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IMPUTING INCOME: IT'S A MATTER OF CHOICE Introduction Section 19 of the Federal Child Support Guidelines ("CSG") provides as follows:
19 (1) The court may impute such amount of income to a
spouse as it considers appropriate in the circumstances,
which circumstances include the following: Two lines of case law have developed in Canadian jurisprudence on the issue of imputed income. In one stream, the 'bad faith cases' courts have interpreted "intentionally" to mean a deliberate course of conduct on the part of the payor spouse to avoid his or her child support obligations. Under these authorities, absent bad faith, courts will not impute income. In contrast, another line of cases has emerged which hold that courts will impute income where the payor spouse intentionally chooses not to maximize his or her income from employment. With the recent pronouncement in Drygala v. Pauli, the Ontario Court of Appeal has held that there is no bad faith requirement before a court can impute income to a payor spouse under s. 19(1)(a) of the CSG. It appears Ontario courts are prepared to impute income to payor spouses, even absent bad faith, when typically, the father decides to change jobs or even careers. The purpose of this paper is to review the development of a divergence in the case law, analyze the Drygala v. Pauli decision and summarize the leading principles in determining whether and to what extent reasonableness is a factor in this exercise. The Divergence of the Case Law Prior to Drygala The Element of Bad Faith The only recent appellate decision requiring a court to make a specific finding that the payor spouse intended to evade child support payments before it can determine whether a spouse is intentionally underemployed / unemployed is Hunt v. Smolis 2001 CarswellAlta 1357, (2001), 20 R.F.L. (5th) 409 (Alta. C.A.) ("Hunt"). In Hunt, supra, the majority of the Alberta Court of Appeal justified the bad faith requirement of a parent to thwart child support obligations on the basis of the wording of s. 19, the objectives of the CSG and the potentially unreasonable requirement to maximize employment income. With respect to s. 19(1) of the CSG, the majority honed in on the word 'deliberate' and the examples set out at ss. (b) to (i) and held at para. 49 that a "court should only treat deliberate unemployment or underemployment as a basis for interference where the obligor is avoiding support obligations". The majority recognized the flexibility in s. 19(1)(a) to allow 'deliberate' unemployment or underemployment when required by the child's needs or the reasonable education or health needs of the parent. The court further held that one objective of the Guidelines is "to provide children with a fair standard of support, not the maximum standard of support which the parents are capable of contributing". Lastly, the court showed great concern for the unreasonable consequences for the obliging parent if they are forced to earn to the maximum of their earning capacity. In this regard the court stated the following at para. 64, . . .to require spouses to support their children to the maximum of their earning capacity also has the effect of dictating to divorced spouses that they may engage in a limited range of employment, namely, only those which pay the maximum they are capable of earning. This fails to recognize the fundamental importance of work to a person's life and fails to value the freedom to choose work which fulfills needs and interests extending beyond the receipt of an income. For a summary of Ontario and provincial appellate cases up until 2000 which deal with the issue of intentional underemployment / unemployment and a general synopsis of the "bad faith cases" please see "Income Determination under the Child Support Guidelines: A Case Law Review" 19 C.F.L.Q. (2000) 285 by N. Boutet and C. Kish, in particular, Chart A. Second Line of Cases: intention is key The trend beginning in 1999 was for courts to shy away from requiring a finding of bad faith but rather to assess the reasonableness of the payor spouse's income and career choice. What follows below is a synopsis of the relevant cases since then on this issue generally. In Hanson v. Hanson, [1999] B.C.J. No. 2532 (S.C.), the husband ("H") was a 49 year old fire department captain who also worked as a concrete marketer. H was terminated from his marketing job and decided not to work in this field any longer. Due to stress, he also took a leave of absence from the fire department. The wife ("W") brought an application for interim child support and asked the court to impute income. After comparing H's present earnings to his capacity to earn, the court decided that the H's decision not to resume a marketing job amounted to intentional underemployment, even absent bad faith. The court concluded that H had capacity to continue earning his traditional income due to the availability of jobs in the marketing industry. Capacity to earn is derived from two aspects namely, what the parent is capable of earning based on