S.E.C. v. D.C.G.

2003BCSC0896

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: S.E.C. v. D.C.G., 2003 BCSC 896 Date: 20030610 Docket: E003428 Registry: Vancouver Between: S.E.C. Plaintiff And D.C.G. Defendant Before: The Honourable Mr. Justice Davies Reasons for Judgment Counsel for the Plaintiff: S.N. Mansfield Counsel for the Defendant: C.A. Miller Dates and Place of Trial: March 17--21, March 24--26, 2003 Vancouver, B.C. A. INTRODUCTION [1] This case raises issues concerning the extent to which a parent may rely upon negotiated agreements to prevent an award of retroactive child support and also issues about that parent's future child support obligations. B. BACKGROUND [2] The plaintiff, S.E.C. (the "mother") and the defendant, D.C.G. (the "father") were involved in a relationship that resulted in the birth of their child, M, in [ ] of 1985. At the time, the mother was an unmarried teacher and the father was a recently separated financial advisor who had one other child. The 1986 Agreement and its aftermath [3] When M was born the father determined that he did not wish to be involved in any way in M's life. That decision led to an application in 1986 by the mother for child support under the Child Paternity and Support Act, R.S.B.C. 1979, c. 49. [4] The mother's application eventually resulted in a negotiated agreement (the "1986 Agreement") finalized in late 1986. It provided that: WHEREAS: A. A

child, namely [M] ("the child") was born on [ ], 1985, of a relationship between [the mother] and [the father]; B. The child has been in the custody of [the mother] since the child's birth; C. [The mother] and [the father] wish to settle between them the question of what sums [the father] shall be obligated to pay [the mother] for expenses she incurred in connection with the birth of the child and for the support, maintenance and education of the child. NOW THEREFORE the parties in consideration of the provisions and covenants contained in this Agreement agree with each other as follows: 1. The statements of facts set forth in the recitals to this Agreement are correct. 2. [The father] shall pay [the mother] for the support, maintenance and education of the child the sum of $500.00 each month on the first day of each month beginning July 1, 1986. 3. [The father] shall pay to [the mother] on the first day of May in 1987 and in each year thereafter until and including 2005, or at such earlier date in each such year as may be agreed between [the mother] and [the father], such sum as may be required to ensure that the net amount received by [the mother] pursuant to this Agreement for the support, maintenance and education of the child in the preceding year, after payment of income taxes owing by her on the sums paid to her by [the father], is the equivalent of $500.00 a month. 4.

[The father]'s obligation to pay [the mother] for the support, maintenance and education of the child shall cease when the child attains his majority. 5. [The father] shall forthwith pay [the mother] the sum of $5,250.00 for expenses [the mother] has incurred in connection with the birth of the child and for the support and maintenance of the child from the date of birth of the child through June 30, 1986. 6. [The father] shall forthwith purchase an annuity as a gift for the child which annuity shall be guaranteed to yield $40,000.00 on the day the child attains his majority, namely [ ], 2004, and which shall be made irrevocably payable to the child on [ ], 2004 unless the child should die before that date, in which case all funds in the annuity shall revert to [the father]. 7. [The mother] and [the father] acknowledge that each of them has received independent legal advice before executing this Agreement, and that each of them is fully aware of the purpose, intent and effect of the Agreement. 8. [The father] acknowledges that this Agreement is binding on his estate, his heirs, executors, administrators and committees. [5] Before the 1986 Agreement was executed the father disclosed that his 1985 income was $181,438. He testified at trial that given the nature of his work he did know in late 1986 that his income for 1986 would exceed $500,000. He also resisted the mother's

requests for information relative to his 1986 expenses, claiming that they were not relevant. [6] Also, of significance is the fact that the finalization of the 1986 Agreement included the mother's requirement that the Superintendent of Family and Child Services approve its terms. In response to inquiries from the father's lawyer on that issue, the then Deputy Superintendent of Family and Child Services, Mr. Larry Ohlmann, wrote a letter dated December 18, 1986 to the father's lawyer in which he stated: Further to your telephone conversation with Joan Mills of December 9th, 1986, I am writing to advise you that the Superintendent's representative has discussed the agreement with [the mother], and is satisfied that she wishes this agreement to be completed. The Superintendent agrees that this agreement is intended as an agreement under Section 20 of the Child Paternity and Support Act, and consents to the agreement. [7] Whether the 1986 Agreement should be considered as an agreement made under s. 20 of the Child Paternity and Support Act is now of both jurisdictional and substantive importance to the determination of whether a retroactive support order can now be made. [8] From 1986 until 1996 the father performed all of his obligations under the 1986 Agreement except that he did not purchase the $40,000 annuity required by paragraph 6. Quite surprisingly, given his expertise in

financial matters, the father testified that he did not initially know what an annuity was. He also testified that when he found out, he determined that he had sufficient financial wherewithal to make the $40,000 payment when it became due, so that there was no need for him to purchase the annuity. [9] When the mother entered into the 1986 Agreement she was employed full time as a school teacher with an income of approximately $48,000 per year. She and M lived in rental accommodations, part of which she sublet to offset living expenses. [10] In 1989, the mother determined that she was not able to spend sufficient time with M while he was in daycare and she was working. She subsequently retired from her teaching position, cashed out her accumulated Registered Retirement Savings Plan ("RRSP") in the amount of approximately $30,000 and also took an early retirement allowance of $20,000 paid over two tax years. The mother then worked part time at night as a music teacher and used those earnings and the monies that were available to her from her RRSP and retirement allowance to meet living expenses. Her existence was a frugal one in which she dedicated herself to M's nurturing and well-being. [11] In 1989, the mother met H.M. and they eventually entered into a common-law relationship. The relationship eased the mother's financial burden as she and H.M. pooled all of their financial

resources. H.M. also became very involved in all aspects of M's life and quickly began to treat M as his own son. [12] In 1991, the father re-married. Later that year the father and his new wife became the parents of a daughter, C. [13] In 1993, the mother and H.M. became the parents of triplets. After that, H.M. became even more involved in M's life as the mother took on primary responsibility for the care of the triplets. [14] In 1993, H.M.'s business pursuits became less profitable and the family unit suffered financially for the next few years. However, by cutting back on expenses, the mother and H.M. were able to maintain a home and provide for their four children in rental accommodations in West Vancouver, near H.M.'s business. Their living expenses were financed by H.M. cashing in his savings and also by business pursuits in which the mother participated to the extent possible. [15] Eventually, through their efforts and also with the assistance of the plaintiff's mother, the mother and H.M. were able to purchase a "fixer-upper" home in West Vancouver. They stayed in West Vancouver because they had virtually always lived there and because of M's schooling. [16] A significant amount of the time H.M. spent with M involved M's pursuit of athletic endeavours. He is by all accounts a gifted athlete and a very good student. M is now in his graduation year and has prospects for

acceptance at several universities, both because of his scholastic achievements and his athletic abilities, the latter of which may result in scholarship opportunities. M may also be able to pursue a career in professional baseball, but it is far more likely that he will pursue a university education. [17] The mother and the father had no contact whatsoever between 1986 and 1996, notwithstanding that they both lived in West Vancouver. In 1996, however, the mother came to learn, by happenstance, that the father had prospered greatly. [18] Given the costs associated with M's care and the fact that she had been unable to provide M with many of the advantages she had hoped to provide for him (including attendance at a private school) the mother decided to pursue additional child support for M. In late 1996 she applied to the Provincial Court of British Columbia for an increase in child support. [19] To put the relative financial positions of the parties into context for the period from M's birth in 1985 until the mother's application for increased child support in late 1996, I will now record the mother's income from 1985 to 1989, the joint incomes of the mother and H.M. from 1990 to 1996 and the income of the father from 1985 to 1996: (1) The mother's income from 1985 to 1989: 1985: approximately $48,000 from teaching; 1986: approximately $48,000 from teaching; 1987: approximately

$48,000 from teaching; 1989: $48,488 comprised mainly of her RRSP withdrawal ($29,769), a retiring allowance ($10,000) and Unemployment Insurance Benefits ($11,187); (2) Joint incomes of the mother and H.M. from 1990 to 1996: 1990: $68,974 of which the mother's income was $15,000 and included a retiring allowance of $10,000; 1991: $84,349 which included an RRSP withdrawal by H.M. of $9,632 1992: $42,818; 1993: $34,000; 1994: $42,000; 1995: $93,732; 1996: $70,025; and (3) Income of father from 1985 to 1996: 1985: $181,438; 1986: $504,276; 1987: $665,424; 1988: $1,057,643; 1989: $1,289,895; 1990: $1,399,073; 1991: $425,200; 1992: $643,279; 1993: $711,678; 1994: $2,222,709; 1995: $2,334,111; 1996: $2,322,550. The 1997 Amendment and its aftermath [20] The merits of the mother's 1996 application for increased child support were never determined. As a consequence of jurisdictional issues advanced by the father in April of 1997, her application was dismissed and the father did not make any disclosure of his current financial circumstances. [21] After the father successfully resisted the mother's application for an increase in child support in April 1997, the parties entered into an amendment to the 1986 Agreement. [22] That amendment was in the form of a letter dated June 19, 1997 (the "1997 Amendment") from the father's former lawyer to the mother, which was then signed by her. It

stated: The purpose of this letter is to serve as written confirmation of verbal agreement reached between the parties supplementary to the written agreement of November 10, 1986. The parties to the original agreement have now agreed as follows: 1. The original agreement dated November 10, 1986 will remain in full force and effect; 2. [The father] will voluntarily agree to accelerate the payments provided for in paragraph 6 of the agreement by making one $10,000.00 payment forthwith, a second $10,000.00 payment on May 1, 1999, a third $10,000.00 payment on May 1, 2001 and a fourth and final $10,000.00 payment on May 1, 2003. Payment of the sums referred to in this paragraph shall constitute fulfilment of [the father's] obligations as described in paragraph 6 of the agreement. 3. [The father] will also agree to pay tuition for [M's] full time attendance at a recognized post-secondary educational institution for the entire period of time that [M] attends that institution provided that [M] diligently pursues a course of study on a full time basis. It is expressly understood and agreed that [the father] will not be responsible for such expenses as books, living expenses, travel expenses or any other incidental expenses of [M].

4. As consideration for [the father] taking on the obligations described in paragraphs 2 and 3 of this agreement, [the mother] agrees that she will not bring any further applications to vary the amount of monthly maintenance provided in the original agreement dated November 10, 1986. Your signature on this letter will constitute proof of your agreement to the terms. [23] There is a dispute as to whether the impetus for the 1997 Amendment came from the father or the mother. [24] The mother testified that she was approached about a change of the 1986 Agreement by the father's lawyer sometime after the dismissal of her application for increased child support. She said she accepted his proposal because of her disappointment and confusion over the dismissal of her application and because the offer provided some immediate financial relief. [25] The father testified that he believed that his former lawyer told him that the mother had approached that lawyer about a new agreement and that he agreed to the terms suggested but only provided that the new agreement would preclude any further court proceedings by the mother. [26] I accept the mother's evidence over that of the father on this issue. Although the mother's recollection was not entirely precise, I am satisfied that her testimony concerning the events is generally reliable. On the other hand, the father's evidence was wholly

based upon reconstruction and hearsay. Further, it was open to the father to lead the evidence of his former lawyer on what is a relatively significant factual issue rather than attempt to rely on inadmissible hearsay evidence but he did not do so. [27] In May 2000, after again hearing by happenstance of the father's great financial successes and also after learning of the existence of the Federal Child Support Guidelines, SOR/97-175 (enacted May 1, 1997) but, as it turns out, also after the April 14, 1998 enactment of the British Columbia Child Support Guidelines, B.C. Reg. 61/98 O.C. 287/98 (the "British Columbia Guidelines"), the mother applied to the Provincial Court for a child support order based upon the British Columbia Guidelines. I will, in future, refer to the Federal Guidelines and the British Columbia Guidelines collectively as the "Guidelines" unless there is a substantive need to specifically refer to only one rather than the other. [28] In order to put the relative income positions of the mother and father in May 2000 into perspective, I will record the taxable income of the mother and H.M for the years 1997 though 2000. Although it is somewhat difficult to reconcile the total taxable income of H.M. and the mother based upon the income tax returns that have been produced and their evidence that they engaged in income splitting for tax purposes, I have determined

