvantage arising from the marriage or the conferral of an economic advantage upon the other spouse. The compensatory support principles are rooted in the "independent" model of marriage, in which each spouse is seen to retain economic autonomy in the union, and is entitled to receive compensation for losses caused by the marriage or breakup of the marriage which would not have been suffered otherwise (Bracklow, at paras. 24, 41). The compensatory basis for relief recognizes that sacrifices made by a recipient spouse in assuming primary childcare and household responsibilities often result in a lower earning potential and fewer future prospects of financial success (Moge, at 861-863; Bracklow, at para. 39). In Moge, the Supreme Court of Canada observed, at 867-868: The most significant economic consequence of marriage or marriage breakdown, however, usually arises from the birth of children. This generally requires that the wife cut back on her paid labour force participation in order to care for the children, an arrangement which jeopardizes her ability to ensure her own income security and independent economic well-being. In such situations, spousal support may be a way to compensate such

economic disadvantage. 51 In addition to acknowledging economic disadvantages suffered by a spouse as a consequence of the marriage or its breakdown, compensatory spousal support may also address economic advantages enjoyed by the other partner as a result of the recipient spouse's efforts. As noted in Moge at 864, the doctrine of equitable sharing of the economic consequences of marriage and marriage breakdown underlying compensatory support "seeks to recognize and account for both the economic disadvantages incurred by the spouse who makes such sacrifices and the economic advantages conferred upon the other spouse" (Rowles J.A.'s emphasis). [98] Rowles J.A. in Chutter continued at para. 53: 53 In W. v. W., 2005 BCSC 1010, 19 R.F.L. (6th) 453, a frequently cited decision in trial decisions in British Columbia, Justice Martinson made the following helpful observation about the interpretation in this province of the emphasized portion in Moge: [11] In British Columbia this comment in Moge has been interpreted to mean that in long marriages the result will likely be a rough equivalency of standards of living. Doing so recognizes that the longer a marriage lasts, the more intertwined the economic and non-economic lives of the spouses become. [12] Throughout the marriage, each spouse makes decisions that accommodate the economic and non-economic needs of the other. The decisions

include the way in which child care and other family responsibilities will be handled and the way careers will develop. These decisions can have a significant impact upon the income earning ability of each at the time of separation. Yet it is not easy to determine exactly the relationship between these decisions and the consequent benefits and detriments to each spouse. The rough equivalency of standard of living approach has operated as a workable substitute to assess compensatory claims. [Rowles J.A.'s emphasis] [99] On both an originating application or an application to vary, the following factors must be taken into account pursuant to the Divorce Act, s. 15.2(6): (a) recognize any economic advantages or disadvantages to the former spouses arising from the marriage or its breakdown; (b) apportion between the former spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage; (c) relieve any economic hardship of the former spouses arising from the breakdown of the marriage; and (d) in so far as practicable, promote the economic self-sufficiency of each former spouse within a reasonable period of time. [100] All four objectives must be considered and no single objective is paramount: Moge at 852. [101] Additional factors are found in s. 15.2 of the Divorce Act: (4) In making

an order under subsection (1)....the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including (a) the length of time the spouses cohabited; (b) the functions performed by each spouse during cohabitation; and (c) any order, agreement or arrangement relating to support of either spouse. [102] On the facts before the court, I find that the defendant is entitled to compensatory spousal support given the factors set out by the legislation above. This was a union nearing of 27 years duration. As noted in the agreement itself: [C.N.D.] has foregone economic opportunities as a result of the marriage and staying at home to raise [W.J.D.] which have been taken into account in this Agreement in the arrangements relating to division of property and the payment of support. [103] In addition to remaining at home for W.J.D., C.N.D. did not work outside of the home while caring for the parties' first son between 1987-1990. I accept her evidence, as well, that the plaintiff told her when they moved to B.C. she could concentrate on the family and would never have to work again. She often worked sporadically and mostly on a part time basis throughout the child-rearing years of the relationship. She advocated at school for her older son who had a learning disability, including attending the school to ensure a proper testing environment was

set up for him. [104] The parties had agreed that the division of labour would be such that she would take responsibility for looking after the family to free up the plaintiff to do work on the property. Indeed, the plaintiff testified to an incident where C.N.D., one time seeking relief, asked him to look after their infant W.J.D. for a time. He refused, advising her he could not possibly take on that responsibility as he had his own work to attend to. He consequently acknowledged the division of their respective roles in the family. All the business decisions were made by the plaintiff. The defendant focussed on their children and their activities. In the later years of the marriage, she would work from the home doing the books for the proprietorship, working out of the house, as she testified this enabled her to be home as much as possible for their sons. [105] I find on all the evidence the parties' marriage is marked by similar factors to those before the court in Chutter and the defendant is entitled to compensatory spousal support.

6. DETERMINATION OF INCOME (a) Defendant's Income [106] The income of the defendant is fairly easily determinable as she, unlike the plaintiff was not being paid through a corporation of which she was a principal. Her income is derived chiefly as an office worker for VMAC. She additionally rents out rooms in her home. [107] In 2006, her employment income was $16,558.10. She earned $13.13 per hour. She has conceded that she was underemployed because she wants to be available for her son. I impute to her employment income of $27,310, being her hourly wage projected at a 40 hour work week over a full year. She received from the plaintiff $6,500. This is to be deducted from her income pursuant to the Guidelines (Schedule III, s. 3(a)). She also received $961.02 in rental income. She also received $5,000 in RRSP income. Her total income in 2006 I find was $33,271. [108] In 2009, the defendant's gross pay was $16,593. At present the defendant earns $16.31 an hour from VMAC. It was the defendant's submission overall, respecting her income from the time of the Separation Agreement forward, that she is still working the same number of hours per week as she was in 2005. As she did for the Separation Agreement in 2006, she desires that the quantum of spousal support be determined by this Court by imputing full-time employment income to her. This results in a figure of $33,924. [109] The