age, education, experience, skills and health; and secondly, realistically available job opportunities. The court went on to state that "income should not be imputed when a change (in career) was reasonable in the circumstances." In Donovan v. Donovan, [2000] M.J. No. 407 (C.A.), the Manitoba Court of Appeal dismissed a husband's appeal from a motion judge's finding that he was "intentionally unemployed." In 1996, H was ordered to pay child support based on his annual income of $67,000.00 a year as a police officer. By June 1999, H had retired from the force and was receiving a pension of approximately $27,000.00 a year. His health was fine and there was nothing preventing him from working in another less stressful job. H admitted to actively not seeking further employment because he was devoting all his free time to pursuing his life long dream of being a screen writer. The motions judge held that H's decision to retire was reasonable but his decision to pursue a full time career as a screenwriter was not given his circumstances. The judge imputed an amount equal to his police salary. In dismissing the appeal, the Court of Appeal rejected the bad faith requirement and focused its inquiry on whether H's career decision was reasonable at the time it was taken considering all the circumstances. In determining whether or not to impute income, the court applied the following guidelines taken from Julian Payne's article Imputing Income, "Determination of Income; Disclosure of Income", Child Support in Canada, Danrab Inc., August 3, 1999) [the 'Payne principles']: 1. There is a duty to seek employment in a case where a parent is healthy, and there is no reason why the parent cannot work. It is "no answer for a person liable to support a child to say he is unemployed and does not intend to seek work or that his potential to earn income is an irrelevant factor" (Van Gool v. Van Gool (198), 166 D.L.R. (4th) 528 BCCA); 2. When imputing income based on intentional underemployment, a court must consider what is reasonable in the circumstances having regard to a parent's age, education, experience, skills, health, availability of work, freedom to relocate etc.; 3. A parent's limited work experience and job skills do not justify a failure to pursue employment that does not require significant skills or employment in which the necessary skills can be learned on the job. While this may mean that job availability will be at the lower end of the wage scale, courts have never sanctioned the refusal of a parent to take reasonable steps to support his or her children simply because the parent cannot obtain interesting or highly paid employment; 4. Persistence in unremunerative employment may entitle a court to impute income; 5. A parent cannot be excused from support obligations in furtherance of unrealistic or unproductive career aspirations; 6. A parent cannot avoid child support obligations by a self-induced reduction in income. In comparing H's present earning situation versus his capacity to earn, the Court agreed with the motion judge that H's decision to work as a screen writer full time was not reasonable, and that H was intentionally unemployed. The court highlighted the fact that H failed to provide any evidence as to what he could earn as a screen writer. In Vitagliano v. DiStavolo (2001), 17 R.F.L. (5th) 194 (S.C.J.) H and W separated in 1997. At this time, H was earning over $100K as a statistician with Met Life. H worked for Met Life until they terminated him. He then went to work at Manulife. By December 1998, H resigned from Manulife and took on a new job opportunity in early 1999. This new position involved a move to the U.S.. H was not prepared to move from Ottawa (because his new girlfriend lived there) so his employer terminated him at the end of February 1999. In January 1999, H received his severance package (approximately $182,000.00) from MetLife. Manulife rehired H but he resigned by the end of May 1999, and since then, H operated his own risk consulting business. During this time, the H declined many offers of employment with salaries of over $100,000.00. Instead, H pursued his own business. He drew a salary of $49,000.00 a year. The court held H's decision to establish his own business and live exclusively in the Ottawa area was not reasonable in the circumstances even though it was not done to thwart support obligations. The court did find however that H's decision was made recklessly and without regard to his legal support obligations. As such, H's income was artificially low. The court criticized H for his decision to stay in Ottawa when his wife, children and extended family lived in Montreal and previously, he had never hesitated to relocate for a lucrative job opportunity. H's employment prospects in the risk field industry were favourable in Montreal and Toronto but not in Ottawa. Further, by H resigning from Manulife and starting his own business, he voluntarily chose to reduce his income, and expected his support obligations to be reduced proportionately. H knew that the business was a risky venture to undertake. In Weir v. Therrien (2001), 20 R.F.L. (5th) 199 (Ont. S.C.J.) when the spouses separated in 1991, H was earning $56,000.00 a year in a supervisory mill wright position at a pulp and paper mill. Being dissatisfied at work, and because of minor health problems, H explored alternatives. In 1999, H purchased a small grocery convenience store and continued to work at the mill. His income for that year increased to $85,000.00. In late 1999, H experienced a health scare but was eventually given clean bill of health. In 2000, H returned to the mill on modified duties and continued at the store. When the mill denied his a leave of absence to pursue his business opportunities with the store, H quit the mill and began full time work at the store. His income decreased to $24,000.00 a year. The court held that H was intentionally underemployed based on his age, work history and the financial security he enjoyed at the mill even absent bad faith. In comparing his actual earnings to his earning capacity, the court concluded that H could have and should have remained at the mill. The court imputed to him the amount of his salary at the mill at the time of his resignation. In Eisnor v. Eisnor (2001), 21 R.F.L. (5th) 272 (N.S. S.C.) just before the divorce, H chose to resign rather than be fired from his general manager position where he earned $43,000.00 a year. Upon his resignation, H accepted a job as a manager of a convenience store owned by his new wife, earning $25,000.00 a year. The court held that H's decision to resign rather than be fired was reasonable but his decision to work as a manager of a convenience store was not reasonable given his capacity to earn in light of his age, health, education and available employment opportunities. Bad faith was irrelevant, and not applicable to this case in any event. The court found H to be intentionally underemployed. H was a healthy 45 year old with a good employment prospects. In reaching its decision, the court placed significance on the fact H had not even been moderately aggressive in pursuing other employment opportunities. In Schindle v. Schindle, [2001] M.J. No. 564 (C.A.), H was a sales manager with a manufacturer of marine products in Manitoba. From 1996 through to 1999, H's income was $50,000.00, $75,000.00, $125,000.00 and $125,000.00, respectively. The spouses separated in 1998. In early 2000, H resigned from his job and took on a sales manager position in Kenora, Ontario. His base salary was set at $54,000.00 plus bonus based on performance. Through no fault of his own, the position did not work out and H was unemployed by the end of the summer of 2000 and remained unemployed. On an interim basis in 1999, the court ordered H to pay child support based on an annual income of $125,000.00. This amount was varied in May 2000 and recalculated on the basis of an annual income of $48,000.00. The trial judge found the H was NOT intentionally unemployed or underemployed as his decision to quit the Manitoba job and take the Kenora position was reasonable. Further, H's actions were not done to evade his child support obligations. The Court of Appeal agreed with the trial judge's decision and declined to find H was intentionally unemployed. The court stated at para. 14, While it is not a prerequisite to imputing income under this provision (s. 19(1) CSG) that the payor be intentionally unemployed for the purpose of avoiding one's child support obligation, obviously if such a motive exists, it will be a significant factor to be considered in the decision to impute income . . . a decision as to whether a person is capable of earning more income than they are presently earning depends on the context. . . Payor spouses are still entitled to make decisions in relation to their career path so long as those decisions are reasonable at the time they are taken considering all the circumstances. In deferring to the trial judge's finding that H acted reasonably in changing jobs, the Manitoba Court of Appeal also reviewed and applied the 'Payne principles', supra at para. 14. In Steele v. Koppanyi, [2002] M.J. No. 201 (C.A.), the parties were divorced in May of 1993. Child support was ordered in 1993 and varied in a 2001 application. H was a painter earning over $30,000.00 a year but claimed his income was between $16,000.00 - $18,000.00 in 1996/1997. In 1999, H quit his job due to asthma and eczema. H enrolled in a computer college course which he completed in December 2000. In January 2001, H accepted a courier job and earned approximately $16,000.00 a year. In the 2001 proceeding W requested the court to impute income to H based on his previous income as a painter. The motions judge declined to impute income and based child support on the $16,000.00 figure. W appealed. Relying on the Donovan, supra and Schindle, supra decisions, the court allowed the appeal and imputed to H the income he earned previously as a painter in 1998 and 1999. The court noted that H presented no evidence to satisfy the onus upon him to demonstrate that it was reasonable for him to enroll in the