that the mother and H.M. earned taxable income (net of child support payments for M made by the father) between 1997 and 2000 in the following approximate amounts: 1997: $90,000; 1998: $78,000; 1999: $58,000; 2000: $80,000. [29] During that same period, the father reported "Line 150" income on his Income Tax Returns as follows: 1997: $2,023,918; 1998: $1,505,048: 1999: $1,353,925; 2000: $2,453,194. [30] In September 2000, the mother's application for child support was transferred to this Court for all purposes by consent. Since then, various interlocutory proceedings have been pursued including a Summary Trial application heard in May 2001. [31] After a two day hearing of that Summary Trial application, Humphries J. decided that the issues should not be determined summarily. She reached that conclusion, at least in part, because of the complicated tax issues related to the November 2000 sale of the father's most significant business asset, N.[ ] Corporation ("N.[ ] Corporation"). [32] I will now discuss that transaction in the context of this litigation. The N.[ ] Corporation Transaction [33] On November 3, 2000, the father filed a Property and Financial Statement in this proceeding in which he valued his interest in N.[ ] Corporation based upon a stated asset value of $2,800,000. [34] Three days later, on November 6, 2000, the shareholders of N.[ ] Corporation entered into an

agreement with the Toronto Dominion Bank (the "TD Bank") pursuant to which the TD Bank agreed to acquire all of the shares of N.[ ] Corporation. [35] As a consequence of that agreement, the father received cash in the amount of $223,849.06 representing the cost base of his N.[ ] Corporation shares. He also received 237,606.27 TD Bank shares (the "TD Shares"), valued at $9,507,244.69 based upon $40.0126 per share. Of the TD Shares acquired by him, 121,606 shares were held in escrow, to be released as to one-third of their total in each of January 2002, 2003 and 2004. [36] The father maintains that he did not know of the particulars of the TD Bank offer for the shares of N.[ ] Corporation when he swore his Property and Financial Statement on November 3, 2000. He testified that the negotiations between N.[ ] Corporation and the TD Bank were undertaken by a small committee of the shareholders of N.[ ] Corporation in secret to preclude speculation and protect the secrecy of the negotiations. The father also testified that he opposed the sale because he believed it would result in the termination of his employment. [37] Counsel for the mother argues that the father's evidence that he did not know that the negotiations for the sale of N.[ ] Corporation would result in the father realizing at least three times more than the value of N.[ ] Corporation recorded on his Property and

Financial Statement should not be believed. He submits further that the undervaluation is part of a deliberate pattern of reluctant, limited and misleading disclosure by the father in his dealings with the mother since 1986. [38] I am not prepared to find that the father knew with certainty that his holdings in N.[ ] Corporation would be sold to the TD Bank for in excess of $9,500,000 within three days of the filing of his Property and Financial Statement. I do, however, find that he was aware that serious discussions for the purchase of N.[ ] Corporation were underway and that he also knew from information received from Goldman Sachs that in the year 2000, the purchase price for a company such as N.[ ] Corporation would likely be calculated upon a valuation of 3.2 or 3.3 times its book value. Since the father also knew that N.[ ] Corporation had a book value of approximately $3,200,000 in November of 2000, I am satisfied that he knew that the $2,800,000 value he attributed to his interest in N.[ ] Corporation on his November 3, 2000 Property and Financial Statement substantially understated its actual value. [39] The father's concern that his employment would be lost if the sale of the TD Bank was completed turned out to be well-founded. His employment in the former Vancouver office of N.[ ] Corporation was terminated at the end of November 2000. [40] The father then retained

legal counsel (not his former lawyer or his counsel at this trial) who negotiated a severance settlement under which the father received $1,100,000, less holdbacks in the amount of $330,000 for Income Tax. In return, the father signed a Release and Indemnity and received $770,000 in early 2001 pursuant to the settlement. [41] On April 19, 2001, the father swore an affidavit in the Summary Trial proceedings that were heard in May 2001. On April 24, 2001, he also swore an updated Property and Financial Statement in which he disclosed the existence of securities having a total value of approximately $14,000,000. [42] Although they were not specifically identified as such, those securities included both the free-trading and escrow TD Shares he had received from the disposition of his N.[ ] Corporation holdings. [43] In his affidavit of April 19, 2001 the father deposed: 12. In the fall of 2000, the Toronto-Dominion Bank approached N.[ ] Holdings Inc.. with an offer to acquire all the outstanding shares in the company. I was opposed to the share transaction as it would result in the closing of the Vancouver office of N.[ ] Capital Inc.. and put me out of work. I was, however, outvoted by the other shareholders and an agreement was entered into, dated November 6, 2000, for the purchase of the shares of the Toronto-Dominion Bank. The transaction closed on January 16, 2001. Attached

hereto and marked as Exhibit "A" to this my Affidavit is a copy of the memorandum of December 13, 2000 and the purchase price election notice with respect to the transaction. As a result of that transaction, I received $993,781.25 in cash, 116,006 free-trading Toronto-Dominion Bank shares and 121,600 Toronto-Dominion Bank shares which are held in escrow. The latter shares become free-trading shares and will be delivered to me as follows: (a) one-third in January 2002, (b) one-third in January 2003, and (c) the final one-third in January 2004. The Toronto-Dominion Bank shares pay an annual dividend of $1.12 per share for a total annual income of $266,112.

13. While with N.[ ] Capital Inc.., any gains made by me on the sale of shares were treated as income for income tax purposes. As a result, the sale by me of the Toronto-Dominion Bank shares would create a significant tax liability. The adjusted cost base of the Toronto-Dominion Bank shares is zero, or close to it, so all of the sale proceeds will be taxed as income given the manner in which Revenue Canada treats me. Since the sale of the N.[ ] Corporation shares, I have been unemployed. I have been actively pursuing employment but have been unsuccessful. In part, the preparation of this affidavit was delayed while I pursued a job prospect, however, that has fallen through. It is a very difficult time in the stock market and the brokerage firms are consolidating. That is why the Toronto-Dominion Bank bought N.[ ] Corporation. There are no positions available to me at this time given my age and experience. I now must, therefore, live off capital. [My emphasis] [44] The father also stated that $993,000 of $3,000,000 held by him in a banker's acceptance as of April 19, 2001 had been received from the "sale of my N.[ ] Corporation shares". [45] Finally, in that same affidavit he deposed: 33. Given the current economic situation, I estimate my income for 2001 to be $432,492.00 made up as follows: (a) $3,000,000.00 banker's acceptance at 4.45% $133,500.00 (b) Dividends on TD shares

at $1.12 per year $266,112.00 (c) Sarmac Holdings $ 32,880.00 Total: $432,492.00 [46] The evidence establishes that the father's income in 2001 was not limited to the extent that he deposed. [47] In reality, his "Line 150" income for 2001 was $1,611,872. Of that amount, $1,100,000 consisted of the severance payment he received in April 2001 after his employment with N.[ ] Corporation was terminated on November 30, 2000. [48] I find it disturbing that the father failed to fully and fairly advise this Court of his real income for 2001 in Summary Trial proceedings. [49] Although the father now says that he included the net amount he had received pursuant to the severance agreement ($770,000) as part of the cash received by him for the sale of his N.[ ] Corporation shares to the TD Bank, I find that explanation to be deliberately misleading. Significantly, while the father did disclose the fact that $770,000 had been received by him as cash, his characterization of those monies as part of the proceeds of sale of his N.[ ] Corporation shares masked their true character as taxable income in circumstances where the determination of his income for Guidelines purposes for child support was one of the principle issues before this Court. Further, the reporting of only the net amount he received further understated the amount of the settlement that would appear as part of his Line 150

income by $330,000. [50] Further, the father did not disclose that the $770,000 cash from the severance agreement was not part of the N.[ ] Corporation share disposition until after the issue was raised by the mother's accountant. That reinforces my determination that his inclusion of the amount as a part of a capital transaction was deliberately misleading. I do not accept that this highly successful institutional financial advisor did not know the difference between a share transaction and a negotiated severance agreement. The mother's 2001 Interim Child Support Application and its aftermath [51] After the dismissal of the Summary Trial proceedings in May 2001, the mother applied for interim child support. That application was heard in July of 2001 at which time the father disputed the mother's entitlement to retroactive support, but agreed that notwithstanding the 1986 Agreement and the 1997 Amendment, he was, by reason of the Family Relations Act, R.S.B.C. 1979 c. 121 and the British Columbia Guidelines, obligated to pay future child support. [52] In July 2001, Master Patterson determined that the father would have income of $1,650,000 in 2001 pursuant to the Guidelines. That determination resulted in an interim order (the "Interim Order") that the father pay $10,679 per month for M's support, retroactive to January, 2001. [53] The father has paid all amounts required by

the Interim Order. By the date of this trial he had paid approximately $288,000 pursuant to the Interim Order as well as $10,000 paid on May 1, 2001 under the 1997 Amendment. [54] In 2001, aside from the substantial child support payments she received from the father, the mother had Line 150 income of $38,500 and H.M. had Line 150 income of $34,260. Neither had yet filed their 2002 income tax returns by the end of the trial but I am satisfied that their total family income will also be approximately $73,000. [55] Since receiving the significant support payments made by the father under the Interim Order, the mother and H.M. have undertaken extensive renovations to their home. They financed those renovations in part by way of a $150,000 line of credit but also used approximately $100,000 of the support payments made by the father under the Interim Order for other home renovations of which M is the primary beneficiary. Further, while they have not specifically put the payments made for M's support under the Interim Order into a separate account for him or for his use, they each testified that they have at least notionally attempted to earmark those support payments for M's needs and for "his share" of family expenses. In so doing they have notionally attributed approximately one-third of general family expenses to M. [56] While that attribution may be somewhat artificial, I do

not find it to be unreasonable given M's size, his age and activity levels (both academic and athletic), his food consumption and that of his friends, as well as his relatively exclusive occupation of a large portion of the family home. [57] Even with that attribution, however, and a generous allowance for M's additional direct expenses it is obvious that unless M incurs significant educational expenses, the cost of supporting him will not approach $10,679 per month now that the renovations to "his portion" of the home have been completed. That should not be surprising, however, given the relatively modest lifestyle that the mother and H.M. and their four children have always lived and still live. Changes to the father's financial circumstances since the N.[ ] Corporation transaction [58] After the father's employment with N.[ ] Corporation was terminated on November 30, 2000, he was unemployed until July 1, 2001. He then joined HSBC Securities at a salary of $120,000 per year, together with the right to share in a bonus program that was dependent upon his group's profitability. [59] On February 14, 2002, the father separated from his wife and on February 15, 2002, he left his employment with HSBC Securities. [60] In August of 2002, the father and his wife negotiated a settlement agreement under which the father has either already paid or has become obligated to pay

approximately $7,500,000 to his wife. That amount is comprised of: (1) the transfer of 72,000 of his TD Shares (valued at $2,500,000) pursuant to the tax-free rollover provisions of the Income Tax Act by September 1, 2002; (2) $2,500,000 in cash on or before September 1, 2002; and (3) $2,500,000 (in cash) payable upon the earlier of the sale of their former matrimonial home or December 1, 2003. [61] The father and his wife also agreed, on an interim basis, that the father would pay $2,000 per month for the support of C as well as the costs of C's attendance at a private school. The father testified that child support quantum was agreed to be the father's Guidelines responsibility for C based upon an annual income of approximately $350,000, but recognizing that the father also has responsibility for the support of both C and M. [62] After February of 2002, the father was unemployed until October 1, 2002. At that time he obtained a new position with C.[ ] Corporation ("C.[ ] Corporation") at a minimum annual salary of $100,000, with bonus potential. C. ISSUES [63] The father acknowledges his responsibility to pay support for M under the Guidelines from January 1, 2001 (the effective date of the Interim Order) to the date of trial as well as in the future, all pursuant to the Family Relations Act and the British Columbia Guidelines. He denies, however, that the mother is entitled

