G.J.L. v. M.J.L.

2017 BCSC 2504 G.J.L. v. M.J.L.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: G.J.L. v. M.J.L., 2017 BCSC 2504 Date: 20171016 Docket: E130396 Registry: Vancouver Between: G.J.L. Claimant And M.J.L. Respondent Before: The Honourable Mr. Justice Schultes Oral Reasons for Judgment Appearing on her own behalf by teleconference: G.L. Counsel for the Respondent: A. Huang Place and Date of Hearing: Vancouver, B.C. July 27, 2017 Place and Date of Judgment: Vancouver, B.C. October 16, 2017 1. Introduction [1] On April 28 of this year, I gave a judgment in this family law trial: 2017 BCSC 688. A full understanding of the issues in the trial is available from those reasons. [2] For the purposes of this application what is essential to know is that the parties were disputing whether their separation agreement needed to be varied. The agreement provided that M.J.L. ("M."), the higher income earner, was to pay half of the so-called setoff amount of child support (the difference between their respective table amounts in the Federal Child Support Guidelines) to G.J.L. ("J.") in their situation of shared parenting. I ultimately concluded that the full setoff amount was required to be paid to her and varied the agreement to reflect that. A retroactive support payment to J. resulted. [3] I added some other clarifying language to the agreement, which has given rise to this application.

2. Determining Income [4] J. has made an application for a clarification of the paragraphs in the judgment that deal with the ongoing calculation of the parties' incomes and the resulting adjustments to the setoff amount, as well as their respective contributions to the children's special and extraordinary expenses. [5] The catalyst for the application, it appears, was a change in the circumstances of M.'s employment - from the employee status that he had had throughout the trial, to his current self‑employed status. Although his prospects for gaining further contracts are uncertain, he deposes that he is prepared to have his current support obligation based on a salary of $130,000 a year, which is slightly lower than the income I found for him at trial. (As of the hearing in this matter, J.'s very low disability income remained in place, with a somewhat alarming deadline of March of next year for it to end completely.) [6] The portions of the judgment in question are beginning at para. 158: [158] While I do not necessarily agree that there have been shortcomings in M.'s financial disclosure that make it necessary, and while many of the departures from the original formula in the agreement were actually for J.'s benefit, it would still greatly assist these parties in maintaining their largely constructive post-separation relationship to revert to the much simpler and clearer

income-determination formula provided by the Guidelines. [159] Accordingly, I will replace those provisions of the agreement, as it has been amended by the parties from time to time, with an order that the parties' incomes for the purposes of child support and special and extraordinary expenses will be determined in accordance with s. 16 of the Guidelines (Line 150 incomes, as modified by any permissible changes under Schedule III). [160] I also consider it advisable, for the same purposes, to supplement the provisions of the agreement dealing with disclosure of income information and the review of amounts payable with the following additional orders: - Each party will immediately advise the other of any change in their income and provide all available supporting documentation concerning it; - Unless a material change of circumstances occurs that requires a further review of child support pursuant to s. 9 of the Guidelines, the parties will automatically adjust child support to the set-off of their respect table amounts of support whenever there is a change in their income, effective the month following the change. [7] There was a further, related order in the part of the judgment dealing with special and extraordinary expenses: [162] The agreement already provides that the parties will share the special and extraordinary expenses defined in the agreement in proportion to their

incomes. To make the process as fair and efficient as possible, I will simply add a term that in addition to the yearly adjustment of special and extraordinary expenses contemplated in the agreement, the parties will also adjust their proportionate shares of those expenses whenever there is a change in either of their incomes. [8] In her affidavit, J. deposes to her belief that these terms were intended to ensure that long‑term changes to income, like salary increases or having to go on disability, are captured in a timely manner, but that they do not contemplate sporadic changes to income such as bonuses or commission. To that end, she has submitted a method for addressing changes that would make it clear that if the nature of the change allowed its impact on yearly income to be predicted (which would be possible in the case of the more enduring types of changes she has described), then child support payments would be adjusted immediately based on it. No interim adjustment would be made in the case of less enduring changes. Those would be captured at the end of the year, when the tax return reflecting that parties' entire income is filed. [9] J. has correctly identified the purpose underlying these provisions. My intention was indeed to create a mechanism for adjusting the required payment that took into account changes to employment that might occur within an individual tax

year and therefore would not be captured until the next exchange of tax returns and notices of assessment. I had in mind the difficulties that have arisen when these parties attempt to "reconcile" (their term for the process) their respective financial obligations relating to the children each year, as the trial evidence revealed. [10] I made specific reference to the income determination directed by s. 16 of the Guidelines, which is expressed in annual terms, because during the time since their separation the parties have periodically decided that various things are or are not included in income for the purposes of their agreement. My intention there was to have a single, consistent standard, guided by the applicable law, for defining income from now on. [11] However, as the request for clarification correctly identifies, there is a potential inconsistency between the sources of income as determined in s. 16 of the Guidelines, which refers to line 150 of the personal tax return with the adjustments permitted by Schedule III, and the monthly monitoring and potential adjustments that I have provided for in para.

160. Specifically, changes within a year end up being expressed in terms of their impact on annual income for the purposes of calculating increases or decreases to the table amount of support, regardless of when in the calendar year they occur. [12] The possible approach J. has identified in her material - extrapolating the increase to yearly income if the nature of the increase permits it and deferring any such change if it does not - is a thoughtful and rational one and it requires that I reflect on the practical value to the parties of the calculation method for shorter‑term changes that I have provided. [13] I feel comfortable taking notice that many of the agreements and consent orders that come before the Court require an exchange of returns and notices of assessment by a fixed date each year, often June 1st, followed in many cases by a provision for an automatic adjustment of support based on any changes. This approach has the virtue of being extremely simple to carry out and, in the case of parties with mostly stable incomes and a good faith approach to implementation, it can avoid the need for further court applications for many years. Its limitation is that these changes within a tax year that I have described will not necessarily be immediately captured and, absent an agreement between the parties, may require an application for retroactive support to correct. [14]

Previous decisions of this Court have pointed out that despite the language of s. 16, it is not the payor's income from the last closed tax year that inevitably forms the basis of their support. The court should rely on the most current sources of income available. In my reasons, I cited the well‑known decision of Fuzi v. Fuzi, [1999] B.C.J. No. 2263 (S.C.), as authority for the principle. Instead the court should, based on the best information available, annualize the payor's current income for the year in which the application is taking place. A three‑year averaging in s. 17 can then be employed if the current income that has been determined is not the fairest. [15] I conclude that the more specific mechanism that I provided in para. 160, despite the intentions underlying it, will ultimately create more problems than it solves and should be varied. While certain changes in employment or income will almost certainly affect annual income, it may in many cases be difficult for these parties to extrapolate annual income immediately, or within the period I have provided, based on monthly changes, especially now that M. is self‑employed and relies, according to his material, on various sources of work during the year. [16] The same is true for changes in J.'s disability situation, such as the end of her current coverage which looms ahead, and her efforts that she has described for

retraining for employment that she is able to do despite her serious levels of pain. [17] On reflection, I also think it was ill‑advised for me to try to draw the distinction that I did between changes in income that might result in monthly changes to support, and a material change in circumstances giving rise to the right to review. Of course, any such change that has a meaningful effect on annual income will almost inevitably be a material change. [18] A payor parent always has the obligation to increase their support as their income rises. So, in a situation where the payor experiences a meaningful increase in income earlier enough in the year that the recipient is prejudiced by the support adjustment not occurring until the end of that tax year, there could always be an application by the recipient for retroactive support for the shortfall. Similarly, a payor can apply to recover any significant overpayment if their income dropped earlier in the year. [19] To avoid either of these situations, with the costs awards that could accompany them, it makes sense for parties to advise each other of major changes in their income as they occur and to discuss the appropriate resulting change in support. [20] The better approach, I conclude, is therefore to continue to adjust support based on the generally indisputable information available from tax returns and notices of assessment

