S.C.E. v. W.C.K.

2010 BCSC 1592 S.C.E. v. W.C.K. IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: S.C.E. v. W.C.K., 2010 BCSC 1592 Date: 20101108 Docket: E8642 Registry: Chilliwack Between: S.C.E. Appellant And W.C.K. Respondent Before: The Honourable Mr. Justice Joyce Corrected Judgment: The text of the judgment was corrected at line two of paragraph 51(4) on February 1, 2011 On Appeal from the Decision of the Provincial Court of British Columbia dated December 11, 2009 (Chilliwack Registry Docket: F10569) Reasons for Judgment Counsel for the Appellant: J.C. Lee, Q.C. Counsel for the Respondent: Z.M. Tabaczuk-Porter Place and Date of Hearing: Chilliwack, B.C. October 28, 2010 Place and Date of Judgment: Chilliwack, B.C. November 8, 2010 INTRODUCTION [1] The appellant, S.C.E., appeals the decision of the Provincial Court dated December 16, 2009 concerning the appellant's application for child support pursuant to the Family Relations Act, R.S.B.C. 1996, c. 128 (the "FRA"). The appellant submits that the learned Provincial Court Judge erred by: (1) failing to include Workers Compensation Board ("WCB") benefits paid to him under the Workers Compensation Act, R.S.B.C. 1996, c. 492 (the "WCA") when determining the respondent's income pursuant to s. 16 of the Federal Child Support Guidelines,SOR/97-175 (Divorce Act); (2) failing to gross up the respondent's WCB benefits; (3) fixing the date for the commencement of support based on the date the application was heard rather than when it was filed; and (4) finding that one of the two children was not a "child of the marriage" during the relevant period of time. FACTUAL BACKGROUND [2] The parties were married in 1985. Two children were born of this relationship, M.K., born in June 1989; and A.K., born in February 1996. [3] In 1990, the respondent was injured in a work-related injury that rendered him a paraplegic. [4] The parties separated in 1996 and on September 1, 1997, the parties entered into a separation agreement. When the separation agreement was made, the appellant was employed and earned approximately $1,200.00 per month from her employment. The respondent was also employed through a company that he owned and earned approximately $2,500.00 per month from that employment. In addition to this employment income, the respondent was in receipt of WCB benefits in the amount of $2,808.74 per month, pursuant to an award made on July 19, 1991, under s. 22 of the WCA in force at the time. [5] The separation agreement provided for the division of property. In this regard, it provided in clause 33 that: The Husband shall retain the benefits under his WCB Pension Plan for his own use and benefit absolutely and the Wife hereby releases any claim to the Husband's WCB Pension entitlement. [6] The separation agreement provided that the respondent would pay spousal support of $850.00 per month until June 2002. The agreement provided that the respondent would pay child support of $400.00 per month per child "until such time as the Child is no longer a child of the marriage as defined by the Divorce Act." [7] In February 1999, the parties entered into a further agreement that amended the 1997 separation agreement. The amending agreement recited that, at that time, the respondent's sole source of income was his WCB Pension in the amount of $2,412.66, and a Home Owner's and Maintenance Allowance of $195.00 per month. The amending agreement provided that, because of the change of circumstances, the spousal support was reduced to $300.00 per month, effective March 1, 1998. The amount of child support remained unchanged. The amending agreement further provided that as of January 1, 1999, the child support payment would be $412.00 per month per child and the spousal support payment would be $276.00 per month. [8] The respondent continued to pay child support in accordance with the agreements. [9] M.K. moved out of her mother's home in January 2008, at which time the appellant no longer asked for regular support payments for her. M.K turned 19 years of age, in June 2008. [10] M.K attended college from September to December 2008, in a Journalism program. She then attended a different college from January to April 2009, enrolled in General Studies Courses. She then attended a private institution, in a cosmetology program, from April to mid-June 2009, when the school closed its doors. The appellant paid tuition for M.K. in 2009 for a total of $6,723.85. M.K. repaid her mother $3,000.00 of this amount when she obtained a student loan. [11] On November 6, 2008, the appellant filed an application in the Provincial Court seeking an order for child support in an amount based upon the respondent's Guideline Income determined based upon his employment income of $56,730.76, plus his WCB benefits of $33,487.00, grossed up to account for the fact that he is not required to pay income tax on those benefits. [12] In March 