to retroactive child support. [64] The father further submits that his income for 2002 was only approximately $350,000, and that his future income will be approximately the same. He says that those circumstances, together with his child support obligations for C, should be the basis of his obligation for his future support of M, which he calculates to be approximately $2,000 per month. He also argues that the Interim Order should be re-visited based upon his actual income for 2002 and his new support obligations for C. [65] I must accordingly address the following specific issues: (1) Do the 1986 Agreement or the 1997 Amendment preclude the mother's present application for retroactive child support; (2) If not, what is the appropriate quantum of retroactive child support to which the mother is entitled; (3) Has the father paid excessive interim child support since January 1, 2001; (4) If so, what was the amount he should have paid and is he entitled to a retroactive adjustment and repayment of any amounts that he overpaid; and (5) What is the father's present income for Guidelines purposes and his future child support obligations for M? D. ANALYSIS AND DISCUSSION (1) Do the 1986 Agreement or the 1997 Amendment preclude the mother's present application for retroactive child support? [66] This question requires consideration of changes since 1985 to the statutory child support

obligations of a father who has not been involved in his child's life. It also requires consideration of the 1986 Agreement and the 1997 Amendment, measured against the father's statutory obligations over time. Finally, it involves consideration of the father's financial disclosure obligations in 1986; the extent to which he met those obligations; and, the effect of the determination by the Provincial Court in 1997 that it had no jurisdiction to hear the mother's claim for increased maintenance. (a) Is the 1986 Agreement an agreement made under s. 20(c) of the Child Support and Paternity Act so as to bar the mother's right to retroactive child support? [67] In 1986 the Child Support and Paternity Act governed a legislative regime for: determination of paternity when disputed; protection of the interests of unwed mothers and their children by the Superintendent of Child Welfare or his or her appointee; and, determination of the appropriate standard of child support by a Provincial Court Judge. [68] The following provisions of the Child Support and Paternity Act are of particular significance to the issues in this case. 9(1) The [Provincial Court] judge shall fix maintenance that will enable the child to be maintained according to a reasonable standard of living, and the judge shall be governed by a consideration of the probable standard of living the child would have enjoyed if he had been born to his parents in lawful wedlock.

19. Subject to section 20, no agreement between a mother and the putative father of her child is a bar to any proceedings under this Act.

20. A putative father may agree in writing with (a) the mother and the superintendent for adequate maintenance and education of the child and for any other matter and on failure of the putative father to comply with the agreement the superintendent or mother may apply to a judge for an affiliation order, the agreement being sufficient proof of paternity; (b) the superintendent for adequate maintenance and education of the child and for any other matter and on the failure of the putative father to comply with the agreement the superintendent may apply to a judge for an affiliation order, the agreement being sufficient proof of paternity; (c) the mother and the superintendent where maintenance and education of the child and any other matter is made by payment of a lump sum in cash, and in that case the settlement is; (i) a bar to proceedings under this Act either by the mother or the superintendent for the child named; and (ii) adequate ground on application by the putative father, the mother of the child or the superintendent for the rescission of an affiliation order made by the judge who made the original or subsequent order. [69] The father submitted that the 1986 Agreement is an agreement for a lump sum payment for the maintenance and education of M made under s. 20(c) of the Child Support and Paternity Act. He further submitted that s. 20(c) and successor legislation bars

the mother's right to claim child support in addition to that which the father has paid under the 1986 Agreement and the 1997 Amendment. [70] I am satisfied that the 1986 Agreement was not an agreement made under s. 20(c) of the Child Support and Paternity Act. I reach that conclusion notwithstanding Mr. Ohlmann's letter of December 18, 1986 which, as noted above, stated: The Superintendent agrees that this agreement is intended as agreement under Section 20 of the Child Paternity and Support Act, and consents to the agreement. [71] In my view s. 20(c) is of no application to the 1986 Agreement or the 1997 Amendment because: (1) Mr. Ohlmann's letter does not specifically refer to s. 20(c); (2) To characterize the 1986 Agreement as a lump sum agreement under s. 20 (c) ignores the fact that before commencing proceedings under the Child Support and Paternity Act the mother proposed a lump sum settlement of the father's support obligations and provided him with an actuarial analysis of the present value of the father's support obligations based upon specifically identified costs. The father rejected that lump sum offer in favour of a monthly payment of $500 per month; (3) Although the 1986 Agreement does provide for a one time payment of $5,250 for expenses incurred in connection with M's birth and his support and maintenance from birth through June 30, 1986 the evidence

establishes that the payment was intended to compensate for legal expenses in relation to the negotiation of the 1986 Agreement and to pay $500 per month otherwise due for unpaid monthly support. To construe that payment as a lump sum payment for the "maintenance and education of the child" under s. 20 (c) ignores the reality of the situation; and (4) While counsel for the father also submitted that the requirement that the father provide an annuity of $40,000 to M upon the age of majority rendered the constituted a lump sum payment in cash under s. 20 (c) of the Child Support and Paternity Act that argument also fails. The $40,000 annuity is specifically identified by the 1986 Agreement as a gift to M, not as a payment in cash to the mother for M's support. Although the father testified that the annuity was intended for M's education there is no such reference in the 1986 Agreement. Further, the 1986 Agreement provides that if M dies before reaching the age of majority, all funds in the annuity are to revert to the father. [72] If I am wrong in that analysis, I am also satisfied that successor provisions to the Child Support and Paternity Act enacted after 1986 do not support the proposition that the 1986 Agreement acts as a bar to the mother's claim for retroactive child support in this case. [73] In June 1989 the Child Support and Paternity Act was repealed by the Family Relations (Amendment) Act, R.S.B.C. 1988, c.

36. Pursuant to that amending statute, s. 83(10) of the Family Relations Act continued the existence of the former s. 20(c) as a bar to proceedings in the following terms: A written agreement made under section 20(c) of the Child Paternity and Support Act is a bar to an application for an order under this Act for the maintenance of the child named in the agreement. [74] The father relied upon s. 83(10) of the Family Relations Act as a bar to the mother's application for increased support in 1996 and also initially relied upon it as a bar to the retroactive support orders sought by her in this proceeding. [75] In M.T. v. British Columbia, 2000 BCPC 119, however, Bruce Prov. Ct. J. determined that s. 83(10) of the Family Relations Act contravened the equality provision of s. 15 of the Charter of Rights and Freedoms, Part 1 of the Constitution Act, 1982 (the "Charter") and on April 30, 2002, s. 83(10) was repealed. [76] The father then took the position that s. 93(5)(d) of the Family Relations Act precluded the mother from obtaining support for any period prior to the filing of her present application in 2000. (b) Does s. 93(5)(d) of the Family Relations Act limit the mother's claim for retroactive child support? [77] In L.S. v. E.P., 1999 BCCA 393 the Court of Appeal considered issues of retroactive child support in the context of the Child Support and Paternity Act, its

successor legislation, the 1988 Family Relations (Amendment) Act, and the Family Relations Act. [78] The issue on appeal was whether the trial judge had erred in failing to make a retrospective lump sum award for child support in circumstances where the mother had made no claim for child support in the paternity proceedings that she had brought in the Provincial Court in 1984. She had testified in those proceedings that she was able to support her son, wished to do so, and did not wish support of any kind from the father. In 1988, however, because of a permanently disabling injury suffered at work, her financial circumstances changed and in 1995 she applied in this Court for child support under the Family Relations Act. [79] At trial in 1997 this Court determined that what was then s. 93(5)(d) of the Family Relations Act precluded the making of any order for child support for any period prior to the date of the mother's application. [80] When the trial was heard, s. 93 of the Family Relations Act provided that: 93 (1) Subject to the Divorce Act (Canada), a court may make an order on application, or if the court makes or refuses an order for judicial separation or dissolution of marriage or a declaration that a marriage is null and void, requiring a party to the proceeding to discharge his or her liability under section 88, 89 or 90, as the case may be, by paying to the person

designated in the order the amount the court considers reasonable. (2) If a spouse or child will be living separate and apart from the spouse or parent against whom the application is made, the court may, as it considers appropriate, adjust the amount of its order under subsection (1) to take into account the needs, means, capacities and economic circumstance of each spouse, parent or child, including the following: (a) the effect on the earning capacity of each spouse arising from responsibilities assumed by each spouse during cohabitation; (b) any other source of support and maintenance for the applicant spouse or children; (c) the desirability of the applicant spouse or child having special assistance to achieve financial independence from the spouse or parent against whom the application is made; (d) the obligation of the spouse or parent against whom application is made to support another person; (e) the capacity and reasonable prospects of a spouse or child obtaining an education or training. (3) An order under this section may also include one or more of the following: (a) payment of an amount periodically, annually or otherwise, and either for an indefinite or limited period or until the happening of a specified event; (b) payment of a lump sum directly or in trust on terms provided; (c) charging of property with payment under the order; (d) payment of support and

maintenance from the date the application in the proceeding was served on the respondent; (e) payment for expenses arising from and incidental to (i) the prenatal care of the mother or child, or (ii) the birth of the child. [My emphasis] [81] On appeal, Rowles J.A. thoroughly reviewed the jurisprudence concerning retroactive child support as well as policy concerns that inform the judicial discretion to award retroactive child support. She determined that in appropriate cases s. 93(5)(d) did not preclude an order for retroactive child support to a date earlier than the date of the application. [82] Much of the argument advanced during this trial concerned whether the decision in L.S. v. E.P. was correctly decided. That was because of the father's reliance upon an apparently contradictory Court of Appeal decision in T.(E). v. T.(K.H.) (1996), 25 R.F.L. (4th) 98 and the numerous decisions of this Court that had followed that decision, notwithstanding the later decision in L.S. v. E.P. [83] Counsel for the mother urged me to follow L.S. v. E.P. but, in the alternative, argued that s. 93(5)(d) of the Family Relations Act was, like s. 83(10) of the Family Relations Act, unconstitutional in that it contravened the equality provisions of s. 15 of the Charter by denying the children of unmarried parents the same rights to support as those of married parents. [84] Unbeknownst to both

counsel, however, by the time of this trial both the stare decisis issues concerning L.S. v. E.P. and the mother's alternative constitutional argument had been rendered moot by the amendment of s. 93(5)(d) of the Family Relations Act on January 31, 2003. The section now states that an order made for child support may provide for "payment of support for any period before the order is made". [My emphasis] [85] After the trial had concluded, this recent amendment came to my attention. I then brought counsel's attention to it. Counsel for the father then conceded that unless I determined that the amendment was not intended to have retrospective effect, s. 93(5)(d) as amended does not statutorily limit the mother's present claim for retroactive child support. He also acknowledged that if I determined that the amendment did have retrospective effect, the father's defence to the mother's retroactive claim must rely upon common law principles related to the enforcement of agreements and the jurisprudence concerning the appropriate use of judicial discretion to vary agreements retroactively. [86] I am satisfied that the recent amendments to s. 93(5)(d) of the Family Relations Act were intended to have retrospective effect. I reach that conclusion by adoption of the reasoning of both Levine J.A. and Hall J.A. in their majority decisions in Johnstone v. Wright, 2002 BCCA 406 which

considered the retrospective effect of s. 120.1 of the Family Relations Act. [87] The effect of s. 120.1, when considered in relation to existing provisions of the Family Relations Act, is to treat co-habitation agreements between spouses who are not married in the same way as marriage agreements. Either may now be reviewed for fairness under the provisions of s. 65 of the Family Relations Act. [88] The majority of the Court of Appeal determined that, notwithstanding that retrospective application of s. 120(1) could result in parties to co-habitation agreements being subject to different legal consequences than those that existed when the agreements were made, the Legislature intended that s. 120.1 would be retrospective in effect. [89] In reaching that conclusion, Levine J.A. considered policy issues and the evolving nature of the legal rights of unmarried spouses. At paragraphs 68 to 71 she stated: [68] I do not doubt that when the property division provisions now found in Part 5 of the Act were first introduced in 1979, and made expressly retrospective and retroactive (Martelli v. Martelli (1981), 130 D.L.R. (3d) 300 (C.A.), many married spouses felt that it was unfair that the arrangements they had made with respect to the ownership of their property would be subject to new statutory rules. While marrying imports many legal rights and obligations into a relationship, in