when that material becomes available. This is the basic structure of their original agreement. However, it seems to me that the parties have, to some extent, become hung up on the concept of reconciling and adjusting their respective support obligations and s. 7 expenses, based on the past year's income information, when in fact it is mainly intended as a means of adjusting support going forward, with the opportunity to seek a retroactive variation if an undisclosed change is revealed by those documents. [21] I think some modification of the language in the agreement is needed to make that absolutely clear. Accordingly, para. 160 in the reasons for judgment will be replaced with the following: [160] I also consider it advisable to make the review mechanism in the agreement more explicit with respect to the responsibilities of each party. Therefore s. 15(1) will be replaced with the following: · The parties will provide each other with their filed personal tax returns including all attachments and notices of assessment, by June 1st of each year. · Effective July 1st the parties will adjust their respective table amounts of support and the resulting setoff to be paid from that point onwards based on their line 150 incomes, less any deductions permitted by Schedule III. Effective that date the parties will also adjust their proportionate shares of the children's special and

extraordinary expenses to be paid from that point onwards based on the same incomes. · If the parties operate any businesses they will provide the other party with a copy of their annual business tax returns with all attachments as soon as they are filed each year. In view of this mechanism ss. 16(1)(a)(b) and (e) of the order will be deleted. [22] I should say, for greater certainty, that until there is an order or agreement adjusting it, M. should currently be paying child support based on a setoff of his and J.'s table amount, based on their 2016 tax returns and notices of assessment. The relationship between those two incomes should also form the basis of their current respective shares of special and extraordinary expenses.

3. Assessment of Costs [23] I provisionally awarded J. her costs at the ordinary scale of difficulty for having achieved substantial success on the issues of importance in this trial. This was subject to the parties' ability to make additional submissions if there were relevant matters that I was not aware of at that point. [24] Obviously, J. does not take issue with the award in her favour, but asks that I assess the costs based on the draft bill that she has provided, to avoid her having to go through another hearing in front of the registrar. Court appearances are extremely stressful and physically demanding for her. [25] M.'s counsel raises the valid concerns that there were earlier applications in this matter on which he was successful or success was divided that will have to be taken into account, and the registrar will be in a better position to deal with that situation. [26] As I have said repeatedly, I have considerable sympathy for the physical suffering that J. endures as a result of her injury and I fully accept that the stress of this litigation aggravates her condition. [27] The family tariff of costs has been simplified considerably and there could certainly be situations in which it is more in keeping with proportionality for the trial judge to assess costs based on it following a family trial. [28] But in addition to having to apportion costs based on the

outcome of earlier applications which are not referred to in the draft bill, I think J.'s entitlement to all of the potential available items in the tariff, despite her self‑represented status, would be best determined with the assistance of the registrar's specialized expertise in this matter. [29] The law is that a self‑represented litigant should be entitled to their costs in the usual way, since an award of costs serves to function beyond just defraying the expense of retaining counsel, but there may be nuances to that analysis in application that a registrar will grasp more fully. [30] I actually think that the registrar's involvement will benefit both parties, because it eliminates the risk of either an excessive or an inadequate costs award resulting from the absence of that level of expertise on my part. [31] Therefore, if the parties are unable to agree on the amount of costs to be paid in this case, which I strongly recommend they attempt to do, there will be a reference to the registrar for an assessment.