2009, the Provincial Court made an interim order finding the respondent's Guideline Income to be $56,000.00 per year, and requiring the respondent to pay support in the amount of $848.00 per month. One-half of that amount, or $424.00, was to be paid to the appellant on account of A.K.; and one-half was to be paid directly to M.K. "as long as she is able to provide proof that she is in full-time attendance at a University or a post-secondary educational institution. JUDGMENT IN THE COURT BELOW [13] The appellant's application for child support was finally heard on October 2, 2009. The learned trial judge considered first the question of whether the respondent's WCB benefits should be included in determining the respondent's Guideline Income. The respondent argued that the WCB benefits were akin to an award of non-pecuniary damages for personal injury and should not be included. [14] The trial judge recognized that the WCBbenefits came within a source of income that is set out under the heading "Total Income" in the respondent's T1 General Tax Return and, therefore, appeared to be included under s. 16 of the Guidelines. However, he relied on a document provided by someone at WorkSafeBC dated March 31, 2009, to conclude otherwise. At paras. 16 - 19, he said: [16] It would appear that on a strict reading of s. 16, the FSCG Mr. [K.] is required to include his compensation benefits as income for the purposed of calculation of his child support payments. [17] However, this does not end the matter as far as I am concerned. A document filed by counsel after the hearing, at my request, provides a total breakdown of payments for Mr. [K.'s] WCB claim as of March 31, 2009. The figures are as follows: "wage loss compensation of $17,478.94 and health care/rehabilitation expenses of $346,569.39". This would be over the life of the claim from December 1990 until March 31, 2009. The payments continue. [18] He has received no compensation for wage loss since July 1991. [19] I consider the above information to be critical to this matter. The vast bulk of this compensation is not for lost wages or any attempt to replace earnings. It is for "health care/rehabilitation expenses". This description refutes the claimant's attempt to have the monies declared "income". (Emphasis added). [15] The trial judge, therefore, determined the respondent's Guideline Income to be his employment income of $56,730.00, and ordered child support for A.K. in the amount of $529.00 per month, as of September 1, 2009. He also made an order that the respondent maintain A.K. on his medical and dental plans, and that he pay 65% of the cost of orthodontics, eye examinations, eye glasses and karate for A.K. It is unclear from his reasons how he arrived at that percentage, given the appellant's stated income of $41,572.00 per year, which would yield a percentage share of 58% (56,730/(56,730+41,572) x 100 = 57.7%). [16] The trial judge concluded that M.K. was a "child of the marriage" during the period from September to December 2008, and ordered the respondent to pay child support of $429.00 per month for those 4 months, as well as 65% of her education expenses for that period. However, he concluded that by January 2009, M.K. was no longer a child of the marriage and he declined to require the respondent to pay any child support for her from that date. GROUNDS OF APPEAL [17] The appellant raises the following grounds of appeal: 1. The learned trial judge erred in deciding that the respondent's WCB benefits should to be included in the determination of his Guideline Income? 2. As a consequence of the first ground of appeal, the learned trial judge erred in not grossing up the WCB benefits under s. 19 of the Guidelines? 3. The learned trial judge erred in ordering child support for Amanda effective September 1, 2009, rather than an earlier date? 4. The learned trial judge erred in not awarding s. 7 expenses relating to Megan's educational expenses for the period from January to June 2009? DISCUSSION AND ANALYSIS Are the WCB benefits to be included in determining Guideline Income? [18] In the course of making her submissions on the appeal, although not before, counsel for the respondent conceded that the trial judge erred in law in not including the respondent's WCB benefits as Guideline Income. In my view, that concession was properly made. [19] With respect, it appears to me that the learned trial judge was led into error when he gave effect to what he perceived to be the significance of the document that was provided by WorkSafeBC in concluding that the payments were of the same nature as an award of non-pecuniary damages in a tort award. No explanation was provided by WorkSafeBC as to the meaning or significance of that label. In my view, characterizing the benefits as compensation for injuries in the same manner that non-pecuniary damages compensates a person for injuries suffered as a