R.D.L.J. v. B.S.J.

2014 BCSC 1566 R.D.L.J. v. B.S.J.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: R.D.L.J. v. B.S.J., 2014 BCSC 1566 Date: 20140718 Docket: E112411 Registry: Vancouver Between: R.D.L.J. Claimant And B.S.J. Respondent Before: The Honourable Mr. Justice Butler Oral Reasons for Judgment In Chambers Counsel for the Claimant: D.J. Miller D.L. Garand Counsel for the Respondent: H.W. Wiebach Place and Date of Trial/Hearing: Vancouver, B.C. July 11, 2014 Place and Date of Judgment: Vancouver, B.C. July 18, 2014 [1] THE COURT: The parties to this matrimonial dispute separated in June 2011 after a 12-year marriage. They have twin sons who are now ten years old. They are co-parenting the boys on an equal basis. Mr. J. is a self-employed construction tradesman who has earned a very modest income since the separation. Ms. J. is a consultant in the information technology field. She was always the primary breadwinner for the family and has earned a relatively high level of income since the separation. [2] On January 13, 2012, Master MacNaughton made an interim order which established the parenting regime and set the quantum of support. She imputed incomes to both parties: to Ms. J. an annual income of $347,000 and to Mr. J. $48,400. She also ordered that Ms. J. pay approximately $24,000 in arrears that had accumulated. The interim support order required her to pay child support of $3,852 per month and spousal support of

$6,783 per month. [3] In the year after the MacNaughton order, Ms. J. remained behind in support payments because she failed to make the ordered retroactive payment. She was self-represented at the time and had discussions with FMEP about her support arrears. She arrived at an understanding with FMEP that she would pay an additional amount each week towards the arrears. She believed that she was fulfilling her responsibilities by doing so. However, because of the unpaid retroactive support, Mr. J. brought an application to have her found in contempt. At the hearing of that application on November 7 and 13, 2012, Ms. J. took the position she did not have funds available to pay the retroactive support that had been ordered by Master MacNaughton. She did not apply to vary the amount of interim support but asked that the existing order be varied to provide for weekly payments of the amount. [4] Associate Chief Justice Cullen heard the application and found Ms. J. in contempt of court for failure to make the retroactive payments ordered. He determined that she did have sums available and that her breach was intentional as that term is understood in contempt applications. He suspended sentence for 14 days to allow Ms. J. to purge the contempt by paying the arrears, which she did. [5] I should note that both the reasons of Master MacNaughton and Cullen A.C.J. thoroughly set out the

circumstances of this case in the period up to the end of 2012 - hence my brief description of the background and history. [6] In the period after the contempt application, Ms. J. made the majority of the ongoing support payments, but by mid-2013 slowly began to fall behind. At the end of 2013, she was approximately $10,000 behind in support payments. While that amount would be significant for many families, it represents just one month of support payments in this case. [7] While Ms. J. was having some difficulty in making the support payments, she did not bring an application to vary support. She now says she had difficulty making the payments because of a reduction in her income. As I will explain later in these reasons, there may be some merit in Ms. J.'s statement that her income has been reduced somewhat from what it was at the time of the MacNaughton application. In 2014, she says her income has been further reduced, and she has found it more difficult to continue making the support payments. On April 28, 2014, she stopped paying support entirely. I understand she has made no payments since that date. [8] As set out in Master MacNaughton's reasons, Ms. J. has worked as an IT consultant in New Zealand, the U.S.A., England and Canada for Accenture, a multinational corporation. Most of the time she has worked for Accenture as an independent contractor. During her time in

