M.T. v. J.S.

2018 BCSC 615 M.T. v. J.S. IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: M.T. v. J.S., 2018 BCSC 615 Date: 20180417 Docket: E173352 Registry: Vancouver Between: M.T., also known as M.S. Claimant And J.S., also known as J.W.S., and S.H. Ltd. Respondents Corrected Reasons for Judgment: The Reasons for Judgment have been amended on March 21, 2019 to anonymize the parties. Before: Master Muir Reasons for Judgment Counsel for the Claimant: P. Daltrop Counsel for the Respondents: E.C. Walker Place and Date of Hearing: Vancouver, B.C. March 15, 2018 Place and Date of Judgment: Vancouver, B.C. April 17, 2018 introduction [1] This is an application by the claimant for the following orders: a) interim spousal support commencing January 1, 2018 and continuing on the first day of each month thereafter; b) interim child support for the two children of the marriage, C.W., born December 2, 2000 and C.T., born August 15, 2002 (collectively, the "children"); c) interim primary residence of the children to be with the claimant; d) the claimant to have exclusive occupancy of the former family home located at [address redacted], West Vancouver, B.C.; and e) costs. [2] The balance of the notice of application was not proceeded with. [3] The orders for primary residence of the children and exclusive occupancy of the former family home are not opposed and are hereby granted. Background [4] The parties began to reside together in a marriage-like relationship in 1998. They married on February 5, 2000 and separated on November 4, 2017. [5] The parties enjoyed a luxurious lifestyle during their marriage. They are members of both the Hollyburn Club and Capilano Golf and Country Club. They enjoyed annual vacations to Hawaii, Las Vegas and Los Angeles and they travelled to Europe. The children have always attended private schools. [6] The respondent is a well-known realtor and is the sole shareholder of S.H. Ltd., which is the sole shareholder of J.S. Realty Inc. (the "realty company"). [7] The claimant is a qualified real estate agent. However, she says her role during the marriage was to be the primary caregiver to the children while the respondent developed a highly successful real estate practice. The claimant apparently worked part-time when the children were in school, arranging agents' open houses and taking prospective buyers to see houses. [8] The claimant was receiving $10,000 per month from the respondent as a means of income splitting. She received that sum in January 2018, but the cheque for February 2018 was not honoured due to the January 8, 2018 financial restraining order pronounced by Justice Kent. That cheque has not been replaced. [9] From a summary prepared by the respondent's accountant, the realty company had historic pre-tax net income as follows: 2011 $2,450,000 2012 $1,750,000 2013 $1,250,000 2014 $2,450,000 2015 $1,900,000 2016 $2,950,000 2017 $1,000,000 [10] The respondent presently pays $8,000 to $9,000 per month for expenses related to the former family home. [11] In addition, the realty company continues to pay for the claimant's vehicle lease and an umbrella insurance policy, totalling approximately $3,400 per month. [12] The claimant and the respondent presently report on their Form F8 Financial Statements monthly expenses of $27,408.17 and $92,908.61 respectively. Positions of the parties [13] The respondent concedes that the realty company's pre-tax net income is available to him. The claimant argues that the respondent's income for support purposes should be the average of the realty company's net income for the past three years, which, adding back salaries paid to the parties, would amount to $1,929,735 per annum. That would provide monthly child support of $23,160 under the Federal Child Support Guidelines, SOR/97-175 ("FCSGs") and monthly spousal support ranging from $45,298 to $52,851 in accordance with the Spousal Support Advisory Guidelines ("SSAGs"). [14] The claimant submitted that it was not appropriate to depart from the SSAG figures given the expenses being borne by her and the lifestyle of the parties pre-separation. [15] The claimant argues that she should be entitled to spousal support at the high end of the SSAGs as she has a strong compensatory claim. She refers me to Boekhoff v. Boekhoff, 2016 BCCA 33 at para. 80 and K.P.O. v. C.L.O., 2017 BCSC 187 at para. 83. [16] Alternatively, the claimant argues that I should annualize the $366,068.33 in commissions the respondent has received in the first three months of this year, which would provide an annual gross income figure of $1,464,272. [17] Much argument was made by both parties about payment of the parties' expenses. The respondent proposed various deductions to spousal support to account for expenses paid by him and by the realty company. In the alternative, he argued that his responsibility for those expenses should cease. [18] The respondent, in particular, argues that, should he be required to continue paying the expenses for the former family home, those expenses should be deducted from any spousal support ordered. The claimant submitted that should the respondent stop paying the expenses for the former family home, her needs would be increased accordingly. [19] The respondent argues that it would be devastating to him if his income for support purposes is based on an average of the realty company's past three years' net income. He says that the real estate market slowed down from 2016 to 2017 and is likely to slow further down in 2018. He argues that the slow down has been caused by the foreign buyer's tax, the tightening of residential mortgage insurance rules, and the increases to the Bank of Canada interest rate. The respondent says these have resulted in a general tightening in the mortgage financing marketplace. Further, he says there is a hesitancy in the real estate market due to uncertainty over what steps the NDP government might take, some of which have been announced since the respondent swore his affidavit. [20] The respondent expects his income in 2018 will be roughly what it was in 2017. [21] In his Form F8 Financial Statement, the respondent indicates his present income is $1,010,914, less $3,255 for accounting fees, resulting in a guideline income of $1,007,659. [22] This is based on the realty company's pre-tax net income for the year-end August 31, 2017, adding back the salaries paid to the parties and some personal expenses paid by the realty company. [23] The respondent submits that given the quantum of income here, there is a wide degree of discretion with respect to support amounts. He agrees that child support should be based on the FCSGs, but says that in determining spousal support, there should be a consideration of the uncertainty and variability of his income. [24] The respondent argues that he needs to be able to support the expenses of the realty company in months where commissions are low and that caution should be exercised so that he has flexibility in case his income does not keep pace with that of the past years. [25] His view is that the standard of living that the parties have enjoyed in the past was and is unsustainable. He appends a memorandum, allegedly from his accountant, showing that the expenses of the parties have well exceeded their ability to pay. [26] The respondent argues that child support should be fixed at $11,000 per month. This is based on a guideline income of $1,000,000 and the resulting guideline amount of $12,189 less $1,130 (the claimant's contribution to present s. 7 expenses). [27] As to spousal support, the respondent argues that it should be based on a 50/50 net disposable income split after factoring in payment of a number of extraordinary expenses, resulting in a payment of $8,824 per month. The respondent then subtracted the additional monthly expenses of $3,400 that the realty company continues to pay, arriving at monthly total spousal support payable to the claimant of $5,424 (rounded to $5,500). [28] The respondent argues that, after paying the expenses related to the former family home of $8,122 per month and factoring in income tax, the claimant would have a monthly disposable income of $7,657. [29] The respondent argues that any underpayment resulting from a conservative approach can be compensated for at trial given the substantial equity in the family home. Analysis The Respondent's Guideline Income [30] I do not agree that the guideline income of the respondent should be based on an average of the realty company's net income for the past three years. There is no evidence to suggest that the real estate market going forward will be as favorable as it was pre-2017. [31] I accept that the respondent has reason to be pessimistic about the real estate market and hence his income. [32] It does seem reasonable, however, to set his guideline income for interim purposes at the same level as for 2017. It is reasonable to assume that much of the impact of the changes to the real estate market referred to by the respondent has been reflected in the market by now. [33] Certainly, the evidence of his sales and commissions in the latter months of 2017 and the first three months of 2018 supports that the respondent's 2018 income will likely match that of 2017. [34] As noted, the calculation of the respondent's income that is included in his Form F8 Financial Statement is based on the realty company's income for the year-end 2017, adding back the salaries paid to the parties and some personal expenses paid by the realty company. [35] That seems to be as good an estimate of 2018 income as can be done for present purposes. Thus, the respondent's guideline income for the purposes of this application will be $1,010,914. There was a deduction for accounting fees made in the respondent's Form F8 Financial Statement of $3,255. There was no argument directed to this and I do not see any evidence of the basis for the reduction. I have, therefore, not considered it for present purposes. Child Support [36] As the respondent's guideline income is greater than $150,000 per annum, s. 4 of the FCSGs permits deviation from the guideline amount where that amount is "inappropriate". [37] The respondent conceded that there are no facts that would make the application of the tables inappropriate here. The court of appeal discussed this issue in Hathaway v. Hathaway, 2014 BCCA 310 at paras. 23-35. Absent the concession made by the respondent, I would have come to the same conclusion. There is no compelling reason to depart from the table amounts for child support in this case. [38] The claimant's notice of application here was filed December 21, 2017. It is, therefore, arguably appropriate to commence payment of child support in January 2018. Given the payment of expenses by the respondent and the realty company since that date, however, I am of the view that child support should commence on April 1, 2018. [39] Thus, I order monthly interim child support in the amount of $12,318 for the two children of the marriage commencing April 1, 2018 and payable on the first day of each month thereafter. [40] There were submissions made regarding s. 7 expenses for the children. Rather than making orders regarding specific expenses, which were not sought, I order that the s. 7 expenses of the children be paid in accordance with the parties' incomes commencing April 1, 2018. Spousal Support [41] There is no question that the claimant is entitled to interim spousal support. The respondent did not take any issue with her entitlement. [42] Given the respondent's income is greater than $350,000, the court has a significant discretion with respect to determining the quantum of support and, in particular, to consider whether the amount set by the SSAGs is appropriate. [43] The parties both referred me to the decision of Loesch v. Walji, 2007 BCSC 1807, aff'd 2008 BCCA 214. [44] The court of appeal in Loesch noted as follows: [17] Applications for interim support are usually made in circumstances in which the evidence concerning family assets and the economic consequences of the breakdown of the marriage are not fully developed. Consequently, most applications for interim support focus on the needs of the party and the ability to pay. [18] As Smith J. (as he then was) observed in Grossi v. Grossi (1993), 48 R.F.L. (3d) 413 at para. 2 (B.C.S.C., Chambers): Where the parties have, during the course of the marriage, established a standard of living and a pattern of spending, the interim award should be sufficient to allow the applicant to continue at that level if the ability to pay warrants that: Row v. Row (1991), 35 R.F.L. (3d) 237 (Alta. Q.B.), at p. 242. The applicant is not entitled, however, to an award which will permit extravagant spending: Kives v. Kives (1984), 43 R.F.L. (2d) 126 (Man. C.A.); O'Toole v. O'Toole (1986), 3 R.F.L. (3d) 218 (B.C.S.C.). [19] In Traber v. Traber, [1998] B.C.J. No. 2195 (QL) (S.C., Chambers), Macaulay J. noted the difficulties posed by applications for interim support, at para. 5: Mrs. Traber argues that an interim order should take the following three criteria into account: (1) needs; (2) ability to pay or means; (3) presumptive claim to an equal standard of living subject to an equal sharing of the consequences of the dissolution of the marriage. The final criteria stems from the decision of the Supreme Court of Canada in Moge v. Moge (1992), 43 R.F.L. (3d) 345, and is a relevant factor on applications for interim spousal support: Carr v. Carr (1993), 46 R.F.L. (3d) 326 (B.C.S.C.) and Myers v. Myers [1996] B.C.J. No. 6805, Cranbrook Registry (B.C.S.C.). However, the extent to which the "equal standard of living" criteria, or any other factor found in s. 15(7) of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) influences the amount of interim support will depend on the nature, extent and reliability of the evidence. It must be remembered that interim applications are based on affidavit evidence that is often conflicting and incomplete. Here, it is too early to fully address all the economic advantages or disadvantages arising from the marriage or its breakdown. It is also too early to fully determine whether Mrs. Traber is able to work full-time and achieve economic self-sufficiency. Accordingly, in spite of all factors being relevant, the evidence as to means and needs is more complete at this stage than the evidence respecting other factors. The difficulty this presents on an application for interim support was recognized in two authorities not referred to by counsel: Johnson v. Johnson, [1993] B.C.J. No. 2140, New Westminster Registry No. D031650 and Short v. Short (1996), 21 R.F.L. (4th) 429 (B.C.S.C.). [20] Thus, the central factors that are usually to be considered on an interim application for either child or spousal support are the means or ability to pay support, and the needs of the spouse and children. [45] The chambers judge recognized (at para. 17) the "ceiling" of payor income of $350,000 under the Spousal Support Advisory Guidelines. The difficulties posed by very high incomes such as the one at bar were considered by Professors Carol Rogerson and Rollie Thompson in The Spousal Support Advisory Guidelines: A Draft Proposal, (Ottawa: Dept. of Justice, 2005) at p. 87: If the payor earns more than $350,000, a court can decide to go higher or not. Under the with child support formula the operation of the ceiling is complicated by the fact that child support increases as incomes rise above the ceiling. We can suggest two possible approaches for these very high income cases using the with child support formula. The first approach uses the formula to determine a minimum amount for spousal support, an approach we can call "minimum plus". A notional calculation would be required to calculate spousal support at the $350,000 ceiling, using the child support payable at the ceiling. This would determine the "minimum" spousal support range. [ .] There would be discretion to add to that minimum for incomes over $350,000, after taking into account the actual amount of child support being paid by the payor at that higher income level. This approach might make more sense where the payor's income is closer to the ceiling. The second approach would be one of pure discretion. Once the payor's income exceeded the ceiling, then there would be no "minimum" for spousal support, just a dollar figure that would take into account the actual amount of child support paid, an amount which can be very large for cases well above the ceiling. [Emphasis in original.] [46] The chambers judge did not elaborate on her use of the Spousal Support Advisory Guidelines, except to note that the court has a discretion in high income cases, and there was evidence of the ability to pay and evidence of need, using a flexible approach. The chambers judge also took into account the fact that the support would be taxable in Ms. Loesch's hands. [47] The Spousal Support Advisory Guidelines were recently discussed in McEachern v. McEachern, 2006 BCCA 508, 62 B.C.L.R. (4th) 95, 33 R.F.L. (6th) 315 at para. 64: As has been stated by this Court on prior occasions, the Advisory Guidelines are simply guidelines; they are not law. The formulas need not be slavishly adhered to by judges, who must always have regard to the particular facts before them. Those facts may disclose valid reasons why the Advisory Guidelines are not of particular assistance in a given case, or why an award may justifiably be greater or less than that set out in the applicable formula. But, it is fair to say that the Advisory Guidelines have been accepted by this Court, and by the trial courts, as a useful tool in determining the appropriate range of awards in most cases. In Redpath v. Redpath, [2006] B.C.J. No. 1550, 2006 BCCA 338, this Court went so far as to indicate that an order of spousal support which falls substantially above or below the suggested range could give rise to an error in law, unless a reasonable explanation was provided for the discrepancy. This is understandable since, as stated by this Court in Yemchuk v. Yemchuk, [2005] B.C.J. No. 1748, 2005 BCCA 406 (at para. 64): " the Advisory Guidelines are intended to reflect the current law, rather than to change it." At this stage in their development, the Advisory Guidelines are not a substitute for relevant authorities, but a supplement to them. [45] I have, thus, reviewed the Form F8 Financial Statements of both parties and the impact of awarding a spousal support amount in keeping with the SSAGs. [46] For an income of $1,010,914, the SSAGs provide for monthly spousal support of $22,960 at the low end, $25,063 mid-range, and $27,165 at the high end. [47] That would provide net disposable income for the parties as follows: SSAGs range Respondent's net disposable income Claimant's net disposable income Low $21,991 $26,978 Mid $20,891 $28,078 High $19,792 $29,177 [48] As noted, the monthly expenses that the claimant and the respondent have set out in their Form F8 Financial Statements are $27,408 and $92,908 respectively. I note the parties would require after-tax income of $1,443,792 to pay the expenses claimed. [49] In the circumstances, I have concluded that I should make an order for interim spousal support and allow the parties to decide which expenses, other than those for the former family home, they will have to sacrifice in order for them to live in the reality of a reduced income and the increased expenses that separation brings. [50] I will order, on an interim basis, that commencing April 1, 2018, the parties are to share the mortgage, taxes and municipal fees for the former family home in accordance with their respective incomes. Other than these expenses and the children's s. 7 expenses referred to above, each party is to bear their own expenses. [51] As to the quantum of interim spousal support, I cannot make any order that will satisfy the stated needs of both parties. [52] I note that the quantum of child support, as is always the case with Federal Child Support table amounts for high incomes, is large. [53] There will be, however, an additional burden on the claimant of assuming all of her expenses and most of those of the children, her portion of the shared expenses for the former family home, and payment of taxes on spousal support ordered. That will likely shift a significant burden of expenses to the claimant. [54] The respondent, of course, in the interim, will receive the benefit of any increase in income over the guideline amount, but also would bear the consequences should his income fall. [55] After considering these factors and the means and needs of the parties, I conclude that a complete departure from the SSAGs is not warranted here. I do conclude, however, that a conservative approach militates in favour of support at the low end of the SSAG range. [56] The claimant will have interim spousal support at the low end of the SSAGs of $22,960 per month commencing April 1, 2018 and payable on the first day of each month thereafter until agreement or further order. [57] Given the potential for large variations in the respondent's income, I am making these interim orders in accordance with the provisions of the Family Law Act, S.B.C. 2011, c. 25 so that there is liberty to apply to vary all of the interim orders in accordance with Family Law Act, ss. 152 and 167. [58] To the extent that the application before me included a retroactive component, that is adjourned generally. [59] The claimant will have her costs of this application in the cause. "Master Muir"