Blameworthy Conduct in the Extreme – When retroactive child support can be ordered for more than three years

by Karen Redmond

Family Law Lawyer

A.J.D. v. C.D. 2017 BCSC 1559

In this decision of the BCSC released September 1, 2017 the wife applied for retroactive child support for 12 years, dating back to the signing of the separation agreement in 2003.  The separation agreement did not provide for annual exchange of financial information or annual updates of child support.  Both children had lived with their mother and the father had stated his income as $90,000 and provided misleading information about his income at the time of signing of the agreement.  He continued to pay child support based on the income information in the separation agreement.  The mother was not aware that the child support could be reviewed annually and took no steps to apply for disclosure of income information from the husband until he unilaterally reduced his child support in 2015 when the oldest child turned 19.  His income had increased significantly between 2003 and 2015 ranging from $105,551 to $772,127. 

The court found the husband’s conduct blameworthy in the extreme, citing the leading case D.B.S. v. S.R.G., 2006 SCC 37 [D.B.S.] and the exceptions to the principles outlined in D.B.S.  Although the Court in D.B.S. said that it would usually be inappropriate to delve too far into the past, to award child support retroactively for more than three years, the court said there are circumstances where the payor’s conduct does warrant such awards.  In the A.J.D. case Madam Justice Young ordered retroactive child support for 12 years for a total payment owing by the husband of $522,408 taking into account the circumstances of the children, their financial need and the present financial situation of the husband and the wife. 

FAMILY LAW LAWYER ORDERED TO PAY COSTS PERSONALLY

GUEST POST

BY Georgialee Lang

Arbitrator and Appellate Counsel, Litigation Strategist and Mediator

 

FAMILY LAW LAWYER ORDERED TO PAY COSTS PERSONALLY

 

Practicing family law is difficult enough without having to be wary of opposing counsel’s wily tactics. One of the cardinal rules of litigation is to provide notice to opposing counsel (or to an unrepresented litigant) of any steps you intend to take in court to pursue your client’s claims. To proceed without notice, also called “ex parte”, ought to be a rarity, particularly in the emotionally charged dynamics of a family law proceeding.

Toronto lawyer and former 2010 mayoralty candidate, Rocco Achampong, was handling a high-conflict custody matter that resulted in a judge ordering him to pay costs of $1,200.00 to his client’s husband for “sharp practice”. Such an order is extremely rare and only made when a lawyer’s conduct has been egregious.

The case started with Mr. Achampong’s client, who was living in the family home, obtaining an ex parte order for custody of her two-year-old daughter from the Ontario Court of Justice. That action resulted in her husband bringing a cross-motion for the same order, however, the parties talked through matters and decided to reconcile. All court action was terminated and the temporary custody order in favour of the mother was vacated.

Their reconciliation, however, was brief and ended after police were called to the home for an alleged incident of domestic violence. Promptly thereafter, the father brought another application to court seeking custody of his child and alleged that he and his wife had previously agreed they would share custody, but she had reneged on their oral agreement. After filing the application but before he obtained a fresh court order, he went to the child’s daycare and brought the child to his home.

This triggered a landslide of emails, letters and telephone correspondence between the parent’s respective lawyers, all of which adopted a conciliatory tone as the lawyers made efforts to resolve their clients’ problems without further court action. Different resolution options were canvassed including a 4-way meeting with clients and counsel, a mediation session, or an expedited return to court to have a judge assist.

However, while father and his counsel, Mr. Schuman believed their negotiations were bearing fruit, Mr. Achampong was hurriedly preparing court documents, while lulling opposing counsel into believing that the only issue between them was the selection of a mediator. 

In the meantime, father’s counsel had obtained an expedited hearing date as well, as a back up, and delivered his application documents to Mr. Achampong.

Despite this, Mr. Achampong obtained a custody order from the Ontario Superior Court of Justice, a higher court in Ontario with the same jurisdiction as the Ontario Court of Justice to make child custody orders. 

He did all of this without notice to opposing counsel, and without advising the judge that a new hearing date had already been secured in the lower court. Neither did he tell the Court that as recently as that morning, he had been involved in ongoing settlement discussions with father’s counsel.

Mr. Schuman was furious with the betrayal and reported Mr. Achampong to the Law Society. His client then brought an application for costs against Mr. Achampong personally. The Court made the following observations:

“Mr. Achampong never advised Mr. Schuman that he was wasting his time in the Ontario Court of Justice since his intention was to have the case heard instead in the Superior Court of Justice. He had an obligation to do so. Even if his client instructed him to proceed in the Superior Court of Justice (likely the case) and not to immediately advise Mr. Schuman (this is unknown), he cannot hide behind the excuse of client instructions. It was his obligation to let Mr. Schuman know that he would be proceeding in a different court, so that Mr. Schuman did not prepare needlessly for a case that would be stayed.

Mr. Achampong demonstrated poor judgment in exercising his professional obligations to Mr. Schuman on October 12, 2012. It is apparent from a review of the correspondence of counsel on that day that they were discussing urgent mediation to try and resolve the temporary issues. Mr. Schuman was taking steps to expedite this process. While Mr. Achampong asked for his client to be able to speak and see the child, there was no indication that he would be immediately going to court to obtain relief. It was certainly reasonable for Mr. Schuman to believe from the correspondence that the process would be mediation first, and if the case was not adjourned, that the temporary motions about parenting arrangements would be argued on Tuesday, October 16, 2012, in the Ontario Court of Justice.”