result of a tort is contrary to the intent of the WCA provisions under which they are paid. Furthermore, to exclude them is contrary to the express provisions of the Federal Child Support Guidelines, and to authorities that have dealt with this issue. [20] The benefits that are paid to the respondent were awarded pursuant to s. 22(1) of the Workers Compensation Act, R.S.B.C. 1979,which read as follows: 22(1) Where permanent total disability results from the injury, the compensation must be a periodic payment to the injured worker equal in amount to 75% of the worker's average earnings, and must be payable during the lifetime of the worker. [21] In my view, the purpose of this section is to provide wage loss compensation to workers who have suffered an injury at the workplace, not to compensate for pain and suffering. If the benefits were to compensate for pain and suffering, they would not be directly related to a worker's average earnings. [22] The benefits must be reported by the respondent on line 144 of his T1 General Income Tax Return and are included in the line 150 "Total Income", although they are subsequently deducted at line 250 in determining his "Taxable Income". [23] The benefits are therefore to be included when determining Guideline Income pursuant to s. 16 of the Guidelines, which reads as follows: 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 used by the Canada Revenue Agency and is adjusted in accordance with Schedule III. [24] There is nothing in section 17 to 20 or Schedule III of the Guidelines that affects the obligation to include the benefits as income. [25] The authorities have held that WCB benefits are not family assets for the purpose of property division under the FRA, but they are considered as income when determining a spouse's support obligations: see Coulter v. Coulter (1998), 60 B.C.L.R. (3d) 6 (C.A.) ; Polajzar v. Polajzar, [2004] B.C.J. No. 3014 (S.C.); Dedosenco v. Beauchamp, 2005 BCSC 692 ("Dedosenco"); Peterson v. Horan, 2006 SKCA 61("Peterson"); Dahlgren v. Hodgson, 1999 ABCA 23 ("Dahlgren"). [26] I am satisfied that the order of the learned trial judge must be set aside. However, it is my opinion that it is not necessary to remit the matter for a re-hearing. In my view, this court has all of the facts that are necessary to make the proper award. There was no dispute as to the underlying facts. It is the application of the law to those facts that must be corrected. Should the WCB benefits be grossed-up? [27] The trial judge did not address this issue since he found that the WCB payments were not income. [28] Section 19(1)(b) of the Guidelines permits the court to impute income to the paying spouse where he or she is exempt from paying federal or provincial income tax. The authorities hold the court may exercise its discretion under this section in the case of pension benefits which are received free of income tax and impute additional income to bring the pension amounts up to the equivalent gross taxable amount: see Dedosenco; Peterson; and Dahlgren. [29] The rationale for grossing up tax-exempt income was stated by Fraser C.J. in Dahlgren at para. 5 in the following way: 5 ... when dealing with any form of benefits or attributed benefits received by a parent that are not taxable for income tax purposes, it is essential that any such amount be grossed-up to take into account what it would have been had it been taxed. The purpose in doing so is to ensure that the apportionment of responsibility between the parents for child support is based on the same approach for both parents. The guidelines are premised on division of financial responsibility based on gross before tax income. Therefore, to properly apportion that responsibility for child support between the parents, the same foundation must be used. In this regard, it would be wrong to equate non-taxable income in the hands of one parent with taxable income in the hands of the other without the appropriate gross-up. [30] Counsel for the respondent submits that I should decline to exercise the discretion under s. 19(1)(b) of the Guidelines; and that I should not gross-up the respondent's WCB benefits. She makes this submission on the basis that, under the separation agreements, spousal support and child support was in paid in amounts greater than justified by the respondent's employment income and, on the basis that the appellant received other benefits, including 100% interest in the family home. [31] The separation agreements were negotiated by the parties with the benefit of legal advice. The appellant received the home, but the respondent received a business. The respondent also obtained the benefit of having to pay spousal support for a fixed duration only. [32] The suggestion that the respondent paid more support under the agreements than he was obliged to pay is simply not accurate. I am satisfied that the difference between the amount