computer course or that it was reasonable for him to accept employment as a courier. The court referenced H's ongoing financial obligation to his children and his right to change careers for health reasons. Fundamental to the court's decision was H's failure to establish that his present employment was reasonable given his work experience, his skills, his health, his age, and his education. For instance, H could have provided evidence as to his prospects for employment in the computer animation industry or his mitigation efforts to secure employment comparable to his job as a commercial painter. H failed to explain why he took a courier position earning such a lower amount than as a painter. Drygala v. Pauli, supra: Ontario's Current Position The Ontario Court of Appeal in Drygala v. Pauli (April 11, 2002) ( "Drygala") has now held that there is no bad faith requirement for a court to impute income to a payor spouse vis a vis s. 19(1)(a) of the CSG. In reaching this conclusion, Gillese J. states the following at paras. 28-29, Read in context and given its ordinary meaning, "intentionally" means a voluntary act. The parent required to pay is intentionally under-employed if that parent chooses to earn less than he or she is capable of earning. That parent is intentionally unemployed when he or she chooses not to work when capable of earning an income. The word "intentionally" makes it clear that the section does not apply to situations in which, through no fault or act of their own, spouses are laid off, terminated or given reduced hours of work. I note that there is no requirement of bad faith in the provision itself, nor is there language suggestive of such a requirement. (emphasis added) Thus, in Ontario, a court is not required to find a parent's intent to thwart its child support before it will impute income. The crucial test is whether the parent's underemployment/ unemployment is voluntary. The court has clearly stated that a parent's underemployment/unemployment is NOT voluntary in situations of lay off, termination or reduced hours of work. Drygala also stands for the principle that a payor who chooses less remunerative employment than he or she could command will be found to be underemployed because, it is submitted, he or she had a choice. The same cannot be said of a payor spouse who did not have a choice, for instance due to market forces. In Drygala, the trial judge and Court of Appeal agreed that H was intentionally underemployed when he chose to attend university rather than work but that he did NOT act in bad faith. The Court of Appeal then looked to H's educational needs to determine if full time study with no employment was reasonable in the circumstances. The Court of Appeal agreed with the trial judge that by going to school full time and not obtaining even part time work, H failed to recognize his child support obligation and some income should be imputed to him. In determining a parent's capacity to earn income, actual versus full potential capacity, the Court adopted the Payne Principles. The Drygala decision endorses at the appeal level the trend of the lower courts to reject a bad faith requirement on the part of the payor spouse to avoid support obligations. In doing so, the Ontario Court of Appeal has expanded a judge's discretion to impute income based on the reasonableness (or lack thereof) of a spouse's career choice in relation to his or her income earning capacity. Discussion and Analysis The following principles emerge from the foregoing jurisprudence which should provide the practitioner and the courts guidance in deciding whether or not to impute income: 1. a court need not find an intent to thwart support obligations before imputing income; 2. "intentional" in s. 19(1) refers to whether the parent voluntarily became underemployed or unemployed. A parent is not intentionally unemployed if terminated or laid off or assigned reduced hours.
3. if the parent voluntarily became underemployed or
unemployed, i.e. going back to
school, resigning, changing
jobs/career, retiring and living off
a pension, etc.) has the
payor spouse acted reasonably with a
view to the following
objective and subjective factors: If not, the court may impute income. 4. A payor spouse who has been terminated and has made reasonable efforts to obtain suitable employment will not be considered underemployed - the voluntariness required for such a finding being absent. The question becomes has the payor spouse reasonably mitigated in the circumstances and provided sufficient evidence to the court to substantiate his or her past job search efforts and his or her plans for the future? Underlying the concept of choice is the concept of reasonableness. If unemployment or underemployment is an unreasonable choice in all the circumstances, courts will impute income. One of the main circumstances to be considered is the payor's family obligations first and foremost. Perhaps the fundamental question to ask is whether or not the actions taken by a payor spouse would be considered reasonable if the family were still