Evetts v. Evetts

2004 BCCA 297 Evetts v. Evetts COURT OF APPEAL FOR BRITISH COLUMBIA Citation: Evetts v. Evetts, 2004 BCCA 297 Date: 20040527 Docket: CA031284 Between: Cynthia Ruth Hendricks Evetts Respondent (Plaintiff) And Frederick George Evetts Appellant (Defendant) Before: The Honourable Madam Justice Prowse The Honourable Mr. Justice Oppal The Honourable Mr. Justice Lowry R.W. Johnson Counsel for the Appellant D. Marzban Counsel for the Respondent Place and Date of Hearing: Vancouver, British Columbia May 10, 2004 Place and Date of Judgment: Vancouver, British Columbia May 27, 2004 Written Reasons by: The Honourable Madam Justice Prowse Concurred in by: The Honourable Mr. Justice Oppal The Honourable Mr. Justice Lowry Reasons for Judgment of the Honourable Madam Justice Prowse: NATURE OF APPEAL [1] Mr. Evetts is appealing from the decision of a chambers judge, pronounced September 12, 2003, ordering Mr. Evetts to pay child support to Ms. Evetts for the benefit of their 16 year-old son in the amount of $413 per month, plus certain special expenses for medical and dental coverage. [2] Mr. Evetts is also appealing from a subsequent decision of the chambers judge, pronounced October 3, 2003, ordering each party to bear his or her own costs of the proceedings. ISSUES ON APPEAL [3] Counsel for Mr. Evetts has raised several grounds of appeal. He submits that the chambers judge erred: (1) in his interpretation and application of s. 9 of the Federal Child Support Guidelines by: (a) failing to find that certain payments received by Ms. Evetts from her family constituted income for Guidelines purposes, or, in the alternative, failing to take these payments into account in assessing her "means"; (b) finding that there had not been a disproportionate increase in Mr. Evetts' access costs since the original order for child support was made in 1994; (c) utilizing the wrong formula for calculating child support under s. 9 of the Guidelines, and thereby awarding an amount of child support which was higher than Ms. Evetts' claimed costs for child expenses; (2) in finding that the amount expended by Mr. Evetts for hockey for their son was not an extraordinary expense within the meaning of s. 7(1)(f) of the Guidelines, such that these expenses should be borne by Mr. Evetts alone; and (3) in failing to award Mr. Evetts costs of the proceedings based on an offer to settle made by Mr. Evetts prior to trial, or, in the alternative, in failing to award costs to Mr. Evetts on the basis that he had been substantially successful on the application to reduce child support. [4] I note that the relevant child support provisions which apply in this case are the Federal Child Support Guidelines SOR/97-175, (the "Guidelines"), as adopted with minor modifications by Child Support Guidelines Regulation, B.C. Reg. 61/98, pursuant to s. 129 of the Family Relations Act, R.S.B.C. 1996, c. 128. BACKGROUND [5] Mr. Evetts is 55 years of age and a professional engineer earning approximately $88,000 per year. Ms. Evetts is 50 years of age and a self-employed businesswoman earning approximately $52,000 per year. They have a 16-year-old son. [6] The parties were divorced by order dated October 13, 1994 after 10 years of marriage. On July 13, 1994, an order was made under the Family Relations Act which provided, amongst other things, that Ms. Evetts would have custody of their son, with generous and specified access to Mr. Evetts. Mr. Evetts was also ordered to pay child support in the amount of $829.48 per month. This award was made prior to the enactment of the Guidelines and was designed to provide Ms. Evetts with net after-tax child support in the amount of $500 per month. At the time the order was made, Mr. Evetts was earning approximately $63,000 per year (plus $5,000 from his holding company) and Ms. Evetts was earning approximately $30,000 per year from her company. [7] Since the order of July 13, 1994, there have been other proceedings between the parties, including one appeal to this Court with respect to the division of family assets. The most recent proceeding was the application by Mr. Evetts on August 20, 2003 in which Mr. Evetts applied for: a declaration that the parties had shared custody of their son within the meaning of s. 9 of the Guidelines since 2000; an order reducing child support to $238 per month; and a further order whereby Mr. Evetts would undertake to pay directly (but not to Ms. Evetts) certain medical, dental and hockey expenses for their son. The result of this application is the order under appeal. DECISION OF THE CHAMBERS JUDGE [8] In dealing with the application of s. 9 of the Guidelines, the chambers judge considered numerous authorities, including the decision of this Court in Green v. Green (2000), 75 B.C.L.R. (3d) 306, 2000 BCCA 310. He found that Mr. Evetts met the 40 per cent threshold for the application of s. 9 of the Guidelines. He then went on to consider the amount of child support which would be appropriate in the circumstances. [9] The chambers judge observed that the courts had taken various approaches to the issue of quantum of support, which he described, in part, at paras. 19-21 of his reasons: The "straight set-off" was applied in Middleton v. MacPherson (1997), 204 A.R. 37 (Alta. Q.B.) and simply sets off the Guidelines amounts without any further calculation. That is, subtract the table amount for the custodial parent from the table amount for the access parent. In Spanier v. Spanier (1998), 52 B.C.L.R. (3d) 343 (B.C.S.C.), two more approaches were discussed. The "pro-rated set-off" is where the custodial parent's Guidelines amount would be multiplied by the access parent's percentage of time. This number would then be subtracted by the access parent's Guidelines amount multiplied by the custodial parent's percentage of time. The second approach is the "straight pro-rate" which takes the percentage of time the custodial parent has the children multiplied by the Guidelines amount for the access parent. Finally, in Hunter v. Hunter (1998), 37 R.F.L. (4th) 260 (Ont. Ct. (Gen. Div.)), there is the "pro-rate with multiplier" approach. The amount calculated under a pro-rated set-off would be applied to a multiplier of 1.5. In doing so, the court assumes that 50 percent of a custodial parent's childcare expenses are fixed costs. [10] The chambers judge fixed the Guidelines income for the parties at $88,707 for Mr. Evetts and $52,887 for Ms. Evetts. In dealing with s. 9(b) of the Guidelines ("increased costs of shared custody"), he concluded that Mr. Evetts had not demonstrated "that there has been a disproportionate increase in his costs since the Order [of July 13, 1994] so as to change anything." He also rejected Mr. Evetts' suggestion that monies Ms. Evetts had received from her family significantly affected her "means" within the meaning of s. 9(c) ("the conditions, means, needs and other circumstances of each spouse . . ."). [11] The chambers judge further rejected Mr. Evetts' submission that the "pro-rated set-off" approach should be utilized, on the basis that it would result in a support award of only $235.80 per month, which he considered "far too low". [12] Instead, he adopted the straight pro-rate approach whereby Mr. Evetts would simply pay 60 per cent of the Guidelines amount he would otherwise have to pay. In choosing that approach, the chambers judge expressed concern about the stability of Ms. Evetts' income, and he found nothing else in ss. 9(b) or (c) which would justify a lower award. He considered and rejected a straight set-off (which would result in an award of $246) and the multiplier approach (which would result in an award of $353.70). Applying the straight pro-rate approach, he determined that an appropriate award of child support would be $413 per month. [13] With respect to s. 7 of the Guidelines, the chambers judge found that the medical and dental premiums and expenses should be paid by the parties as follows: The section 7 expenses described above shall be paid by the parties as follows: a. the Defendant [Mr. Evetts] shall pay the expenses in the first instance; b. the Defendant will submit reimbursement documentation to his insurer and receive any reimbursement provided by the insurer; c. the Defendant will provide the Plaintiff [Ms. Evetts] with an accounting, with supporting documentation, of the uninsured amounts which will then be shared by the parties, pro rata, based on their respective Guideline incomes as determined in this Order. [14] The chambers judge was not satisfied that the extracurricular hockey expenses incurred by Mr. Evetts for their son were extraordinary expenses. It appears that he relied primarily on the fact that hockey expenses had been incurred by the parties prior to their separation in coming to that conclusion. [15] With respect to costs, the chambers judge found that the offer made by Mr. Evetts to Ms. Evetts prior to the hearing was less favourable than the result he achieved, and that this was an appropriate case in which each party should bear his or her own costs. DISCUSSION (1) Application of s. 9 of the Guidelines [16] Section 9 of the Guidelines provides: Shared custody 9. Where a spouse exercises a right of access to, or has physical custody of, a child for not less than 40 per cent of the time over the course of a year, the amount of the child support order must be determined by taking into account (a) the amounts set out in the applicable tables for each of the spouses; (b) the increased costs of shared custody arrangements; and (c) the conditions, means, needs and other circumstances of each spouse and of any child for whom support is sought. [17] The first issue raised under s. 9 is whether the chambers judge erred in failing to treat monies received by Ms. Evetts from members of her family as either income, for the purpose of determining her Guidelines income, or as part of her means under s. 9(c). [18] The evidence was that Ms. Evetts received the following amounts (in U.S. funds) in 2002-2003: (a) July 2002 - inheritance from her uncle - $10,000 (b) September 2002 - loan from her brother - $ 3,000 (c) June 2003 - loan from her brother - $ 5,000 (d) July 2003 - advance on inheritance - $25,000 [19] Mr. Evetts deposed that Ms. Evetts also received periodic funds from her family during the marriage, by way of loans or gifts. [20] It is not clear whether Mr. Evetts asked the chambers judge to find that the monies received by Ms. Evetts constituted income to her within the meaning of the Guidelines. The chambers judge does not refer to such an argument in his reasons for judgment. It is apparent, however, that the chambers judge rejected Mr. Evetts' submission that Ms. Evetts' receipt of such funds on an occasional basis significantly affected her means within the meaning of s. 9(c). He also stated that increases in Ms. Evetts' net worth due to factors such as the increase in the value of her residence were not relevant to a determination of child support. [21] In my view, the monetary gifts received by Ms. Evetts in 2002-2003 did not constitute income within the meaning of the Guidelines for the purpose of determining Ms. Evetts' Guidelines income. They do not correspond to any source of income set out under the heading "Total income" in the T1 General form issued by the Canada Customs and Revenue Agency referred to in s. 16 of the Guidelines, and counsel for Mr. Evetts has not suggested that these funds fall within any other provision for calculating income under the Guidelines. [22] Nor am I persuaded that the chambers judge erred in finding that the inheritance in 2002 and the cash gift in 2003 were significant enough, in themselves, to justify a reduction in the amount of child support payable by Mr. Evetts. To the extent that these amounts became part of Ms. Evetts' net worth, however, they should have been considered as part of her "conditions, means, needs and other circumstances", as should the value of her residence. [23] In my view, the full net worth of the parties should be taken into account under s. 9(c). In that regard, Mr. Evetts set forth the relative net worth of the parties at the time of the application as follows: Assets Item Appellant Respondent Real Estate $396,600.00 $412,400.00 Vehicles $ 20,000.00 Unknown Financial assets $ 123.12 $ 64,923.39 Pension & RRSP $245,296.91 $179,923.55 Retained earnings in company of respondent $ 72,611.00 Other $ 15,000.00 Total assets $662,020.03 $744,857.94 Liabilities Appellant Respondent Secured debts $248,310.41 $ 18,971.00 Unsecured debts $ 2,100.00 $ 13,712.40 Total Debts $250,410.41 $ 32,683.40 Net Worth $411,609.62 $712,174.50 [24] Ms. Evetts neither agreed with, nor disputed, this assessment of the parties' relative net worth, except to state that the retained earnings of her company did not necessarily equate with cash available to her. I will return to the significance of the parties' net worth later in these reasons. [25] The second issue which arises in relation to s. 9(b) is whether the chambers judge erred in failing to take into account the increase Mr. Evetts claimed in access expenses since the original order was made. Mr. Evetts stated that his housing expenses had increased because he had purchased a home closer to Ms. Evetts and his son, and that his son's recreational expenses, including such activities as snowboarding and hockey, had increased significantly over the past few years. Mr. Evetts kept a detailed list of expenses, and it indicates that he has been generous in his expenditures for their son, particularly in relation to extracurricular activities. [26] As noted at para. 10, supra, the chambers judge found that there had not been a disproportionate increase in Mr. Evetts' child care expenses compared with Ms. Evetts' child care expenses over the years. He observed that since Mr. Evetts had always enjoyed generous access, there was no significant increase in access which would, in itself, justify a finding of increased access costs. He also concluded that, although Ms. Evetts had not kept detailed lists of her expenses in relation to her son, her child care expenses would also have increased since the original