4. Offer to Settle [32] J. seeks double costs from the time of her delivery of an offer to settle on April 15, 2015, just before the trial began. The key component of her offer was that income for support purposes would be determined based on the parties' line 150 income on their tax returns for the preceding year. A straight setoff formula for child support would result in a payment to J. of $1,414 per month, a payment by M. of $12,000 for retroactive child support, and a payment by him of $5,000 "in compensation for a small portion of the costs associated with these matters". [33] In his affidavit M. referred to a number of reasons why he did not accept this offer. At that point, it was anticipated that J. would be returning to work from her back injury. Disclosure from her was also limited - her examination for discovery had only been held on April 7 and her list of documents was dated April 20. An order had been made for documents related to the income of Mr. V., her current partner, and M. recalled that this material was not disclosed until the end of April. In addition, the relatively new Family Law Act may have had some effect on how agreements such as the one that was sought to be varied would be viewed by the court. [34] The relevant parts of Rule 11(1) of the Supreme Court Family Rules provide: (1) In this rule, "offer to settle" means (a) an offer to settle

made under this rule that (i) is made in writing by a party to a family law case, (ii) has been served on all parties, and (iii) contains the following sentence: "The ..............[party(ies)].............., ..............[name(s) of party(ies)].............., reserve(s) the right to bring this offer to the attention of the court for consideration in relation to costs after the court has pronounced judgment on all other issues in this proceeding." (4) The court may consider an offer to settle when exercising the court's discretion in relation to costs. (5) In a family law case in which an offer to settle has been made, the court may do one or more of the following: (b) award double costs of all or some of the steps taken in the family law case after the date of delivery or service of the offer to settle; (6) In making an order under subrule (5), the court may consider the following: (a) whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer to settle was delivered or served or on any later date; (b) the relationship between the terms of settlement offered and the final judgment of the court; (c) the relative financial circumstances of the parties; (d) any other factor the court considers appropriate. [35] First of all, there is no dispute that the language used by J. is sufficient to meet the definition of an offer to

settle. [36] With respect to whether this was an offer that ought reasonably to have been accepted, the oft‑cited decision in Hartshorne v. Hartshorne, 2011 BCCA 29, contains some helpful comments at para. 27: The first factor - whether the offer to settle was one that ought reasonably to have been accepted - is not determined by reference to the award that was ultimately made. Rather, in considering that factor, the court must determine whether, at the time that the offer was open for acceptance, it would have been reasonable for it to have been accepted . . . As was said in A.E. v. D.W.J., "The reasonableness of the plaintiff's decision not to accept the offer to settle must be assessed without reference to the court's decision" . . . Instead, the reasonableness is to be assessed by considering such factors as the timing of the offer, whether it had some relationship to the claim (as opposed to simply being a "nuisance offer"), whether it could be easily evaluated, and whether some rationale for the offer was provided. We do not intend this to be a comprehensive list, nor do we suggest that each of these factors will necessarily be relevant in a given case. [37] I conclude that this offer is not one that should reasonably have been accepted. The level of disclosure from J., particularly in light of the clear state of the law concerning the relevance of Mr. V.'s contribution

to the household expenses, would not have permitted an accurate determination of the prospects of success. [38] Similarly, M.'s counsel was relaying a 2014 decision of this Court, which I ultimately distinguished in my judgment, holding that agreements could not be retroactively varied under the Family Law Act. [39] I also do not think sufficient detail was provided to assess the appropriateness of the additional $5,000 payment that J. requested, which was not related to a specific aspect of the notice of family claim. [40] With respect to the relationship between the offer and the final order, the monthly amount of support I awarded is about $200 higher than what was offered and the retroactive payment is about $1,000 lower. This should be treated as a neutral factor in the analysis. [41] Despite the move to self‑employed status described in M.'s affidavit, J. earns such a small amount on disability that there is still a meaningful disparity between the financial circumstances of the parties. While still not a decisive factor, it weighs in her favour. [42] Ultimately, I conclude that the state of the disclosure and the reasonable understanding of the law at the time that the offer was delivered are the determinative considerations and I decline to award double costs against M.

5. Costs of this Application [43] Finally, since the need for this application was created by what I now consider to have been an incorrect approach on my part (by adding additional provisions for short‑term income determination) there will be no award of costs in relation to this application. The Honourable Mr. Justice T.A. Schultes