intact. AUTHORS' FAVOURITES What follows is a summary of some recent Ontario and other provincial appellate cases on specific application of (or refusal to apply) the imputed income argument sorted by s.19 subsections. By no means is this an exhaustive summary of the case law. Rather, the cases are provided as a convenient reference and research starter for the practitioner who is trying to get a flavour of the jurisprudence in this area. (1) Scory v. Scory, [1999] S.J. No. 644, 1 R.F.L. (5th) 276 (C.A.) - trial judge found that severance the spouse received was to be considered imputed income. Court of Appeal disagreed and held instead that severance was to be treated as actual income spread over the 18-month notice period. (To the same effect see MacDonald v. MacDonald, [1998] 6 W.W.R. 86 (Alta CA) where the court treated severance as having been - accelerated - over the 21 month notice period and calculated the annual equivalent for CSG purposes). Adler v. Jonas (199) 48 RFL (4th) 228, 1999 CarswellBC 311 (S.C.) - Free or subsidized accommodation is not referred to specifically in s. 19 (1) nonetheless the court treated it as additional or imputed income. To the same effect see Esligar v. Eslligar (1999), 45 R.F.L. (4th) 258 (N.B. C.A.) (a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse; Llewellyn v. Llewellyn, [2002] B.C.J. No. 542; 26 R.F.L. (5th) 389 (C.A.) - Income of $18,000.00 attributed to non-working mother on basis that she could earn that amount and chose not to seek employment. Dean v. Brown, [2002] N.S.J. No. 439 (C.A.) (October 16, 2002) - Court allowed an appeal where trial judge imputed additional income to H by taking judicial notice of income of mechanics generally. The judge erred in taking judicial notice of economic factors. White v. White (2002), 27 R.F.L. (5th) 462, CarswellNS 224 (C.A.). The court held that a parent cannot avoid child support based on an intentional decision to leave a secure job for the prospect of pursuing different career goals. It was an unreasonable decision. After the divorce, H, although fully employed fell into arrears regarding his child support obligations. After 21 years with the same company, H voluntarily took a "buy-out" package and decided to enter the e-commerce industry. When the severance package ran out, H fell into arrears again, and went on social assistance. Tapper v. Connolly (2002), 26 R.F.L. (5th) 199, 2002 CarswellNfld 81 (U.F.C.) - where H legitimately sought out less strenuous and less lucrative work as a result of health issues, the court refused to impute income to him for Guideline purposes. West v. West (2001), 18 R.F.L. (5th) 440, 2001 CarswellOnt 1936 (S.C.J.) - court imputed income to H who had discontinued participation in lucrative lecture tours after separation. H had no valid reason to justify his actions and the court found him to be intentionally underemployed. Reasonableness includes a consideration of the joint legal obligation to support the children and a parent's duty to realize their full earning capacity to which the judge added, was to be taken in light of the factor that the needs of two households are always greater than one intact household. Uens v. Uens (2000), 11 R.F.L. (5th) 202, 2000 CarswellOnt 4478 (S.C.J.) - court did not impute income to H where he had worked significant overtime during the marriage to support the family, but post separation decided to cut down on the overtime to spend more time with the children. The court concluded H's decision was reasonable in the circumstances. Montgomery v. Montgomery, [2000] N.S.J. No. 1 (C.A.) the court imputed income to H who voluntarily chose to go to law school, graduated and articled with the government. Court concluded H's career decision did not meet the 'reasonable educational needs of the spouse' when one considers the financial circumstances of the children in order to ensure that they receive a fair standard of support. Lachapelle v. Vezina, [2000] O.J. No. 3171 (S.C.J.) - in the absence of any bad faith or intention to thwart support obligations, the court imputed income to a W who took an extended unpaid maternity leave. Court did not impute income during paid maternity leave. (b) the spouse is exempt from paying federal or provincial income tax Pelletier v Kakakaway, [2002] S.J. No. 448; 31 R.F.L. (5th) 132 (C.A.) - GST and Child Tax Credit included in income for the purpose of calculating income in a s. 10 (undue hardship) claim for the purpose of the standard of living test (Query why not in calculating income for Table amount and Special and extraordinary expenses). Hoover v. Hoover (July 21, 1997), Doc. Yellowknife 6101- 02064 (N.W.T. S.C.) - H's only source of income was $23K WCB pension benefit which was exempt from income tax. The grossed up amount for national income tax was calculated as $29,565.00. Le Bourdais v. Le Bourdais (1998), 36 R.F.L. (4th) 387 (B.C. S.C.) - where H was a status Indian who did not pay income tax, court grossed up his income for the purposes of CSG. The court holds that CSG require that the children benefit from the financial means of both parents and to ignore H's tax situation would thwart that intention. Walgren v. Walgren (2002), 26 R.F.L. (5th) 226, 2002 CarswellBC 884 (S.C.) - where H's income was a $3,000 monthly tax free disability payment, the imputed to H the benefit to be equivalent to a taxable annual income of $47,000 and calculated CSG accordingly. (c) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada Nkwazi v. Nkwazi (1998), 171 Sask. R. 120 (Q.B.) - H, a doctor, had moved to the U.S. and was paid in American dollars. The court imputed an income of $177,700 which was his average income in equivalent Canadian dollars over the last three years. The court was not prepared to accept H's argument that the benefits of lower taxation in the U.S. were offset by higher living expenses. Thompson v. Scullion (2000), 7 R.F.L. (5th) 440 - H earned $78,000 US in Florida, equivalent to $117,000 Cdn. W argued that the court should impute an extra amount to H's income on the basis that Florida had no personal income tax. The court refused to do so without an analysis of the differences in the cost of living in Florida and New Brunswick where W lived. Schnell v. Schnell, [2001] S.J. No. 704 (C.A.) - the Court of Appeal dismissed H's appeal from an order imputing income on the basis inter alia that a substantial portion of H's earnings were not subject to tax. H earned $162,000 in 1996, $174,000 in 1997, and $79,000 CAD and $59,000 USD in 1998. For CSG purposes, court held that H's 1998 income was equivalent to$238,000 CAD. (d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines Reyes v. Rollo, 2001 CarswellOnt 4541 (S.C.J.) - H was self employed, owned a number of rental properties and a fishing resort. H claimed income of $7,200.00 but spent over $72K. Kiteley J. found that H did not make full financial disclosure and held that he was intentionally underemployed. H arranged his affairs in such a way (i.e. accelerated mortgage payments) to ensure that he did not have readily identifiable and attachable income Hanmore v. Hanmore, [2000] A.J. No. 171 (C.A.) - H sought reduction in child support claiming undue hardship relating to his obligation to support his current wife and two children. Trial judge found undue hardship and reduced support. W's appeal was allowed. The court noted that the objective of the CSG was to apply high thresholds on undue hardship claims and that undue hardship will not be presumed simply because H has a legal responsibility for other children or because standard of living of father's household is lower than that of other spouse See also Vermeulen v. Vermeulen, [1999] N.S.J. No. 193 (C.A.), and DiSipio v. Disipio, [1998] O.J. No. 4921 (Gen. Div.) summaries in Boutet & Kish article, supra. (e) the spouse's property is not reasonably utilized to generate income Tauber v. Tauber, [2001] O.J. No. 3259 (S.C.J.) - at second trial, H claimed an income of $1.4M Court used most recent income (H's salary as set out in a pro forma 2001 income tax return and bonus) as starting point father's salary and then added 1) amounts paid to his parents where no services warranting such payment was established, 2) rental income paid to his father for rental of business premises, 3) amounts which were retained in his company which could be attributed back to H; and 4) interest on H's outstanding shareholder loan balance. Court calculated H's income to be $1.65 M and in doing so considered H's past, present and future circumstances and ability to generate wealth. C. (F.J.) v. S (Y.L.), 2002 CarswellAlta 877 (Q.B.) - recipient spouse took in a boarder in order to make ends meet. Payor spouse moved for court to impute the rental income. Court held that it is NOT reasonable to impute rental income for failure to take in a boarder on an annual basis for CSG purposes. Dalton v. Craig, 2001 CarswellOnt 4551 (S.C.J.) - as a result of car accident, H received over $400K in damages and benefits. H invested the money and his monthly expenses were taken from these funds. W wanted income attributed to H to reflect the capital withdrawals plus disability income H received. Court held that the depletion of one's own capital is not treated as income where such a depletion does not give rise to taxable consequences. Court did note however that a form of reckless depletion of a capital fund could support a finding that capital is not being reasonably utilized to generate income. Waese v. Bojman, 2001 CarswellOnt1813 (S.C.J.) - W was discretionary beneficiary under her father's estate and received a bi-weekly sum as repayment of a shareholder's loan from a family company amounting to $98,000/ year. Mesbur J., considering Rudachyk, attributed $6,000 a year to W on the basis of underutilization of the capital asset. The court determined that the payments represented deferred income, treated as a loan advance which was paid out to W over time. (f) the spouse has failed to provide income information when under a legal obligation to do so Klerides v. Klerides, (2002), 28 R.F.L. (5th) 371 (Ont CA) - H failed to make full financial disclosure or provide medical