defendant also submits with respect to her rental income that this is income that she did not have in 2005. She purchased this house after the parties separated in April 2006. She rents out most of it. The defendant testified that, but for buying a property that would generate income, she would not have been able to get back into the real estate market. She testified that she negotiated a separation agreement which would allow her husband to maintain ownership of the former matrimonial home on lakefront acreage so that he could continue to operate his crane truck business from that location. I accept that evidence, and further take it as evidence of her expectation that she would continue to receive spousal and child support from income generated by the business. [110] Based on the full occupancy of both rental units in the home which was purchased by C.N.D. in 2006, the gross rents are $19,821.00 per year. After expenses relating to only those units the net income to her is $3,758.00. These figures are based on those set out in her 2008 Income Tax return, as in 2009, one rental unit was vacant for six months. I find, given the conceded imputation of income to the defendant her income for child support Guidelines purposes is $37,682 for 2009, the sum total of $33,924 from employment and $3,758.00 from the rentals. (b) Plaintiff's Income [111] The plaintiff's income is chiefly

derived from his business, which he incorporated on March 2, 2006. 100% of the shares are in the name of B.M.D. The fact of the incorporation was not known to the defendant or her counsel at the time the parties entered the Separation Agreement. He has complete control over the assessment of his income. [112] The determination of the plaintiff's income for the purpose of child support requires an examination of the pre-tax corporate income of the company that was available to him for the purpose of paying child support. [113] At the time of the Separation Agreement in 2006, the plaintiff's income was $80,000 for Guidelines purposes. The plaintiff indicates in his financial statement filed May 10, 2010 that he had an annual income of $40,000 in 2007, $50,912.46 in 2008, and $35,867.74 in 2009. [114] The plaintiff's business, D Truck and Crane, operates five trucks, identified at trial as Units 1-5. The plaintiff began in the business with the purchase of the Unit #1 truck for $15,000 in 1996. The crane, he testified, installed was $12,000. In June of 2003 the parties' eldest son, D.L.D., graduated from high school. After working for another company and then travelling, he began working with his father in the proprietorship. This was in approximately 2004. At this time the plaintiff purchased Unit #2, a 2004 Freightliner semi-truck, cab, and tractor, for $79,000 for the truck,

and $12,000, for the crane. [115] Of particular interest in this trial is the sole leased truck operated by the company, known as Unit #3. Unit #3 was purchased by S.N. for US$105,000 in January 2007, and subsequently leased to D Truck and Crane. [116] Unit #4 was then purchased in December 31, 2006 for US$107,000, with Unit #5 purchased shortly thereafter in January 2008 for US$115,000. [117] Section 18 of the Guidelines deals with the determination of income in circumstances where a parent is a shareholder of a corporation. Under s. 18(1), the determination of income may include all or part of the pre-tax income of the corporation for the most recent tax year, or an amount commensurate with the services that the parent provides to the corporation, provided that the amount does not exceed the corporation's pre-tax income. Section 18(2) provides that in determining a corporation's pre-tax income, all salaries, fees, or other payments made to persons who are not at arm's length to the corporation must be added to the pre-tax income, unless the parent establishes the payments were reasonable in the circumstances: 18.(1) Where a spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the spouse's annual income as determined under section 16 does not fairly reflect all the money available to the spouse for the payment of

child support, the court may consider the situations described in section 17 and determine the spouse's annual income to include: (a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or (b) an amount commensurate with the services that the spouse provides to the corporation, provided that the amount does not exceed the corporation's pre-tax income. ... (2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm's length must be added to the pre-tax income, unless the spouse establishes that the payments were reasonable in the circumstances. [118] Our Court of Appeal has said that courts do not need to look for intentional avoidance of child support obligations before applying s. 18: Kowalewich v. Kowalewich, 2001 BCCA 450. Instead, the purpose of s. 18 is to lift the corporate veil to ensure that funds received fairly reflect those available to pay child support: Kowalewich; Baum v. Baum (1999), 182 D.L.R. (4th) 715; 7 R.F.L. (5th) 231 (B.C.S.C.) at para.

28. While the section is intended to permit a court to scrutinize corporate decision-making, it should not be taken to the point of overturning reasonable business decisions: Volken v. Volken, 2001 BCSC 970, at para. 31. [119] In Kowalewich, the issue before the court was the method to be used to determine the income available for child support in a corporate situation such as in this case. The court rejected the proposition that the court should look only at the value of the owner parent's personal services to the company, and noted that the corporate income method would likely be the fairest method where the payor wholly controls the corporation. Starting at para. 47, Huddart J.A. stated the following: 47 The Guidelines give no explicit guidance as to how a parent or a court might go about choosing whether to use the corporate income method or the personal services method in determining annual income. However, s. 18 suggests two considerations in the preconditions for its application: (1) which method produces an annual income that more fairly reflects "all the money available to the spouse for the payment of child support;" and (2) which method does the nature of the spouse's relationship with the corporation support. Section 18 also permits reference to the "situations described in s. 17," and thus to the spouse's income pattern over the previous three years. 48 In some

cases, the nature of the spouse's relationship with the corporation will be decisive. Section 18 applies to a spouse who wholly controls a corporation, but it also applies to one who shares ownership and control with others. In the former case, the corporate income method is likely to be the fairer method of determining income. This is because it allows a court to include not only reasonable payment for personal services but also a reasonable return on the owner's entrepreneurial capacity and investment. These are sources of income available for child support an intact family would utilize. Moreover, it not only permits but requires the inclusion of the income of companies related within the meaning of the Income Tax Act, and of non-arms length payments made without value for the company. [120] The plaintiff is the sole owner of his corporation. Accordingly, the corporate income method is appropriate in this case. The Court is permitted to include all non-arm's length payments. (c) Issues [121] In this case, two issues arise with respect to the determination of the plaintiff's income under s. 18: a) Were the wage and lease payments made to S.N. not at arm's length such that they must be added to the corporation's pre-tax income? b) What approach should be taken with respect to the amortization of the trucks? (d) Non-Arm's Length Transactions [122] The defendant submits that

