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Docket: |
CA028912 |
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COURT OF APPEAL FOR BRITISH COLUMBIA |
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BETWEEN: |
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CYNTHIA ROZEN |
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APPELLANT (PLAINTIFF) |
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AND: |
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ARON ROZEN |
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RESPONDENT (DEFENDANT) |
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Before: |
The Honourable Madam Justice Rowles |
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The Honourable Madam Justice Ryan |
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The Honourable Madam Justice Huddart |
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L. Kahn |
Counsel for the Appellant |
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P. Daykin |
Counsel for the Respondent |
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Place and Date of Hearing: |
Vancouver, British Columbia |
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6 September 2002 |
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Place and Date of Judgment: |
Vancouver, British Columbia |
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27 September 2002 |
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Written Reasons by:
The Honourable Madam Justice Huddart
Concurred in by:
The Honourable Madam Justice Rowles
The Honourable Madam Justice Ryan
Reasons for Judgment of the Honourable Madam Justice Huddart:
[1] This appeal from a child support order considers first, the consequences of a father's failure to comply with the disclosure requirements of the Child Support Guidelines and the Supreme Court Rules on an application for support under s. 15.1 of the Divorce Act, R.S.C. 1985, c. 3 and second, the principles governing applications for retroactive child support.
[2] The order under appeal required the respondent father to pay the appellant mother $4,275 per month commencing 1 September 2001 as support for the three children of their marriage. This is the amount the Child Support Guidelines require be paid on an income of $311,194. He also ordered the parties to bear their own costs. His reasons for judgment may be found at [2001] B.C.J. No. 1633 (Q.L.), 2001 BCSC 1173. Because they are readily available, I propose to refer in these reasons only to the few facts relevant to the issues raised by this appeal.
[3] After a 20-year marriage preceded by a 3-year period of cohabitation, the parties separated in January 1996. With the assistance of counsel and a mediator, they entered Minutes of Settlement that resolved the division of family assets, child and spousal support. By those Minutes, the parties agreed the father would pay $2,863 per month "pursuant to the Federal Child Support Guidelines." Without more, that would suggest a Guidelines income of $200,000, but it is not disputed the mother knew the father's income had exceeded that amount in 1996 and would probably do so in 1997. The father also agreed to pay the mother $300 monthly "as a contribution toward the special and extraordinary expenses of the Children as defined in Section 7 of the Federal Child Support Guidelines." In addition, the father agreed to pay school, synagogue, summer camp, and hockey expenses directly to the relevant institution. Under those provisions, the direct payments totaled $9,470 in 1998 and $6,550 in 1999. For her part, the mother agreed to provide the father annually with a list of actual expenses incurred "for such special and extraordinary expenses of the Children" so they might determine whether the father's contributions were "fair and reasonable."
[4] The mother did not provide that list for 1998 or 1999. At the hearing before us, she claimed extraordinary expenses for 1998 of $12,092 and for 1999 of $2,030. The main component of the 1998 expense ($10,488) was for a nanny the mother required by reason of her illness. The main component of the 1999 expense was a cleaning lady.
[5] The father agreed his obligation to pay child support would bind his estate, "provided that his executor will have the same legal rights as the Respondent to seek a variation in the event of a material change of circumstances of the Petitioner or the children." He also agreed to maintain life insurance in an amount not less than $1 million with his brother as beneficiary in trust for the children. The mother agreed to maintain a life insurance policy in an amount not less than $130,000 with the father as beneficiary in trust for the children. The father's evidence suggests he spent $5,800 in 1998 and $5,900 in 1999 to maintain his life insurance for the children's benefit.
[6] Both parents agreed to comply with the disclosure requirements in s. 25 of the Federal Child Support Guidelines, presumably in anticipation of a court confirming the Minutes in an order under the Guidelines and of future changes in circumstances.
[7] Finally, the mother received the right to purchase the father's 40% interest in the family home on or before June 30, 2002. If she did not exercise that right, the house was to be listed for sale. In the meantime, the home would be the children's primary residence with their mother.
[8] From other provisions, it appears the parties anticipated the mother might receive sufficient funds from her father's estate to make that purchase possible. The house was in clear title, so the deferral of the sale can be seen as a direct benefit to the children. While the mother's extra 10% share of the family assets can be seen as an indirect benefit to the children, that $40,000 more importantly represents the only compensation by way of capital the mother received for the sacrifice of her earning capacity to the care of three children while the father pursued a successful career.
[9] The Rozens married young with good prospects. She left the marriage as a person working part-time as a community relations officer with an income of $30,000 per year and the continuing primary responsibility for teenage children still in school. He left with an income in excess of $200,000 that has since increased to over $400,000.