evidence confirming disability. Trial judge found H to be deliberately unemployed or hiding income. The Court of Appeal confirmed these findings. Motyka v. Motyka, [2001] B.C.J. No. 52 (C.A.) - by failing to disclose full financial information as statutorily required, H put himself at risk for court to draw an adverse inference in accordance with s. 23 of the CSG. Kapogiannes v. Kapogiannes (2000), 10 R.F.L. (5th) 63, 2000 CarswellOnt 2374 (S.C.J.) - Where the husband's income was difficult to ascertain for child support purposes because of his history of providing misleading and contradictory information, it was appropriate to impute an income to him at the high end of the range for his job. Cornelius v. Andres (1999), 45 R.F.L. (4th) 2000, 1999 CarswellMan 86 (C.A.) - H was in breach of his disclosure obligations under the CSG as he had only provided incomplete tax records, and for one of his businesses, some financial statements, monthly income and expenses for one year and various other records. The court held that in determining income from rental property, a party can deduct interest payments but not principal on loans for capital expenditures. However, as the husband had not provided full financial disclosure, it was difficult to break down the current mortgage payments as between principal and interest. The court fixed the husband's rental income expenses at $813.20 per month and thus raised his net monthly income from this source to $1,824.80 per month or $21,897.60 per year. See also Schnell, supra and Reyes, supra (g) the spouse unreasonably deducts expenses from income Rush v. Rush, 27 R.F.L. (5th) 151 (PEI. T.D.) - while the CSG provide that capital cost allowance for real property is to be added back to income, the court finds no similar obligation to do so for personal property where the deduction was reasonable and the asset in question, a transport truck, was due to be replaced shortly (see also Rudachyk v. Rudachyk, [1999] S. J. No. 312(Sask CA) where the likelihood of replacement, cost of replacement, continued need for the asset and finding that the allowance was - real - (as opposed to a book entry) led the court to permit the allowance to stand. Egan v. Egan, [2002] B.C.J. No. 896, 2002 Carswell BC 905 (C.A.) - court held that if an expense or deduction is reasonable from the perspective of the CSG and not just the Income Tax Act, it is generally deductible from support income. The court adopted the reasoning in Rudachyk, supra. In this case, the depreciation of the H's truck was a reasonable deduction from his income. However, the limited evidence of H did not support his contention that other deductions were reasonable. Eager v. Graves (2002), 29 R.F.L. (5th) 313 (Ont CA) - court overturned the trial judge's inclusion of 70% of gross rental income in the payor's income and reduced it to 40% (after mortgage interest, property taxes and insurance) Myketiak v. Myketiak (2001), 13 R.F.L. (5th) 431, 2001 CarswellSask 84 (C.A.) - court rejected H's appeal from a finding that disallowed his deduction of farm losses from his employment income on the basis that the manner in which H managed the farm would likely continually result in such losses annually, and if H chose to operate his farm at a loss over an extended period, he could not expect the W and children to subsidize the operation when reasonable alternatives were open to him (on the topic of farm losses see also Smith v. Smith, [2001] A.J. No. 1420 (C.A.)). (h) the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax Walgren v. Walgren (2002), 26 R.F.L. (5th) 226 (B.C. S.C.) - court grossed up H's income for CSG purposes to include a disability benefit that was non taxable. Such a benefit the court concluded equated to employment income. (i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust Jackson v. Jackson, [1997] O.J. No. 4790 (Gen. Div.) - Pardhu J. held that annual capital encroachments charged against the capital of a trust were to be considered a benefit from a trust and treated as income for Guidelines purposes. Waese, supra - the court had to determine the mother's income for Guidelines purposes, a great deal of which came from family trusts and her father's estate. Given her close relationship to the trustee, it was appropriate to consider the maximum potential amount available to the mother under the trusts and the estate. Court held that the averaging the income paid over several years would not produce a fair estimation. Mr. Davis practices with the Toronto firm of Bennett Best burn LLP and restricts his practice to family law with particular emphasis on mediation and negotiation of agreements and litigation of property, support, custody and access issues involving married and unmarried couples. Mr. Davis is also a Dispute Resolution Officer of the Superior Court of Justice in Toronto. Ms. Kish practices with the firm of Bennett Best Burn LLP in Toronto in the area of civil litigation with a particular focus on employment law and commercial litigation. G.
Ross Davis
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