certain payments made by the corporation to S.N., the plaintiff's girlfriend, are non-arm's length payments that should be included in the calculation of the plaintiff's income for child support purposes. [123] The following criteria apply in determining whether the parties were dealing at arm's length. Although these criteria have generally not been used in family law cases such as this, they have been used by courts in determining whether parties to a transaction in other contexts were not dealing at arm's length. These criteria were articulated by the Canada Revenue Agency and are set out in the IT-419R2 guideline: a) Was there a common mind which directs the bargaining for both parties to a transaction? b) Were the parties acting in concert? c) Was there "de facto" control? [124] The IT-419R2 guideline's definition of non-arm's length also refers to parties "acting in a highly interdependent manner," and an "element of common interest." [125] In general, non-arm's length payments to a spouse or partner will be added to a parent's income for child support purposes, except where such payments are necessary and reflect reasonable recompense for services when measured against industry standards applicable to similar work rendered in the circumstances: Kinasewich v. Kinasewich, 2001 ABQB 759 at paras. 24-25. [126] Before addressing these issues, I will summarize the relevant

facts with respect to the relationship between the plaintiff and S.N., the lease of a truck by S.N. to the plaintiff, and S.N.'s employment by the plaintiff's company. (i) S.N. [127] S.N. and the plaintiff are a romantically involved couple. They intend to marry and expect to move in together in two to three years. At the time of trial, the couple are very close. In September 2008, the plaintiff was encouraged to join S.N. and her children in California to engage in family therapy. The plaintiff testified that a psychologist recommended that he attend as a "father figure" for S.N.'s daughter. (ii) S.N. Lease [128] In November and December of 2006, B.M.D. testified that he found two tandem axle trucks and cranes for sale on the internet by a company called Michael's Machinery in Las Vegas, Nevada. He testified that he informed the Bank of Nova Scotia about his plans to purchase the two cranes. However, the bank would only lend him funds for one truck and not both. As a result, he purchased the 2002 Sterling truck (which became known as Unit #4) on December 31, 2006 for US$107,000, or Cdn$124,687.10. This purchase resulted in a $125,000 loan, with a monthly payment of $2,100 plus interest per month. [129] After discussions with S.N. about the second truck, she became interested in acquiring it. Together they travelled to Las Vegas in February of 2007 to purchase the second truck,

the 2000 Sterling (which became known as Unit #3), for US$105,000, or Cdn$126,000. She raised the $126,000 by using $15,000 of her savings, and $111,600 by way of a loan with the Royal Bank of Canada. The invoice and the loan documentation were entered into evidence. [130] S.N. (apparently on the advice of her accountant, Joan Granger, C.M.A., who also testified on behalf of the plaintiff as an expert witness) testified that at that time she sought the services of counsel who prepared for her an equipment lease dated for reference in mid February 2007. Negotiations between B.M.D. and S.N. ensued as to the terms of the lease. B.M.D. testified to his belief that to lease this type of equipment at that time would have cost his company approximately $4,000 to $5,000. S.N. testified that B.M.D. indicated that he did not want to pay S.N. more than $2,800 a month. When they realized that there were PST and GST involved, they settled on a basic rent of $2,803.74, with an additional amount of $364.48 for PST and GST, for a total monthly payment of $3,168.22. They also agreed in the lease that D Truck & Crane would pay 15% of any hourly charge for the crane use, which B.M.D. and S.N. referred to as commission, and that the company would be responsible for repair and maintenance of the truck. The lease was to last for a period of 48 months from March 1, 2007. There was no option for the

company to buy out the truck at the end of the lease. [131] S.N. created a proprietorship for her truck, High Reach Truck and Crane Services. As part of the agreement dated for reference February 15, 2007 (although S.N. testified she signed this document before obtaining the loan for the truck from Scotia Bank which was on February 13, 2007), which was entered into evidence, the lease was for a four-year period for $3168.22 monthly, inclusive of all taxes (now $3140.09 because of the reduction of GST). Her loan payments were $1,300 monthly. In December 2009, the company only paid half a payment and then defaulted further on the May 1, 2010 lease payment. On May 12, 2010 the plaintiff provided S.N. a cheque for $1,500. B.M.D. ceased paying commission for work using the truck entirely in November 2009. [132] S.N. did not insure the truck between November 2009 and February 2010. S.N. was unable to recall how the 15% charge out rate figure was arrived at. Similarly having no experience in the trucking field or leasing of trucks and cranes, she relied on the defendant for what would be a suitable amount for the lease. At trial she testified that there was approximately $3,700 owing in arrears by the plaintiff. [133] After establishing the lease agreement with S.N., the plaintiff had a total of five trucks at his disposition. [134] Unit #3 still has $87,000 owing on it. The term of

the loan was for ten years and at the time of trial it was going to take her a further seven years to pay off the truck. It was noted and put to S.N., and agreed if the math was correct, that were the plaintiff to keep up his payments, after 48 months, including the PST and the GST, he would have paid in excess of $150,000. (iii) S.N. Employment [135] B.M.D. testified that around the same time as the lease transaction, he continued to work 10 to 12 hours a day, handling all of the bookkeeping, mechanical and driving jobs, and searching out new contracts. He felt he needed some further assistance, and that S.N. would be a suitable candidate. She was hired by his company March 1, 2007. B.M.D. and S.N. agreed that S.N. be paid a salary of $3,000 per month. The plaintiff testified that they agreed that this amount was a "fair amount for the type of work to be done and [S.N.'s] qualifications." At that time it was understood that she was to become a crane operator. [136] S.N. testified that she wanted to become a crane operator herself. She obtained a class 1 license which allowed her to drive every form of vehicle, and took an airbrake course in March of 2007. During the first three months she learned to operate all the equipment, with the assistance of B.M.D. Thus it was agreed that she would receive the salary of $3,000 a month noted above, for training as a crane operator for D