[10] The Minutes of Settlement were not confirmed by a court order before the mother's application for child support came before Mr. Justice Oppal in May 2001. From correspondence in 1999 between counsel and between the parties, it is apparent the father was refusing to provide a copy of his 1998 income tax return the appellant's counsel considered necessary before filing the consent order based on the Minutes. There was also some question about an undisclosed KPMG pension plan. The father is a partner with that accounting firm. The mother obtained disclosure only after she obtained an order from Master Tokarek. The father's reason for failing to comply with his disclosure obligation was that the mother had not provided the extraordinary expense list and the information she had agreed to provide about her father's estate. She provided that information after she was ordered to do so by Master Tokarek.
[11] The reasons of the chambers judge focus on s. 15.1(5) of the Divorce Act, the effect to be given to the parties' agreement, and s. 4 of the Child Support Guidelines (whether the court should vary the table amount in respect of that part of the father's income that exceeds $150,000). Mr. Justice Oppal was persuaded the special provisions in the Minutes of Settlement did not provide a basis on which to vary the table amounts. Indeed, he concluded the settlement was "based on inaccurate and faulty information" provided by the father, before concluding (at para. 26):
… With respect, I do not think reapportionment in favour of the wife, the wife's occupation of the family home until June 2002, the payment of generous child support and the payments for synagogue, school tuition, hockey and summer camps constitute “special provisions” within the meaning of the Act. It should be noted that this was a lengthy marriage in which the wife indirectly supported the husband while he pursued his professional career, and cared for the children. In the circumstances an order for reapportionment would not be unreasonable. Moreover, it cannot be said that aforementioned payments "reflect a financial or property obligation beyond that which the law would normally impose." (Danchuk [v. Danchuk, 2001 BCCA 291], para. 27). At most these expenditures fall within s. 7 of the Guidelines. That section deals with special or extraordinary expenses. …
[12] With respect, I agree with this reasoning.
[13] Mr. Justice Oppal then turned to what he called "the real issue", whether the Court ought to exercise its discretion under s. 4 of the Guidelines to order an amount other than the table amount. He continued (at para. 26):
I recognize that in this case the husband has been extremely generous. To that extent he must be commended. However, the courts have a very limited discretion to depart from the Guidelines that the Parliament of Canada has implemented. I cannot conclude that, in the words of the Supreme Court of Canada in Francis v. Baker [[1999] 3 S.C.R. 250], the table amounts are so excessive of the children's needs that they no longer qualify as child support. Moreover I cannot say the table amount would be inappropriate or unfair. However, I am concerned that the husband has been generous and financially supportive of the children's extracurricular activities and, by imposing Guideline amounts, he may feel that there is less disposable income to make the payments that he has thus far been making.
[14] As we shall see the chambers judge's concern did not translate into varying the table amount of support, but it did affect his decision not to make the variation retroactive. The father provided his 1999 income tax return as his most current and reliable information. The parties agreed on a methodology that produced a Guidelines income of $311,000 on that basis. However, in the absence of any information about the father's 2000 income, the mother asked that additional income be imputed to him for 2000 because of the continually rising income trend in his income since 1997. The chambers judge refused to impute additional income to the father for 2000, considering it "speculative and dangerous" to do so. Accordingly, he found the father’s Guidelines income to be $311,194 with the consequence that child support was fixed at $4,275 monthly.
Failure to Disclose
[15] On this appeal, the mother seeks to have admitted as fresh evidence the father's 2000 income tax return she obtained by order of Scarth J. in a Supreme Court proceeding to review her spousal support. By the methodology on which the parties agreed to proceed before Oppal J., the father's 2000 income was $412,000. Had that information been before Oppal J. and that agreement in place, he would have determined the table amount to be $5,550.
[16] The failure to make full disclosure of his 2000 income is an egregious mistake in judgment on the father's part. It is not disputed that he defaulted on his statutory obligation under s. 21 (1)(e) of the Guidelines to confirm his income and draw from, and capital in, KPMG for the "three most recent taxation years." Those included 2000 even though he had not yet filed his tax return for that year.
[17] More importantly, it is clear Mr. Rozen knew his partnership income for 2000 when his counsel appeared before Oppal J. He had signed the 2000 income tax return on 23 April 2002. On 16 May 2001, Mr. Daykin advised Oppal J. that the respondent was not required to file his 2000 income tax return until 30 June 2001. The return was filed on 15 June 2001. The fact the hearing was held a month before he filed his 2000 income tax return (in which case s. 21(1)(a) would have specifically required him to provide a copy to Ms. Rozen) does not excuse his failure to disclose all information available to him that is relevant to his child support obligation. During the hearing before Oppal J., the court was invited to impute additional income for the year 2000. The respondent opposed the application and remained silent as to his 2000 income, thus permitting the court to find that it would be "speculative and dangerous" to impute more income, a fact the respondent knew to be untrue.
[18] I cannot resist the conclusion Mr. Rozen deliberately withheld his 2000 income tax return from Oppal J. with a view to minimizing the payment of child support and thwarting the purpose of the Guidelines. The fresh evidence is cogent and practically conclusive of the result of the application for support in the Supreme Court. I would admit the fresh evidence. It follows the table amount Mr. Justice Oppal should have been considering under s. 4 was $5,550 or whatever lesser amount he would be required to pay if the court were aware of his actual total income and accepted his submissions with regard to a business expense deduction.
[19] It is settled law, as Oppal J. noted, that the payor spouse must persuade a court by clear and compelling evidence that the table amount is inappropriate, in the sense that is it "unsuitable." I can see nothing in the evidence Mr. Rozen provided that would persuade a trial court to vary this table amount. Of the amounts he paid to benefit his children, aside from those obligations he undertook under the Minutes of Settlement, only the Richmond Country Club dues ($900 per year) fit into what might be termed voluntary support for extracurricular activities. The other expenses are those any access parent with Mr. Rozen's income would spend on his children, sometimes at their request. They include entertainment, clothing, vacations with him, a computer and supplies, "incremental rent re: larger home," "kids furniture/supplies," restaurants, and food.
[20] The table amounts take these normal expenses of access into account. Access expenses are to be considered separately only where a claim of undue hardship is made under s. 10 of the Guidelines. Mr. Rozen made no such claim. While the Richmond Country Club fees, like both parents' expenditures on their daughter's Bat Mitzvah in 1999, might qualify as special or extraordinary expenses in the circumstances of this family, the parties did not include them in the list of such expenses in the Minutes of Settlement that the father would pay directly. Neither party took advantage of the provision in the Minutes of Settlement to determine whether their agreed division of the extraordinary expenses was reasonable. Ms. Rozen did not make any prospective claim under s. 7 for a contribution to special or extraordinary expenses.
[21] It follows I would not interfere with the chambers judge's conclusion to order support in the table amount. He reached that conclusion before he determined Mr. Rozen's Guidelines income. Nothing in the evidence or his reasons persuades me his decision would have been any different had the table amount been $5,550. Because Ms. Rozen was asking for an award based on a higher income, Mr. Rozen would have had to meet the onus of establishing a higher table amount would be inappropriate, although $4,275 was not.
[22] The remaining issue with respect to the claim for prospective child support is the precise amount of Mr. Rozen's Guidelines income for 2000. In recognition that the cost of remitting this matter to the chambers judge for reconsideration would exceed the difference between them, the parties asked this Court to do the best it can on the basis of the evidence to determine that income. The major dispute is over the amount of the deduction for expenses Mr. Rozen claimed in 2000 for his automobile, the interest on his loan to finance his capital contribution to KPMG, travel, entertainment and promotion.
[23] The mother is content to accept $412,000 as appropriate and the table amount of $5,550 that flows from that income. In so doing, she accepts that a one-time capital gain of $38,219 can be deducted from his Total Income for Guidelines purposes, although that gain was offset by a claimed capital loss of $37,165.
[24] Mr. Rozen considers the proper application of Schedule 3 of the Guidelines would produce an income for their purposes of $351,029, and thus a table amount of $4,721 monthly. He would have this Court deduct from his Total Income business expenses of $61,171 although his counsel acknowledged an argument could be made that not all of these expenses are deductible under the provisions of Schedule 3. Ms. Rozen is not prepared to accept the accuracy of the claim for business expenses.
[25] Mr. Rozen's Total Income for 2000 was $498,660.91. Ms. Rozen's skepticism about the accuracy of his record keeping is justified by his deduction of $66,156 in support payments, when the total of his deductible spousal support payments was $28,200. Nevertheless, it is likely his interest expense ($13,211) and his KPMG medical insurance premiums ($1,043) are accurate. His motor vehicle expenses seem reasonable for both the leased 1997 Cadillac and its 2000 replacement. The deduction he claimed for 50% of those expenses is $11,170.37. The other expenses (for meals and entertainment, business promotion, travel, office supplies and consulting fees) are less easily assessed. His tax return provides no particulars. He did not respond to the new evidence motion with any documents to support this claim, although he knew Ms. Rozen had disputed the accuracy of his 1998 and 1999 returns and a compromise was reached that did not provide for a deduction of all business expenses. It would be reasonable, in my view, to make allowance for business deductions at $48,000 for 2000. Accordingly, I would fix Mr. Rozen's 2000 Guidelines income at $364,000.
[26] It follows I would vary the prospective child support order to the table amount for that income, $4,946.
Retroactive support
[27] The next question for decision is whether the chambers judge erred when he refused to order retroactive support because the husband had made "some substantial payments that did not form a part of the agreement."
[28] Earlier in these reasons, I noted the payments both parties had made on behalf of the children. I noted that Mr. Rozen did not take advantage of the provisions of the agreement permitting variation of the sharing of special or extraordinary expenses, and I noted the limited extent of voluntary expenses on extracurricular activities by Mr. Rozen. I also noted Ms. Rozen did not make any claim for contribution to her expenses until May 2001, nor did she provide the list of expenses she promised in the Minutes of Settlement to provide to Mr. Rozen. In these circumstances, I can find no error in the chambers judge peremptory dismissal of Ms. Rozen's claim for retroactive or special expenses for the years 1998 and 1999. At most, an accounting would have shown Mr. Rozen owed Ms. Rozen about $800 if those earlier special or extraordinary expenses were shared proportionately for those years. Mr. Rozen's expenses in 1997 are irrelevant to the retroactive support claim because the claim is from 1 December 1997.
[29] However, I am persuaded the chambers judge erred in principle when he failed to undertake the analysis this Court requires be done when a claim for retroactive support is made under the Divorce Act. In L.S. v. E.P. (1999), 50 R.F.L. (4th) 302 (B.C.C.A.), 1999 BCCA 393, leave to appeal refused [1999] S.C.C.A. No. 444, Madam Justice Rowles reviewed the principles relating to retroactive support claims. At paras. 66 and 67, she discussed the significant factors to be taken into account on such an application.
[30] There is no indication in the reasons of the chambers judge that he undertook that analysis, although counsel agree they made submissions with regard to each factor. In many cases, the paucity of reasons would not cause a problem. Here it does because the reason the chambers judge gave for not awarding retroactive support is not supported by an analysis of the relevant evidence. Mr. Rozen provided very little more child support than was required by the Child Support Guidelines for a person with an income of $200,000, although he provided well for his children while they were with him, as parents are reasonably expected to do.
[31] The analytical gap was exacerbated by the father's refusal to fulfill his legal obligation to disclose information about his current income when requested to do so. This failure to disclose precluded the mother from assessing from time to time whether she was seeking the appropriate amount of support for the children.
[32] The evidence supports a conclusion that the first request for information was made orally by Ms. Rozen's counsel to Mr. Rozen's counsel on 28 April 1999. On 4 May 1999, Ms. Stowe, who then acted for Ms. Rozen, wrote to Mr. Daykin confirming her telephoned request of 28 April for a copy of Mr. Rozen's 1998 income tax return so she might file the required affidavit setting out the parties' Guidelines incomes with a praecipe for a consent order resolving her client's action for divorce and corollary relief in the terms of the Minutes of Settlement. In the same letter, she inquired about the possibility Mr. Rozen had failed to disclose the existence of a KPMG pension plan. On 21 October 1999, Ms. Rozen wrote to Mr. Rozen personally to request, among other documents, copies of Mr. Rozen's 1997 and 1998 tax returns, noting that she and her lawyer had asked for them repeatedly. She advised him in that letter his refusal to supply these documents was costing money that would be better spent on the children. She also indicated that she did not want to spend more getting what was her "right by law." On 18 November 1999, Ms. Stowe advised Mr. Rozen’s counsel that Ms. Rozen would apply for an order for disclosure of Mr. Rozen's 1998 income tax return if a copy was not received within 10 days. Matters dragged on until both parties made applications that resulted in Master Tokarek's order for disclosure made 9 November 2000.
[33] Had Mr. Rozen disclosed his 1998 income tax return promptly after the filing deadline of 30 June 1999, Ms. Rozen would have been able to determine whether to seek an order in the terms of the Minutes of Settlement or bring an application for support under s. 15.1, as she ultimately did on 22 September 2000. When Oppal J. finally heard that application in May 2001, he concluded the Minutes were of no value in fixing the appropriate child support because they had been based on faulty information. Mr. Rozen considers Oppal J. erred in that regard.
[34] Mr. Rozen may be right insofar as the chambers judge determined the child support had been based on a Guidelines income of $200,000 for 1997. While the agreed child support reflected a Guidelines income of $200,000, it seems the parties did not determine a precise amount for 1997 before reaching their agreement. The settlement was reached on the basis of his 1996 income tax return and information about Mr. Rozen's income current to October 1997.
[35] Mr. Rozen's Guidelines income was agreed for the purposes of the hearing before Oppal J. at $250,956 for 1997, $275,580 for 1998 and $311,194 for 1999. The relevant table amounts are $3,510, $3,823,and $4,275 respectively. Yet, from 1 December 1997 until 1 October 2001, Mr. Rozen paid only $2,863 monthly. That amount is probably best understood as having been agreed without the benefit of the decision of the Supreme Court of Canada in Francis v. Baker, supra. It was never reviewed by a court for reasonableness in light of the overall agreement upon proper evidence. Such a review is required if an order for child support is to be included in a consent order under the Divorce Act.
[36] Even the table amount based on the father's 1997 income is a significant departure from the agreed support, and arguably more than can be explained by the benefits Ms. Rozen received under the settlement that provided indirect benefit to the children. The amounts Mr. Rozen was paying for special or extraordinary expenses would have been additional to the table amount and thus would not be relevant to its determination.
[37] The disparity between the amount Mr. Rozen was paying and the amount the Guidelines required him to pay had become so remarkable by September 2000, I can think of no reason the order for support was not made retroactive to 1 October 2000. The real issue is whether it should have been made retroactive to an earlier date, and if so, to what date. This requires a consideration of the factors Madam Justice Rowles discussed in L.P., supra.
[38] Ms. Rozen seeks retroactive child support from 1 November 1997 totaling about $71,000. She did not provide evidence to support any need on the part of the children she could not meet, nor any need to encroach significantly on her capital to meet child-rearing expenses between November 1997 and May 2001. Need is relative to income, of course. The effective consequence of the disparity is that Mr. Rozen rather than Ms. Rozen was able to determine how "child support" was used. If Ms. Rozen had been receiving the support Parliament mandated be paid by someone with Mr. Rozen's income, she would have been able to spend more on the children. She would, for example, have been able to take annual vacations with them more comparable to those they enjoyed with their father; she would have been able to spend more on their entertainment, restaurant meals, and clothing. On these items Mr. Rozen spent almost $20,000 annually during their visits with him. On her personal income of $52,000 in 1998 and $57,000 in 1999 Ms. Rozen could not be so generous.
[39] Mr. Rozen put forward no evidence to establish any unreasonable or unfair burden on him should he be ordered to pay retroactive child support. There is no evidence to support a conclusion Ms. Rozen would hoard the money or spend it on herself. The chambers judge rejected a similar submission made on behalf of Mr. Rozen with regard to prospective support.
[40] The significant factors arising from the evidence before the chambers judge are the delay in the application for child support and the blameworthy conduct on the part of Mr. Rozen.
[41] On that evidence, Ms. Rosen's first request for a copy of the 1998 income tax return was made on 23 April 1999. After that date, and particularly after 30 June 1999, when he would have no excuse at all for not providing the requested copy of his filed 1998 income tax return, Mr. Rozen's conduct is blameworthy. His excuse that Ms. Rozen had failed in her contractual obligation to provide information to him is not a sufficient justification. He did not choose to apply for an order requiring the disclosure he wanted until Ms. Rozen brought the application for child support in September 2000, and as part of that application sought a disclosure order. I note that Mr. Rozen was in the superior financial position to institute court proceedings.
[42] However, Mr. Rozen's conduct is not a complete answer to Ms. Rozen's delay in bringing an application for child support. She could have applied for an order requiring disclosure of the 1998 return as early as July 1999 and for the 1999 return in July 2000 in the context of an application for support, as she did in September 2000. Moreover, she could have taken away Mr. Rozen's purported justification by making the annual disclosure she was required to make to him. Ms. Rozen’s counsel did not refer to any explanation for that delay in the materials.
[43] Unexplained delay, even when significant, will rarely preclude an order for retroactive child support. This is because it is wrong in principle to visit a parent's delay on a child's need for proper support. However, in this case, it appears the children have benefited from much of what should have been paid to their mother by way of child support during 1998 and 1999. That may be what the chambers judge intuitively recognized when he refused to look backward to analyze what should have happened and whether it was now appropriate to remedy the situation guided by the principles in L.S. supra, with full knowledge of Mr. Rozen's income for those years. He did not, however, know that Mr. Rozen's income had increased significantly again in 2000.
[44] In my view, the appropriate order in such circumstances, with the benefit of the knowledge of Mr. