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Archive for February, 2009

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BC Family Asset and British Columbia Property Division and Reapportionment in Short to Medium Length Marriages Ending in British Columbia Divorce

Friday, February 20th, 2009

As Vancouver family lawyers and Fort St John
family law and divorce lawyers, we are often asked what BC courts do in shorter marriages in British
Columbia that end in divorce both with respect to British Columbia spousal
support and BC family asset division. We are also frequently asked what kind of
BC assets are divided at the end of a marriage?
We advise people that the test is- whether the assets were ordinarily
used for a family purpose. If you have a specific question concerning BC family
property division contact us as the courts have construed a family asset to
include a wide variety of family property. Our BC family law lawyers can be
reached toll-free throughout the province at 1-877-602-9900.

A recent British Columbia Court of Appeal
decision applying the spousal support advisory guidelines and dealing with
reapportionment of property in a seven-year marriage provide provides updated
guidance in determining what is a short marriage for purposes of
reapportionment of BC family assets and how it impacts on an award of
entitlement and quantum of spousal support in British Columbia.

In the decision of Wang V. Poon [2008] B.C.J. No
2113 our British Columbia Court of Appeal dealt with a seven-year marriage with
husband was 76 years old and his wife was 47 years of age some 30 years his
junior. The husband brought the majority of assets into the marriage and his
assets were used to purchase various condominiums.

(more…)

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BC Spousal Support Advisory Guidelines Spousal Support Exceptions for High-Net Worth Client

Thursday, February 19th, 2009

The finalized version of the Spousal Support Advisory
Guidelines was released in the fall of 2008 and I note the following revisions
or clarifications that relate to BC high-net worth families in British Columbia
Spousal Support cases:

 

  1. a new
    exception that recognizes a payor’s inability to deduct spousal support
    for income tax purposes if his or her income is mostly or entirely from
    legitimately non-taxable sources;

 

This is a critical exception for spouses who are working
abroad in a regime where no taxes are paid or where taxes are paid but no deduction is allowed by the foreign state. 
Where the take-home pay of the payor is substantially higher as a result
of no tax being taken off, Courts will routinely gross up the non-tax paying
spouse’s income to reflect what a gross income in Canada would have to be to
net the same amount of take-home pay in the non-tax paying jurisdiction.  However, it is critical that the Court be
made aware that the Spousal Support Advisory Guidelines take into account the
substantial tax deduction that is available to the paying spouse and that tax is paid by the receiving spouse. 

 

In cases where there is no tax deduction available to the
payor, it is questionable whether the recipient will pay tax in Canada on such an amount.  There are options for
lawyers to be creative with respect to lump-sum payment maintenance to ensure
that neither the recipient nor the payor are affected by the tax deduction tax
inclusion regime.

 

  1. a
    clarification that “indefinite” spousal support means support with a
    duration that is not specified – not permanent or infinite support;

 

It is important to note that maintenance Orders are never
final and are always subject to being changed if there is a substantial change
in circumstances in the income or asset position of the paying or receiving
spouse.  Given the current economy with
job losses at an all time high, it is not improbable that an indefinite Order
for maintenance might last only a few months.

 

 

  1. a new
    exception that recognizes the possibility in B.C. of reapportionment of
    property on spousal support grounds by allowing the amount of spousal
    support to be reduced below the ranges where a large reapportionment order
    has been made;

 

British Columbia is the only province in Canada that allows for a Court to divide property other than equally between the
spouses when taking into account the financial needs of a spouse.  As this unequal division relates
substantially to the same issue as economic disadvantage suffered by a spouse
that would qualify them to receive spousal support a special exception for
British Columbia to prevent double recovery had to be instituted.  In my opinion, some judges erroneously nearly
add a notional interest component to the property value above half that a
spouse receives when they receive more than half when in fact they should be
dividing the capital as well as the interest that capital can produce over a
certain number of years to reduce dollar for dollar the Spousal Support
Advisory Guidelines calculated amount after factoring in the property is tax free money. 