Trucking. [137] After a period of approximately three months, however, it became obvious to S.N. that she was not physically capable of lifting the heavy equipment involved. However, it appeared by this time that she was well enough acquainted with the business that she was able to switch to dispatching, bookkeeping, doing the company banking, doing sales and marketing, and trying to obtain new work for the company. She testified that she worked many hours, including weekends and evenings. She also used her personal vehicle on many occasions, for which she was not reimbursed. [138] S.N. testified that the 2006 company paperwork was not done so Taylor-Made Bookkeeping Solutions Ltd. was hired to do this. She testified that they did this while she was craning for three to four months. Following her unsuccessful foray into driving and craning she testified that she became the dispatcher having learned how to dispatch by listening to the plaintiff while on the job for the three or so months she drove the truck. She then began working on the bookkeeping for 2007. She took incoming phone calls, did the bookkeeping and dispatching from mid 2007 into 2008, working eight hour days. She testified she sought out work for the company in Nanaimo, Errington, Port Alberni, and Victoria. She testified in 2009 she did support advertising in 2009 with stickers for the hardhats, introductions,

and packages sent out to the construction companies. Her office work was conducted from the office in the former matrimonial home. [139] S.N.'s 2007 income tax return was entered into evidence. From her proprietorship High Reach Bucket Truck and Crane earned $70,963.64. Her salary from D Truck and Crane was $30,000 and the remainder was the truck lease payment and commission. The expenses were listed in the tax return but she testified the maintenance and repairs on the truck were paid for by D Truck and Crane. Her tax return notes that there was $1,568.54 charged to office, and maintenance and repairs were for her own car. She also wrote off a portion of her mortgage as she stored the truck at her home, she testified. In 2008, she earned in total $73,891.72 which, as before, comprised both her salary and the truck lease payments and commission. In 2009, she earned $70,855.62. Her salary was recalculated from $3,000 per month to $18.75 an hour when she worked fewer hours due an unrelated court proceeding of S.N. She was a contractor, not an employee to D Truck and Crane. [140] In November 2009, B.M.D. laid off two truck workers including his own son. His son earned $40,000 per annum. He did not lay off S.N. [141] B.M.D. took out a $70,000 line of credit in February 2009. Initially it was intended to use those monies to fix up his home but most of it went for payroll lease

source deductions. He additionally put $10,000 in August 2008 towards the company as a further loan. Concerned, due to a major loss in revenue and further concern of B.M.D. that he "wouldn't be able to make his lease payments", S.N. considered selling the truck. She advertised it for $118,000 in the fall of 2009. An offer of $85,000 was rejected by her on the advice of B.M.D. [142] S.N. was asked why, when the son of B.M.D. was laid off, she was not. Her answer was not direct and she instead referred to a business course that she took with the plaintiff in San Francisco where they discussed overall business plans for the trucking company. The plaintiff's expenses to run the company when he had his full complement of drivers were $32,000 a month. With the layoffs, and not insuring some of the trucks, the expenses of D Trucking were $22,000 to $20,000 according to S.N. In January of 2010 she volunteered to quit from the company noting that the phone was not ringing. In March 2010, she stopped working for pay. The end of March was her last paycheque. [143] In cross-examination, S.N. was questioned about her qualifications respecting being a bookkeeper. She testified she had taken a 10-month course at Malaspina College, in the last five months of which she focussed on bookkeeping. She conceded that prior to working for the plaintiff she had never earned what she testified to as an

average wage for a bookkeeper, which changed from $25 an hour to as low as $15 an hour. [144] The defendant points to several other facts to show that the plaintiff and S.N. are not at arm's length: · The plaintiff testified that in December 2009 that "we (my emphasis) laid [D.L.D.] and another driver off", referencing S.N., who remained on the payroll; · Although the plaintiff testified that S.N. has been trying to sell truck #3, which she purchased in February 2007, it was he who called Falcon Equipment in Surrey to advise the vehicle was for sale, and it was he who, according to S.N.'s testimony, decided that the proffered price was not good enough; · S.N. and the plaintiff have taken trips together to California, Las Vegas, and Hawaii, for both business and pleasure; · The defendant submits that S.N. is not just an employee of D Truck and Crane Ltd. She and the plaintiff are planning the future of the company together. They both testified about the E-myth Seminar which they attended in California in the fall of 2009. They discussed changing the company name. · The defendant submits that although S.N. is supposedly a contractual employee responsible for her own income taxes, there is no written employment contract between her and the plaintiff. · In his direct examination, B.M.D. referred to the fact that "we" are trying to fix the house up. · He talked about carrying us (my

emphasis) through the rough times: "We use the leased vehicle (his Toyota truck) for company purposes." (e) Analysis: Were the wage and lease payments made to S.N. at arm's length? [145] Joan Granger was called as an expert witness for the plaintiff in the area of preparing T1 general income tax returns, corporate financial statements and corporate tax returns, and interpreting necessary provisions of the Income Tax Act, R.S.C. 1985 c. 1 (5th Supp.) ("ITA") as they had bearing on the completion of income tax returns. She is a certified management accountant. She first attended Northern Alberta Institute of Technology and graduated from an accountant program in 1992. She then commenced a two-year program in Vancouver receiving her certification and graduating in 1998. The plaintiff is her client both for his personal and company affairs. [146] In her report of October 29, 2009 Ms. Granger concluded that the plaintiff had available to him the following, as income for assessment pursuant to the Guidelines. 2007 - $83,623 2008 - $51,649 2009 - $40,714 I note that these amounts are higher than the annual income amounts stated by the plaintiff. Ms. Granger testified and stated in her report filed in evidence that she arrived at these figures by adding back the management expense of the plaintiff. [147] Brian D. Lewicki was called as an expert witness for the defendant. He is a

chartered accountant, and was accepted by the court as an expert witness in the area of accounting and the provisions of the ITA as they affect both personal and corporate income tax returns in the same areas as Ms. Granger. [148] Ms. Granger disputed many of Mr. Lewicki's assumptions. I outline the significant differences and state where I accept or reject the evidence of either Mr. Lewicki or Ms. Granger below. [149] Mr. Lewicki prepared a report expressing an opinion of the plaintiff's income based on a series of assumptions set out in his report. The report was based on the following documents concerning the corporation: Financial statements for the fiscal years ending February 28, 2007 through February 28, 2009 as reported by accountant; Corporate income tax returns for the fiscal years ending February 28, 2007 through February 28, 2009; Detailed general ledgers for the fiscal years ending February 28, 2007 through February 28, 2009; Documentation regarding asset additions for the initial two years ending February 29, 2008; T4 information for the calendar years ending February 28, 2007 through February 28, 2009. [150] Mr. Lewicki's report was also based on the following documents concerning the plaintiff: Financial detail of the partnership business for the calendar year ended December 31, 2005; Personal tax returns for the calendar years ending December 31, 2005 through

December 31, 2008; T2124 Statement of Business Activities for the two-month period ended February 28, 2006, as the business was incorporated on March 2, 2006. [151] Mr. Lewicki testified that he adjusted the plaintiff's available income in accordance with ss. 15-19 of the Guidelines. In his report, Mr. Lewicki stated that, in his opinion, two adjustments had to be made. First, he stated that the lease payments to S.N. should be added back to corporate income because those payments were not made at arm's length. Mr. Lewicki also analyzed the amortization for the truck and stated that while the allowable amount was used under the ITA, that had little to do with the true useful life of the assets, as evidenced by the plaintiff's valuations in 2006. He analyzed the utilization of the trucks for the years 2005 through to February 2009 and stated as follows: We...note that there has been a dramatic under-utilization of these trucks since [B.M.D.] decided to increase the fleet size. Revenue-generating hours bill[ed] by the two trucks in 2005 were used as a base model to prepare a utilization analysis...for the years ended February 28, 2007 through 2009. We note that [B.M.D]'s T4 issued by his company at each December has been consistently lower than the salary expensed in the financial statements at each February...The cumulative effect of these timing differences is that [B.M.D.] has

reported $41,000 less on his T4's up to December 31, 2008 than has been expensed in his Company up to February 28, 2009. [152] Mr. Lewicki also noted that in 2006 the plaintiff re-mortgaged his home and paid out $226,470 of company debt from his total mortgage proceeds of $342,729. The plaintiff began then deducting 66% of the interest from his home mortgage in the company. He also received a shareholder credit for these payments. At the time the plaintiff also had a shareholder debt owed by the company of an almost equal amount. As noted by Mr. Lewicki, the cash injection into the Company "merely repaid the Company for assuming the plaintiff's line of credit upon incorporation." Therefore the bulk of this interest should not be deducted through the company. In his report, Mr. Lewicki added back that interest and instead calculated an amount based on the shareholder loan balance at each year end. In 2007 that was 4% so Mr. Lewicki used that number ($9,054/66%/$342,729). I accept this evidence. [153] According to Mr. Lewicki, the 20% personal use for the telephone should also be added back, which I accept. [154] While donations can have legitimate advertising revenue generating reason, none satisfied me on the whole of the evidence and this income will be added back to the plaintiff's income. Meals and entertainment are similarly to be added back. It is important to bear in mind

that a calculation of income available under the Guidelines, while not an analysis of what can be deducted from income for income tax purposes, remains an analysis of what is available to pay the child support and accordingly to that extent, income of the company must be examined. [155] While Mr. Lewicki would have added back the amount for the home shop, I am satisfied on all the evidence that this shop was, in fact, used by the plaintiff in his business, and this amount will not be added back to the plaintiff's income. [156] More significant however are the transactions involving S.N. [157] By Mr. Lewicki's analysis a significant portion of Ms. S.N.'s income was to be added back to B.M.D.'s income. The basis for this was twofold - first, that Mr. Lewicki considered S.N.'s qualifications respecting her office work to be not commensurate to what she was being paid, and second, that she was not at arm's length to B.M.D. [158] Dealing firstly with her qualifications, in his evidence he testified that someone of her qualifications would earn $12 to $15 an hour (which was corroborated by the plaintiff's own accountant and expert, Ms. Granger, who indicated that for someone of like experience, the hourly wage would be $12). S.N. conceded the rate of pay for an office worker ranged greatly. She testified this was her first paid accounting work. She never did achieve the requirements

necessary to be employed as a trucker by the company, yet S.N. was being paid at the outset of her employment in the capacity of crane operator. Evidence was led that she attempted sales calls and drove to various places to seek out work for the company. However, it is also to be noted that when she commenced as an office worker, purportedly doing accounts, again, she did not actually start in that capacity. Rather she testified the work was contracted out to Taylor-Made Solutions for a time until she took over. [159] I accept the evidence that reasonable recompense for S.N.'s employment services would range from $12 to $15 an hour. In all of the circumstances, I find that the parties were not at arm's length with respect to the wage payments. I would thus allow only the sum of $25,000 per annum for S.N.'s work which incorporates the promotional work she did for the company in addition to the office and other administrative work. [160] I accept Mr. Lewicki's evidence that the plaintiff's fleet of five trucks was dramatically underutilized following the creation of the lease agreement. However, I must consider the statement of our Court of Appeal that when engaged in analysis under s. 18 of the Guidelines, I am not required to second guess the business judgment of the parties (Kowalewich, at para. 44). [161] The evidence displays a close association of the plaintiff and S.N.

with respect to plans concerning the growth and development of the business. I find that the lease agreement was not at arm's length. There is no precise mathematical formula I am able to employ; however, I must take into account the non-arm's length lease agreement while not second guessing the business decision to acquire an additional truck. Accordingly, I would disallow 70% of the deductions from the plaintiff's corporate income of all lease payments for the truck, and allow the insurance expenses for the truck. In my view this adequately accounts for the fact that an additional truck was acquired and some level of expenses associated with it were the result of a legitimate, albeit questionable, business decision. (f) Capital Cost Allowance [162] The method for dealing with Capital Cost Allowance ("CCA") in the context of the determination of income available for child support must also be considered. I was directed by the plaintiff to the following passage in Egan v. Egan, 2002 BCCA 275, which Prowse J.A., at para. 28, quotes from Wakeling J.A., in Rudachyk v. Rudachyk, [1999] S.J. No. 312 (Sask C.A.): Turning to the CCA of the personal property, it is reasonable to assume that since the guidelines refer only to CCA on real property a reduction in the allowance for CCA of personal property would not be the normal practice. This approach is consistent with the comments of

Noble J. in Beeler v. Beeler (1997), 161 Sask. R. 167; 32 R.F.L. (4th) 397 when he stated at pp. 169-70: . . unless the evidence indicates that he is deducting C.C.A. unreasonably in calculating his income for tax purposes then this kind of an adjustment . . . is not open to argument. There is no evidence to suggest his claim for C.C.A. is not properly done and unless the court is satisfied it has been unreasonably deducted, then only C.C.A. related to real property depreciation can be added back to his income. A similar approach has been taken in a number of cases, some of which are: Beeching v. Beeching, [1998] S.J. No. 355 (Q.L.) (Sask. Q.B.); Wilson v. Wilson, [1998] S.J. No. 236 (Q.L.) (Sask. Q.B.); O'Hara v. O'Hara, [1997] S.J. No. 482 (Q.L.) (Sask. Q.B.); Desrochers v. Desrochers, [1998] M.J. No. 379 (Q.L.) (Man. Q.B.). This method of dealing with CCA has the merit of accepting the recognition by the business community and the accounting profession that it is a valid business expense, a concept which is not difficult to understand. Assets do generally deteriorate with the passage of time and will need to be replaced if the business is going to continue to operate and generate the income required to provide the continued support payments. However, it also accepts that there are occasions when a CCA factor on chattels may be claimed when there is no justification for the

claim, perhaps because there is no intention to replace that item or it no longer serves a useful function. This factor may, of course, be offset by a situation where the replacement of another essential item will be more costly than the accumulated CCA on the replaced item will provide. I expect that the practical difficulty of taxation officials or accountants to make such a detailed analysis of a CCA claim has compelled the adoption by these parties of an overall general approach to what is an appropriate CCA, namely a specific overall standard rate of CCA. However, the same generalized approach, which for practical reasons must be adopted by auditors and tax authorities, is not justified in a situation relating to child support where the question of what constitutes a realistic CCA is appropriate and can be reasonably determined. Counsel who have access to a CCA statement would not have great difficulty in determining whether it was representative of a realistic expense. If questions did arise, an examination for discovery would disclose whether there was a foundation for a challenge to the validity of a specific claim for CCA and necessary adjustments to the allowance might result. [Emphasis added in Egan.] [163] Prowse J.A. went on to state: [30] I respectfully agree with the interpretation of s. 11 adopted by the Saskatchewan Court of Appeal and with the pragmatic

approach taken by that court in relation to the issue of deductibility of contested CCA claims for Guidelines purposes. In my view, that approach contemplates that if there is some evidence supporting the reasonableness of the expense (beyond the fact that it allowable under the Income Tax Act), the court is unlikely to deny the deduction in calculating the payor's income. Similarly, the court will be unlikely to second-guess the rates permitted under the Income Tax Act and Regulations unless the allowable rate appears to be unusual, or based on a particular policy being pursued by the taxation authorities, rather than on the likely economic life of the asset in issue (emphasis added.) [164] Prowse J.A. reviewed as well the Manitoba Court of Appeal decision in Andres v. Andres, [1999] M.J. No. 103, in which the husband was seeking to reduce his income for Guidelines purposes on the basis of depreciation claimed in respect of his trucking business. The argument on appeal was that as s. 11 is silent with respect to personal property, that amount should be not be imputed back and included as income in determining income. Monnin J.A. set out the following useful questions to guide a determination of whether a particular CCA deduction should be imputed back. Prowse J.A. noted that these questions were not to be followed slavishly but rather to serve as a guide to making the assessment. Each case is to be decided on its own facts and it is not the case that evidence has to be lead on every point. The questions were: 1. Was the CCA deduction an actual expense in the year?

2. Was the CCA deduction greater than or less than the cost of acquisitions during the same time period?

3. Was the CCA deduction greater than or less than the repayments of principal with respect to the chattels in question?

4. Was the CCA deduction the maximum allowable CCA deduction?

5. Was it necessary to take the CCA deduction in that year?

6. How much of a loss in a business year resulted in that year?

7. Are the chattels for which the CCA was claimed truly needed for business purposes?

8. Do the chattels for which the CCA was claimed truly depreciated [sic]?

9. Is it foreseeable that future chattel purchases will not be required?

10. Is there a pattern of spending which establishes a greater real income than income tax returns indicate?

11. If the children were living with the spouse, would they benefit from the actual income earned by the spouse?

12. Is there a dire need for child support? [165] As set out by Prowse J.A., in para. 33 of Egan, Monnin J.A. in Andres, concluded that there was no general rule which could be readily applied in determining when CCA on personal property should be "imputed" back into income, and that the reasonableness of these contested expenses must be assessed on their merits. In the result in Egan, the CCA deduction was allowed, although there was little evidence short of Mr. Egan's statement that he was beating his truck "to death out on the logging roads." [166] Prowse J.A. held each case was unique: 34 While I find the list of factors listed by Monnin J.A. helpful in making this determination, I do not suggest that all of those factors should be considered in every case, or that evidence has to be led with respect to all of the factors. Rather, the list provides a useful guide for parties, counsel and the courts in approaching the issue of deductibility, depending on the nature and extent of the deduction claimed. [167] It is also important to distinguish amortization as a general accounting expense from CCA which is a defined matter and often accelerated or done on a different basis from usual amortization. In certain instances an amortization expense will be properly excluded from income (see Barker v. Barker, 2002 BCCA 345). As was discussed by Mr. Lewicki during his evidence, there

may be many reasons the Canada Customs and Revenue Agency establishes what would exceed normal amortization methods - the legislature may be directing the tax incentives for a policy purpose, i.e. to encourage or discourage matters. (i) Analysis: What approach should be taken to the amortization of the fixed assets? [168] As noted by both experts, the trucks make up the bulk of the assets being amortized. At the CCA rate of 30% per annum this could result in the assets' book value being much less than their market value. [169] Mr. Lewicki used the plaintiff's own remarks that he gave to his own accountant respecting the value of the trucks when the business was incorporated. With respect to trucks 1 and 2, the plaintiff valued them at their actual value, thereby in effect conceding that the CCA rate of depreciation, which would have resulted in a lesser amount, did not accurately reflect the loss in value over time of the trucks. Ms. Granger in her report stated as follows: The point to make is that the amortization that was used, reduced the corporate taxes payable - and thereby increased cash available. If amortization was used as suggested, there would have been much more tax paid, decreasing available cash. [170] This statement discloses that Ms. Granger missed the thrust of Mr. Lewicki's assumption and analysis in accordance with the Guidelines - which was adding the CCA

rate of amortization back to B.M.D.'s income and instead deducting an acceptable rate of amortization that reflected the life of the asset. I prefer Mr. Lewicki's evidence respecting the amortization of the fixed assets over that of Ms. Granger's. [171] I find in all the circumstances that, except where noted above, I accept much of the expert evidence of Mr. Lewicki with regard to the adjustment to the plaintiff's income for the purposes of child support payments. Accordingly, I find the plaintiff's income to be as follows: 2007 - $107,808 2008 - $154,942 2009 - $138,972 [172] Mr. Lewicki projected the plaintiff's income for 2010. S.N. no longer receives income from the trucking business. Accordingly, the plaintiff's available income is $93,782. This includes subtracting out $21,600 for bookkeeping, since S.N. is no longer doing this work. Support will be calculated on that basis.