British Columbia before March 31, 1979 it did not import the presumption of an equal division of family assets on marriage breakdown (s. 56 of the Act) and review by a court of that division, or of a marriage agreement, for fairness (s. 65 of the Act). The Legislature made a clear policy decision that the unfairness of retrospectivity was outweighed by the need to recognize the economic contribution of both spouses and to provide an equitable division of property for dependent and often vulnerable spouses, more often women. [69] In Miron, McLachlin J. noted at paragraph 155: Of late, legislators and jurists throughout our country have recognized that distinguishing between cohabiting couples on the basis of whether they are legally married or not fails to accord with current social values or realities.... All this suggests recognition of the fact that it is wrong to deny equal benefit of the law because a person is not married. [70] Section 120.1 is one of the ways in which the B.C. Legislature has recognized these social realities and resulting wrongs. It has done so respectively, in the same manner as it did when it applied a statutory fairness standard to marriage agreements between married spouses. [71] Thus, the interpretation of s. 120.1 of the Act that gives it retrospective effect is supported by current social policy, legislative history and recent Charter

jurisprudence. [90] In concurring reasons, Hall J.A. said, at paragraph 73: [73] I have read in draft the Reasons for Judgment of both Mr. Justice Lambert [in dissent] and Madam Justice Levine. If I were dealing with what I might characterize as an ordinary commercial or contractual issue, the considerations adverted to by my colleague, Mr. Justice Lambert, would be ones to which I might assign greater weight. However, in the case here under consideration, we are dealing with an area of law that contains considerable aspects of contemporary social policy. The legal landscape of domestic law has, over the past twenty-five years, been much altered by the course of legislative enactment and judicial decision. I agree with Madam Justice Levine's observation that there has been a movement towards fostering economic equality between domestic partners in both realms. [91] In this case, at issue is the right to support of a child of unmarried parents. It seems to me that if the Legislature intended that retrospective effect should be given to the property rights enjoyed by all unmarried spouses under the Family Relations Act, a fortiori, it intended that retrospective effect would be given to the amendments to s. 93(5)(d) of the Family Relations Act to ensure that all of the children of unmarried couples would enjoy the same fundamental rights to parental support as the children of

married couples. That interpretation is also consistent with the decision of the Court of Appeal in L.S. v. E.P. and to that extent can be seen as an affirmation of existing law. [92] I am accordingly satisfied that s. 93(5)(d) of the Family Relations Act now imposes no limit upon the mother's right to claim retroactive child support for M for any period prior to the filing of the present application. (c) What is the effect of the 1986 Agreement and the 1997 Amendment on the mother's claim for retroactive child support? [93] In L.S. v. E.P., after considering this Court's jurisdiction to order retroactive child support, Rowles J.A. for the Court of Appeal, stated at paragraph 42: [42] While it seems clear that there is jurisdiction to order retroactive child maintenance, it seems equally clear that the discretion to make such an order is not to be exercised as a matter of course. [94] She next addressed "policy concerns regarding the discretion to award retroactive maintenance" and as part of that discussion, considered the presumption against retroactive effect but also the important principle that child maintenance is the right of the child, not of the parent. As to the latter principle she stated, at paragraph 58: [58] A fundamental tenet of the modern law of child maintenance is that the right to maintenance is a right belonging to the child, not the parent. This simple

statement has profound implications for the issue of retroactive support. As the right belongs to the child it cannot be waived or bargained away by the custodial parent or lost due to that parent's neglect, delay, or lack of diligence in enforcing the right. As Wilson J. stated in Richardson v. Richardson, [1987] 1 S.C.R. 857 at 869-70: The legal basis of child maintenance is the parents' mutual obligation to support their children according to their need. That obligation should be borne by the parents in proportion to their respective incomes and ability to pay .... Child maintenance, like access, is the right of the child .... For this reason, a spouse is always free to intervene and determine the appropriate level of support of support for the child. Further, because it is the child's right, the fact that child support will indirectly benefit the spouse cannot decrease the quantum awarded to the child. [95] In further considering the relevant policy issues concerning the awarding of retroactive support, Rowles J.A. next addressed the principle that parents are jointly responsible for child support. She stated at paragraph 60: [60] A fundamental principle in relation to child support obligations is that the parents are jointly responsible for the support of their children. As a result, courts have ordered retroactive child maintenance to be paid in cases where the custodial

parent has borne a disproportionate share of child maintenance expenses, and where fairness and justice require that that parent be compensated by the non-custodial parent for these expenses. [96] In my view, those observations are of particular importance to the facts of this case. [97] At paragraph 64 of L.S. v. E.P., Rowles J.A. considered policy concerns related to the encouragement of negotiated settlements to avoid protracted and acrimonious litigation as a factor in favour of the presumption against giving retroactive effect to child support orders. She also noted, however, that: [64] ... This policy concern stands in obvious tension with the fundamental principle discussed above that child support is a right of the child and, as such, cannot be bargained away by either parent. The reach given to the policy of encouraging negotiated settlement must be accordingly limited and constrained. [98] At paragraphs 66 and 67 Rowles J.A. summarized the "Factors Governing the Discretion to Award Retroactive Maintenance". She stated: [66] A review of the case law reveals that there are a number of factors which have been regarded as significant in determining whether to order or not to order retroactive child maintenance. Factors militating in favour of ordering retroactive maintenance include: (1) the need on the part of the child and a corresponding ability to pay on the part of

the non-custodial parent; (2) some blameworthy conduct on the part of the non-custodial parent such as incomplete or misleading financial disclosure at the time of the original order; (3) necessity on the part of the custodial parent to encroach on his or her capital or incur debt to meet child rearing expenses; (4) an excuse for a delay in bringing the application where the delay is significant; and (5) notice to the non-custodial parent of an intention to pursue maintenance followed by negotiations to that end. [67] Factors which have militated against ordering retroactive maintenance include: (1) the order would cause an unreasonable or unfair burden to the non-custodial parent, especially to the extent that such a burden would interfere with ongoing support obligations; (2) the only purpose of the award would be to redistribute capital or award spousal support in the guise of child support; and (3) a significant, unexplained delay in bringing the application. [99] I will now discuss each of those factors to determine whether the mother has established that she is entitled to retroactive support for M for any period prior to this application.

1. Need and corresponding ability to pay [100] There can be no issue that M has been in need of support since his birth and there is also no issue that the father has had the ability to pay support. The real question in this case is whether the level of support paid by the father has been sufficient to meet M's needs such that it would now be inappropriate to re-visit that level of support. [101] It seems to me that the "need and corresponding ability to pay" factor should be determined by reference to s. 9 of the Child Paternity and Support Act which, as noted above, provided: 9.(1) The judge shall fix maintenance that will enable the child to be maintained according to a reasonable standard of living, and the judge shall be governed by a consideration of the probable standard of living the child would have enjoyed if he had been born to his parents in lawful wedlock. [102] Although s. 9(1) set the standard to be fixed by a judge if the matter was heard by the Provincial Court, I can see no reason why any agreement for child support entered into as a consequence of proceedings brought under the Child Paternity and Support Act should not be tested against that same standard. I also do not see why that standard should not apply to circumstances after 1986. [103] When that standard is applied to the level of support paid by the father to the mother for M's maintenance before the

Interim Order was made in 2001, it is plainly obvious that M did not enjoy the probable standard of living he would have enjoyed had his parents been married. Measured against that standard, given the father's yearly earnings, his accumulation of wealth and the lavish lifestyle that the father and his own family enjoyed, M's needs for support were not met in circumstances where there can be no doubt that the father had the corresponding ability to meet those needs.

2. Blameworthy conduct on the part of the non-custodial parent such as incomplete or misleading financial disclosure [104] Counsel for the mother submits that the father's financial disclosure not only at the time of the negotiation of the 1986 Agreement but also during these proceedings has been both incomplete and misleading. [105] In 1986, with the assistance of experienced counsel, the mother and father negotiated the terms of the 1986 Agreement "on the Courthouse steps" before the hearing of the mother's application for support under the Child Paternity and Support Act. Prior to the scheduled hearing, counsel for the mother had demanded "full financial information so that I can prepare adequately for the hearing". Included in that request was counsel's demand for "lists setting forth [the father's] income, assets, liabilities and expenses". [106] The requested documents were not delivered prior to the scheduled hearing and the agreement that the father was to pay $500 per month was made subject to the delivery by the father of requested financial information. [107] Through his counsel, the father then eventually provided copies of his 1983, 1984 and 1985 tax returns. The 1985 return established that in 1985 the father had taxable income of $181,438. The father also provided a sworn Net Worth Statement stating that he had assets worth $643,000. He refused, however, to

disclose his monthly expenses. [108] In response, in a letter dated August 20, 1986 to the father's counsel, the mother's counsel stated: ... What was important to us on July 2 is still important: how much money does [the father] have each month on average to meet his expenses and obligations? He may receive or draw down money that may not be of interest to Revenue Canada Taxation because of the manner in which he gets it, but it is of signal interest to our client and would be of equal interest to the Court. [109] On September 5, counsel for the father wrote: [The father's] monthly expenses would be meaningless because income is not generated on a monthly basis. Some months he has a large income and some months he has no income. [110] Delay in the provision of financial information, the father's refusal to provide all of the information requested, and the consequent delay in the finalization of the 1986 Agreement resulted in the mother incurring legal fees well beyond those contemplated when the 1986 Agreement was initially negotiated. Faced with financial pressures that she had not anticipated, the mother disputed the amount of her counsel's account and ultimately was required to have it reviewed. Before that occurred, however, she determined that she would not continue to press for the provision of the expense information she had sought. She then finalized the 1986 Agreement

without the benefit of that information and without the assistance of counsel. [111] At this trial the father took the position that he has always provided all of the information that his lawyers have asked him to provide. He also testified that he could not have known in late 1986 that his income for that year would be far more than double the amount that it had been the previous year. [112] I do not accept the father's evidence that he provided all of the information to his former lawyer that was requested. The letter from his counsel to the mother's counsel by which he refused to provide a list of expenses indicates to the contrary. I also do not accept that the father did not know in late 1986 that his income would be dramatically greater in 1986 than in previous years. It defies logic that a high income earner such as the father, whose income was based on the financial success of the organization in which he was intimately involved, would not know how well he and that organization were doing financially. [113] Further, the father's failure to fairly disclose the substance of the $1,100,000 severance agreement paid to him in early 2001 when the Court was being asked to summarily decide his income for Guidelines purposes is indicative of a pattern of behaviour that I cannot ignore both in determining his credibility and in assessing the integrity of his financial disclosure

to the mother from 1986 onwards. In all of the circumstances I find that the father's disclosure of his income in 1986 was at best incomplete and at worst deliberately misleading. [114] I recognize that in signing the 1986 Agreement the mother ultimately acquiesced in the father's refusal to provide the full financial information that had been requested. Such acquiescence does not, however, preclude her from now obtaining retroactive child support. The authorities make it clear that parents cannot bargain away a child's right to support. [115] Further, in my opinion, the principles expressed in Clarke v. Clarke (1991), 55 B.C.L.R. (2d) 273 (C.A.) apply in this case. In Clarke, at p. 278, the Court stated: It is apparent the learned trial judge approached the question of fairness from a conventional, commercial law point of view. With respect, that is not the correct approach to questions arising under s. 51 [of the Family Relations Act]. Instead, it is necessary to examine the respective positions of the spouses objectively as of the date of the agreement to determine if the agreement they reached was actually fair, not whether each of the parties has conducted his or her affairs sensibly or negotiated well or otherwise. This Court has endeavoured to state this principle in a number of cases. In Stark v. Stark (1990), 26 R.F.L. (3d) 425, 47 B.C.L.R. (2d) 99, 71 D.L.R. (4th) 446

(C.A.) (leave to appeal to S.C.C. refused [1990] S.C.C.A. No. 391, counsel for a husband seeking to uphold a settlement agreement found by the trial judge to be unfair relied upon the well-known case of Morrison v. Coast Finance Ltd. (1965), 54 W.W.R. 257, 55 D.L.R. (2d) 710 (B.C.C.A.), which counsel also relied upon in this case. In Stark, this Court said [at B.C.L.R. p. 105, R.F.L. p. 433]: ... I cannot accept that submission [based on Morrison] although I do not find it necessary to comment on its correctness or otherwise in a commercial law context. That is because this is a family law case and this court has held that different considerations should apply. In Logan v. Williams (1989), 41 B.C.L.R. (2d) 34, 24 R.F.L. (3d) 72, a family law case, a defence of acquiescence was raised. Anderson J.A., speaking for this court, said at p. 42: "I emphasize that family law cases, and in particular cases involving marital settlements, stand on an entirely different footing from commercial cases such as Storthoaks v. Mobile Oil Can. Ltd., [1967] 2 S.C.R. 147, [1975] 4 W.W.R. 591 ..." [116] When the rights and entitlement of children are at issue, a parent who not only negotiates on an adversarial basis but also fails to fully disclose his or her true financial position runs the risk that the negotiated settlement will be re-visited by the Court equipped with full knowledge of the facts

that existed at the time. To do otherwise would be to countenance avoidance of parental obligations. [117] I turn next to the issue of the father's disclosure in relation to the 1997 Amendment. [118] As I have previously noted, in 1996 the mother learned by happenstance that the father had apparently become very wealthy. In her application for increased child support in 1996 in the Provincial Court, she sought financial disclosure. The father took the position that the Provincial Court had no jurisdiction to order increased support for M and also refused to make any disclosure of his financial position until his jurisdictional argument was heard. [119] As I read the proceedings before the Provincial Court on April 2, 1997, the father's jurisdiction argument was basically three-fold. First, he submitted that the provisions of the 1986 Agreement relating to the one-time compensation payment of $5,250 and the requirement to provide the $40,000 annuity constituted a lump sum agreement under s. 20(c) of the Child Paternity and Support Act and were a bar to awarding any child support. Second, the father submitted that s. 83(10) of the Family Relations Act (subsequently determined to be unconstitutional in M.T. v. British Columbia, supra) barred the mother's application for an increase in monthly child support since the 1986 Agreement was an entire agreement from which the alleged

"lump sum" provisions could not be severed. Finally, the father submitted that since the 1986 Agreement had not been registered with the Provincial Court by consent under s. 74 of the Family Relations Act, the Provincial Court had no jurisdiction to vary it. [120] The learned Provincial Court Judge accepted that he had no jurisdiction to hear the mother's application because the 1986 Agreement had not been registered under the Family Relations Act and dismissed her application. There was, however, discussion by the presiding judge about the possibility of a proceeding in this Court. Also, at the conclusion of the hearing the following exchange occurred concerning the $40,000 annuity: THE APPLICANT: I'm not sure this is valid, but there was in paragraph 6 a suggestion or at least it says that [the father] will purchase an annuity as a gift to the child -- THE COURT: Yes? THE APPLICANT: -- and although I've asked many times for proof of the annuity, I'm not ever able to get anything. [121] That exchange was followed by a statement from the father's counsel that "I will get instructions". [122] Counsel for the mother takes the position that the father raised the foregoing jurisdictional issues in the Provincial Court in 1997 to avoid financial disclosure and that his conduct in so doing should be looked at as part of a continuing pattern of deliberate blameworthy conduct. [123] I

am not prepared to find that the jurisdictional arguments raised by the father in 1997 were advanced in bad faith. I am, however, concerned that there was virtually no evidentiary foundation for the proposition that the 1986 Agreement was a "lump sum" agreement under s. 20(c) of the Child Paternity and Support Act especially since the father testified that he had been advised by his counsel to reject the mother's request for a lump sum settlement. I am even more concerned by the failure of the father to disclose that the $40,000 annuity upon which he relied had never been purchased by him. [124] My concern about the father's failure to purchase the annuity extends to the 1997 Amendment which came about only after the father's jurisdictional submissions had resulted in their being no financial disclosure by him. [125] I am satisfied that the father's proposed amendments to the 1986 Agreement arose, at least in part, as consequence of a determination to preclude further inquiry into his financial wherewithal and to overcome any consequences of his failure to fully meet his obligations under the 1986 Agreement by purchasing the annuity. [126] The totality of the father's conduct in the circumstances, including his failure to disclose his default under the 1986 Agreement and his negotiation of the 1997 Amendment without providing current financial information both preclude any reliance by him upon the 1997 Amendment as a bar to retroactive support.

3. Encroaching on capital or incurring debt [127] The evidence establishes that the mother used all of her RRSP savings during the early years of M's life so that she could spend more time with him rather than leave him in the care of others. While those were career and lifestyle choices made by her, they were not taken with a view to increasing the father's support obligations.

4. The effect of and any excuse for delay where the delay is significant [128] In my view the mother's delay in the bringing of this application for retroactive support is both explicable and excusable. [129] The fact that the mother and father had no social contact or any interaction concerning M between 1986 and 1996, when the mother first sought to have child support reviewed, takes this case out of the realm of the usual circumstances considered in cases of delay. When the mother learned in 1996 of the father's apparently affluent circumstances, she almost immediately commenced proceedings for further support. [130] The delay between 1997 and the bringing of this application in 2000 arose by reason of the mother's unsuccessful application, the intervening 1997 Amendment which resulted in her receiving some immediate financial relief, and the same continuing lack of contact with the father that had existed in the previous 15 years of M's life. It was only after the promulgation of the Guidelines and the mother later learning in 1999 (again by happenstance) of the father's financial successes that the mother could have known that there was any basis for a claim for increased support. [131] There is no evidence in this case that the mother deliberately sat on her rights to the father's detriment. Any delay by her in asserting her rights was justified by her lack of knowledge of the father's financial situation, exacerbated by the father's failure to provide full and fair financial disclosure at any material time prior to the present proceedings.

5. Notice of an intention to pursue support, followed by ongoing negotiations to that end [132] This factor does not apply in this case except concerning the very short period in 1997 after the Provincial Court jurisdictional hearing during which the father proposed and the mother accepted the variation of the 1986 Agreement by way of the 1997 Amendment. [133] In 1996 the father had notice of the mother's intention to seek increased support and resisted that application by raising the jurisdictional issues I have discussed. I am satisfied that the 1997 negotiations that eventually came about as a consequence of the dismissal of the mother's 1996 application should be considered a neutral factor in the consideration of my discretion to award retroactive support in this case. While those negotiations had the effect of precluding further actions for a period of three years, as I have previously determined, the circumstances were such that I am satisfied that the father should not be entitled to use the 1997 Amendment to preclude further inquiry into whether he adequately provided for M's needs after 1997.

6. Creating an unreasonable burden for the non-custodial parent [134] There is no evidence that an award of retroactive support in an amount necessary to provide child support in keeping with his parental obligations would place any unreasonable burden upon the father. It also would not in any way compromise his ability either to pay future support for M or to meet his obligations concerning his daughter C.

7. Re-distributing capital or awarding disguised spousal support [135] In almost any situation in which a custodial parent seeks an order for retroactive support, such an award may have the effect of awarding the custodial parent funds that will not have to be immediately expended to support the child. That is so because the child will have already lived through the period in question without the benefit of the funds that could or should have been available for his or her support. While the creation of an immediately available pool of capital for the non-custodial parent may be the practical result of a retroactive order, it does not necessarily follow that a retroactive award will constitute capital re-distribution. [136] If, as in this case, the custodial parent has borne a disproportionate share of the cost of raising a child, a retroactive order is better viewed as a re-capitalization of the custodial parent rather than as a re-distribution of capital. In such circumstances there is no reason why a retroactive child support order should not be made even though the custodial parent may be the main beneficiary of the award. The award arises not from a re-distribution of capital but rather from the recognition and enforcement of joint parental responsibility for child support. (See: Cherry v. Cherry (1996), 24 B.C.L.R. (3d) 158 (C.A.); Hess v. Hess (1994), 2 R.F.L. (4th) 22

(Ont. Gen. Div.) and Collins v. Collins (1998), 221 A.R. 111 (Q.B.)). [137] As I have ruled, s. 93(5)(d) of the Family Relations Act as amended on January 30, 2003 now provides that any order made for child support under s. 93(5) may provide for "payment of support for any period before the order is made". [138] After having considered the totality of the evidence in this case and the factors which militate both against and in favour of an award for retroactive child support as delineated in L.S. v. E.P., I am satisfied that the mother is entitled to an award of child support retroactive to 1986 notwithstanding the existence of the 1986 Agreement and the 1997 Amendment. [139] In reaching the conclusion that retrospective support is appropriate notwithstanding the 1986 Agreement and the 1997 Amendment, I have placed significant emphasis upon: the father's incomplete and misleading disclosure of his financial circumstances in 1986; the father's material breach of the 1986 Agreement in failing to purchase the $40,000 annuity; his failure to acknowledge that breach before the Provincial Court in 1997 while relying upon the annuity as a lump sum payment; the fact that the 1997 Amendment was negotiated without the provision of current financial disclosure by the father; the mother's encroachment on her capital; and, the woefully inadequate support that the father has paid for M when measured against the father's earnings and standard of living over the years.

2. What is the appropriate quantum of retroactive child support to which the mother is entitled? [140] In determining the amount of the retroactive child support award to be made in this case I must, of course, consider all amounts that the father has already paid. I must also bear in mind the fact that M has enjoyed considerable benefit from the involvement of H.M. in his life as well as from the mother's devotion and the expenditure of her own limited resources. Those joint family efforts have, at least somewhat, ameliorated the extent to which M suffered the disadvantage of not receiving the level of support to which he was entitled from the father. [141] The situation in this case is, however, not like that in L.S. v. E.P where a retroactive support order was not made. The evidence in that case established that through the efforts of the child's mother and her family the child had not missed out on advantages that would have accrued to him if his father had been paying support. [142] While counsel for the father argued that the mother has not established entitlement to significant retroactive child support because, thanks to the efforts of the mother and H.M., M did not suffer disadvantage, I do not agree. [143] In this case, the extent to which M's life has changed since the mother began to receive child support in accordance with the Guidelines graphically illustrates the

probable standard of living that M would have enjoyed if an appropriate child support had been paid by the father between 1986 and 2001. Notwithstanding the efforts of the mother and H.M. between 1986 and 2001, it cannot be said that M has not suffered disadvantage when the standard of living which the mother and H.M. were able to provide for him is measured against the standard of living which M was entitled to enjoy and which the father was obligated to assist in providing. [144] Unfortunately, I was given little assistance concerning the appropriate level of pre-Guidelines child support that the father ought to have paid. Counsel for the mother relied on submissions that would have effectively resulted in applying the Guidelines retrospectively for each year between 1986 and 2000. On the other hand, counsel for the father asserted that no additional support should be paid. [145] In support of his submission that the Guidelines should be retroactively applied, Mr. Mansfield relied upon the decision of this Court in Campbell v. McRudden, 2001 BCSC 529 in which Harvey J. considered the Guidelines in determining the appropriate level of retroactive child support for a period of five years prior to their enactment. In doing so, Harvey J. stated: [110] I have taken into consideration the appropriate factors that must be taken into account when ordering retroactive child support to

a period before the Guidelines came into effect. Whereas the Guidelines were not in effect before May 1997, they are of some guidance and can be utilized to that limited extent. In the circumstances here, I order that the defendant pay retroactive child support for the two children in the amount of $1,400 per month for the period August 1992 through April 1997 (57 months) for a total amount of $79,800.00. [146] I agree that for periods prior to the date on which they became effective, the Guidelines can be of some guidance. In this case, for example, I am satisfied that from 1997 when the Federal Guidelines were enacted until April 1998 when the British Columbia Guidelines came into effect, the Guidelines are an extremely valid guide to appropriate levels of child support. [147] On the other hand, the guidance available from the Guidelines in years before 1997 and especially those far distant from 1997 is much less useful. That is so primarily because an entirely different regime based upon individually determined means and needs governed the determination of adequate child support. One major aspect of that regime had to do with the income tax treatment of child support orders. Further, as I understand the rationale behind the development of the Guidelines, it was the intent of Parliament to reflect the current costs of raising children. Accordingly, uncritical application of

the Guidelines to periods of time when they were either not in place or within active legislative contemplation, runs the risk that a retroactive award of lump sum support would exceed that which would likely have been awarded when the cost of living was lower. [148] Due to the differing extent to which the Guidelines should be considered and applied for the respective periods from 1986 to 1996 and from 1997 to 2000, I have determined that I should approach the two periods separately in assessing the appropriate retroactive support order that should apply to each period. (a) Retroactive Support for the period 1986--1996 [149] From 1986 to 1996 the father's yearly taxable income averaged approximately $1,233,000. [150] Given the difficulties with an uncritical retrospective application of the Guidelines, I have determined that I should approach the determination of the appropriate quantum of retroactive support for the period 1986 to 1996 in the following way: (1) I will undertake a comparison with support payments ordered for the children of high income earning non-custodial parents in decided cases to the extent that such a comparison can be usefully made; (2) I will consider the extent of the likely present value of the mother's encroachment upon her capital to enable her to provide for M's care; (3) I will consider the level of support that would have been ordered had the Guidelines been in existence, bearing in mind the concerns I have noted above and attempting to adjust for those concerns; and (4) I will then determine the appropriate lump sum award for 1986 and 1996 bearing in mind all of those considerations.

1. Comparison of child support orders for high income earners between 1986 and 1996 [151] Reported cases involving child support orders for children of parents with incomes as high as that of the father are of course extremely rare. After a search of reported Canadian cases, I concluded, however, that for the purposes of this comparison cases that considered a non-custodial parent's yearly income of at least $175,000 could offer some guidance. The extent of that guidance obviously increases with the income earned. [152] I then determined that the circumstances in those cases referred to in the table of cases attached as Schedule A to these Reasons are of assistance in assessing the appropriate quantum of retroactive support that the father should now pay to compensate the mother for his inadequate support of M between 1986 and 1996. [153] I recognize that the extent of any guidance available from any specific case is limited not only by the widely varying circumstances of each case but also by the fact that support payments ordered prior to the enactment of the Guidelines involved an analysis not only of the means of the paying spouse but also those of the recipient spouse and the children. Further, in the years under consideration, both child and spousal support payments were taxable in the hands of the recipient and deductible by the payor. As such, I believe it is fair to

say that there was in some cases a more blended approach to support orders than is now the case since that approach is precluded by the Guidelines. [154] My consideration of the cases in Schedule A leads me to conclude that the father should have paid at least $3,500 rather than $500 per month for the support for M for the 11 years from 1986 to 1996. Based upon that analysis, the father should have paid approximately $396,000 more in child support than he did. That amount would, of course, have been tax deductible for the father and taxable in the mother's hands. On the other hand, the mother did not have the benefit of receiving those monies as and when needed from 1986 to 1996, and the father has had the use of those funds during not only all of that period but also to the date of trial.

2. The lost value of the mother's encroachment upon capital [155] In 1989 the mother collapsed her RRSP of approximately $30,000 and also took an early retiring allowance of $20,000 paid out over two years. While she made career lifestyle choices in so doing, the further fact remains that had she not done so she would have had significantly greater expenses for M's daily care. [156] The father testified that if he had purchased an annuity in 1986 pursuant to the terms of the 1986 Agreement he would have had to pay $10,000 to obtain a yield of $40,000 in 18 years. While I do not have the benefit of actuarial evidence, the father's testimony is at least some evidence of the potential growth of an investment over some of the relevant time period now under consideration. [157] Doing the best I can with limited evidence, I am satisfied that the mother's encroachment upon her capital in the amount of $50,000 in 1989 has likely resulted in a loss of capital appreciation that would otherwise have accrued to her of between approximately $150,000 and $200,000 between 1989 and the date of trial.

3. Child Support if the full Guidelines Table Amounts were applied retrospectively between 1986 and 1996 [158] If the 1997 Guidelines Table Amounts were applied to the father's average annual income between 1986 and 1996 of $1,233,000 without reduction, the father would have been required to pay approximately $8,000 per month in child support. If that amount is reduced by approximately one-half to account for lack of tax deductibility and a further, somewhat arbitrary 20% for inflationary concerns the appropriate order for support would have been approximately $3,200 per month. On that analysis, the father would have underpaid the mother approximately $356,000 for child support between 1986 and 1996.

4. Summary of Approaches [159] Analysis based upon case law comparisons indicates that the father paid the mother approximately $396,000 less between 1986 and 1996 than would likely have been ordered with full knowledge of the mother's financial circumstances of the parties. Analysis based upon the value of the mother's encroachment upon her capital would yield a compensation order of between $150,000 and $200,000. Finally, analysis based upon the retrospective application of the Guidelines adjusted for notional tax and inflation considerations would result in an award of approximately $356,000 for the period 1986 to 1996. [160] In view of the totality of the evidence and the foregoing comparison analyses, I have determined that a total award of $250,000, inclusive of interest to the date of trial and net of taxes, will appropriately compensate the mother for the inadequate child support paid by the father from 1986 to 1996. (b) Retroactive Support from January 1997 to December 2000 [161] I have determined that the appropriate retroactive child support award for the period 1997 to 2000 should be based upon the Guidelines, less all amounts actually paid by the father during that period. [162] I am satisfied the application of the Guidelines to the period from the beginning of 1997 to April 14, 1998 is appropriate because of the proximity in time of the new regime to the

enactment of the British Columbia Guidelines. Further, at the time that the mother made her application for an increase in child support in Provincial Court, the enactment of the Federal Guidelines was imminent and their Table Amounts were being widely used both in negotiating child support orders and by this Court in making child support orders in contemplation of their enactment. [163] Cases such as Campbell v. McRudden, supra, illustrate the extent to which the Guidelines have been applied to establish the pre-Guidelines support obligations of non-custodial parents. Further, a perusal of the authorities during the period from the enactment of the Federal Guidelines in 1997 until the enactment of the British Columbia Guidelines in 1998 shows that the Federal Guidelines were being regularly applied even in those cases where the Divorce Act did not govern the rights of the parties or their children. (See for example: Metzner v. Metzner (1997), 46 B.C.L.R. (3d) 149 (S.C.)). [164] Although the father argued that the application of the Guidelines at any time prior to the Interim Order would be excessive, the father failed to meet the evidentiary burden of rebutting the presumption in favour of the Guidelines Table Amounts. (See: Francis v. Baker (1999), 50 R.F.L. (4th) 228 (S.C.C.); Hollenbach v. Hollenbach, 2000 BCCA 620 and Metzner v. Metzner, 2000 BCCA 474.) [165] Accordingly,

I order that the father pay lump sum child support to the mother for the support of M between January 1, 1997 and December 31, 2000 pursuant to the Guidelines, in the total amount of $505,112 calculated as follows: 1997: $13,072 per month based upon his taxable income of $2,023,918 (Total: $156,864); 1998: $9,751 per month based upon his taxable income of $1,505,048 (Total: $117,012); 1999: $8,784 per month based upon his taxable income of $1,353,925 (Total: $105,408); 2000: $15,819 per month based upon his taxable income of $2,453,194 (Total: $189,828); less: $44,000 paid at $500 per month and two payments of $10,000 each made pursuant to the 1997 Amendment. [166] In total, therefore the mother is entitled to retroactive child support between November 1986 and December 2000 of $755,122 based upon $250,000 for the period 1986 to 1996 and $505,112 for the period 1997 to December 31, 2001. [167] While I recognize that this is a very large amount that bears little resemblance to the amounts that ordinary income earners spend in the raising of their children, the father is not an ordinary income earner. [168] Subject to clear and compelling evidence to the contrary (which the father has not adduced), the Guidelines Table Amounts are the amounts deemed appropriate by the Parliament of Canada and the Legislature of the Province of British Columbia for the support of children of high

income earners. [169] In the circumstances of this case, given the father's ability to pay and his woefully inadequate support of M from 1986 until the Interim Order was made, I see no reason why the father should not pay retroactive support in an amount deemed appropriate by the legislative authorities merely because he has the benefit of an extremely high income. With that income came responsibilities which he did not appropriately meet before the Interim Order was made in 2001. (3) Has the father paid excessive interim child support since January 1, 2002 and if so, what amount should he have paid and is he now entitled to retroactive adjustment and repayment of any amounts that he may have over-paid? [170] On November 29, 2002 the father applied to vary, retroactively to January 1, 2002, the child support he had paid for M pursuant to the Interim Order. Although counsel for the father attempted to have that application heard before this trial commenced, he was unable to do so and thus the father's retroactive variance application became a part of this proceeding. [171] The father seeks reassessment of his child support obligations for 2002 and for those months of 2003 that have passed until the date of this judgment. He also seeks repayment of any amounts he has paid during that period in excess of what he says should be determined to be his Guidelines income for that

period. [172] The father submits that, given his reduced actual income from the amount determined by Master Patterson in July, 2001, and that after August 2, 2002 he became obligated to pay support for both C and M, the mother should now be required to repay amounts that exceeded his Guidelines obligation. He seeks repayment of a total amount of approximately $146,000 based upon approximately $7,000 per month in child support from January 1, 2002 to August, 2002 (approximately $56,000) as well as approximately $9,000 per month thereafter to the date of this judgment (approximately $90,000). [173] Determination of the question of whether the father paid more support than he should have paid requires consideration of: the father's income for Guidelines purposes in 2002; whether there should be any re-assessment of the father's support obligations prior to the filing of his application to re-visit the Interim Order; and whether the father's recent separation from his wife and subsequent obligation to pay support for C should result in a further reduction of the child support that he was obligated to pay for M after August 2002. [174] The answers to these questions will also, at least to some extent, impact upon the determination of the father's future child support obligations for M. (a) What was the father's income for Guidelines purposes in 2002? [175] The Interim Order made in

July of 2001 to be effective as of January 1, 2001 was based upon an interim determination that the father would have taxable income in 2001 of $1,650,000. That amount included the $1,100,000 severance settlement that arose from the father's loss of employment after the TD Bank acquired his interests in N.[ ] Corporation. [176] That interim determination of the father's anticipated income was made in circumstances where the father had been unemployed since November 30, 2000 and had only obtained new and also much less remunerative employment three days before the interim application was heard. [177] Master Patterson's Reasons for Judgment dated July 4, 2001 indicate that the father's counsel conceded that the father's income in 2001 would be $1,512,000. Master Patterson concluded, however, that it was more likely that the father's income would be $1,650,000. As it turned out, the father's 2001 Line 150 income was $1,611,872. [178] After the Interim Order was made: (1) the father and his wife separated on February 14, 2002 and the father voluntarily left his employment with HSBC Securities on February 15, 2002. Prior to leaving that employment he earned $67,715 in 2001 and $75,248 in 2002; (2) the father was unemployed from February 15, 2002 until October 1, 2002 when he obtained a position with C.[ ] Corporation ("C.[ ] Corporation") at an annual salary of $100,000 together

with bonus potential. He testified that his bonus potential is entirely dependent upon management assessment of his entitlement based at least in part upon group profitability; and (3) the father earned approximately $25,000 from his employment with C.[ ] Corporation in 2002 and by the date of this trial in March, 2003, had earned $25,000 in salary as well as a bonus of $40,000 paid in early February or March, 2003. The father testified, however, that he did not anticipate further bonuses in the foreseeable future due to very depressed international financial market conditions. [179] At the time of this trial the father had not yet filed his 2002 income tax return. He did, however, submit a document entitled "2002 Tax Return Summary" (the "2002 Summary") that he testified would result in Line 150 income of $363,542 in 2002. He based his submissions as to the appropriate level of child support for 2002 and in future years upon the 2002 Summary. [180] Unfortunately the father did not provide a draft Schedule 4 or any other "backup" financial detail which would allow a detailed inquiry into the reliability of the 2002 Summary. For example, while the 2002 Summary anticipates that he will have "Business Income" in a net amount of $2,585 he does not record how that amount was arrived at by providing details of either his Gross Business Income or his Business Expenses. [181] That

omission is of significance for two reasons. First, presentation of the 2002 Summary devoid of back-up detail precludes critical examination of any of the amounts recorded. Second, the evidence establishes that in 2002 the father disposed of 10,000 of his TD Shares (having a net value of $350,000) on the open market. He did so in order to satisfy obligations to his wife pursuant to their property division agreement. The receipt of $350,000 is, however, not specifically identified in any way as income on the 2002 Summary. [182] The tax treatment of the disposition of those 10,000 TD Shares is important because one of the reasons Humphries J. gave for determining that this matter was inappropriate for Summary disposition in May of 2001 was that it was not then known whether the father's eventual disposition of his TD Shares would attract income or capital gains treatment. That issue still remains clouded. [183] That is so because the net proceeds of the father's disposition of his TD Shares both in 2002 and in future will fall into his Line 150 income, whether a disposition is treated as income or as a capital gain. However, if for the taxation year 2002 he is intending to write off losses on other investments to achieve a small net Business Income gain for that year (which appears to be the case given that the 2002 Summary does not record the $350,000 received by him for his TD