order was made. [27] Mr. Evetts pointed to the fact that, in her Financial Statement, Ms. Evetts only attributed expenses of $327 per month as directly attributable to their son, while Mr. Evetts attributed $662 to child care expenses, including a $167 per month contribution to an R.E.S.P., $54 to insurance, and approximately $250 to activities and lessons. [28] Although Mr. Evetts' access costs have increased since the original order was made, both parties' overall expenses have increased over the years, including their costs of raising their son. It is clear that the minimal amount which Ms. Evetts listed as attributable to specific child care expenses is not an accurate reflection of her overall child care costs, including her fixed costs relating to such basics as food, shelter and transportation. The suggestion that Ms. Evetts' child care expenses have decreased from $500 in 1994 (the net amount she was awarded in the original order) to $327 in 2003, simply does not withstand scrutiny. Expenses for raising children do not decrease as the children grow older. Therefore, I would not interfere with the finding of the chambers judge that, overall, Mr. Evetts' access costs had not increased proportionally in relation to Ms. Evetts' child care expenses. [29] The next issue which arises in relation to s. 9 is whether the chambers judge erred in applying a straight pro-rated approach to the determination of support payments, which had the effect of reducing the amount Mr. Evetts would otherwise have to pay for child support by 40 per cent, from $689 to $413 per month. [30] As earlier stated, the chambers judge considered various authorities relating to s. 9 of the Guidelines, including the Green decision, supra. It is apparent from the following extract at para. 22 of his reasons that he understood the basic principles underlying the application of s. 9: Whatever formula, if any, a court may decide on following there appears to be four factors in the background that should guide a court's decision in calculating support in a shared custody scenario. The first factor to consider is the purpose behind variation of child support under s. 9. The assumption under s. 9 is that a shared custody situation will have increased overall costs for both parents as a result of duplication. As a result, paying the base Guidelines amount would be unfair. The second factor to bear in mind is the "cliff effect" as discussed in Green, supra. The cliff effect is the sudden drop in income of the custodial parent as the access parent crosses the threshold between 39 percent and 40 percent access. Thirdly, there is the view that variation is more readily justified if the access parent has less means than the custodial parent and would have difficulty in meeting increased expenses occasioned by greater access. Finally, as Prowse J.A. reminds us in Green, supra, the court must not give undue weight to s. 9(a) without giving sufficient consideration to ss. 9(b) and (c). [31] After reviewing various formulae which have been applied both inside and outside British Columbia, the chambers judge concluded that the criteria under s. 9 could best be met in this case by applying the straight pro-rate formula, whereby Mr. Evetts would pay 60 per cent of the amount he would otherwise be responsible for under the Guidelines to reflect the fact that he had access approximately 40 per cent of the time. The chambers judge concluded that the other methods for determining child support in this case would yield a result which was too low, or, in the case of the formula suggested by Mr. Evetts, "far too low." [32] In my view, there is no basis for interfering with the amount of child support awarded by the chambers judge or with the manner in which he arrived at that amount. He was not satisfied that the application of the straight set-off approach advocated by Mr. Evetts would achieve fairness between the parties or adequate support for the parties' son in accordance with the criteria set forth in s. 9. While it appears that he did not place much weight on the relative net worth of the parties under s. 9(c), I am not persuaded that that factor justified a different result in this case. The chambers judge was obviously concerned that Ms. Evetts' income source was much less stable than that of Mr. Evetts, who was employed with an income-earning potential significantly greater than that of Ms. Evetts. In my view, this was a valid consideration tending to offset Ms. Evetts' greater asset base. [33] In my view, it is also significant that the result of the application of s. 9 in this case was to leave Ms. Evetts with a lower payment of child support than she had been awarded in 1994, despite the fact that