Canada, she has provided her services to Accenture through M.Co., which acts as an intermediary or agent. [9] In 2011 around the time of the separation, she and her new partner, Mr. W., incorporated I.Co. to provide the services to Accenture. She is paid an hourly fee by Accenture for the services she provides and M.Co. takes an administration fee off the top. At the time of the MacNaughton order, Ms. J. received $145 per hour but now receives $163 net of the administration fee. The amount was increased because she used to receive an annual rent allowance from Accenture. She no longer does, and the higher hourly rate recognizes the loss of that allowance. [10] One contentious issue regarding Ms. J.'s income arises from the fact that Mr. W. is a shareholder in I.Co. and has received dividends of $50,000 per year from the company since approximately 2012. Ms. J. receives the same amount of dividends in addition to income which is paid to her by I.Co.. Ms. J. argues that the payments to Mr. W. are legitimate company expenses and thus valid deductions from the company's earnings which flow through to her. I note that Mr. W. has not sworn an affidavit, and the information regarding the services he provides is rather limited. Prior to his involvement, Ms. J. did not employ anyone to carry out administrative services, and she had rather limited expenses totalling approximately $20,000

to $30,000 on an annual basis. [11] Ms. J. has produced a series of letters from Accenture which confirm that she receives $163 per hour at the present time and that Accenture sets a target rate of 40 hours as the amount of work they expect to make available to her on a weekly basis. However, the actual hours made available to her by Accenture can range from none to 60 hours per week. There is no minimum or guaranteed amount. The most recent letter confirms that Ms. J. has worked all hours the company has made available to her and that 2014 has been particularly slow. Accenture says the decreased level of work is expected to continue into 2015. She is working at the rate of about 28 hours per week at the present time. As an independent contractor she does not receive sick days or vacation days. She has never obtained work from other sources. While she is not an employee, she is for all intents and purposes dedicated to working for Accenture. [12] Mr. J. has worked as a skipper and in the construction industry. When the parties moved around the world, he took on both types of work and performed renovations on houses the parties purchased in order to prepare them for resale. The parties prospered significantly from his endeavours. They took time off work to go on extended sailing trips. To do that they purchased a large sailboat, which is one of the significant family

assets. [13] Given Mr. J.'s talents and varied work experience, Master MacNaughton had some difficulty arriving at a fair level of income to impute to him. In part this was because he had some difficulty obtaining a work visa in Canada. It is not clear how the income was imputed, as the reasons do not reference this. It appears to have been a compromise of the positions taken at the interim application. [14] Mr. J. now says his income has been reduced, mainly because of further problems with his visa. He also argues that he does not have the ability to earn the income imputed to him given the nature of work he does. When he first came to Canada, he received a limited time temporary residence visa, which expired in April 2012. Ms. J. would not let him renew his temporary visa on the back of her visa because she had added Mr. W., her new partner, onto her visa. [15] Mr. J. says this required him to apply for permanent residence status, which took 18 months to resolve. He says that during that time he was restricted to working for his sponsor, B.B.P.R.. He says they had almost no work for him in that time period. He has yet to produce the sponsorship agreement with B.B.P.R. but says this will support his allegations. His visa problems resolved early in 2014 when he was granted permanent residency status. He is now free to work for anyone and has decided to operate a business, a

proprietorship, through which he performs construction and handyman services. He says he has limited net income through this business. He says that his 2013 line 150 income was only $2,537 on a gross income of about $17,000, but submits that he expects to earn about $34,000 to $35,000 annually in his new business. [16] Before turning to the parties' arguments, I note that there is no issue on the application before me about the parenting regime. The applications only raise issues regarding support payments and arrears. [17] This hearing was initiated when Mr. J. served the notice of application in late April to have Ms. J. found in contempt based on her failure to make the support payments. Ms. J. had approached him a few months earlier - in about February - seeking his agreement to reduce the level of support because of her reduced income. While the parties had some discussions, they could not arrive at an agreement, and Mr. J. brought the application. Shortly after the contempt application was filed, Ms. J. brought the application to vary the interim support order and cancel the arrears. [18] The last piece of background information which is particularly relevant to this application is that the trial of the action is scheduled to take place in less than three months. A ten-day trial is scheduled to start on October 6, 2014. Position of Mr. J. [19] The notice of application