Shares as a capital gain), questions arise as to whether the father has now elected to treat the 2002 sale and all future sales of his TD Shares as income. That would be to his obvious potential detriment as a taxpayer in future years when offsetting investment losses are not available to him. [184] The fact that the father could suffer serious adverse tax disadvantages from that course of action without an explanation as to why he would do so raises serious questions as to whether he will in fact file his 2002 Income Tax return in accordance with the 2002 Summary. Accordingly the extent to which the 2002 Summary can be relied upon either in determining his 2002 income or as a model for future years is compromised. [185] I reach that conclusion because if the father does in fact elect to attempt to treat the disposition of 10,000 TD Shares in 2002 as capital gains (which he could do given that he had not filed his 2002 tax return at the end of the trial and given also his testimony that this issue of tax treatment was still an open consideration) that decision could result in there being no offsetting investment losses to reduce his Business Income in 2002. In that case his Line 150 income for 2002 would be much higher than that indicated by the 2002 Summary. The same would be true in future years that TD Shares are sold by him. [186] I raise these concerns not because I seek

to interfere with the father's present or future tax planning, but rather as an example of why the presentation of the 2002 Summary without detailed Schedules or financial data has lead me to conclude that I can place little reliance upon it. While I would have that concern in any case where such a bare summary was relied upon, here my concern is exacerbated by the father's demonstrated past reluctance to provide full and accurate disclosure of his financial circumstances. [187] Given those concerns, how then do I approach the determination of the father's 2002 income for Guidelines purposes? [188] In Fuzi v. Fuzi, [1999] B.C.J. No. 2263 (S.C.) Pitfield J. decided that when the relevant portions of the Guidelines are considered there can be no rigid rules for determining either interim or permanent child support obligations. [189] After reaching that conclusion, however, Pitfield J. stated that the Court should, under s. 16 of the Guidelines, first determine annual income for the year in which the application is heard using the most current source of information available for each aspect of the payor's income. [190] Section 16 of the Guidelines provides: s.

16. Subject to sections 17 to 20, a spouse's annual income is determined using the sources of income set out under the heading "Total income" in the T1 General form issued by the Canada Customs and Revenue Agency and is adjusted in accordance with Schedule III. [191] Pitfield J. next said: [17] Having made the determination, the next step in the process, according to the Guidelines, will be to consider whether the determination of annual income made by the court under s. 16 does or does not provide the fairest determination of annual income. One might ask how, if the court has done its job properly, the determination under s. 16 can be anything but the fairest determination of annual income from any source. [18] The reasonable interpretation of the combined effect of ss. 16 and 17 must be that if there is a material difference between the amount determined under s. 16 and the high, low, or average amount, as the case may be determined under s. 17(1)(a) or (b), the amount determined under s. 16 should be questioned for fairness and that should be fairness in relation to historical patterns. [19] The mere fact of difference will not result in a finding of unfairness. The degree of permanence associated with the difference between the s. 16 determination and the result of the s. 17 analysis will be material. Since one objective of the Guidelines is to ensure that children benefit

from the financial means of parents, and annual income is a good measure of those financial means, they should gain when income goes up, and lose when it goes down. Indeed, that is contemplated by s. 14 of the Guidelines which provides that for purposes of variation, a change in circumstances is any change that would result in a different child support order being made. A change in annual income is just such a circumstance. [20] The quality of the change in income from historical levels must be considered. An increase might have the appearance of permanence as with a promotion or change of employment. The increase might be the temporary result of increased overtime or decreased downtime. A decrease might be permanent because of a change of employment, disability, or unemployment or it might be temporary and the result of factors adversely affecting employment in the short term. The quality of the increases or decreases and the reasons giving rise to them must be addressed in order to assess the fairness of the s. 16 determination in the context of s. 17. [192] At the time Fuzi was decided, s. 17(1) of the Guidelines provided: 17(1) Where the court is of the opinion that the determination of a spouse's annual income from a source of income under section 16 would not provide the fairest determination of the annual income from that source, the court may determine the annual income

from that source. (a) Where the amount in respect of the source has increased in each of the three most recent taxation years or has decreased in each of those three years, to be the amount from that source of income in the spouse's most recent taxation year; (b) where the amount in respect of the source of income has not increased or decreased as described in paragraph (a), to be the average of the amount received by the spouse from that source of income in the three most recent taxation years, or such other amount, if any, that the court considers appropriate; (c) where the spouse has received a non-recurring amount in any of the three most recent taxation years, to be such portion of the amount as the court considers appropriate, if any. [193] Section 17(1) was subsequently amended to provide: 17.(1) If the court is of the opinion that the determination of a spouse's annual income under section 16 would not be the fairest determination of that income, the court may have regard to the spouse's income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years. [194] That newer, more flexible approach to the consideration of fluctuating incomes does not in any way detract from the process of analysis suggested by Pitfield J. in Fuzi, and I will

accordingly now undertake that analysis. [195] As to my determination of the father's 2002 income under s. 16 of the Guidelines, after considering the totality of the father's financial circumstances in 2002 and notwithstanding my concerns about the reliability of the 2002 Summary, I have determined that the father's 2002 income for Guidelines purposes was approximately $650,000. [196] In reaching that conclusion I have paid particular attention to the father's admissions concerning his income from various sources as well as the evidence related to his disposition of 10,000 TD Shares for approximately $350,000 in late 2002. I have not, however, considered any business or other offsetting losses that he may eventually use to reduce the return from that share disposition or from other share dispositions for his personal income tax purposes. [197] I have calculated his minimum income for 2002 as being approximately $650,000 by reference to the following income sources: (1) Employment income: $92,133 (for 4.5 months); (2) Dividend income from TD shares: $185,478 (based upon 165,606 shares at $1.12 per share); (3) Interest and other investment income: $20,499; and (4) Proceeds of Disposition of 10,000 TD Bank Shares: approximately $350,000. TOTAL: $648,110 [198] I have calculated the dividends from the TD Shares on a total of 165,606 shares notwithstanding that 10,000 shares were

sold in late 2002. I did so because the father would also have received some dividend income from 72,000 TD Shares before he transferred those shares to his wife after August 20, 2002 and I have not included those dividends in his income. [199] While I recognize that the father testified that the $350,000 from the sale of the 10,000 TD Shares was used to pay his obligations to his wife under their separation agreement I have determined that the disposition amount of $350,000 should still be included in his 2002 income because he himself chose to liquidate that particular asset. It was open to him to dispose of a non-taxable capital asset or to borrow in order to fund those obligations. In my view, M should not suffer the consequences of either the father's obligations to others, or his tax reduction initiatives. [200] I turn next in the Fuzi analysis to my consideration of whether a determination of income in the amount of approximately $650,000 under s. 16 of the Guidelines would be fair having regard to the amended provisions of s. 17(1) of the Guidelines. [201] Over the three years from 1999 to 2001 the father's Line 150 income fluctuated from $1,353,924 in 1999, to $2,453,194 in 2000, and to $1,611,959 in 2001. [202] In 1999 and 2000, however, the father was employed by N.[ ] Corporation, with whom he had always enjoyed huge financial success. Further, $1,100,000 of his

2001 income resulted from a one-time severance payment from N.[ ] Corporation. [203] In 2002, the father's employment situation was dramatically different than it had been in the three previous years. That occurred, at least in part, because in 2002 he only worked for slightly more than four months. It also, however, resulted because of changed market conditions in the institutional investment business. [204] Having considered all of those circumstances, I am satisfied that the determination of the father's income at $650,000 for 2002 under s. 16 would not be unfair to either the mother or the father. In that regard, I also refer to s. 17(2) of the Guidelines which provides: 17(2) Where a spouse has incurred a non-recurring capital or business investment loss, the court may, if it is of the opinion that the determination of the spouse's annual income under section 16 would not provide the fairest determination of the annual income, choose not to apply section 6 and 7 of the Schedule III, and adjust the amount of the loss, including related expenses and carrying charges and interest expenses, to arrive at such amount as the court considers appropriate. [205] In my determination of the father's income for 2002 under s. 16, I effectively denied the father the use of the alleged Business Income losses claimed by him in the 2002 Summary. That is so because if the $350,000 sale

proceeds from the disposition of his TD Shares was in fact recorded in his Business Income, other Business Income losses were then used to offset that income. By including the $350,000 from the sale of the 10,000 TD Shares in his 2002 income without set-off I have effectively applied the provisions of s. 17(2) of the Guidelines in the s. 16 analysis. In my view that is appropriate because I have no evidence that any of those losses are recurring losses. On the other hand, to further increase or decrease his income under s. 17(1) for Guidelines purposes would result in unfairness. (b) Should any re-assessment of the father's support obligations pre-date the filing of his application to re-visit the Interim Order? [206] Since I have determined that the father's income for Guidelines purposes in 2002 was approximately $650,000, rather than the $1,650,000 upon which the Interim Order was based, questions arise as to whether he is entitled to a retroactive re-assessment of his support obligations in 2002 for the period prior to November 29, 2002 when he applied for a retroactive variation. [207] In my discussion concerning the mother's application for retroactive child support I reviewed in some detail the principles enunciated in L.S. v. E.P., supra, governing the factors to be considered in determining whether a retroactive support order should be made. [208] Those same principles

must now be applied to my consideration of whether the father is entitled to retroactive relief from overpayment. In that regard, of particular concern are those principles concerning notice to the mother of the intended application for reduction of support and the principle of whether to deny re-assessment would amount to a re-distribution of wealth. [209] In most circumstances the Court will be reluctant to make a retroactive order affecting child support before the payee parent had notice of an application to do so. That is because the payee will have governed his or her affairs in reliance upon the original award. In this case, however, the evidence before Master Patterson was that the father's income prospects for 2002 were much diminished from previous years and would likely continue as such because of the loss of his employment with N.[ ] Corporation. Also, the mother was aware that the $1,100,000 severance payment was a one-time occurrence so that the father's future income would likely be much lower than that upon which the Interim Order was based. In those circumstances it can not be said that the mother could be surprised by an application to re-visit both the amount and duration of the Interim Order. [210] Further, counsel for the mother has relied upon what would have been the father's historical Guidelines income in advancing the mother's claim for retroactive

support. I have accepted that submission for the period 1997 to 2000, resulting in a significant retroactive award. [211] In those circumstances, I am satisfied that it would be unfair to require the father to pay support for 2002 based upon a significantly lower income than that upon which the Interim Order was based, when that significant decrease was not only foreseeable but anticipated. [212] I have accordingly concluded that the father's child support obligation for 2002 for Guidelines purposes should be based upon taxable income of $650,000. [213] That conclusion requires (subject to the question of whether the father is entitled to further relief after August, 2000 due his obligation to support his daughter C) that the mother re-pay to the father $76,800 in child support over-payments for 2002. That amount is calculated as follows: (1) Support for 12 months at $10,679 per month, based on income of $1,650,000: $128,148; less (2) Support for 12 months at $4,279 per month, based on income of $650,000: $51,348. [214] Due to the late filing of the father's application, I do not, however, order the payment of any interest on the amount of the overpayment. (c) Does the father's recent separation from his wife and subsequent obligation to pay support for C result in a further reduction of the child support that he was obligated to pay for M after August 2002? [215] Section