of child support the respondent should have paid, based on his grossed-up income, exceeds the total amount of child and spousal support that he has in fact paid. [33] Furthermore, child support is the right of the child and cannot be bargained away by the parent. The fact that, under the agreements, child support was paid in amounts that were less than those that he had the ability to pay based upon his total income is not a reason to now deny child support in accordance with his present capacity, which capacity must take into account the tax-free WCB benefits he is receiving. [34] Based on the authorities to which I have referred, and the reasons stated therein, I am of the opinion that it would be appropriate to use s. 19(1)(b) to impute additional income to account for the tax-free nature of the payments. [35] There is, however, an issue as to whether all or only some of the WCB benefits should be grossed up. One portion of the respondent's benefits is a clothing allowance ($500.00 per year); and another portion is an allowance for cleaning and house maintenance ($2,640.00 per year). In Dedosenco the court declined to gross-up that portion of the WCB benefits that represented a "care allowance", but did include the net amount of those parts of the total benefits determining income. Counsel for the appellant submits that it would be appropriate to treat the clothing allowance and the cleaning and house maintenance portion of the respondent's benefits in a similar manner. I accept that submission. [36] Therefore, I propose to gross-up the figure of $30,347.00 by imputing additional income under s. 19(1)(b) of the Guidelines. Using DivorceMate software, I have determined that the amount of imputed income is $15,953.00. The respondent's total Guideline Income is therefore, $106,170.00. Based on that amount of Guideline Income, basic child support under s.3 of the Guidelines, for one child, is $957.00 per month. [37] Section 7 expenses are to be shared, 72% by the respondent and 28% by the appellant, in accordance with the parties respective Guideline Incomes: $106,170.00 for the respondent and $41,572 .00for the appellant. What is the appropriate commencement date for the Support Order? [38] The appellant filed her application on November 26, 2008, but it was not finally heard until October 2, 2009. Without any analysis or reasons, the learned trial judge ordered that child support would be payable pursuant to the order commencing September 1, 2009. [39] The appellant seeks an order effective December 1, 2008, the first month after she filed her application under the FRA. [40] I am of the opinion that the trial judge erred in principle and that the appellant is entitled to support pursuant to the FRA commencing December 1, 2008. [41] In D.B.S. v. S.G.R., [2006] 1 S.C.R. 231, 2006 SCC 37 ("DBS") the Supreme Court of Canada dealt with the issue of so-called retroactive support orders in four appeals that were heard at the same time. I have referred to "so-called retroactive support orders" because as observed by Mr. Justice Bastarache at para. 2 of D.B.S.: 2 ... these "retroactive" awards are not truly retroactive. They do not hold parents to a legal standard that did not exist at the relevant time. [42] D.B.S. identified three separate situations in which it may be appropriate for a court to order that a retroactive award be paid: (1) where there has already been a court order; (2) where there has been a previous agreement; and (3) where there has not been a previous order or agreement. The present case is concerned with the second situation. The court recognized that the making of a retroactive order where there is an existing agreement may affect the benefit of certainty but noted that the fact that the court is dealing with children must remain of primary significance in a court's analysis. [43] At para. 78, Mr. Justice Bastarache said: 78 In most circumstances, however, agreements reached by the parents should be given considerable weight. In so doing, courts should recognize that these agreements were likely considered holistically by the parents, such that a smaller amount of child support may be explained by a larger amount of spousal support for the custodial parent. Therefore, it is often unwise for courts to disrupt the equilibrium achieved by parents. However, as is the case with court orders, where circumstances have changed (or were never as they first appeared) and the actual support obligations of the payor parent have not been met, courts may order a retroactive award so long as the applicable statutory regime permits it: compare C. (S.E.) v. G. (D.C.) (2003), 43 R.F.L. (5th) 41, 2003 BCSC 896. [44] The court stated that if a retroactive order is appropriate then there are four choices as to the date to which the order should be retroactive. In order from shortest to longest they are: the date the application was made to