filed by Mr. J. indicates that he is seeking a fine or imprisonment of Ms. J. as punishment for the civil contempt. At the hearing of the application, he took the position that all he seeks is an order similar to that made by Cullen A.C.J. In other words, an order that Ms. J. purge her contempt by making the arrears payments within a short period of time. Quite simply, he wants an order that requires her to make the ordered interim support payments. [20] Mr. J. opposes Ms. J.'s application to vary the interim support orders for a number of reasons. First, he says interim support orders should only be varied where there are compelling circumstances to do so and where those compelling circumstances are such that the variation application cannot await trial. He says that if there were compelling circumstances, Ms. J. should have brought those to the attention of the court long before he brought the contempt application. [21] In addition, Mr. J. says that Ms. J. has not demonstrated a change in her income which amounts to a material change of circumstances from those which existed at the time of the interim order. Of particular note, he says that Ms. J.'s attempt to split income with her new partner should be disregarded. He says if Mr. W.'s dividend income is attributed back to her, Ms. J.'s income is actually at a level similar to or higher than what was imputed to her by Master

MacNaughton. He argues that her level of income explains the very comfortable lifestyle he says she is living, which is very different from what he says he experiences. In addition, he says that if the court entertains the application to vary, the court should also take into account his circumstances and his reduction in income. He says he has suffered a material change of circumstances and that if his actual income is taken into account, the amount of retroactive support that should be ordered is greater than the amount owing pursuant to the existing order. [22] With regard to Ms. J.'s argument that the interim order should be changed or varied because the mid-range of the Spousal Support Advisory Guidelines ("SSAG") calculations are unfair, he says this is an issue that was already considered and rejected by Master MacNaughton and is thus not suitable for consideration on an application to vary the interim order. This is particularly the case as the argument would result in a significant change to the practice and the law in British Columbia. Position of Ms. J. [23] Ms. J. acknowledges she should have brought this application sooner. She says she did not do so because she tried to get Mr. J. to agree to a lesser level of support that is more in line with her income and was unsuccessful in doing so. When Mr. J. brought the application for a finding of contempt, she says she

had no alternative but to raise the issues she had tried to discuss with Mr. J. [24] She says there are two main reasons why there are compelling circumstances which require the court to vary the interim order prior to trial. First, she says Master MacNaughton based the interim order on the mid-range of the SSAG. She says this is patently unfair because the "with child" SSAG mid-range of support when the parties are co-parenting divides the Net Disposable Income ("NDI") of the family unfairly between the two parties. Instead of dividing it equally, or perhaps giving the party who earns the higher income a larger percentage of the NDI, the SSAG favours the lower income parent. For example, she says the DivorceMate calculation using the incomes imputed by Master MacNaughton divides the NDI approximately 53.6% to Mr. J. and 46.4% to her. She says this is patently unfair when she is the one who earns the vast majority of the income and the parties have the same childrearing responsibilities and should have similar expenses. In other words, she says there is no logic which could support the division of NDI which results from a mid-range support order. [25] The illogic of the situation is further exhibited when looking at other SSAG calculations. For example, the mid-range of the SSAG for the same income levels without children would result in a division of incomes which would give

Ms. J. 68.1% of the NDI, while he would receive only 31.9% of the NDI. She says there is no rational basis on which to justify the difference between these calculations. [26] Ms. J. also argues that it is the use of the mid-range figure for the interim order that places her in the position she is in today. This is because the effect of the SSAG mid-range figure results in her having to pay approximately $1,400 per month in support more than she would have to pay if the low range figure was used. The low range would divide the NDI equally between the parties in a shared custody situation. She says there is no reason why the low range or the 50/50 split in NDI should not be used in the circumstances of this case. [27] Second, Ms. J. argues that her income is significantly below the figure imputed to her by Master MacNaughton. She says the court need not look back to 2012 when the earlier orders were made, but rather to her income levels in 2013 and 2014. She has suffered a real reduction in her billings to Accenture and thus her income. Her payments from M.Co. net of expenses in 2013 total only $244,174, which is $100,000 less than the amount imputed to her. Her line 150 income in her tax return was only $233,617. In 2014 she has billed only $118,256 to Accenture, which she says extrapolates to an income of about $212,000 for the year. She argues that these figures establish a