 

  1. a
    recognition that it is open to counsel to argue for an exception in
    high-property, high-income cases;

 

My firm handles a substantial number of high-net worth
cases.  At a certain point when the asset
pot that is divided becomes so high it becomes clear that the spouse with a
lower income should not be provided with spousal support as there was no
disadvantage suffered during the marriage and there is no real need.  For example, if a spouse obtains 4 million
dollars in assets in a property division, most cases would suggest that no
spousal support be payable.  The issue
becomes if no spousal support is payable on 4 million dollars of assets, what
spousal support should be payable if the spouse receives 2 million.  Surely, there should be some reduction of support to reflect the advantage of the assets attained from the marriage.  This topic requires a separate article which
I will produce at a later date.

 

  1. an
    exception allowing for an increase in the duration or amount of spousal
    support under the with child support
    formula after child support that limited the amount left over for spousal
    support pursuant to s. 15.3 (priority of child support) ends.

 

Finally, the issue of what happens to spousal support under
the with child formula when the
children become adults is a topic of considerable complexity.  There must be a transition of child support
from the with child formula to the without child formula when the last
child no longer receives child support. 
It is critical that this be taken into account on any settlement or any
Court argument as spousal support under the with
child formula provides the spouse with an amount that is leftover after
child support is paid.  As the child
support declines, unless the spousal support increases, there will be an uneven
standard of living in the paying and receiving spouse‚Äôs household. 

 

If you have a situation like this, please do not hesitate to
call me.

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BC Retroactive Child Support and BC Spousal Support

Thursday, February 19th, 2009

 

Our BC Court of Appeal recently reiterated the test for
retroactive awards of British Columbia child support in Hinds v. Hinds
[2008] BCJ No. 2540 where the Court reviewed the law.

 

Shortly after the trial in this case, the Supreme Court of
Canada addressed the issue of retroactive support in D.B.S. v. S.R.G., L.J.W. v. T.A.R., Henry v. Henry, and Hiemstra v. Hiemstra.  In D.B.S.,
the Court reiterated the principle that parents have a joint obligation to
support their children commensurate to their income.  Where a non-custodial parent has failed to
meet that legal obligation, Bastarche J., for the majority, identified the
following factors to consider in determining whether a retroactive award would
be appropriate in the circumstances:

 

i)                   
The reasons why the recipient did not apply for support
earlier;

 

ii)                  
Any blameworthy conduct by the payor that privileges
the payor’s own interest over his or her children’s right to an appropriate
amount of support;

 

iii)                
The circumstances of the child both at the time the
support should have been paid and at the time the application for retroactive
support is made; and

 

iv)                
Any hardship that might be occasioned by a retroactive
award.

 

 

40     In
determining the amount of a retroactive award of child support, the court must
decide the date which the retroactive award should commence, and the amount of
the retroactive support that would adequately quantify the payor's deficient
obligation.

41     In
regard to the former, the court in D.B.S. suggested that the date of
"effective notice" of a request for appropriate child support would
be the starting point in determining the date to which the award should be made
retroactive. In the absence of "blameworthy conduct", the court
indicated that date should be, for practical and hardship reasons, no more than
three years in the past. This retroactive fixed date of three years past is to
be weighed against any blameworthy conduct by the payor that belies his or her
belief that the child's needs had been met, regardless of their failure to
provide appropriate support.

42     The
second factor in determining the quantum of a retroactive award is to ensure
that the amount awarded is consistent with the applicable statutory scheme. In
this case, that scheme is based on the Guidelines, which permits the
consideration of any undue hardship that a retroactive award might have on a
payor.

43     In
regard to the date of "effective notice," the appellant first asked
the respondent in 2001 to make financial disclosure and to pay interim child
support pursuant to the divorce action. In response, he filed a Property and
Financial Statement on December 6, 2001, deposing that his 2001 income was
$8,385.57. In fact, his 2001 reported income was $18,595. The respondent also
failed to disclose his half-interest in real property in Vernon as an "asset" in Part 3 of his 2001 Property and
Financial Statement.

44     In
November 2002, the appellant issued a second demand for an up-dated Property
and Financial Statement from the respondent. The respondent did not respond to
that demand. Again, in March 2003 the appellant made a third demand for an
up-dated Property and Financial Statement, which included an application that
the respondent be fined for non-compliance with her earlier demand.

45     During
the periods of these repeated demand for financial disclosure (between 2001 and
2003), the respondent continued to pay the monthly $181 pursuant to the FRA
Order. Given the amount of his reported income in 2001 and 2002, the Guidelines
support would have been comparable to the amount he was actually paying.
However, his financial circumstances materially improved in 2003, 2004 and
2005, when his income increased to $37,609.87, $46,501.14, and $60,999.53,
respectively. During this period, the child was entitled to share in the
benefit of his improved financial circumstances; yet the respondent failed to
increase his child support payments until February 2005. This behaviour, in my
view, amounts to "blameworthy conduct" that warrants an order for
retroactive child support.