7. EFFECT OF THE SEPARATION AGREEMENT [173] As discussed above, the registration of the Separation Agreement for the purposes of enforcement does not render it an order of the court. Accordingly, this is an originating application. This does not render the Separation Agreement irrelevant. I must consider its effect in determining both child and spousal support. (a) Child Support [174] Section 15.1 of the Divorce Act applies to an originating application for child support: Child support order 15.1 (1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to pay for the support of any or all children of the marriage. Interim order (2) Where an application is made under subsection (1), the court may, on application by either or both spouses, make an interim order requiring a spouse to pay for the support of any or all children of the marriage, pending the determination of the application under subsection (1). Guidelines apply (3) A court making an order under subsection (1) or an interim order under subsection (2) shall do so in accordance with the applicable guidelines. Terms and conditions (4) The court may make an order under subsection (1) or an interim order under subsection (2) for a definite or indefinite period or until a specified event occurs, and may impose terms, conditions or restrictions in connection with

the order or interim order as it thinks fit and just. Court may take agreement, etc., into account (5) Notwithstanding subsection (3), a court may award an amount that is different from the amount that would be determined in accordance with the applicable guidelines if the court is satisfied (a) that special provisions in an order, a judgment or a written agreement respecting the financial obligations of the spouses, or the division or transfer of their property, directly or indirectly benefit a child, or that special provisions have otherwise been made for the benefit of a child; and (b) that the application of the applicable guidelines would result in an amount of child support that is inequitable given those special provisions. Reasons (6) Where the court awards, pursuant to subsection (5), an amount that is different from the amount that would be determined in accordance with the applicable guidelines, the court shall record its reasons for having done so. [175] In the present case, it is the application of the father that requires a retrospective examination of the child support payable under the Separation Agreement. In particular, the plaintiff father has asked that arrears of child support payable under the Separation Agreement be cancelled, and relies on s. 9 of the Guidelines as the legal basis for his claim, and the shared custody arrangement and relative income of

the parties as the factual basis. [176] It is a well-settled principle in the law of child maintenance that the right to support is the right of the child, not the right of the parent. Accordingly, our Court of Appeal has held that "[a]s the right belongs to the child it cannot be waived or bargained away by the custodial parent or lost due to that parent's neglect, delay, or lack of diligence in enforcing the right." (L.S. v. P.E., 1999 BCCA 393, at para. 58 [L.S.]). I therefore must consider the possibility of an increased award for child support if it is required by the Guidelines, despite the defendant's stated preference that I not retroactively increase the child support payable. [177] In Fung-Sunter v. Fabian, 1999 BCCA 346, the Court of Appeal addressed a case where the parties had entered into a separation agreement providing for child maintenance prior to the coming into force of the Guidelines. In examining the effect of the separation agreement on an originating application for child support, Hollinrake J.A. wrote: 27 I can see no reason in principle why a party cannot successfully apply for an original child support order simply because there is a written separation agreement in force. Such an agreement may lead to an order not strictly in accordance with the Guidelines if the payor in this case can bring himself within s. 15.1(5) of the Act but in my opinion it

cannot in principle be used as a bar to a s. 15.1 Divorce Act order on the facts of the case before us. [178] In G. (C.N.) v. R. (S.M.), 2007 BCSC 822, Madam Justice Sinclair Prowse found that where the support agreed to between the parties is not consistent with the Guidelines, then the agreement is not enforceable. (at para. 17) [179] In examining s. 15.1(5) of the Divorce Act, I am unable to find that there were any special provisions made for W.J.D. in the Separation Agreement, or that it would be inequitable to apply the Guidelines, and in particular s. 9, for the period from which the plaintiff makes his claim, which I find to be the point where there was a material change in circumstances, the change in custody arrangements agreed to in February 2009. [180] Finally, the Separation Agreement itself, at clause 13(1), provides for an annual review to ensure the amount paid accords with the appropriate Guidelines amount. (b) Spousal Support [181] In an originating application for spousal support, I must apply s. 15.2 of the Divorce Act. The relevant portions of that section are: Spousal support order 15.2 (1) A court of competent jurisdiction may, on application by either or both spouses, make an order requiring a spouse to secure or pay, or to secure and pay, such lump sum or periodic sums, or such lump sum and periodic sums, as the court thinks reasonable for the support

of the other spouse. ... Factors (4) In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including (a) the length of time the spouses cohabited; (b) the functions performed by each spouse during cohabitation; and (c) any order, agreement or arrangement relating to support of either spouse. Spousal misconduct (5) In making an order under subsection (1) or an interim order under subsection (2), the court shall not take into consideration any misconduct of a spouse in relation to the marriage. Objectives of spousal support order (6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should (a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown; (b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage; (c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and (d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time. [182] The defendant asks that I declare arrears owing to her under the Separation

Agreement for spousal support. In Wells v. Wells, [1998] B.C.J. No. 2695 (B.C.C.A.), the Court of Appeal overturned a lower court decision that treated a separation agreement as a prior order of the court in confirming arrears owed under the agreement. Prowse J.A., in an oral judgment, found that the agreement "was one of several factors to take into consideration in determining whether maintenance should be paid, ... in what amount, [and] it was not the sole or determining factor." (at para. 11). Accordingly, I will take into account the Separation Agreement, but I must consider all of the relevant factors under s. 15.2 in making any order regarding spousal support. [183] I am not persuaded that the Separation Agreement was unfair, or that it should be discounted. The arguments presented by both parties were largely framed within the confines of the Separation Agreement. In particular I find that clause 16(1) of the Separation Agreement is helpful, in that it requires a "material change in circumstance that affects the financial needs or abilities of either party" prior to variation of spousal support. To the extent that I consider the Separation Agreement under s. 15.2 of the Divorce Act, I must also consider whether there has been a material change in the circumstances of the parties since the Separation Agreement. I consider the significant shifts in income of B.M.D. since

the Separation Agreement was entered into to amount to a material change. (c) Child Support - Quantum [184] I have determined that the parties have shared custody of W.J.D. on an equal basis since February 2009. Accordingly, I must apply s. 9 of the Guidelines (reproduced above) in determining the appropriate amount of support payable. [185] The plaintiff ceased paying support in the summer of 2008, on the premise that his income and that of the defendant were relatively equal, and in accord with s. 9, neither should pay child support to the other. While this was not an unreasonable interpretation of the law, it was based on an unreasonable assessment of his income, which exceeded the defendant's by well over $100,000 at that time. [186] As discussed above, despite the existence of the Separation Agreement, I am bound by s. 15.1 of the Divorce Act in assessing the appropriate amount of child support payable. The existence of the Separation Agreement does not prevent me from assessing the appropriate quantum of support under the Guidelines. [187] While I have evidence before me that the plaintiff's income was considerably higher in 2007 and 2008 than it was at the time the Separation Agreement was entered into, the defendant has not asked for a retroactive variation in child support. However, the plaintiff has asked that I order the cancellation of arrears back to when he ceased

payments in the summer of 2008. While I must consider the principle that child support is the right of the child, and cannot be bargained away, I must also consider the principles of finality, certainty, and fairness to the parties. In L.S., Rowles J.A. found at para. 42 that there was jurisdiction in the court to order child support on a retroactive basis, but "discretion to make such an order is not to be exercised as a matter of course." [188] While I have reviewed the factors to consider when determining retroactivity of an award for child support set out by Rowles J.A. in L.S., I find that they are relevant to a claim for retroactive support by the recipient parent. In the present circumstances I am faced with no such claim. I am satisfied that the child must have been cared for adequately, and that the need for certainty of both parties weighs against reopening the amount of support from the date the plaintiff ceased payments to trial. If I were not faced with an explicit request by the mother not to revisit these amounts, I would have done so. [189] However, I am satisfied that there was a material change in circumstances, as envisioned within the Separation Agreement, when the parties agreed to shared custody in February of 2009. Accordingly, I will consider the claim of the plaintiff for the application of s. 9 of the Guidelines for that period forward. [190] I confirm

the amount owing under the Separation Agreement of $739 per month for the period between July 2008 and January 2009. I order the plaintiff to pay arrears on that amount. That amount is $4,434. [191] In 2009, I have assessed the plaintiff's income at $138,972, and the defendant's at $37,682. Accordingly I find that the appropriate table amount was $867. I order the plaintiff to pay arrears in the amount of $9,537, for the period from February 2009 until December of 2009. [192] B.N.D.'s projected income for 2010 is $93,782. I have relied on the 2009 income figures for C.N.D. Accordingly, I find that the child support payable by the plaintiff to the defendant for 2010 is $506 per month. I order the plaintiff to pay that amount in arrears beginning in January 2010, and going forward. (d) Spousal Support - Quantum [193] I have already determined that C.N.D. is entitled to ongoing spousal support on a compensatory basis. In Redpath v. Redpath, 2006 BCCA 338, at para. 42, our Court of Appeal indicated that spousal support awards should generally fall within the range determined by the Spousal Support Advisory Guidelines, except where special circumstances exist. [194] In making an order for spousal support, I note that the defendant specifically asked that I not make an order for an increased amount on a retroactive basis. As such I elect not to do so. I am satisfied that at the very

least, she is entitled to the amount owing under the terms of the Separation Agreement from the time B.M.D. ceased making payments. Accordingly I order the plaintiff to pay arrears of $650 per month from August 2008 until the end of 2010. [195] Going forward, based on the relative incomes of the parties, the length of the marriage, the roles of the parties during the marriage, and the age of C.N.D., I award her spousal support at $1,430 per month, which is at the high range of the Spousal Support Advisory Guidelines. I have chosen this figure with the comment in mind, reproduced above, in Chutter, where Huddart J.A., at para. 11, said "in long marriages the result will likely be a rough equivalency of standards of living." This high end figure should generate a rough equivalency of income between the parties. The plaintiff is to begin making these payments on January 31, 2011. [196] Any outstanding arrears of child and spousal support will also become payable on January 31, 2011. [197] It is important to note that W.J.D. is now 15 years old. It may be that within a few years the parties' circumstances may change substantially. Given as well the possible future variations in income of the parties, I am directing that the parties shall make financial disclosure to each other annually, beginning on or before June 30, 2011, at which time the parties may have recourse to the dispute resolution procedure outlined in their Separation Agreement.

8. SUMMARY [198] The following is a summary of my findings with respect to outstanding arrears and the plaintiff's ongoing support obligations: Child Support $506 a month Spousal Support $1,430 a month Arrears Child Support ($4,434 for 2008, $9,537 for 2009, and $6,072 for 2010) $20,043 Arrears Spousal Support (29 months x $650) $18,850 [199] I order the plaintiff to pay interest on the arrears pursuant to s. 11.1 of the Family Maintenance Enforcement Act, R.S.B.C 1996, c.

127. I leave it to counsel to determine the amount owing based on the within findings. I also leave it to counsel to ensure that the Family Maintenance Enforcement Program is informed as to what is the correct state of affairs of the plaintiff's account, having regard to the amounts in the letter placed into evidence, and these reasons. I am reasonably confident that counsel will be able to agree as to settlement of the Family Maintenance Enforcement Act amounts. Again, if there is some dispute that cannot be resolved, there will be liberty to apply.

9. COSTS [200] As the success in this case is divided, I order each party is to bear their own costs, with the exception of the time spent by the plaintiff advancing the grounds of cruelty as a basis for the divorce. Keeping in mind the comment of the court in McPhail, this was unnecessary and I assess special costs against the plaintiff for one and a half days, given the testimony and argument devoted to this ground and the additional written argument and attendant response in the pleadings tendered by the defendant in respect of this issue. "The Honourable Madam Justice Maisonville"