material change in circumstances. [28] With regard to Mr. J.'s argument that his income for support purposes should be substantially reduced, Ms. J. says that he must be underemployed if he has earned as little as he alleges. He is young, healthy and skilled. In response to his claim that he could not work because of visa difficulties, she questions why he did not attempt to change sponsors if B.B.P.R. did not provide work to him. She also notes that he has not produced a sponsorship agreement. [29] Ms. J. says she has met the test for cancellation of the 2013 and 2014 arrears as she will not be able to pay the arrears in the future, has shown a significant and longstanding change in circumstances, and it would be grossly unfair not to cancel the arrears. In that regard, she notes that she is in a precarious financial situation. As of July 2014, she owes more than $85,000 in GST, corporate and personal taxes and arrears. In addition, she now owes $43,391 in support arrears plus substantial amounts for taxes and legal fees. Ruling [30] My ruling can be stated very simply: I am adjourning both parties' applications to be heard at trial. If the trial does not proceed as scheduled in October, either party is at liberty to reset the application after October 6, 2014. [31] While my ruling can be stated simply, I want the parties to know that I have considered the extensive material

placed before the court and the detailed and meritorious arguments put forward by counsel. Ultimately, I am not prepared to rule on the applications, given the timing of the applications, the difficulty in ruling on some issues without the benefit of viva voce evidence, and of course the proximity to trial. I appreciate that this ruling will please neither party. However, I do intend to set out my analysis of the main issues in the hope that this may assist the parties in resolving these issues without a trial. [32] The main factual issues on the applications are the incomes for support purposes for each party. As Master MacNaughton found, this determination is not simple. Before I turn to my preliminary analysis of that issue, I will explain why I am adjourning the contempt application. [33] Mr. J. notes that the order to pay weekly support was clear. Ms. J. had notice of it and had been making payments for some time. Further, she understands the significance of court ordered support and her requirement to obey the support order as a result of the previous contempt application. [34] As Ms. J. acknowledges, she should have brought this application to vary the amount of support earlier, especially in light of the previous history. However, her explanation as to why she did not do so is credible. The sequence of events explains why the delay in bringing the application is not

particularly long. While arrears began to accumulate in the latter half of 2013, by the end of the year she was only one month behind in support payments. While being one month in arrears is a breach of the support order, parties rarely bring, and courts do not like to entertain, contempt applications for relatively modest amounts of arrears. By early 2014, it became apparent to Ms. J. that her financial situation was deteriorating and she was having difficulty making payments. She approached Mr. J. and sought an agreement to reduce the monthly payments. After some discussion and failure to agree on a varied order, his response was to bring the contempt application. Ms. J.'s response was, quite naturally, the variation and cancellation application. [35] In these circumstances, I cannot determine the contempt application without considering the application to vary support and cancel arrears. This requires consideration of Ms. J.'s assertion that the amount of support should be reduced retroactively and prospectively. [36] Before turning to consideration of the parties' incomes, I must deal with Ms. J.'s argument that there is an inherent unfairness in using the mid-range of the SSAG for shared parenting situations. This requires consideration of the circumstances under which a court will vary interim support orders. [37] Recently, in Janmohamed v. Janmohamed, 2014 BCSC 107,

Donegan J. reviewed the law on the court's ability and jurisdiction to vary interim support orders. I accept her analysis and adopt her conclusion. At para. 44, she quotes from Hall J.A. in Huculak v. Huculak, [1998] 103 B.C.A.C. 276 at para. 3, where he notes that courts should be reluctant to vary interim support orders: [3] It is fair to say that previous cases, both in this court and in the Supreme Court, have made it clear that variations to interim maintenance orders are not granted lightly. There are sound policy reasons for that because if that were not the case, there would be a considerable expenditure of judicial and legal time and resources on matters that are in their nature of an interim or temporary nature and subject always to revision at the trial of the matter. [38] At para. 45, Donegan J. concludes as follows: [45] The law seems very clear here. There is no statutory provision in the Divorce Act to vary an interim order for support. Such an order can only be varied pursuant to the court's inherent jurisdiction. This jurisdiction should only be exercised in compelling circumstances that are urgent and cannot wait for trial. The onus upon the applicant is a heavy one. [39] The argument put forward by Ms. J. on this issue is strong. It is difficult to see why there should be a split of the family's NDI, which favours the lower income earning parent in an equal