Mr. Achampong compounded his ethical breach by arguing before the Court that he had done nothing wrong. Another lesson learned. Best to fall on one’s sword than to justify improper behavior. The costs order is miniscule compared to the embarrassment of the national publication of his breach of professional ethics.

My guess is that in his zeal to have his client’s child returned, he forgot about his professional obligations as an officer of the court. In my view, no client’s case is worth a breach of ethical standards.

 

Do You Need to Prove 'Ouster' in Order to Make a Claim for Occupational Rent in BC?

Karen Redmond

Family Law Lawyer

Family Law Mediator

The Oxford Dictionary defines ouster as:   ejection from a property, especially wrongful ejection.  In the context of family law, it means that one person has been tossed out of the family home forcing them to live elsewhere.  In these situations, the person having been tossed, often wants to collect money from the ‘tosser’, and this is called occupational rent.  The case law has been relatively consistent about what is required in order to make a claim for occupational rent, and we would typically tell our clients that they had to prove they had been ‘forcibly ejected’ in order to support a claim for occupational rent.   

In McFarlen v. McFarlen, 2017 BCSC 1737,  a recent decision of Mr. Justice Jenkins released September 28, 2017 the finding of the court was that it was not necessary to prove that a party had been ousted in order to succeed with a claim for occupational rent.  The McFarlen’s were married for only two years but had lived together for 15 years prior to their apparently ill-fated nuptials.  They were both 53 at separation and did not have children together.  The central issue in the case was the claim by Mrs. McFarlen that her husband should pay occupational rent, because he had lived in the former family home since the date of separation, up to and including the eventual sale.  The issue was, had she been outsted, and more particularly, if she had , did she have to prove it in order to make her claim? 

Mr. Justice Jenkins reviewed the oft cited case of Ross v. Ross, 2013 BCSC 1716 which clearly lays out the principles applied in cases where claims for occupational rent were made.  At paragraph 47 of Ross:

“From the jurisprudence the following principles may be drawn regarding the awarding of occupational rent on a matrimonial home:

1.     Occupational rent is a remedy which may be utilized to obtain justice and equity in appropriate circumstances.

2.     The remedy is exceptional and should be used cautiously.

3.     The following factors, where relevant, are appropriately considered:

·        The conduct of both spouses, including failure to pay support, the circumstances under which the non-occupying spouse left the home, and if and when the non-occupying spouse moved for a sale of the home (Peltier at paras. 16-17; Wilgosh at paras. 99 and 109; Good, at para.90)

·        Where the children are residing and who is supporting them (Good at para. 90; Peltier at paras. 16--17; Wilgosh at para.108).

·        If and when a demand for occupational rent was made (Wilgosh at paras. 100 and 106; Good at para.90, and Peltier at para.16)

·        Financial difficulty experienced by the non-occupying spouse caused by being deprived of the equity in the home (Peltier, at paras. 16-17; Wilgosh at para. 106)

·        Who is paying for the expenses associated with the home. This includes who is paying the mortgage and other upkeep expenses (maintenance, insurance, taxes, etc.). ….

·        Whether the occupying spouse has increased or decreased the selling value of the property (Peltier at paras. 16-17)

·        Any other competing claims in the litigation that may offset an award of occupational rent (Wilgosh at para. 108; Good at para. 92).

4.     The remedy is a discretionary one requiring the balancing of the relevant factors to determine whether occupational rent is reasonable in the totality of the circumstances of the case.

And continuing at paragraphs 48 through 50, Justice Verhoeven wrote:

“[48]      A similar list of considerations is set out in Higgins v. Higgins (2001), 19 R.F.L. (5th) 300, at para. 53 (S.C.J.), and is regularly applied in Ontario. Higgins expressly states that ouster is not required. Similar approaches are applied in Alberta, Manitoba, Nova Scotia and New Brunswick: Braglin v. Braglin, 2002 ABQB 816, at para. 3; England v. Nguyen, 2013 MBQB 196, at paras. 74-77; Carmichael v. Carmichael, 2005 NSSC 318, at paras. 49-64; Cripps v. Cripps, 2007 NBQB 2, at paras. 52-57.

[49]      Concepts of occupational rent derived from general property law may be inconsistent with modern family law. In England at para. 74, Johnston J. observed:

To focus on a consideration of "ouster" is to set the development of family law back to the "bad old days" when issues of conduct may have been relevant considerations to our courts. How a person came to be in possession of a jointly owned asset should be a lesser concern to the court. The effect of the period of occupancy should be the focus of the court's consideration in exercising its discretion in attempting to value a fair result.

[50]      On the approach used by the other jurisdictions, as I interpret it, the overriding question is whether occupational rent, as a discretionary remedy to be used cautiously, should be utilized in order to achieve justice and equity in all of the circumstances of the case. This approach appropriately places little if any emphasis on the question of fault or blame for the decision of one spouse or the other to leave the matrimonial residence.

In support of the proposition that ouster is not required in order to prove a claim for occupation rent, Mr. Justice Jenkins cited a line of cases including Shen v. Tong, 2013 BCCA 519; Piderman v. Piderman, 2015 BCSC 475; Hodel v. Adams, 2016 BCAC 910.  The Honourable Judge also reviewed a line of cases where the BC Supreme Court had recently found that ouster was in fact a condition precedent to a claim for occupational rent.  At paragraph 20 he concludes that a party is no longer required to prove ouster in order to support a claim for occupational rent:    

"[20] So, is “ouster” a condition precedent to a claim for occupational rent? The authorities suggest that this remains an open question. Based on my interpretation of the law in this province,         I accept that “ouster” is no longer a pre-condition to a claim for occupational rent measured by the cost of alternative accommodation. The statements by Verhoeven J. which have been adopted by McEwan J. in Piderman as well as the statement by Willcock J. in L.M.R v. J.F.R., 187 A.C.W.S. (3d) 775, support this interpretation. My reasoning is reflective of the opinions expressed by Verhoeven J. and McEwan J. in Ross, Piderman and C.M.L.S.- that the proper way to approach a claim for occupational rent is as a discretionary tool to achieve fairness. Such a conclusion is consistent with family law legislation including the Divorce Act, (R.S.C., 1985, c. 3 (2nd Supp.)) and the FLA which are not premised upon “fault based” principles. If I have correctly interpreted the law in British Columbia, then a review of the claim can proceed on the basis of equity. If “ouster” is required, this issue would have to proceed to trial to determine whether or not there has been an ouster."

In this writer’s opinion, the courts will still look at ouster in examining the fairness and equity principles, but it is no longer a condition precedent to these types of applications.

Is child support payable for a child over the age of majority who is attending college or university?

Karen F. Redmond

Family Law Lawyer

As we approach September, the question is arising more and more frequently in my practice about when a child is still considered to be a dependent ‘child’ and in need of financial support if they are attending college or university and not living  at home. As a mother of three ‘children’, ages 19, 22 and 24, all of whom are pursuing post-secondary studies, I can tell you first hand that there is no clear point at which children are no longer in need of financial aid from their parents.  The case of Kiristmanson v. Kristmanson 2012 BSC 1750 is helpful in this regard. 

From the Court’s perspective, payment of child support for a child over the age of majority depends on the facts of each particular case. 

In six Canadian provinces, the age of majority is 18: Alberta, Manitoba, Ontario, Prince Edward Island, Quebec, and Saskatchewan.  And, the age of majority is 19 in the four remaining provinces and the three territories: British Columbia, New Brunswick, Newfoundland, Northwest Territories, Nova Scotia, Nunavut, and Yukon.

The Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) provides the following definition for the term "child of the marriage" where a person is over the age of majority:

“child of the marriage” means a child of two spouses or former spouses who, at the material time,

 . . . is the age of majority or over and under their charge but unable, by reason of illness, disability or other cause, to withdraw from their charge or to obtain the necessaries of life;

Case law has interpreted "other cause" to include an adult child in attendance at post-secondary schooling.

The seminal case of Farden v. Farden (1993), 2570 BCSC tells us that the onus rests upon the applicant to establish that the person for whom a support order is sought is still a child within the meaning of the Act.  Master Joyce, as he then was, provided the following helpful analysis for determining the status of an adult child:

Whether or not attendance in a post-secondary institution will be sufficient cause for a finding that the child is still a "child of the marriage" requires examination of all of the circumstances.  It is not a conclusion which follows automatically from proof of attendance at the institution . . . In my view the relevant circumstances include:

(1)  whether the child is in fact enrolled in a course of studies and whether it is a full-time or part-time course of studies;

(2)  whether or not the child has applied for or is eligible        for student loans or other financial assistance;

(3)  the career plans of the child, i.e. whether the child has some reasonable and appropriate plan or is simply going to college because there is nothing better to do;

(4)  the ability of the child to contribute to his own support through part-time employment;

(5)  the age of the child;

(6)  the child's past academic performance, whether the child is demonstrating success in the chosen course of studies;

(7)  what plans the parents made for the education of their children, particularly where those plans were made during cohabitation;

(8)  at least in the case of a mature child who has reached the age of majority, whether or not the child has unilaterally terminated a relationship from the parent from whom support is sought.

In Neufeld v. Neufeld, 2005 BCCA 7 (CanLII), the Court of Appeal expressly adopted the above passage from Farden as being a non-exhaustive list of considerations which apply in cases where the Court is being asked whether support is payable for an adult child.  In Neufeld, the issue was whether support was payable for an adult child pursuing a medical degree.  One of the important factors considered by the trial judge was that the decision to pursue this level of education was in keeping with the family’s pre-separation plans for their daughter. 

The cases tell us that there is no arbitrary cut-off point for child support for adult children, based either on age or level of education.  We know that there is no statutory prohibition against support for an adult child seeking a second degree; determination depends on the facts of each specific case, and Neufeld reminds us there is not a specific or primary piece of the Farden inquiry which will determine the result in any given case. 

So, the answer to the question, "Is child support payable for a child over the age of majority who is attending college or university?", is, as with most family law matters, it depends on the facts of your case.   

The Presumption of Advancement as an “anachronistic legal principle”

The Presumption of Advancement as an “anachronistic legal principle”

In the recent decision of H.C.F. v. D.T.F. 2017 BCSC 1226, Mr. Justice Voith, in his lengthy (70pg) decision, provides an excellent overview of recent case law on the issue of division of property including excluding property.  He also provides commentary on the intersection between the law and consistency with social change.   The Honorable Judge examines the legislative intent behind the FLA, including the reasons for the expanded definition of spouse, which was specifically intended to include same sex couples.  His Lordship’s thoughtful and logical analysis paints his clear views on the presumption of advancement as an outdated concept, which, should not be allowed to continue, as he says, “in the context of legislation that was intended to recognize and reflect the broader and changed nature of relationships in present day society.”    He says at paragraph 149, “The ongoing application of the presumption of advancement under the FLA would mean that of these various potential forms of relationships, within which all partners are “spouses” for the purposes of the FLA, the only subset of relationship to which the presumption of advancement would apply would be a gift from a man to a woman in a traditional marriage. “  This being a result he calls “incoherent”. 

Get a coffee, sit down and read it.   It’s long but it's an essential and important case. 

Karen F. Redmond

Family Law Lawyer

Paying child support in shared parenting cases - the new (ab)normal!

I have written about this issue before but this morning when I was reading a newsletter circulated by the folks at DIVORCEMATE I came across their article on Harder v. The Queen, 2016 TCC 197  I thought it was worth sharing.  Both parents in a child sharing situation need to be aware of the potential consequences of not complying with the requirement that both parents actually and physically pay child support to the other.  The old practice of paying an offset amount, is no longer acceptable. 

"Beware of New Tax Court Ruling The allocation of the “eligible dependant credit” (formerly, the equivalent-to-spouse credit) in a shared parenting arrangement has recently come under intense discussion and scrutiny as a result of a recent decision of the Tax Court of Canada, Harder v. R., 2016 TCC 197. Until this decision, it was generally understood that in shared parenting, so long as any court order or written separation agreement provided that both parties were paying support, even if ultimately a “setoff” payment was made from one to the other for convenience, this would suffice to allow the parties to allocate the credit to the higher income parent. The basis for this understanding came from the Income Tax Act (“ITA”) and various guides and folios published by CRA. It is against this backdrop that the Tax Court of Canada released its Harder v. R. decision, and threw the family law bar into a tizzy. In this case, the parties had two children and had resolved all issues arising out of their separation pursuant to a written consent that was filed with the court. Despite the fact that the consent outlined both parties’ child support obligations in a shared parenting arrangement, and specifically provided that each party would each claim one of the children as a dependant for the eligible dependant tax credit, the Tax Court disallowed the allocation of the credit because ultimately a single setoff payment was paid by the higher income parent to the other. The court held that the “combined effect of subsections 118(5) and 118(5.1) [of the ITA], at a minimum, requires a comprehensive documentary and evidentiary record... Surely cheques, or even their more modern replacement of recurring e-transfers, may evidence a clearly enumerated, reciprocal and mandatory support amount paid by each spouse to the other” (par 11). The unfortunate conclusion of this case is that it now appears necessary to not only provide that both parties are paying support to one another in any written court order or agreement, but the parties must now actually do so, creating the necessary “documentary and evidentiary record”. Aside from the unnecessarily cumbersome two-way exchange of money, this raises concerns where one parent pays his/her share, but the other parent does not. This leads to a particularly ridiculous result when the “deadbeat” parent is the higher income earner - not only would the lower income parent not get the support required, but he/she would be supplementing the deadbeat parent as well! Unfortunately, until such time as the court or the legislators revisit this issue, this is the result with which we are left."


Karen F. Redmond
Family Law Lawyer

What to do about summer parenting access problems?

As the wildfires burn out of control in BC this summer, so it seems, do the ongoing disputes between some parents about summer parenting time. I wonder sometimes if parents realize how awful it must be for the children to be caught in the crossfire between the 'responsible' adults in their life, all of which is done, supposedly in "the name of love".  I wonder if there is a better way to show love and commitment to parenting without putting a child smack in the middle of your disputes?


If my annoyance is coming across in my writing, I apologize, but it's not surprising given the number of interactions I have had in the past weeks with parents who are so blinded by concerns for their own 'rights' to their children, that they can't see their way to resolving disputes "in the best interests of their child", for what that's worth.  Of course there will be the exceptional cases where lawyers need to be involved, but for the most part, I believe there is a better way to resolve these types of disputes and that is to use professionals who are trained to deal with children and children's issues. 


This is my little plug for parents to use parenting coaches and parenting counselors instead of lawyers, to resolve summer parenting and scheduling problems.  Collaborative Divorce BC has a website that lists counselors and coaches who can help both parents (together!)  to come up with some sort of compromise that doesn't necessitate dragging the children on a sunny summer day to the lawyers office to try to give a statement about what the parent did or didn't do.  Honestly, it feels tragic to me that parents could think that their child actually wants to be involved to the point of making a statement to a lawyer about the other parent. 


If you have a parenting dispute, which even the most skilled parents and communicators will encounter, consider using a mental health professional, a counselor or a parenting coach to assist you.  You and your former partner can sit together to discuss the issue with a counselor, and get some guidance and advice, which you may or may not accept, but isn't it worth a try, for the sake of your child?


Here is the link to the Collaborative Divorce BC Website, where you can find the parenting coaches and counselors: 




http://www.collaborativedivorcebc.com/index.php


and HERE  for child specialists




Karen Redmond
Family Law Lawyer and Mediator

Can the date of separation be used for valuation of family property in British Columbia?

The humorous subtitle to this article is "Why the heck does he/she get to benefit from the mortgage payments I made on the house since he/she left?" 

Most often in separation and divorce, couples manage their finances in an informal way for months and sometimes even years before they venture in to see a lawyer and have a formal separation agreement drawn up.  Many times, one party has moved out and the other party has stayed in the family residence, one party pays the mortgage and the other party pays their rent and their own bills and so on.  It is not surprising, therefore, that the person who has been in the family home thinks they alone should be able to benefit from their payments, so when they meet with their lawyer they often expect that the value of the family home will be the date that their spouse moved out.  This is not so, says the Family Law Act. 

Section 87 of the FLA requires, unless an agreement or order provides otherwise, that the value of family property be based on fair market value at the date of trial: 

Valuing family property and family debt:

87        Unless an agreement or order provides otherwise and except in relation to a division of family property under Part 6,

                        (a) the value of family property must be based on its fair market value, and
                        (b) the value of family property and family debt must be determined as of the date
                         (i) an agreement dividing the family property and family debt is made, or
                         (ii) of the hearing before the court respecting the division of property and family debt.

However, the court does have discretion to order an alternative date for valuation in order to avoid significant unfairness relating to a spouse’s post-separation contribution.   In the case of Bamford v. Mulyati, 2017 BCSC 945 CLICK HERE the 83 year old Claimant applied to divorce his 51 year old wife after she fled the country with his first (deceased) wife’s jewelry in 2013.  The family property consisted of the increase in value of the Claimant’s pre-marital investments and his claim to the Court was for reapportionment in his favour based on significant unfairness due to post separation contributions to those assets. 

The Bamford case referenced the case of Slavenova v. Ranguelov, 2015 BCSC 79 HERE to support the claim for valuation at the date of separation.  From paragraph 53:  “the FLA provides two alternate routes to address potential unfairness that may arise from a party’s post-separation contributions, namely s. 87 and s. 95.  Under s. 95 a court can order reapportionment to address any “significant unfairness” that may arise from an equal division of property and debt in light of the spouse’s post-separation contribution.  Alternatively, under s. 87 the Court may depart from the date of hearing or agreement as the valuation date.”

Madam Justice Morellato in the Bamford case agreed that the date of separation should be the date of valuation, as she found that a significant unfairness had arisen because Ms. Mulyati had not made any contributions towards the family property since her ‘sudden departure’ in 2013.  A review of the cases makes it clear that it does take a set of very unique facts for the Court to Order valuation at the date of separation. In the case of K.A.L. v. K.J.L. 2017 BCSC 651 HERE the Claimant had remained living in the family residence and was responsible for making mortgage payments.  The family residence had increased in value since separation, and the Claimant said it would be unfair for her to share that with the Respondent.  The Court looked at the financial arrangement, which as with most separated couples, involves a complicated web of payments by each party to support the family in the immediate months and years post separation, stating at paragraph 286:  “In my view, there should be compelling evidence to depart from the standard valuation date as the date of trial thereby disentitling one property owner the benefit of the increase in value of property which is brought about by market forces and not as a result of direct effort of the other party.”  And at Para 289:  “  I am persuaded by these comments to conclude that a change in valuation date from the norm should certainly be the exception and should only be ordered if it would be significantly unfair to do otherwise. 

See also Jaszczewska v. Kostanski, 2016 BCCA 286 (CanLII), HERE at para. 39, the British Columbia Court of Appeal discusses the general rule that parties should share in post‑separation increase in value of property independent of the parties’ respective contributions to post‑separation increase in value.

[39]      Also, because family property is generally valued on the date of the hearing, the parties will presumptively share in any post-separation increases in the value of family property. Once again, because of s. 81, this entitlement exists independent of the parties’ respective contribution to the post-separation increase in value.

 

Is Spousal Support Paid to a Canadian Recipient by a Payor in the United States Taxable in the Hands of the Recipient?

Karen F. Redmond
Family Law Lawyer and Mediator


Recently in Court a Judge asked a colleague and I this question and although we were all fairly sure we knew the answer, none of us knew with certainty, so here is the answer:   Yes, spousal support paid to a Canadian recipient by a payor in the United States is taxable in the hands of the recipient and deductible by the payor in certain circumstances. 

A US citizen (or a US resident who is not a US citizen) can deduct spousal support payment paid to a Canadian resident.  Here is Article XVIII paragraph 6 of the Canada-US tax treaty (http://www.fin.gc.ca/treaties-conventions/unitedstates-etatunis-eng.asp) :


 “ 6.  Alimony and other similar amounts (including child support payments) arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable  as follows:


                          (a) such amounts shall be taxable only in that other State;


                           (b) notwithstanding the provisions of subparagraph (a), the amount that

would be excluded from taxable income in the first-mentioned State if the recipient were a resident thereof shall be exempt from taxation in that other State.”

Therefore, yes, the spousal support income is taxable in Canada to the recipient who is a Canadian resident and the spousal support is deductible by the payor in his/her US tax return.  In addition, the spousal support income is not taxable in the US for the recipient.


Having said that, please note the following, sent to me by a tax colleague:


1.       In order for the US citizen to deduct the spousal support in his/her US tax return:

1. The recipient must have a US tax number (US Social Security Number or Individual Taxpayer Identification Number).  This may imply that the recipient must be willing to apply for the tax number.
   
   



2. Without a US tax number for the recipient, the IRS will deny the spousal support  deduction.  In IRS’ point of view, a person who does not have a US tax number does not exist.
   
   

2.   I cannot conclude if the US citizen must withhold 15% US tax on the alimony paid if he resides in the US.  You may need to seek additional advice if you require further clarification.  


3.   Based on the treaty table provided by the IRS (https://www.irs.gov/pub/irs-utl/Tax_Treaty_Table_1.pdf), it is silent if alimony is subject to withholding tax (see Belgium or Bulgaria where footnote f specifically mentions “include alimony”).


4.  Based on IRS’ Publication 515 (https://www.irs.gov/pub/irs-pdf/p515.pdf) Page 32 and 51, the IRS now does not require any US tax withholding on alimony payment to non-resident.  Here is the quote:

 “Income that is exempt under a treaty is not subject to withholding at source

        under the statu­tory rules discussed in this publication”

Is income from a new spouse relevant in an application to cancel or reduce spousal support ?

by Karen F. Redmond
Family Law Lawyer


I am involved in an interesting case this week where the husband is applying to reduce his spousal support.  The case has raised a number of interesting issues which I will post more about this week.  The first question is whether the income of the husband's common law wife is relevant to the application for cancellation or reduction of spousal support. 

The answer to the question of whether a new spouse's income is relevant, in short, is yes, for both the recipient and the payor, in different ways, and of course it depends on the particular facts of the case and whether the application is for a change in child or spousal support.

It is fair to say, however, that income from a payor’s new spouse is relevant to a determination of support owing to a former spouse.  I looked at a few cases including:

1. Chevalier v. Chevalier, 1993 CanLII 4475 (NS SC)  (child and spousal support variation application)   Chevalier v. Chevalier
2. Redpath v. Redpath, 2008 BCSC 68 (child and spousal support variation application) Redpath v. Redpath
3. Rakose v Rakose, 2008 BCSC 1165  (application to vary spousal support) Rakose v. Rakose
4. Moreau v. Fliesen, 2008 BCSC 1358  (application to vary child support) Moreau v. Fliesen
5. Chalmers v. Chalmers, 2009 BCSC 517   (application to vary spousal support)  Chalmers v. Chalmers

These cases say that the new spouses either are, or should be, contributing to the household expenses thus making more money available to the payor for payment of support.  I found it particularly interesting that in the Chevalier case the Judge even included the unemployment insurance of the new common law spouse as part of the payor’s household income.  The cases I read all say, in a nutshell, when the court considers an application to end spousal support and to vary child support, it should consider the earning capacity of the parties and the means of any new spouse. 

 For the recipient, re marriage will also be looked at by the Courts but not necessarily in the same way. For example in L.J.Z v. J.A.Z 2014 BCJ No. 1925 the 61 year old husband applied to cancel spousal support based on the wife’s re marriage.  The parties had been married for 29 years and the wife was 55 years old and had been receiving support for only 4 and a  half years at the time of the application.  The wife successfully argued that since the original order contained compensatory elements, the husband had not met the obligation of compensating her for the economic consequences of the marriage breakdown. 

From paragraph 57:   “If the evidence shows the recipient spouse's circumstances have materially changed to the extent they no longer need financial support to achieve a standard of living that approximates what they enjoyed during the marriage, absent a compensatory basis for the award, attachment to the payor spouse's income can no longer be justified. In the present case, therefore, the wife's remarriage and the resulting financial benefits she receives from it become relevant to determining whether she still needs financial support to allow her to maintain the marital standard of living.  And paragraph 58:  "The parties divided the family assets equally. Therefore, to the extent that the wife is entitled to compensation for economic disadvantages she sustained and the economic advantages the husband gained arising from the marital relationship, it must come through a spousal support order, whether lump sum or periodic."   Paragraph 59:  "As noticed earlier, the wife acknowledged in her affidavit that the support order contained both compensatory and non-compensatory consideration. As is most often the case, however, the order does not divide the support amount into compensatory and non-compensatory parts. In my opinion, the most practical way in this case to address that is to determine a percentage reasonably representative of the weight of evidence supporting a compensatory amount. This at least would be a useful starting point……"   The Judge went on to consider the evidence provided by the parties and found that there were both compensatory and non compensatory elements to the original support order. 

Even if the support is based also solely on non compensatory grounds, the Courts still consider the means and needs of the parties.  For example, Aujla v. Singh, [2012] ONSC 5217   Aujla v. Singh  and a line of Ontario cases including Pindur v. Pindur, [2015] O.J. No. 1598 provide direction in non-compensatory cases that involve disabled recipients.  In both the Aujla and Pindur cases, the marriages were under ten years and the husbands were both able bodied and the wives became disabled during the marriage and unable to work.  Neither cases contained strong components of compensatory support.  The Courts, in relying on Bracklow v. Bracklow, [1999] S.C.J. No. 14, said that the cases give rise to entitlement by a disabled spouse regardless of the absence of a compensatory claim (cited at paragraph 39 of Aujla).  In the Bracklow case the marriage was only 7 years and the wife became totally disabled from working.  She was unable to establish any compensatory basis for her claim and although the British Columbia Court of Appeal dismissed her appeal, the Supreme Court of Canada allowed her appeal stating that her claim could be maintained on a non-compensatory basis, at paragraph 48:

Divorce ends the marriage.  Yet in some circumstances the law may require that a healthy party continue to support a disabled party, absent a contractual or compensatory entitlement.  Justice and considerations of fairness may demand no less……….

At paragraph 31:

…. It places the primary burden of support for a needy partner who cannot attain post marital self-sufficiency on the partners to the relationship, rather than on the state, recognizing the potential injustice of foisting a helpless former partner onto the public assistance rolls.

In the Aujla case, the wife had not given up any part of her career to further the applicant’s interests and until she became disabled she was gainfully employed.  She lost her job because of her disability not because of her marriage (para 45).  At paragraph 55 the Court said, “notwithstanding that the Guidelines suggest a maximum duration of spousal support of five years, I will order the applicant to pay spousal support for an indefinite period, subject only to variation based on a material change in circumstances.”  Counsel for the wife argued for indefinite support on the basis that the payments should be based on her need, because of her disability, saying, “anything less will leave her destitute.  Apart from spousal support, her income is fixed and is entirely beyond her control.  In addition, her expenses are entirely beyond her control, and indeed they are relatively modest.  Anything less than the amount she has requested will means that she will be in poverty, and cannot live with any dignity.”

As always, speak to a family law lawyer about the particular facts of your case, but it seems, that from the perspective of the Courts, spousal support is an obligation that you can't easily contract out of, especially if you have a disabled spouse. 


FOOTNOTE:  in Court last week Mr. Justice Leask found that the income of the payer's new spouse was relevant and he was not prepared to hear the application without the information.  If we get a written decision I will post. 


Karen F. Redmond

Annual Review of Child Support

by

Karen Redmond

Family Law Lawyer

I thank my colleague Georgialee Lang for bringing this case to my attention. 

When child support is payable under a separation agreement, the terms of payment, including the amount of the support, are reviewed on an annual basis.  This is provided for in the Federal Child Support Guidelines which can be found here.  FCSG

When drafting separation agreements, we as lawyers, try to set out as clearly as we possibly can, the procedure for annual review of child support, by detailing the timing and details of documents need to be provided to each party.  The clause usually reads something like this

"For so long as the Children are eligible to receive child support, the parties will exchange copies of their respective income and corporate tax returns for the previous year, including all attachments, by no later than May 31 each year and copies of any Notice of Assessment or Reassessment provided to them by Canada Revenue Agency immediately upon receipt, with child support to be adjusted, if necessary, for the following year beginning July 1 of each year based upon the Respondent’s financial information.”

The Court of Appeal in  R.A. v. W.A. 2017 BCCA 126  has drawn attention to this clause as follows:

"The difficulty is that the provision, while stating that support is “to be adjusted” does not explicitly set out how it is to be adjusted. There are various possibilities. The adjustment might be “automatic”, based on a tax return and the table set out in the Federal Child Support Guidelines. Alternatively, it might require agreement or a court order. If agreement or a court order is required, it is not clear what sort of interim adjustment, if any, is to be made, or who bears the onus of bringing the matter to court for resolution...   I make the obvious observation that, particularly in high-conflict family cases, it is essential that obligations under court orders are easily ascertainable. Where an order provides for adjustment of child support, the mechanism for adjustment should be fully articulated."

A good reminder to lawyers and separating parties that, although it seems tedious, and you may roll your eyes when you are presented with a 30 page separation agreement, more detail up front, saves aggravation and legal fees down the road.    My suggestions to avoid the pitfalls outlined above are:

1. Clearly set out the mechanism and timing for review.

2. Clearly set out the mechanism for dispute resolution if no agreement can be reached.

3. Attach to your separation agreements, a document where the parties can formalize the changes to child support on an annual basis. I call this "Addendum:  Annual Child Support Review"

I am happy to share it with you, just send me an email.

to email me click HERE

As always, talk to your lawyer if you  need legal advice

Spousal Support in High Income Cases: Over $350,000

Payor income above the $350,000 ceiling

This week I am copying directly from the Department of Justice website because I really like their concise summary of this issue. What follows is a discussion about calculation of spousal support in high income cases.  The nugget at the end is this: the courts decide cases on the unique facts of each case, but the general trend is towards reliance on the range of payments provided for in the Spousal Support Advisory Guidelines.   SSAG


Karen F. Redmond, Family Law Lawyer


This is from the DOJ cite below:


Department of Justice


"In absolute numbers, there aren’t that many of these cases, but they are over-represented in the decided cases, partly because of the high stakes involved and partly because they test the outer limits of our thinking about spousal support. A number of these cases have made their way to the B.C. Court of Appeal: see Carol Rogerson and Rollie Thompson, “Complex Issues Bring Us Back to Basics: The SSAG Year in Review in B.C.” (2009), 28 Canadian Family Law Quarterly 263 at 283-86. B.C. cases still dominate the reported decisions, as many of these high-income cases in Ontario are resolved by arbitration or mediation-arbitration.
There are some clear principles enunciated in the case law, even if the actual outcomes are discretionary and sometimes conflicting. In J.E.H. v. P.L.H., 2014 BCCA 310, leave to appeal to SCC refused [2014] S.C.C.A. No. 412, there is a careful review of the law for cases above the ceiling, where some of these principles are stated.

• The formulas for amount are no longer presumptive once the payor’s income exceeds the “ceiling”.
• The ceiling is not an absolute or hard “cap”, as spousal support can and usually does increase for payor incomes above $350,000. 
• The formulas are not to be applied automatically above the ceiling, although the formulas may provide an appropriate method of determining spousal support in an individual case, depending on the facts.
• Above the ceiling, spousal support cases require an individualized, fact-specific analysis. It is not an error, however, to fix an amount in the SSAG range, as was done in J.E.H. v. P.L.H., above. Evidence and argument are required.
• Where the payor’s income is not too far above the ceiling, the formula ranges will often be used to determine the amount of spousal support, with outcomes falling in the low-to-mid range for amount. How far is “not too far above” is still not clear. Somewhere between $500,000 and $700,000, it seems.
• Once the payor’s income is “far” above the ceiling, then the amount of support ordered will usually be below the low end of the SSAG range, but SSAG ranges are still calculated and sometimes the outcome will fall within the SSAG range.