46     In
the result, I would vary the order to include an order for retroactive child
support. The date to which the retroactive order would commence should coincide
with the material improvement in the respondent's financial circumstances in
2003; the period of retroactivity would continue until 2005, when he
voluntarily increased the child support. It should be noted that this period of
retroactivity is within the three-year limit suggested in D.B.S., recognizing
the concerns relating to practicality and hardship that retroactive awards can
create.

49     I
appreciate that the respondent may experience some hardship in having to pay
this amount. However, ignoring requests for financial disclosure and failing to
increase child support upon a material increase in Guidelines income,
especially following a request for financial disclosure, should not be rewarded
by permitting the payor parent to avoid their legal obligation to contribute to
the support their child in a manner commensurate with their income.

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When and How Is BC Spousal Support Awarded?

Thursday, February 19th, 2009

Our BC Court of Appeal provided recent guidance on the
conceptual basis for awarding BC spousal support which is the first part of a
two step test to deciding spousal support. 
First, a Court must determine the issue of entitlement and only after a
finding of entitlement is established does the Court move on to decide how much
(‚Äúquantum‚Äù) and for how long.  We have
the Spousal Support Advisory Guidelines in British
Columbia that provide a mathematical formula for
determining how much should be paid and for how long. 

 

In Hinds v. Hinds,
entitlement to spousal support is conceptually based on three models:  compensatory, non-compensatory, and
contractual.  See Moge v. Moge and Bracklow.  The objectives of a spousal support order
under the Divorce Act, R.S.C. 1985,
c. 3 (2nd Supp) are set out in s. 15.2(6) and reflect both the compensatory and
non-compensatory models:

 

An Order made under subsection (1)
that provides for the support of a spouse should…

 

a)      recognize
any economic advantages and disadvantages to the spouses arising from the
marriage or its breakdown;

 

b)      apportion
between the spouses any financial consequences arising from the care of any
child of the marriage over and above any obligation for the support of any
child of the marriage;

 

c)      relieve
any economic hardship of the spouses arising from the breakdown of the
marriage; and

 

d)      in
so far as practicable, promote the economic self-sufficiency of each spouse
within a reasonable period of time.

 

51     With
respect, I am of the view that the trial judge erred in law in failing to
consider the appellant's claim for compensatory support and in making an
unreasonable finding that she had not led sufficient evidence to support her
claim for non-compensatory support.

52     In
my view, the circumstances of the parties' marriage and its breakdown gives
rise to a compensatory spousal support award based on the objectives outlined
in s. 15.2(6) of the Divorce Act.

53     During
the marriage, the appellant was the primary caregiver to the parties' child and
continues to assume that role. Her child-rearing responsibilities permitted the
respondent to work outside the home and, in particular, permitted him to focus
on the pesticide business, which was the parties' primary source of income. The
respondent's work obligations often required him to travel outside the
community in which the family resided. He could only do so because of the
appellant's assumption of the primary care for their child.

54     I
am also of the view the appellant had established a claim for non-compensatory
spousal support. The trial judge's reason for dismissing the non-compensatory
aspect of her claim was her failure to provide a medical report detailing a
prognosis for her partner's recovery, assuming such a report was available.
However, her partner had testified at trial that he had been unable to work
since September 2004 due to health problems. He outlined the nature of his
health problems, and identified the doctors who were treating him and the medication
he was prescribed for his health issues. The trial judge made no adverse
findings of credibility concerning his evidence; however, he negated the
appellant's otherwise valid claim for non-compensatory support because of a
failure he deemed essential to that claim, namely a medical report on the
prognosis of her partner's recovery. In my view, that was not a reasonable
basis for rejecting the non-compensatory aspect of the appellant's claim for
spousal support.