parenting situation. That is particularly the case where, as here, both parties are young, have marketable skills, are equally capable of handling childrearing tasks and should have similar expenses. [40] I asked counsel for Mr. J. if there is any reason in the circumstances before the court why Mr. J. should receive a significantly larger share of the total NDI of the family. She had difficulty pointing to any circumstances. Eventually she said that Mr. J. was paying substantial expenses to maintain the parties' sailboat in New Zealand. I understand that Ms. J. contests this allegation, and I was not taken to the evidence, if it is available, regarding this issue. It is obvious that such a situation could justify an unequal division of NDI, but one would expect that to be specifically factored into the support payments if it was expected to continue. More typically, one would not expect such expenses to form the basis for ongoing unequal division, as the additional expenses paid by one party could be reimbursed when the proceeds from the sale of that asset are divided. In that regard, I understand the sailboat is expected to be sold. [41] In any event, I was not directed to any reason why the division of the NDI should be unequal. I was, however, taken to Master MacNaughton's comments, who considered the same argument at paras. 39-40 of her reasons for judgment, indexed at

2011 BCSC 1721: [39] With respect to spousal support, the Respondent urges me to factor into any order for spousal support the fact that, in a shared-parenting arrangement, there should be a 50/50 split of the net disposable income or monthly cash flow available to the family, after the payment of child and spousal support. This she submits would leave roughly the same resources and standard of living in each household. [40] This may be a case in which the Court, at trial, and after considering the Spousal Support Advisory Guidelines, might split the net disposable income of the parties. However, on an interim basis, I am not prepared to make such an order. In this case, there is still uncertainty about the Claimant's potential earnings, which may exceed the amount I have imputed to him. There is also uncertainty about the impact that the Respondent's personal services corporation will have on her net income. No financial statements were available. As a result, I order that interim spousal support should be paid in the middle of the range on the "with child support" formula in the Spousal Support Advisory Guidelines. [42] As she notes, this may well be a case where the court at trial, after considering all of the evidence, might agree to split NDI equally. She noted there was uncertainty about levels of income for both parties and offered that as a rationale for not dealing

with the issue. I accept the wisdom of Master MacNaughton's statement that this is an issue that should await trial. I say that for a number of reasons. To reach a conclusion that the mid-range of the SSAG is inappropriate for shared parenting situations - the argument put forward by Ms. J. - would amount to a significant change in the practice and perhaps the law in British Columbia. Such a change should be made when the court has a proper and full evidentiary record before it and has heard full argument on the issue. That has not happened here. [43] This is an application to vary an interim order, and the record and argument is far short of what one would expect to see at trial. Further, this is not the kind of issue that is compelling and urgent and cannot await trial. That is particularly the case when trial is only three months away. Finally, I am not satisfied that there is as yet certainty about the parties' incomes for Guidelines purposes and this is an issue that should be fully considered before attempting to divide the family's NDI for the purpose of setting spousal support. [44] This brings me to the difficulty I have in attempting to resolve both parties' incomes. A tremendous amount of documentation and affidavit material regarding Ms. J.'s income was placed before the court. In response to Ms. J.'s application, Mr. J. says that if the court was inclined to find a

variation then it should also vary his Guidelines income, as that will impact on both child and spousal support. Quite simply, he says that Ms. J.'s income cannot be considered in isolation. I agree. [45] Accordingly, a great deal of evidence was placed before the court about Mr. J.'s employment, his income and his visa situation. The evidence before me was highly contentious. Indeed, each party challenges many of the statements made by the other party relative to their employment and calculation of their incomes. [46] There is no doubt that a court will need to hear viva voce evidence to resolve many of these issues. I will not examine that evidence given the decision I have arrived at, but will simply say that the issues which are challenged by the parties include: the validity of the dividend payments to Mr. W.; Ms. J.'s statement that her revenues are declining; the amount of expenses claimed by Ms. J.; the late or incomplete disclosure of documents by both parties; Mr. J.'s failure to work during the period he says he was sponsored by B.B.P.R.; his failure to change sponsors if he was not receiving work; and the lack of a full explanation for his modest income. [47] These questions are important but I am unable to resolve them on the affidavit evidence. Further, and more importantly, I find that this is precisely the kind of case where the court should not be asked to

