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

2025 BCSC 1122 M.G.M.L. v. J.S.L.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: M.G.M.L. v. J.S.L., 2025 BCSC 1122 Date: 20250617 Docket: E233129 Registry: Vancouver Between: M.G.M.L. Claimant And J.S.L. Respondent Before: Associate Judge Robinson Reasons for Judgment Counsel for the Claimant: K. Courtney Counsel for the Respondent: N. Brar Place and Date of Hearing: Vancouver, B.C. April 1 and May 26, 2025 Place and Date of Judgment: Vancouver, B.C. June 17, 2025 Introduction [1] These reasons arise from cross applications, heard over two non-consecutive days, in a family law dispute. [2] The parties began to live with one another, in a marriage-like relationship in January 2013. Thereafter, they were married in May 2015. They separated in December 2022. Over the course of their marriage, they became parents to one child, who shall be referred to as "J" in these reasons. J is now 8 years old. [3] Following separation, the parties continued to cohabitate for approximately one year. In November 2023, the respondent left the former family home, located in Whistler, BC. [4] They have continued to share equal parenting of J since separation. [5] It is in this context that the present applications arise. Whereas each party seeks several orders, the primary issue concerns a determination of their respective guideline incomes for the purpose of assessing interim support obligations. It is from the determination

of the parties guideline incomes that all of the relief sought flows. [6] In this regard, the claimant contends that for the purposes of assessing the parties' respective obligations, the respondent's guideline income ought to be determined or imputed at between $350,000 and $450,000 per annum. Meanwhile, she contends that her guideline income is $40,200 per annum. [7] The respondent takes a different position and argues that the claimant's guideline income ought to be imputed at $90,200 per annum while her own income is only $182,799 per annum. [8] As a preliminary issue, I am compelled to note that the court is being asked to resolve the foregoing discrepancy on an interim basis. The trial of this action is scheduled for eight days, beginning on November 17, 2025 - less than five months from now. The relatively imminent trial has given me pause since any orders made now will need to be revisited. I have considered, but ultimately rejected, the option of dismissing this application and leaving the issues to be addressed at trial. In doing so, I am of the view that the matters before me are capable of being addressed, albeit perhaps imperfectly, as a stop-gap measure pending trial. Background [9] The court was presented with extensive evidence on this application. The joint application record consisted of four volumes and multiple affidavits. For the reasons that follow, it is

not necessary to recite the evidence in detail. a) Respondent's Income [10] The Respondent's income is largely, but not exclusively derived from her ownership and operation of two business, each of which are focused on youth sport programs. These businesses have collectively realized varying levels of success. In the fiscal year ending August 31, 2019, they generated gross revenue of more than $1 million. In the fiscal year ending August 31, 2024, those same businesses generated gross revenues of approximately $900,000. [11] In addition, the respondent has earned income as a realtor after becoming licensed in 2023. In 2023, she earned gross real estate commissions of $90,497. She anticipates gross commissions of approximately $89,000 in 2024. b) Claimant's Income [12] The claimant has similarly derived most of her income from self-employment. She owns and operates a business focused on training and workshops for children's fitness instructors and educators. Her business realized its highest revenue in the fiscal year ending September 2020, when gross revenues totaled more than $350,000. In the fiscal year ending September 2024, revenue from that business had fallen to $140,261. [13] The claimant's income is supplemented by her employment as a fitness instructor with the Resort Municipality of Whistler pursuant to which she earns $175.00 biweekly ($4,200 per annum). Issues for

Determination [14] None of the foregoing is contentious. This dispute and the issues for resolution concern: a) The profitability of the respondent's businesses and the expenses attributable to those businesses. It is argued that to the extent that the respondent's personal expenses are being incurred by the business, those expenses should properly be regarded her income and income and thus inform her guideline income for support purposes; and b) Whether income should be imputed to the claimant on an interim basis. [15] The determination of these issues will necessarily allow for an assessment of the parties' respective support obligations and entitlements. Assessment of Respondent's Income [16] The respondent submits that her guideline income ought to be assessed at $182,799. For the reasons that follow, I disagree. In my view, the respondent's guideline income must account for various personal expenses which are being paid on her behalf by her businesses. A failure to account for those expenses has the effect of artificially reducing the respondent's guideline income and commensurately reducing her obligations related to both spousal support and child support. [17] In this respect, the law recognizes that not all corporate expenses, even those that are lawful and appropriate for income tax purposes, should be relied upon for determining a party's guideline income. The

assessment of guideline income for the purposes of the Federal Child Support Guidelines (the "Guidelines") requires an analysis that differs from that required by the Income Tax Act, RSC 1985, c 1 (5th Supp). See: Riecker v. Parton, 2024 BCCA 114, at paras. 30-31 and Vincent v. Vincent, 2012 BCCA 186, at paras. 35-38 [18] There are circumstances in which an expense might properly constitute a taxable deduction for a business but may not properly be relied upon as a basis for reducing the guideline income of a payor spouse under the Guidelines. [19] When confronted with the dilemma frequently posed by self-employed income earners in family law matters, the law has developed alternative methods of assessment. [20] In some cases, where the amounts stated are coherent and supported by the available evidence it is not necessary to look behind a party's personal income tax return, or the income declared by a party on their F8 Financial Statement. Determining guideline income in those cases is not complex. [21] It is where the stated amounts lack coherency or internal inconsistency that alternative approaches are warranted. In my view, that describes the present case and justifies an alternative approach. [22] One such alternative approach is described as the "corporate income" method. This method assumes the pre-tax corporate income of the payor's corporation to be available for

child support purposes, subject to adjustments pursuant to ss. 18(2) and 19(1) of the Guidelines: Z.A.S. v. T.S., 2022 BCSC 435, at paras. 49-52 and Quinton v. Kehler, 2020 BCCA 254, at paras. 74-101. [23] This approach requires the court to add back in to the payor's income any corporate expenses that are not reasonable, that are not true cash/out-of-pocket expenses, and/or that provide a personal benefit to the payor. The burden of proving the reasonableness of deductions from business income lies with the spouse making the deduction. It is the obligation of that spouse to fully disclose the financial information and documentation relied upon to justify the deduction of each expense. It is not the other party's responsibility to hire, nor is it the court's obligation to appoint, an accountant or other professional to assess and challenge the reasonableness of the deduction: Wiebe v. Treissman, 2017 BCSC 1523, at para. 94. [24] In some cases, where it is impossible to apply the corporate income method to accurately determine guideline income, another alternative employed by the court involves an assessment with reference to a party's personal expenses. This approach, entails a review of the payor's after-tax spending amount which is then "grossed-up" to determine the gross income that would have had to be earned to sustain that level of spending: McCoppen v. Stewart, 2024 BCSC 1533, at para.

30. I will refer to this approach as the "expense gross-up" method. [25] In the present case, the claimant submits that the respondent has been remiss in her disclosure obligations such that it is impossible to meaningfully apply the "corporate income" method. She seeks to have the respondent's guideline income assessed using the "expense gross-up" method. This method, it is argued, would result in the respondent's guideline income being assessed at not less than $595,474 per annum. [26] The claimant arrives at that figure by totaling the respondent's alleged personal spending over the most recent 12-month period. She alleges that amount is at least $327,520. She further says that a net income of that amount requires a pre-tax, gross income of $595,474. [27] After a careful review of the evidence, I am unwilling to accede to the claimant's position. Following a trial of this matter, where the court will have an opportunity to review all of the evidence and the credibility of each witness is subject more comprehensive scrutiny, "expense gross-up" method may be appropriate. However, on an interim application, it is not an approach that I am prepared to employ. [28] The potential injustice arising from this approach is obvious. It could result in an assessment that has no basis in fact. The fact that the respondent may have incurred expenses of $327,520 is evidence only that she

had access to $327,520. It is not evidence that she had access to any higher, pre-tax amount. [29] Moreover, consideration needs to be given to the source of the monies which enabled the respondent to incur expenses of $327,520, particularly where there is evidence that the monies may not constitute income. To the extent that expenses were incurred on credit, they should not factor into the assessment. [30] Here, the respondent's evidence indicates that her lifestyle has been significantly augmented by borrowed funds. She deposes to having incurred a debt of approximately $130,000 owed to her mother. She has further provided evidence of borrowing against a line of credit to pay the costs associated with a business valuation report for use in this litigation. In addition, she deposes that all of her personal credit cards are "maxed out". [31] The foregoing evidence casts doubt on the extent of the respondent's income and it is a doubt that cannot be resolved on an interim application. [32] While there may be compelling reasons why the court will be inclined to use the "expense gross-up" method at trial, those reasons do not arise on an interlocutory application where the evidentiary record is incomplete and where the parties are constrained by time in fully advancing their respective positions. At this time, it is my view that the potential injustice arising from "expense

gross-up" method militates against its use. [33] In my view, justice, or at least, rough justice, can be achieved by an approximation of the "corporate income" method. [34] For the purposes of this application, the focus ought to be on the fiscal year ending August 2023, since this is the last fiscal year for which records are seemingly complete. [35] The unaudited financial statements for the respondent's businesses in that fiscal year that the respondent's businesses collectively generated revenue of $877,468. [36] In that same year, because of the costs of goods sold and operating expenses, the same financial statements indicate that the business realized a net loss $6,065. [37] While many of the expenses set out in the financial statements are beyond reproach and certainly represent legitimate business expenses from which the respondent derived no personal benefit, others are suspect and, in my view, ought to be accounted for in an assessment of the respondent's guideline income. [38] In this regard, expenses related to such things as accounting, advertising, legal fees, employee wages and annual franchise fees undoubtedly affected the corporate income available for distribution to the respondent. However, the same cannot be said for other expenses since they relate to amounts paid directly to the respondent or the respondent's personal expenses paid by the businesses on

her behalf. [39] In this respect, it is apparent that the respondent drew a salary and administrative fees from the businesses which should be treated as income for support purposes. In 2023, her combined salary and administrative fees totaled $117,000. In that same year, the business incurred expenses of $50,000 described as bonuses. That amount should likewise be treated as the respondent's personal income. [40] The more contentious issues concern operating expenses which may qualify as business expenses for income tax purposes but which also confer a personal benefit (in the form of a payment received or a savings realized) by the respondent. In this regard, I am referring to costs related to: a) meals and entertainment; b) telephone and telecommunications; c) travel; and d) vehicles. [41] These amounts are not, on their face, extravagant, but neither are they insignificant. They constitute gross expenses of $54,299 in the fiscal year ending August 2023. While a portion of these expenses likely relate directly and entirely to the operation of the businesses, the evidence satisfies me that a portion of that amount ought to be included in assessment of the respondent's guideline income. [42] Unfortunately, the court is unable to embark on any semblance of a forensic analysis to determine an appropriate portion. Accordingly, in an effort to achieve some measure of justice, I

ascribe 50% of those expenses, or $27,149.50 per annum to the respondent as part of her guideline income. [43] A further business expense which needs to be included in the respondent's income is the amount paid by the businesses for "real estate rental". In this respect, although the businesses had previously rented premises from which they operated, the respondent now conducts operations from her own home. She attributes slightly more than 12% of her household expenses to the businesses. From an income tax perspective, this may be entirely reasonable. However, this attribution has the effect of reducing the businesses' profitability and thus the respondent's support obligations. I find that the real estate rental expenses of $18,933.96 comprise part of her guideline income [44] That is not the end of the analysis. As stated earlier, the respondent has, since 2023, embarked on a secondary career as a realtor. In 2023, she earned gross commissions of $90,497. [45] Taking the foregoing into account, I have determined that the respondent's income, for Guidelines purposes, in 2023, was $303,580.46. [46] I am not inclined to find that the respondent's income has changed substantially since 2023. While the $50,000 bonus payable in that year may not be replicated, there is no reason to expect a significant reduction in the businesses' revenue nor the respondent's real estate

commission earnings in the foreseeable future. [47] Accordingly, on an interim basis, pending further order of this court, I find that the respondent's support obligations ought to be determined on the basis of a guideline income of $303,580.46. Assessment of Claimant's Income [48] An assessment of the claimant's income encounters some of the same issues described above. In this regard, the respondent contends that the claimant has likewise "run" personal expenses through her business. Accordingly, it is argued that her Income Tax Returns are not an accurate or reliable indicator of her true income. [49] This contention is not contested by the claimant who concedes the amount set out in income tax return is not reflective of her guideline income. She attributes this to "certain expenses that are proper and allowable for taxation purposes but that nonetheless should be included in personal income for support purposes". [50] In effect, the claimant acknowledges that it may be necessary to embark on either the "corporate income" or the "expense gross-up" method to ascertain her guideline income. [51] While the evidentiary record is insufficient to definitively employ either method in this context, a cursory review of the most recent financial statements pertaining to the claimant's business indicates that even after a portion of the business' expenses related to travel,

entertainment and management salaries are taken as personal expenses, the claimant's net income from her business is less than $30,000 per annum. This is less than the $40,200 stated as the claimant's guideline income in her F8 financial statement filed December 2, 2024. [52] The respondent's primary position on this application is premised on s. 19 (1)(a) of the Guidelines which confers discretion to impute income in a family law dispute if "the spouse is intentionally under-employed or unemployed". [53] In taking this position, the respondent points to several uncontested facts: a) The claimant has no barriers to employment. She is 43 years of age and is in good health; b) The claimant has previously been engaged in an occupation where she has earned $80,000 per annum; c) The claimant is highly educated, as the holder of two bachelor's degree and a master's degree in education; d) The claimant has the capacity to work full-time hours; e) Despite the claimant relocating in the past, she not expressed a willingness to relocate form Whistler, BC where she has disclosed difficulty in securing remunerative employment; f) The claimant continues to pursue her business despite the apparent futility of doing so, having regard its minimal to negligible profitability over several years; and g) Since the parties' separation, in December 2022 the claimant has applied for no more than five

employment positions (a frequency of approximately one application every six months). [54] The claimant argues that there is no basis on which to impute to her an income level different from that which she has claimed. In this regard, she argues that: a) The circumstances of the marriage compromised her ability to realize her full earning potential. She says that she was encouraged and required by the respondent to make professional sacrifices and prioritize the career aspirations of the respondent ahead of her own; b) Since November 2023 (when the respondent left the former family home), her ability to pursue professional opportunities was affected by the need to find tenants and roommates to assist in paying the mortgage on the former family home; and c) Her business' recent lack of profitability owes to decisions made in prior years - when she was unable to focus on the business' needs - and that she expects her renewed focus will begin to pay dividends and return the business to profitability. [55] In considering the parties' positions, it is useful to begin with a review of the authorities. [56] There are at least two unassailable principles that apply in this context: a) First, child support payments are based on what the parent actually earns and on what the parent has the capacity to earn; and b) Second, a parent has a legal obligation to earn as much as he or she is

reasonably capable of earning to meet the obligations to support the children: R.W.L. v. L.B., 2012 BCSC 457, para. 26 [57] The party seeking to impute income has the onus of establishing the basis for imputation on a rational and evidentiary basis: Windle v. Windle, 2010 BCSC 18 at para. 88. [58] Where imputation is premised on alleged underemployment, the applicable principles are those set out by the court in Donovan v. Donovan, 2000 MBCA 80, endorsed and affirmed by our Court of Appeal in Watts v. Willie, 2004 BCCA 600 at para. 16: The following guidelines may be considered when determining whether to impute income. (See Dr. Julien D. Payne, Imputing Income, "Determination of Income, Disclosure of Income," Child Support in Canada, Danrab Inc., August 3, 1999.) 1. There is a duty to seek employment in a case where a parent is healthy and there is no reason why the parent cannot work. It is "no answer for a person liable to support a child to say he is unemployed and does not intend to seek work or that his potential to earn income is an irrelevant factor" (Van Gool v. Van Gool (1998), 1998 CanLII 5650 (BC CA), 166 D.L.R. (4th) 528 (B.C.C.A.)).

2. When imputing income on the basis of intentional under- employment, a court must consider what is reasonable under the circumstances. The age, education, experience, skills and health of the parent are factors to be considered in addition to such matters as availability of work, freedom to relocate and other obligations.

3. A parent's limited work experience and job skills do not justify a failure to pursue employment that does not require significant skills, or employment in which the necessary skills can be learned on the job. While this may mean that job availability will be at the lower end of the wage scale, courts have never sanctioned the refusal of a parent to take reasonable steps to support his or her children simply because the parent cannot obtain interesting or highly paid employment.

4. Persistence in unremunerative employment may entitle the court to impute income.

5. A parent cannot be excused from his or her child support obligations in furtherance of unrealistic or unproductive career aspirations.

6. As a general rule, a parent cannot avoid child support obligations by a self-induced reduction of income. [59] The foregoing principles were outlined in the context of child support, and the approach is similar when imputing income for the purposes of spousal support claims: Marquez v Zapiola, 2013 BCCA 433 at para. 36-38. In each case, the test is one of reasonableness. [60] Here, there are compelling reasons why the claimant's income ought to be imputed at a level above that which she has claimed as her guideline income. Having regard for her educational background, her experience in operating her own business, her fluency in both English and French, and the lack of any personal characteristics that would constitute barriers to employment, her relatively low rate of income difficult to understand. [61] Indeed, the only plausible explanation owes to the claimant's steadfast commitment to pursuing her own business, which she has described in correspondence with the respondent as her "passion business". While the claimant has a right to pursue her passions and while she may be commended for her persistence, her choices have consequences. In this case, the consequence is an income level which falls short of that which she has the capacity to earn and justifies the imputation of an income level higher than that which she has claimed. [62] The claimant's business has not been

generated signficant profitability in several years. Any expectation that the business' fortunes may change is premised more on optimism than on reason. She has chosen to persist in vocational pursuits that have been historically unremunerative. The consequences of that choice should not be borne entirely by the respondent in this proceeding. [63] In saying that, I do not accept the claimant's explanation for her relatively low income. The evidence as to her being required by the respondent to sacrifice career aspirations is very much in dispute and is subject to being resolved at trial. Moreover, while I have no doubt that the claimant has been somewhat focused on matters related to her separation from the respondent (such as finding tenants and roommates), her own evidence is that she has been able to work on a full-time basis. Her income level is not attributable to a lack of availability. It owes to a conscious choice to focus on her business in circumstances where doing so has been financially futile. [64] This application included evidence of opportunities for which the claimant is qualified or for which she could readily become qualified. In this regard, the evidence discloses that, as a French immersion teacher in Whistler, the claimant would earn between $308 and $472 per day. This equates to between approximately $60,000 and $90,000 per annum. As an event planner (a

job which aligns with the claimant's prior experience), the evidence indicates that she could earn between $20.00 and $38.94 per hour. Extrapolated over a year of full-time employment, that wage equates to between approximately $40,000 and $78,000 per annum. [65] Accordingly, while I am satisfied that $40,200 is a fair and accurate approximation of the claimant's actual income, I am also satisfied that this amount does not accurately reflect the amount the claimant has the capacity to earn nor the amount that the claimant would earn if she discharged her obligation to maximize her earnings to meet her child support obligations. In the circumstances, for the purposes of this application, on an interim basis, I impute to the claimant a guideline income of $70,000 per annum. Support Obligations and Entitlement [66] The foregoing assessments do not align with the submissions of either party and as such, neither party made submissions with respect to the appropriate levels of spousal or child support based on those assessments. I expect however, that they will be able to reach an agreement given the findings I have made. [67] To further assist the parties in this regard, and so that there is no uncertainty, I order the respondent to pay the claimant spousal support based as determined by the Spousal Support Advisory Guidelines (the "SSAG"), using a guideline income for the

respondent of $303,580.46 and a guideline income for the claimant of $70,000. The amount of spousal support payable ought to be at the midpoint of the range established by the SSAG. [68] Spousal support, payable in accordance with this order is payable on the 1st day of July 2025 and continuing thereafter on the 1st day of each subsequent month until further order of this court or further agreement of the parties. [69] I decline to make any orders for retroactive spousal support. A determination of the claimant's retroactive entitlement (if any) requires resolution of significant issues, which is not easily done on the basis of an incomplete evidentiary record, as is common on interim applications. [70] This frequent problem was encountered and address by the court in S.J.R. v. G.P.B.R., 2004 BCSC 1785, where Master Keighley declined to make any orders for interim support, holding, at para. 53: I feel that that issue is best left to the trial judge for a more thorough evaluation of the parties' circumstances [71] Any award of retroactive spousal support would be largely assessed arbitrarily and could result in a significant injustice and prejudice to the respondent pending trial. [72] The issue of retroactive spousal support will therefore be left for determination at trial, at which time the court will have the benefit of a more developed body of evidence which may be tested

by cross examination. [73] My order regarding child support is similar, in that it requires the parties to pay to one another child support, based on their respective incomes as I have assessed them ($303,580.46 for the respondent and $70,000 for the claimant). The amounts are subject to determination with reference to the Guidelines. As the higher income earner, the amount of child support payable by the respondent shall be reduced by the amount of support payable by the claimant such that the respondent shall be required to pay the difference and thus obviating any child support payable by the claimant. This accords with the parties' ongoing shared parenting arrangement of J. [74] As with spousal support, any child support payable pursuant to this order shall commence on July 1, 2025 and shall continue thereafter on the 1st day of each subsequent month until further order of this court or further agreement of the parties. [75] Moreover, for the same reason that I am unwilling to make any award of retroactive spousal support, I similarly decline to make an award of retroactive child support. While it may be that the respondent's child support payments to date have been deficient, the extent of the deficiency (if any) is impossible to determine with confidence. The issue of retroactive child support will therefore be left for determination at trial. [76] Finally, the parties'

respective obligations to pay special and extraordinary expenses related to J shall be shared proportional to their respective guideline incomes. The result of this is that the respondent shall be responsible for paying 75% of special and extraordinary expenses and the claimant being responsible for 25% beginning on July 1, 2025 and continuing until further order of this court or further agreement of the parties. [77] So that there is no uncertainty, special and extraordinary expenses, for the purpose of this order include, but are not limited to, costs related to: a) childcare for the purposes of employment or education; b) art classes; c) summer camps to which the parties agree; d) medical or dental insurance premiums that are attributable to J; and e) health services such as orthodontics. [78] For further clarity, the costs associated with J's ongoing attendance at the Whistler Waldorf School and the costs associated with ongoing French tutoring do not constitute special or extraordinary expenses and shall be borne entirely by the respondent pending further order of this court or further agreement of the parties.

SUMMARY [79] To summarize: a) On an interim basis, the respondent's guideline income is assessed at $303,508.46; b) On an interim basis, the claimant's guideline income is assessed at $70,000; c) Having regard, for the foregoing, i. the respondent shall pay to the claimant spousal support, in an amount equal to the midpoint determined with reference to the SSAG beginning on July 1, 2025 and continuing on the 1st day of each subsequent month until further order of this court or further agreement of the parties; and ii. the respondent shall pay to the claimant child support, equal to the difference between the child support payable by the respondent and the child support payable by the claimant, determined by the Guidelines beginning on July 1, 2025 and continuing on the 1st day of each subsequent month until further order of this court or further agreement of the parties; d) On an interim basis, the respondent shall pay 75% of the special and extraordinary expenses related to J and the claimant shall pay 25% of special and extraordinary expenses related to J beginning on July 1, 2025 and continuing until further order of this court or further agreement of the parties; e) Because success has been divided, costs of these applications shall be in the cause; and f) All other relief sought in the parties' Notices of Application are adjourned generally. [80] If, despite the guidance set out herein, the parties are unable to reach an agreement on the amount of spousal support and child support, they may make written submissions, not exceeding five pages per party, accompanied by supporting DivorceMate calculations, within 15 days of the issuance of these reasons. "Associate Judge Robinson"