3(1)(a) of the Guidelines states that the presumptive rule is: 3.(1) Unless otherwise provided under these Guidelines, the amount of a child support order for children under the age of majority is (a) the amount set out in the applicable table, according to the number of children under the age of majority to whom the order relates and the income of the spouse against whom the order is sought; [My emphasis] [216] In Von Sturmer v. Von Sturmer, [1998] B.C.J. No. 1646 (S.C.), an appeal from a Master's chambers order that assessed the husband's child support obligations by taking the two children from a previous relationship, plus the two to whom the order related, and splitting the Guidelines amount for four children in half, Ralph J. found that this assessment method was incorrect. He explained the situation as follows: [12] Because Mr. Von Sturmer is obliged to support four children, the master then selected the Guideline income for $73,061 and found it to be $1481 for four children. He divided that amount in half to determine the appropriate amount for the two children for whom support is claimed in this application and determined the basis amount to be $740.50 per month. [13] Section 3(1) (a) of the Guidelines provides, however, that the presumptive amount of support to be paid is the amount that applies to the number of children "to whom the order relates." In the application

before the master that number was two children. The presumptive amount for two children is $952.00. [14] Mr. Von Sturmer argues that payment of this amount will create an undue hardship for him and that the court should order a smaller monthly payment applying s. 10 of the Guidelines. In his reasons for judgment, the master said that he was not satisfied that a hardship situation had been made out by Mr. Von Sturmer at this point but "independent upon what occurs at trial he may well be in a situation where an allowance should be made dealing with his claim that a reduced sum be paid by him as a result of undue hardship." [15] The master's conclusion on the issue of undue hardship followed a determination that the appropriate monthly payment was $740.50. In finding that the master's determination of this amount was wrong, it is my conclusion that I need to reconsider the undue hardship concern expressed by Mr. Von Sturmer. Section 10 of the Guidelines contemplates that one of the circumstances that may cause undue hardship is that "the spouse has a legal duty to support a child, other than a child of the marriage": s. 10(2)(d). [217] In Digout v. Digout, 1999 NSCA 117, the Nova Scotia Court of Appeal came to the same conclusion. At paragraph 8 Freeman J.A., for the Court, stated: [8] We agree with the appellant that it was an error of law for the trial judge to base her

decision on the total number of children in the two households, divided by two. The appeal is allowed without costs and the amount of support payable by the respondent to the two younger children of the respondent's first marriage is increased from $550 per month to $704 per month. [218] Also, in Meuser v. Meuser, [1998] B.C.J. No. 2808 (C.A.); 58 B.C.L.R. (3d) 131, Proudfoot J.A. for the Court said at paragraph 16: [16] Before I deal with the issues in this appeal, I comment on an argument advanced at the trial, not argued before this Court. The appellant argued that notwithstanding the fact that his children are a result of two marriages (two families), he should be treated as a father of three children (one family in effect) for the purposes of the Guidelines. That argument was rejected by the Chambers judge, and rightly so in my view. [219] The father lead no evidence of undue hardship under s. 10(2) of the Guidelines in support of his argument that the support that he pays for M should be one-half of that which he would be required to pay for two children because of his support obligations for C. Given his financial circumstances as compared to those of the mother the lack of such evidence is hardly surprising. [220] The father is not entitled to any adjustment of the 2002 support payments made to the mother under the Interim Order other than the sum of $76,800 I have

calculated above. (4) What is the father's present income for Guidelines purposes and what are his future child support obligations for M? [221] The father submitted that his income for 2003 and future years for Guidelines purposes should be determined to be approximately $350,000 based upon: anticipated employment income from C.[ ] Corporation; $128,000 in dividend income on his remaining TD Shares (approximately 155,000 shares) and a further approximately $32,000 in income from his other investments. [222] The mother's counsel submitted that given: the father's historical income levels; his capital assets and most particularly the availability of the TD Shares to supplement his income from time to time; and, his inadequate or misleading financial disclosure throughout these proceedings I should impute income to him far in excess of $350,000 per year. [223] In making that submission the mother relies upon ss. 19(1)(a),(e), (f) and (h) of the Guidelines which provide: 19.(1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following: (a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational health or health needs

of the spouse; ... (e) the spouse's property is not reasonably utilized to generate income; (f) the spouse has failed to provide income information when under a legal obligation to do so; ... (h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; (...) [224] I agree with counsel for the mother that imputation of income to the father in excess of $350,000 per year is warranted by the totality of the circumstances in this case. I have reached that conclusion because: (1) Between 1986 and 2001 the father's taxable income averaged in excess of $1,400,000 per year; (2) Except for 1991 in which the father earned taxable income of only $425,000 his yearly taxable income was never less than $500,000; (3) I have already determined that his 2002 income for Guidelines purposes should be assessed at $650,000 based upon my analysis of his actual income in 2002 including the receipt of $350,000 from the sale of 10,000 TD Bank shares without deduction for off-setting non-recurring investment losses; (4) I have grave concerns about the father's deliberate minimization of his yearly income for Guidelines purposes, as evidenced by his failure to forthrightly disclose the $1,100,000 severance payment he received prior to the Summary Trial proceeding in this

case as well as by his failure to provide reliable detailed information in support of the 2002 Summary; (5) The father has capital assets which he himself values on his latest Property and Financial Statement in excess of $13,500,000. This total includes assets in excess of $7,000,000 that are marketable securities including more than 155,000 TD Shares having a present value of approximately $5,000,000; (6) While the father valued his assets on his latest Property and Financial Statement, at approximately $13,500,000, two real estate properties that were valued by him at $7,000,000 have now been listed by him for sale at in excess of $10,000,000; (7) Although the father is obligated to pay $2,500,000 to his wife before the end of 2003 pursuant to the separation agreement he negotiated with her in August 2002, he will still have assets of a value in excess of at least $11,000,000 when he makes that payment. Also, while he may choose to dispose of some of his TD Bank Shares to satisfy his obligations, it is not necessary that he do so; (8) The father left his employment with HSBC in February of 2002 because he said that he believed that he should get into the marketplace earlier than others who might lose similar positions yet he still postulates an income for 12 months in 2003 that would only be roughly double his earnings over four months in 2002; (9) While the father has

suggested that his income from C.[ ] Corporation in 2003 will be limited to $100,000 in base salary and $40,000 in bonuses I find his evidence concerning his entire lack of control over not only the bonus process but also his expressed lack of knowledge as to the criteria involved in making bonus determinations difficult to accept. The father is a sophisticated businessman and investment counsel who joined C.[ ] Corporation with the intent of helping his new employer to penetrate the investment markets in which he has great expertise and in which he had enjoyed great success, yet he purports to have negotiated no parameters or criteria against which to objectively evaluate his job performance; (10) While I recognize that the father is now 57 years old, that the institutional investment business may be changing and becoming more dominated by larger institutions, and that present global financing markets are in a depressed state, the fact still remains that the father has had enormous past success for many years. I do not accept that the changes to the nature of the business in which he has been so successful will result in him earning only approximately 25% of his historical average income for any protracted period if at all; (11) The father's investment portfolio must, in many ways, be seen as business inventory, the sale of which he can use as necessary to augment his

employment income from time to time as necessary until his income from his employment approaches that of prior years. His actions in 2002 demonstrate his willingness to sell those assets as needed to increase his income notwithstanding that the disposition of some investments may result in a diminution of the interest or dividend components from some income sources in any given year; and (12) The year 2002 was a difficult one for the father as a consequence of his separation from his wife but those events are now largely behind him and should not continue to be a continuing significant impediment to his income earning capabilities. [225] The totality of the evidence establishes that if the father is not now intentionally underemployed he has intentionally understated his income earning ability and capacity, in the same way he has consistently done since 1986 in his dealings with the mother. The evidence also satisfies me that at the income level of $350,000 he advances as his income for Guidelines purposes, his assets would not be reasonably used to earn income. [226] I have concluded income should be imputed to the father, pursuant to s. 19 of the Guidelines, in the amount of $700,000 for 2003. That amount recognizes that in 2003 he will earn at least $95,000 more in salary than he did in 2002 but also recognizes that his dividend income may be less if he disposes of some of

his business inventory as he did in 2002. [227] Based upon an annual income of $700,000 the father is obligated to pay $4,599 per month for M's support pursuant to the Guidelines. [228] Although the father argued that the Guidelines Table amount is excessive, he failed to adduce clear and compelling evidence to support that argument. It therefore must fail. (See: Francis v. Baker, supra and Hollenbach v. Hollenbach, supra.) [229] The father has also not established that by reason of the fact that he is also obligated to support C, payment of $4,599 per month for the support of M would constitute a hardship under s. 10 (2)(d) of the Guidelines. [230] The father is, however, entitled to credit for the months of January through June of 2003 for the difference between $10,679 per month paid pursuant to the Interim Order and the now determined Guidelines amount of $4,599 per month. That results in a total credit of $36,480. The father is also entitled to credit in the amount of $10,000 payable pursuant to the 1997 Amendment on May 1, 2003 if he made that payment while this matter was under consideration by me. [231] Although the mother advanced a claim for extraordinary expenses associated with M's involvement in baseball I am satisfied that all of those expenses have been adequately covered by the Guidelines Table amount orders I have made. [232] I have intentionally not addressed

the question of any extraordinary expenses that might arise in the event that M proceeds to enrolment in a University in the fall of this year. His opportunities and intentions are simply too uncertain to allow other than speculation concerning what costs might be associated with his future educational endeavours, and whether in all of the circumstances some or all of the costs of those endeavours would be expenses in respect of which the father might have additional obligations. E. SUMMARY [233] The father will pay retroactive support to the mother for the support of M in the total amount of $755,122 inclusive of interest. [234] The father shall, however, be entitled to a credit of $113,280 to be applied against that retroactive support award arising from excessive amounts paid under the Interim Order. He is also entitled to a further credit of $10,000 if he paid the May 1, 2003 installment under the 1997 Amendment. [235] Commencing July 1, 2003 the father will pay the mother child support for M in the amount of $4,599 per month based upon his imputed Guidelines income of $700,000 per year. [236] The mother has not established that she is now entitled to payment for any extraordinary expenses but I have not determined whether the father may be responsible to contribute to M's future educational expenses. F. COSTS [237] If the parties are unable to agree upon costs they may make arrangements through the Registry to address those issues. "B.M. Davies, J." The Honourable Mr. Justice B.M. Davies

SCHEDULE A Name Payor Income (per annum) Payee Income Special Facts Spousal Support (per month) Child Support (per month) Kutt v. Sam (1990), 73 O.R.. (2d) 65 (H.J.C.) Yates J. Net worth $986,636, income over $175,000 $30,000 Parties never married, respondent also had two children from previous marriage $1,000 $2,500 (2 children) Lane v. Lane, [1993] B.C.J. No. 1569 (S.C.) Allen J. $544,755.48 with significant assets (over $5 million) Substantial income from family investments Long term marriage, significant assets and property $100,000 lump sum $2,700 (2 children) - reduced to 2,000 when eldest child no longer in need of support Hughson v. James, [1993] O.J. No. 1921 (C.J. Gen Div.) F.G. Carter J. $304,106 (thereafter reduced to $80,000) n/a 2 year long common law relationship; mother subsequently remarried and new partner had extremely high income. Application to vary n/a $1,329 (1 child) - was original order; varied to $800 after variation application Dommisse v. Dommisse, [1994] B.C.J. No. 714 (S.C.) Baker J. $268,629 Rental income of $400 monthly, plus spousal support Detailed separation/marital agreement $1,500 (original 1988 consent order) through to July 1994, thereafter reduced to $750, to terminate in Dec 1994 $2,000 (2 children) - reduced to $1,210 after eldest moved in with father Trefry v. Sweeney (1995), 144 N.S.R. (2d) 138 (Fam. Ct.); aff'd (1996), 154 N.S.R.

(2d) 309 (S.C.) Income not imputed; net worth estimated at over $17,000,000 (derived from share of family business). n/a Parties never married, never lived together; mother sought support in the amount ultimately awarded n/a $3,600 (1 child) Hollenbach v. Hollenbach (1997), 86 B.C.A.C. 13 Huddart J.A. Note: see Hollenbach v. Hollenbach, 2000 BCCA 620 for post-guidelines appeal decision $1,680,000 in 1995 - date of original variation application $771,554 in 1998 - date of second variation application Failed business opportunity funded by payor Original consent divorce order was for $2,000 spousal and $1,500 child support for 2 children; In 1995 - increased to $5,000 child support for 2 children and $5,000 spousal (upheld on appeal); In 1998 upon application to vary child support (post Guidelines) and spousal support: $5000.00 child and $2000 spousal support (for maximum of 2 years) ordered. On appeal. Child support increased to $7,276 pursuant to guidelines 1995 $5,000 reduced to $2,000 (time limited) in 1998 1995 and 1998 $5,000 (2 children) 2000: increased to $7,276 (post Guidelines)