Mr. Evetts' access had not significantly increased. This is a case in which it is likely that the Guidelines produced a lower award of child support than would have been awarded prior to the enactment of the Guidelines. I say that with some confidence given the fact that Ms. Evetts was awarded net child support of $500 in 1994 when their son was six years of age, the parties' incomes were significantly lower and something close to a shared custody regime was in place. [34] As this Court stated in Green, the determination of an appropriate award of child support under s. 9 is one of the few places in the Guidelines which permits some discretion on the part of Masters and trial judges having regard to the factors set forth in ss. 9(a), (b) and (c). There is some flexibility in tailoring an order to the particular circumstances of the case. In that regard, it is important to emphasize that the Green decision does not stand for the proposition that there are only three or four legitimate approaches or formulae which may be applied in fixing child support under s. 9, and that it is simply a matter of the decision-maker choosing the one he or she deems appropriate. The formulae described in Green were designed to assist decision-makers by providing a number of options in approaching their task under s. 9; they were not intended to be definitive or exhaustive. [35] In this case, for the reasons I have given, I conclude that the chambers judge did not err in his award of child support under s. 9. (2) Application of s. 7 - Extraordinary Expenses [36] Extraordinary and special expenses are dealt with under s. 7 of the Guidelines, which provides, in part: Special or extraordinary expenses 7. (1) In a child support order the court may, on either spouse's request, provide for an amount to cover all or any portion of the following expenses, which expenses may be estimated, taking into account the necessity of the expense in relation to the child's best interests and the reasonableness of the expense in relation to the means of the spouses and those of the child and to the family's spending pattern prior to the separation: (a) child care expenses incurred as a result of the custodial parent's employment, illness, disability or education or training for employment; (b) that portion of the medical and dental insurance premiums attributable to the child; (c) health-related expenses that exceed insurance reimbursement by at least $100 annually, including orthodontic treatment, professional counselling provided by a psychologist, social worker, psychiatrist or any other person, physiotherapy, occupational therapy, speech therapy and prescription drugs, hearing aids, glasses and contact lenses; (d) extraordinary expenses for primary or secondary school education or for any other educational programs that meet the child's particular needs; (e) expenses for post-secondary education; and (f) extraordinary expenses for extracurricular activities. Sharing of expense (2) The guiding principle in determining the amount of an expense referred to in subsection (1) is that the expense is shared by the spouses in proportion to their respective incomes after deducting from the expense, the contribution, if any, from the child. Subsidies, tax deductions, etc. (3) In determining the amount of an expense referred to in subsection (1), the court must take into account any subsidies, benefits or income tax deductions or credits relating to the expense, and any eligibility to claim a subsidy, benefit or income tax deduction or credit relating to the expense. [37] The principal issue arising under s. 7 of the Guidelines is whether the chambers judge erred in finding that the hockey expenses of the son, which have been paid for in full by Mr. Evetts since 1996, were not extraordinary expenses which should be shared between the parties. [38] The chambers judge observed that the parties had paid for hockey expenses for their son prior to their separation and that these expenses were a factor taken into consideration when the original child support order was made. In that sense, the chambers judge was correct in finding that the hockey expenses for these parties were ordinary, not extraordinary, expenses. Mr. Evetts' position, however, is that the nature and amount of the expenses associated with their son's hockey has changed substantially over the last 10 years. He has produced an expense list which indicates that the amount he is spending in hockey-related costs is approximately $2,400 per year, including hockey equipment, various hockey camps, ice fees, and related expenses. [39] The leading case in this Court on what constitutes an extraordinary expense under s. 7(1)(f) of the Guidelines is McLaughlin v. McLaughlin, (1998), 57 B.C.L.R. (3d) 186, 44 R.F.L. (4th) 148. In that case, the father had been ordered to make payments of $70 per month as his pro-rated share of overall annual expenditures for extracurricular activities for three children in the amount of $965. The father's annual income was $70,000 and the mother's annual income was $50,000. [40] After observing that the word "extraordinary" was synonymous with "unusual", "out of the ordinary" and "exceptional", this Court referred to the difficulty courts across the country had experienced in determining whether particular expenditures for a particular family met this description. At paras. 81-82 of the McLaughlin decision, this Court set forth some of the factors to be considered in making that determination: In the result, I conclude that, in deciding whether an expense, or the totality of expenses claimed on behalf of children under s. 7(1)(f) are extraordinary, the court should take into consideration the combined income of the parties, as well as the nature and amount of the individual expense, the nature and number of the activities, any special needs or talents of the children, and the overall cost of the activities. This list is not intended to be exhaustive, as considerations may arise in other cases which may also be relevant. I note that in the only other decision of this Court dealing with s. 7(1)(f), Cochrane v. Zarins (1998), 36 R.F.L. (4th) 434, the Court concluded that a particular child's talents are a relevant factor in determining whether an expense for an extracurricular activity is extraordinary. As earlier stated, once an expense or expenses are found to be extraordinary it is necessary for the court to proceed to determine whether the expenses are necessary in relation to the children's best interests and reasonable, having regard to the means of the spouses and those of the child, and to the family's spending pattern prior to separation. There appears to be a consensus in the authorities dealing with s. 7(1)(f) that those questions do not need to be addressed until the expense or expenses in question have been found to be extraordinary. [41] In McLaughlin, this Court concluded that the expenses for extracurricular activities were not extraordinary, either individually, or cumulatively. In reaching that conclusion, this Court noted that the expenses claimed did not include additional fees for such things as camps, trips or expensive equipment. [42] As earlier stated, the incomes of Mr. and Ms. Evetts at the time of original order were $63,000 and $30,000, respectively. They are now earning $88,000 and $52,000 respectively. The hockey expenses incurred by Mr. Evetts amount to approximately $200 per month. I have no doubt that these expenses are considerably higher than they were 10 years ago when their son was six years of age. But the parties' incomes have also increased significantly, and Mr. Evetts' income is considerably greater than that of Ms. Evetts. While I consider these expenses to border on the extraordinary, I am not able to say that the chambers judge erred in his conclusion that they are not extraordinary for these parties in these circumstances. [43] The only other issue which arises under s. 7 is whether the chambers judge erred in the manner in which he ordered the special expenses under ss. 7(1)(b) and (c) to be paid. His order in that regard is set out at para. 13, supra. I agree with the chambers judge that this was the most practical approach to the payment of these expenses in this case, given the ongoing acrimony between the parties. (3) Costs [44] The chambers judge ordered that each party bear his or her own costs of the proceedings. [45] On appeal, Mr. Evetts submitted that he should be granted the costs of the Supreme Court proceedings on two bases; first, that he had made an offer to settle which was more favourable to Ms. Evetts than the result of the proceedings, and second, that he was successful overall. [46] I do not propose to review the offer to settle in these reasons since, during the course of the appeal, Mr. Evetts' counsel wisely resiled from the position that Mr. Evetts' offer to settle was more favourable than the result Ms. Evetts achieved. Further, it cannot be said that Mr. Evetts enjoyed overall success. [47] In these circumstances, I would not interfere with the decision of the chambers judge with respect to costs in the Supreme Court. Given Ms. Evetts' success on appeal, however, I would order that she be awarded her costs of the appeal. CONCLUSION [48] I would dismiss the appeal with costs of the appeal to Ms. Evetts. "The Honourable Madam Justice Prowse" I Agree: "The Honourable Mr. Justice Oppal" I Agree: "The Honourable Mr. Justice Lowry"