55     Throughout
the marriage, the appellant was financially dependent upon the respondent. She
established that she was unable to work because of the debilitating headaches
she had suffered from childhood. Her medical condition was not disputed and is
unlikely to improve. After the breakdown of the marriage, the appellant
experienced economic hardship; she no longer shared in the income derived from
the family's pesticide business and, instead, had to rely on her much lower
disability allowance for support. Her new partner had not been able to
contribute to her support since September 2004, and appeared to be unable to do
so at the date of trial. The trial judge did not appear to take issue with this
evidence. If the trial judge had a basis for believing her partner's health and
financial circumstances would improve in the future, it was open to him to
order a review on that issue at some specified date in the future. In my view,
the appellant demonstrated at trial that she had a clear financial need for
support.

56     The
determination of the amount and duration of that support is another issue. I
would remit this issue back to the trial court to determine after each party
has made the requisite financial disclosure.

 

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BC CHILD SUPPORT AND BC SPOUSAL SUPPORT CONSEQUENCES OF FINANCIAL NON DISCLOSURE 2009

Thursday, February 19th, 2009

It has been said that non-disclosure in family law cases that involve child support,
spousal support, and family property division cases is the ‚Äúcancer‚Äù of
matrimonial law litigation.  The recent case from our British Columbia
Court of Appeal in Hinds v. Hinds [2008]
BCJ No. 2540 summarized the law on what must be proven to establish an adverse
inference against the non-disclosing party.

Paragraph 30 of the Hinds decision
the court held the following:

In support of her position she relies on the
following authorities: Matwichuk v. Stephenson 2007 BCSC 238; Nielsen v. Nielsen 2007 BCSC 306; and Cunha v. da Cunha (1994), 99 B.C.L.R. (2d) 93 (S.C.).  These cases provide that, once a party raises
a prima facie case of non-disclosure, the burden shifts to the
non-disclosing party to show that he or she has made full disclosure.  If the non-disclosing party fails to meet that
burden, the appellant submits the court is permitted to draw an adverse
inference and impute additional income to that party.  In support of the making of an adverse
inference in these circumstances, the appellant relies on the following
authorities: Matwichuk; Cunha; Whitaker v. Whitaker 2007 BCSC 116; Wilson v. Desrochers [2006] O.J. No. 2863 [Ont. Sup. Ct. Jus.]; and Wallace
v. Wallace 2002 BCSC 949.

The person accusing the other party of
non-disclosure cannot simply make the allegation of non-disclosure but must
raise at least arguable proof of same for the onus to shift to the opposing
party.  Suspicious documentary evidence, missing documents in a chain of
documents, budgets that exceed claimed living expenses, and bank deposits that
exceed the tax return declared income are a but a few  examples Lorne
MacLean and the Maclean Family Law Group have dealt with on this issue.

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BC Family Law – 25 years in practice!

Thursday, February 19th, 2009

JW & LNM

Lorne N. MacLean (left) and Justin M. Werb (right) celebrate Lorne's 25 years in practice as a family law lawyer in British Columbia.

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The Joyce and Horn Clauses and BC Child Custody and Guardianship 2009

Monday, February 9th, 2009

There are two different
sets of clauses that can be used to define child raising obligations in BC
family law cases involving joint and shared custody and guardianship.  The
first of these clauses gives the primary parent a final say or veto power if
there is a family law dispute involving British Columbia child custody and
guardianship.  This set of clauses is called the ‚ÄúJoyce‚Äù model joint
guardianship clauses and the terms are as follows:

Joyce Clauses:  FINAL SAY

 

     1)  the parents
are to be joint guardians of the estate of the child;

 

     2)  in the
event of the death of either parent, the remaining parent will be the sole
guardian of the person of the child;

 

     3)  the
custodial parent, who has the primary responsibility for the day to day care of
the child, will have the obligation to advise the other parent of any matters
of a significant nature affecting the child;

 

     4)  the
custodial parent will have the obligation to discuss with the other parent any
significant decisions which have to be made concerning the child, including
significant decisions concerning the health (except emergency decisions),
education, religious instruction and general welfare of the child;

 

     5)  the parent
who does not have custody will have the obligation to discuss the foregoing
issues with the custodial parent and each parent shall have the obligation to
try to reach agreement on those major decisions;

 

     6)  in the
event that the parents cannot reach agreement with respect to any major decision
despite their best efforts the custodial parent shall have the right to make
such decisions;

 

     7)  the
non-custodial parent shall have the right, under s. 32 of the Family Relations Act, to seek a review
of any decision which that parent considers contrary to the best interests of
the child;

 

     8)  each parent
will have the right to obtain information concerning the child directly from
third parties, including teachers, counselors, medical professionals, and third
party care givers.



The second set of clauses
give both parties an equal say on child custody decisions in British Columbia
and this set of BC child joint guardianship clauses are called the “Horn”
clauses:

 

The parents are to be joint
guardians of the estate of the Children;

     i)  In the event of the death of either
parent, the remaining parent shall be the sole guardian of the person of the
Children;

     ii)  The Plaintiff and Defendant shall
have the obligation to advise the other parent of any matters of a significant
nature affecting the Children;

     iii)  The Plaintiff and Defendant shall
have the obligation to discuss with the other parent any significant decisions
which have to be made concerning the Children, including significant decisions
concerning the health (except emergency decisions), education, religious
instruction and general welfare of the Children;

     iv)  In the event that the parents cannot
reach agreement with respect to any major decision despite their best efforts
they are each at liberty to apply to Court;

     v)  Each Party shall have the right to
obtain information concerning the Children directly from third parties,
including teachers, counselors, medical professionals, and third party care
givers;

     vi)  The Plaintiff and the Defendant
shall make joint decisions concerning the education for the Children including
choice of schools, instructors and tutoring;

     vii)  The Plaintiff and the Defendant
shall be obliged to notify the other if an emergency arises regarding the
Children;

     viii)  The Plaintiff and the Defendant shall first attempt mediation to resolve
any disputes between them concerning the Children before applying to Court for
a resolution.

If you have any questions
on these clauses, please contact Lorne MacLean at 604-602-9000.

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British Columbia Family Law Spousal Support Exception Non Deductable or Non Taxable Income

Monday, February 9th, 2009
I have had a number of cases where paying spouses
involved in British Columbia spousal support cases have worked outside of the
country and been paid under a scheme that charged them less tax than they would
have paid on their income had it been earned in Canada. I've also had cases
where paying spouses have worked in countries where spousal support which is
deductible in Canada by the paying spouse, is not deductible. It is important
that we try to correct the spouse's income upward to reflect a higher take-home
pay than they would have earned in Canada and downward in cases where the
spousal support is not tax deductible in the foreign country. The spousal
support advisory guidelines revisions for 2008 apply across Canada and to
British Columbia family law cases.
 
The following extract explains the logic behind
departing from the British Columbia and Canadian spousal support advisory
guidelines when the paying spouse cannot deduct spousal support such that the
net cost to him, of the monthly payment is unfairly high:
 

12.8 Non-Taxable Payor Income

Both formulas produce a "gross" amount of spousal support, i.e. an
amount that is deductible from taxable income for the payor and included in
taxable income for the recipient. As we noted in Chapter 6 on Income, some
payors have incomes based entirely on legitimately non-taxable sources, usually
workers’ compensation or disability payments or income earned by an aboriginal
person on reserve.118
In these cases, the payor is unable to deduct the support paid, contrary to the
assumption built into the formulas for determining amount.

Some of the recipients may pay little or no tax on the support income
received, due to their low incomes, but that is not our concern here. Nor are we
concerned with payors who earn income tax-free by working "under the
table" or by understating their income for tax purposes. Here we are
concerned with payors who legitimately receive their income on a non-taxable
basis.

What warrants this non-taxable exception is when the
non-deductibility of the spousal support poses a problem for the payor’s ability
to pay, as the non-taxable payor is unable to pay the gross amount of spousal
support that would be required of a payor with the benefits of
deductibility.

Under the without child support formula, ability to pay will usually
only become an issue in longer marriage cases, marriages of 15 years or more. In
these longer marriage cases, the 50/50 net income "cap" will simplify the
use of this exception, as the upper limit on spousal support will be
equalization of the spouses’ net incomes. A simple example helps to explain
why.

Example 12.6

Donna and Jeff have been married for many years, with two adult children.
Later in his career, Jeff experienced became unable to work and Jeff now
receives a disability pension of $37,500 per year, non-taxable. Grossed up,
his disability pension would be worth $50,000 per year. Donna works part-time
on account of health issues and earns $10,000 gross per year.

Under the without child support formula, if Donna and Jeff have
been married for 25 years and using the gross income difference, spousal
support would be $1,250 to $1,667 per month, indefinite (duration not
specified). But Jeff cannot deduct any amount for the spousal support
paid, even though Donna will have to include it as taxable income.

In this final version, we have added a net income "cap" under this
formula, so that the upper end of the range for support would leave both Jeff
and Donna with 50 per cent of the net income. This net income calculation
takes into account Jeff’s inability to deduct his support and Donna’s payment
of tax on that support. The "cap" would kick in at $1,318 per
month (using Ontario tax rates), well below the formula’s upper limit
of $1,667 monthly (if Jeff’s income were taxable, the "cap" would still
take effect, but much higher, at $1,575 per month).

That would only leave a narrow range of $1,250 to $1,318 per
month if we applied the "cap" literally. Practically, the
non-taxable exception would mean that a court or the parties
will likely have to go lower than $1,250 per month in most cases, in
consideration of Jeff’s ability to pay.

What if Donna and Jeff were married for 20 years? Using the gross income
difference, the range would be $1,000 to $1,333 per month, indefinite
(duration not specified). The net income "cap" would only have a small
impact here, as it would limit the upper end of the range to $1,318. Ability
to pay concerns for Jeff’s position would be much diminished and this
non-taxable exception may not be required.

The problems are actually more serious at higher income levels, especially
where the support recipient has to pay a higher rate of tax. If the payor
receives $68,388 non-taxable, the equivalent of a grossed-up income of $100,000
and the recipient earned $30,000 per year, the net income "cap" has an
even greater impact than it does for Donna and Jeff. Most cases of non-taxable
income involve low-to-middle incomes rather than such higher incomes.

Because the with child support formula already uses net incomes for
its calculations, the basic formula automatically adjusts for the
non-deductibility of support. The result is that the whole range under this
formula is reduced downward, but it is important to be aware of the reduction
and the amounts involved. Another example can help, if we go back to the
familiar example of Ted and Alice.

Example 12.7

Ted and Alice have been married for 11 years and have two children aged 8
and 10, as in Example 8.1. Alice still earns $20,000, but Ted now
receives a non-taxable disability pension totalling $56,900 per year
(grossed-up, this would be equivalent to $80,000 of employment income). This
means that Ted still pays $1,159 per month in child support and there are no
section 7 expenses. When Ted earned $80,000 per year in employment income, the
spousal support range was $474 to $1,025 per month, using
Ontario rates. Now that Ted receives a non-taxable disability pension, the
range is reduced to $380 to $797 per month. The difference in
the two ranges reflects the effect of Ted being unable to deduct the spousal
support for tax purposes.

It might be possible to make an exception here, to increase spousal support
above the upper end of the automatically-reduced non-taxable range, pushing up
towards $1,025 per month, in order to improve the financial situation of the
recipient and the children. At $1,025 per month, however, almost 61 per cent
of the family’s net disposable income or monthly cash flow would be left in
Alice’s household.

The important point is to appreciate how much the basic with child
support formula has reduced the range for amount when the payor’s income is
non-taxable, in order to make the necessary judgment about whether an exception
should be made, to increase spousal support above the calculated range.

In every one of these non-taxable exception cases, it is
necessary to balance the tax positions of the spouses — the reduced ability to
pay of the payor spouse, who can’t deduct the support paid, and the needs or
loss of the recipient spouse, who still has to pay taxes on spousal support and
only receives after-tax support.

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British Columbia Child Support and Spousal Support Guidelines Update – High Net Income Cases for Self-Employed Spouses

Saturday, February 7th, 2009

British
Columbia

Child Support and Spousal Support
Guidelines Update – High Net Income Cases for Self-Employed Spouses


For a number of years, the writer has been involved in cases
involving the proper calculation of income available to paying spouses who run
their own businesses.  The important
feature of these cases is that we must make sure the paying spouse fairly
allocates his income to his own living expenses as well as the living expenses
of his separated spouse and children who may be living with that spouse whether
on a full-time or shared custody basis.

 

It is important to note that when a person is a
self-employed professional or business person that their tax return may not
always accurately reflect the true income that is available to fairly pay for
spousal and child support. 

 

In the recent British Columbia case of Hausmann v. Klukas, an application for retroactive correction of child support payable by a
husband who ran his own business for the benefit of his children was brought by
his ex-wife.  The husband had failed to
provide timely disclosure of his finances as ordered in past Court decisions.

 

The Court viewed section 18 of the Child Support Guidelines
which indicates that a Court may depart from using the Tax Return line 150
income of a paying parent when that guideline income figure does not fairly
reflect all of the money that may be available to that spouse to fairly pay
child support.  The case also dealt with
when retroactive support for children should be payable and focused on the concept
of there being some fault on behalf of the paying spouse.  In this case, the Court found the fault was
his failure to produce financial disclosure as had been ordered in past cases.

 

The Court of Appeal also looked at section 18 of the Child
Support Guidelines which allow the Court to look at the pre-tax profit of a
professional or business to determine what the true money available to the
person in controlling the company or professional practice was.  It is important to note that you must add
back the wages and management salaries paid to the person controlling the
company to the pre-tax profit in order to determine what the true money
available to the paying spouse was.

 

Further, if legitimate business reasons require money to be
kept in the company to maintain the business in tough economic times or to
purchase inventory or other property to expand the business, not all the pre-tax
profit will be allocated as available for paying spousal or child support. 

 

In the case of Hausmann,
the BC Court of Appeal dealt for the first time with the issue of who bore the
onus of showing a need for the pre-tax profit to be retained in the company for
legitimate corporate purposes as opposed to having all the money from the
pre-tax profit being used by the Court to calculate a maximum amount payable for
child and spousal support.

 

The Court found that the following test should apply:

 

  • The
    onus is on the payor to provide the necessary evidence that the
    corporation‚Äôs pre-tax income is not available to the payor.  The Court should not have to ferret out
    the necessary information from inadequate or incomplete financial
    disclosure.  While Bart Kowski says the evidence of
    the payor must be compelling, I prefer to use the word “clear” when
    discussing the necessary evidence of business circumstances as the former
    word might be taken to suggest a higher standard of proof than is called
    for by Kowalewich.

 

The Court noted in the current case the husband had not
tendered any evidence that would substantiate a clear need to retain monies in the
company.  Based on these facts, the Court
of Appeal attributed all of the pre-tax corporate income to the husband for the
purposes of the calculation of child support.

 

The Court of Appeal also pointed out that it was not a
correct calculation to use the increased and retained earnings of the company
as a measure of what profits were available to the company in addition to the
tax return income of a payor for purposes of the calculation of spousal and
child support.  The Court indicated that the
pre-tax income being the profits of the company after management and salaries
to the owner but before corporate taxes and any dividends paid to the owner was
the proper approach to take. 

 

This is an extremely complex area of law that requires an
experienced counsel to review corporate, tax returns, and financial records
often with the assistance of a certified business evaluator.

 

If you have a case involving a professional practice or
business, please do not hesitate to contact me for assistance.

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BC Spousal Support and Alimony Update 2009

Thursday, February 5th, 2009

BC Spousal Support and Alimony
Update 2009

I recently had the pleasure
of appearing in front of the Supreme Court of Canada in the infamous spousal
support and spousal misconduct decision of Leskun.  That case involved the principles to be
applied to deciding the quantum and duration of spousal support in British Columbia and Canada, and in what circumstances it is
appropriate to review spousal support.

The recent decision of Enemark provides a nice review of what the court should look at when it orders a
review of support.  Generally speaking,
these reviews are most useful in cases where a judge either does not believe
that the spouse has a guaranteed path to economic self-sufficiency, or in those
where the paying spouse may be facing some kind of financial uncertainty.

The case also provides a
nice summary for the layperson of how the concept of spousal support is applied
in Canada.  In simple terms, the court can look at what
one partner gave up economically during the marriage as result of his or her
role.  Even if said partner did not give
up anything economically during the marriage, the court can use a "Robin
Hood" approach when making its decision by looking at both his or her
needs and lower income (in comparison to that of a spouse with a much higher
income).

[42]           
In the case at bar my original order was predicated on the compensatory and
non-compensatory support principles set out in s. 15.2(6) of the Divorce
Act.  With respect to compensatory and non-compensatory grounds
for spousal support, Madam Justice Rowles, in the recent decision of Chutter
v. Chutter, 2008 BCCA 507, said this at para. 49:

[49]     
Although the compensatory and non-compensatory grounds for spousal support are
animated by different models of marriage, the case authorities hold that there
is no single basis of support or objective under the Divorce Act
that supersedes the other, and that many claims involve aspects of both
compensatory and non-compensatory principles (Bracklow, at para.
27; Moge, at 852).  A court is not called upon to decide on
one basis for support to the exclusion of the other but rather to “[apply] the
relevant factors and strik[e] the balance that best achieves justice in the
particular case‚Äù (Bracklow, at para. 32).  Moreover, the
doctrine of equitable sharing is the overarching principle that must be borne
in mind (Moge, at 864).

[43]           
In the Chutter decision, Madam Justice Rowles went on to
consider, in detail, compensatory and non-compensatory support commencing at
para. 50 through to 61.  It is my view that these most recent statements
of the law are apropos to the case at bar, and I will set them out in their
entirety:

[50]     
Compensatory support is intended to provide redress to the recipient spouse for
economic disadvantage arising from the marriage or the conferral of an economic
advantage upon the other spouse.  The compensatory support principles are
rooted in the “independent” model of marriage, in which each spouse is seen to
retain economic autonomy in the union, and is entitled to receive compensation
for losses caused by the marriage or breakup of the marriage which would not
have been suffered otherwise (Bracklow, at paras. 24,
41).  The compensatory basis for relief recognizes that sacrifices made by
a recipient spouse in assuming primary childcare and household responsibilities
often result in a lower earning potential and fewer future prospects of
financial success (Moge, at 861-863; Bracklow, at
para. 39). In Moge, the Supreme Court of Canada observed, at
867-868:

The
most significant economic consequence of marriage or marriage breakdown,
however, usually arises from the birth of children.  This generally
requires that the wife cut back on her paid labour force participation in order
to care for the children, an arrangement which jeopardizes her ability to
ensure her own income security and independent economic well-being.  In
such situations, spousal support may be a way to compensate such economic
disadvantage.

[51]     
In addition to acknowledging economic disadvantages suffered by a spouse as a
consequence of the marriage or its breakdown, compensatory spousal support may
also address economic advantages enjoyed by the other partner as a result of
the recipient spouse‚Äôs efforts.  As noted in Moge at
864, the doctrine of equitable sharing of the economic consequences of marriage
and marriage breakdown underlying compensatory support “seeks to recognize and
account for both the economic disadvantages incurred by the spouse who
makes such sacrifices and the economic advantages conferred upon the other
spouse” (emphasis added).

[52]     
The Court in Moge discussed the relevance of the parties’
standards of living in the context of compensatory support at 870:

Although
the doctrine of spousal
support which focuses on equitable sharing does not guarantee to either party
the standard of living enjoyed during the marriage, this standard is far from
irrelevant to support entitlement‚Ķ.  As marriage should be regarded as
a joint endeavour, the longer the relationship endures, the closer the economic
union, the greater will be the presumptive claim to equal standards of living
upon its dissolution.

[Emphasis added, internal citations
omitted.]

[53]     
In W. v. W., 2005 BCSC 1010, 19 R.F.L. (6th) 453, a frequently
cited decision in trial decisions in British Columbia, Justice Martinson made
the following helpful observation about the interpretation in this province of the emphasized portion in Moge:

[11]     
In British
Columbia this comment in Moge has been interpreted to
mean that in long marriages the result will likely be a rough equivalency of
standards of living.  Doing so recognizes that the longer a marriage
lasts, the more intertwined the economic and non-economic lives of the spouses
become.

[12]     
Throughout the marriage, each spouse makes decisions that accommodate the
economic and non-economic needs of the other. The decisions include the way in
which child care and other family responsibilities will be handled and the way
careers will develop. These decisions can have a significant impact upon the
income earning ability of each at the time of separation.  Yet it is
not easy to determine exactly the relationship between these decisions and the
consequent benefits and detriments to each spouse. The rough equivalency of
standard of living approach has operated as a workable substitute to assess
compensatory claims.  See for example, Dithurbide v. Dithurbide
(1996), 23 R.F.L. (4th) 127 (B.C.S.C.); Rattenbury v. Rattenbury,
2000 BCSC 722; Rinfret v. Rinfret, [1999] B.C.J. No. 2945 (S.C.);
O'Neill v. Wolfe (2001), 14 R.F.L. (5th) 155 (B.C.S.C.); Walton
v. Walton, [1997] B.C.J. No. 1089 (S.C.); Ulrich v. Ulrich,
2003 BCSC 192; and Carr v. Carr (1993), 46 R.F.L. (3d) 326
(B.C.S.C.). 

 

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