the court; the date when formal notice was given; the date when effective notice was given; and the date when the amount of child support should have increased. The court concluded that generally the date of effective notice was the appropriate date because that is when the payor parent can no longer assume that the status quo is fair. [45] The court also made it clear that there should not be undue delay between the date of effective notice and the date when legal action is taken to enforce the obligation. Thus, generally is will be inappropriate to make a support award retroactive to a date more than three years before formal notice was given to the payor (D.B.S. at para. 123). [46] In this case, the date of effective notice and the date of formal notice are the same, the date when the appellant filed her application with the court. The respondent argues that the formal application did not effectively give him notice that the appellant was seeking support based on an income that included his WCB benefits because the document did not expressly state that position. However, there can be no doubt that when he received the application, the respondent knew that the appellant was no longer content to rely on the agreement. She was seeking an order for child support under the FRA. Such an order can only be made pursuant to the Guidelines. The respondent ought to have been aware that under the Guidelines his WCB income would be included and might very well be grossed-up. [47] I am of the view, therefore, that learned trial judge erred in failing to consider the law as set out in D.B.S. and in failing to make the order retroactive to the date of filing the application. Support for Megan [48] The appellant submits that the learned trial judge erred in concluding that M.K. ceased to be a child of the marriage as of January 1, 2009. On this appeal, the only retroactive support that the appellant seeks in respect of M.K. is the respondent's percentage share of the educational costs that she paid for M.K. for the period from January to June 2009, i.e. 72% of $3,723.85 = $2,681.17. [49] The appellant submits that the trial judge erred by applying the wrong test. I am not satisfied that is so. The trial judge observed, correctly, that whether or not attendance at a post-secondary institution or career training program is sufficient cause to find that a child is still a "child of the marriage" requires examination of all the circumstances. He then referred to the frequently cited case of Farden v. Farden, [1993] B.C.J. No. 1315 (S.C.) ("Farden"), which discusses a number of factors that are relevant to the determination. Counsel for the appellant focuses on one sentence in the trial judge's reasons where, in discussing M.K.'s educational endeavours, he stated that "she has yet to find a direction in her life". Counsel for the appellant suggests that the judge used that one fact as the sole test. While the trial judge did not set out in writing an exhaustive analysis of the factors set out in Farden, I am unable to conclude that because of that single remark he failed to have regard to the relevant evidence and the appropriate test in reaching his conclusion that, by January 2009, Megan was no longer a "child of the marriage" or, more properly, that she was no longer a "child" within the meaning of that term as it is used in Part 7 of the FRA, dealing with maintenance and support obligations. [50] Accordingly, the appeal is dismissed in so far as it relates to this aspect of the claim. SUMMARY OF ORDER ON APPEAL [51] The appeal is allowed and the judgment below is set aside insofar as it relates to support of the child A.K., and the following order is made it its place: 1. The respondent's guideline income is declared to be $106,170.00 as at December 1, 2008. 2. The respondent shall pay to the appellant child support for A.K. in the amount of $957.00 per month, commencing December 1, 2008. 3. The respondent shall maintain A.K. on his medical and dental plans. 4. The respondent shall pay to the appellant, pursuant to s. 7 of the Guidelines, 72% of the uninsured cost of orthodontics, eye examinations, eye glasses and karate lessons for A.K. within 30 days of being provided receipts for those expenses, commencing December 1, 2008. COSTS [52] The appellant is entitled to her costs of this appeal. [53] It appears to me that the costs are to be determined in accordance with the Supreme Court Civil Rules since an appeal from the Provincial Court is a "proceeding" under Rule 1-1(1) of those rules. It further appears to me, that it would be expedient to invoke Rule 14-1(15) of the Supreme Court Civil Rules and fix the amount of costs of the proceeding, rather than require an assessment before a registrar. Having regard to items 2, 6, 26, 27 and 41 of the Tariff in Appendix B, I will fix the costs of this appeal at $3,500.00 plus applicable taxes. "B.M. Joyce J."