resolve these issues three months before trial. It is a very poor use of the parties' resources to attempt to do so and a poor use of the court's resources to ask the court to do so. The issues raised by the parties are substantial issues, but they can wait three months to trial and should not be resolved at this time. [48] As Donegan J. noted, the jurisdiction to vary an interim order "should only be exercised in compelling circumstances that are urgent and cannot wait for trial". While the issues here are important for the parties, they must await trial where they can be properly and fully explored. [49] Having determined that I cannot rule on the issues presented, I will nevertheless, make brief comments on the evidence which are only intended to provide some guidance to the parties. I reiterate that I have not determined and I cannot and should not determine incomes for support purposes for the parties on this application. [50] I will begin by making brief comments regarding Ms. J.'s income. The total amount of payments she has received in 2013 and 2014 for services provided to Accenture strongly suggests that her income is less than the amount imputed to her by Master MacNaughton. As her only client is Accenture and her income is dependent on those payments, it would appear that her income for these years should be less than the amount set at the interim application.

Having said that, Mr. J. put forward a strong argument based on the dividend payments which suggests that Ms. J.'s total income for support purposes should be in excess of the payments she receives from Accenture. I am not entirely sure how this works. It may result because dividends have been paid out of retained earnings or the fact that I.Co.'s financial statements are not based on a calendar year. However, if the line 150 income must be based on the receipts from Accenture, it appears that her income has fallen appreciably since December 2012. Of course, there is a caveat with regard to 2014 because there is still a half year remaining. [51] As I have already noted, there are certainly problems with Ms. J.'s line 150 income from her taxes. There is little evidence on the application to support the claim that Mr. W. is providing valuable services to I.Co.. While Ms. J. will have expenses to deduct, it is unclear to me why those should be any greater than the $20,000 to $30,000 she has historically claimed against the revenue. [52] Mr. J.'s income is equally problematic. While he offers an explanation for his dismal earnings for the period from late 2012 to 2014, this must be explored in more detail. Frankly, it does not sound plausible that someone with his skills could sit back and do next to nothing for 18 months. Without the production of the sponsorship agreement, it is

difficult for Ms. J. to deal with his argument. More significantly, the suggestion that his ongoing income should be imputed at a figure less than $35,000 is surprising. This is the level of income which courts impute to unskilled individuals who have been out of the labour market for years. Mr. J. does not fall into that category. [53] In summary, I am dismissing the applications before the court. The contempt application cannot be determined given the problems with the income levels as established in the interim order. The application will have to be adjourned to trial. In addition, the issue of the parties' Guidelines incomes for the period from January 2013 to July 2014 needs to be determined at trial. I am unable to do so on this application, and there is no reason why the court should consider a variation application in all of the circumstances. [54] I appreciate that Ms. J. has not made support payments from April 28, 2014 to the present. Whether she should have and whether the other arrears are due and owing will once again have to be determined on a full hearing. [55] My ruling places both parties in a difficult situation. However, Ms. J. must begin to make interim support payments immediately. She should do so on a weekly basis as ordered by Cullen A.C.J. Of course, that order remains in place. Ms. J. has enjoyed a support holiday since April 28, but that must come to

an end. [56] Finally, I would urge the parties to sit down and attempt to resolve the issues as to income and support. I hope that my comments will assist with that task. They should do so without focusing on the kind of criticism which was made by both parties as to the supposed extravagant lifestyle being enjoyed by the other party. There is no need for this. The fact that Mr. J. purchased a trailer so the twins can ski at Whistler with him and his new partner, and the fact that Ms. J. rents what must be very modest accommodation at Whistler given the price she pays is actually admirable. Given the past lifestyle of the parties, these are not extravagant expenses. These are modest expenses incurred for the benefit of the children. I would urge the parties to refrain from raising the level of animosity by making these kinds of allegations. They do not assist the court and serve to make resolution more difficult. [57] With that in mind, this may well be a case where the parties would benefit from a judicial settlement conference. I would recommend that the parties follow that course if they are willing to take it. [58] In summary, the applications are adjourned and each party will bear his or her own costs. "Butler J."