In light of these principles, it is critical that counsel do SSAG calculations even in high income cases. It is wise to calculate the ranges for alternative income levels:  for the $350,000 ceiling (as a minimum) and for the full income (as a maximum), as well as for a range of intermediate incomes (to assist the court in triangulating an outcome). For a good example of such alternative calculations, see Saunders v. Saunders, 2014 ONSC 2459.
A number of the reported high income decisions involve interim or temporary support awards. Interim outcomes are more likely to fall within the formula range, as the goal in the interim period is to maintain the financial status quo: Cork v. Cork, 2013 ONSC 2788. In some of these cases, the estimate of the payor’s income will be low, pushing the amount higher in the range to adjust: Saunders v. Saunders, above; Loesch v. Walji, 2008 BCCA 214.

• For incomes not too far above $350,000, courts frequently order an amount at the low end of the SSAG range for amount (payor’s income noted for each): Ponkin v. Werden, 2015 ONSC 7466 ($498,828, then $406,507); Stober v. Stober, 2015 BCSC 743 ($600,000); Piche v. Chiu, 2015 BCSC 335 ($465,000); Droit de la famille – 151740, 2015 QCCS 3284 ($375,000);  Cork v. Cork, 2014 ONSC 2488 ($562,000, final); C.E.A. v. B.E.A., 2014 BCSC 1500 ($592,122); Dymon v. Bains, 2013 ONSC 915 ($550,000); D.L.D. v. R.C.C., 2013 BCSC 590 ($652,000); Perry v. Fujimoto, 2011 ONSC 3334 ($353,000); Trombetta v. Trombetta, 2011 ONSC 394 ($660,000); and Teja v. Dhanda, 2007 BCSC 1247, appeal partly allowed on other issues, 2009 BCCA 198 ($425,000).
• Not all of these cases end up at the low end: J.E.H. v. P.L.H., 2015 BCSC 1485 ($650,000, mid, variation); T.T. v. J.M.H., 2014 BCSC 451 ($597,000, mid-high); J.R. v. N.R.F., 2013 BCSC 516 ($471,814, mid-high); Abelson v. Mitra, 2008 BCSC 1197 ($355,000, mid-SSAG); and Y.J.E. v. Y.N.R., 2007 BCSC 509 ($602,400, mid-SSAG). In some jurisdictions, below-SSAG amounts are ordered even for these incomes, e.g. Babich v. Babich, 2015 SKQB 22 ($746,000, well below SSAG) and Milton v. Milton, 2008 NBCA 87 ($500,000, below SSAG).
• For incomes far above the ceiling, the majority of outcomes wind up below the SSAG ranges, sometimes well below at the highest income levels: Volcko v. Volcko, 2015 NSCA 11, leave to SCC refused [2015] S.C.C.A. No. 141 ($1,248,756); J.L.A. v. M.J.G.G., 2014 BCSC 1391 ($831,648); S.R.M. v. N.G.T.M., 2014 BCSC 442 ($900,000); Frank v. Linn, 2014 SKCA 87 ($1,211,828); Margie v. Margie, [2013] O.J. No. 6193 (S.C.J.) (more than $1 million); Goriuk v. Turton, 2011 BCSC 652 ($9,740,000); T.N. v. J.C.N., 2013 BCSC 1870 ($1,163,648, custodial payor); Breed v. Breed, 2012 NSSC 83 ($1,186,585); Dobbin v. Dobbin, 2009 NLUFC 11 ($1.5 million); and Dyck v. Dyck, 2009 MBQB 112 ($3,045,205).
• Even in cases far above the ceiling, however, some courts have fixed amounts within the SSAG range for high incomes: Saunders v. Saunders, above ($1 million, high SSAG, income estimate low); J.E.H. v. P.L.H., above ($1 million, mid-SSAG); B.L.B. v. G.D.M., 2015 PESC 1 ($1,069,724, low SSAG); Blatherwick v. Blatherwick, 2015 ONSC 2606 ($1.4 million, high SSAG); T.N. v. J.C.N., 2015 BCSC 439 ($982,626); Williams v. Williams, 2015 BCSC 112 ($1.2 million, mid-SSAG): K.R.M. v. F.B.M., 2013 BCSC 286 ($895,898, high SSAG); Elgner v. Elgner, [2009] O.J. No. 5369 (S.C.J., leave to appeal denied, 2010 ONSC 1578 (Div.Ct.) ($2.9 million, low SSAG); Loesch v. Walji, 2008 BCCA 214 ($1.6 million, husband’s income higher in past, spousal support $50,000/mo, higher than high end SSAG of $35,000/mo); and S.O. v. C.S.O., 2008 BCSC 283 ($909,569, low SSAG).
• In some high-income with child support formula cases, courts have calculated the table amount of child support on the full payor’s income and then calculated the formula range for a gross payor income of $350,000 for spousal support purposes: J.W.J.McC. v. T.E.R., 2007 BCSC 252 and J.E.B. v. G.B., 2008 BCSC 528 (Master). Remember that if you do this hypothetical calculation for the spousal support range, it is critical that you use the child support amounts appropriate for an income of $350,000 too, and not the actual higher amount of child support (an error made in the otherwise careful analysis in Dickson v. Dickson, 2009 MBQB 274). See the discussion of two incomes under “Income” above.

Some commentators have expressed concern that there is too much defaulting to the formula range in high income cases, but no such pattern emerges from the mass of case law reviewed above. Individual high-income cases can attract considerable legal attention, but the wide discretion for these very high incomes will inevitably result in divergent and unpredictable outcomes. High income cases do not pose technical issues that can be solved by any set of guidelines, but raise fundamental theoretical questions about the rationale and purpose of spousal support."


As always, get legal advice if you need it.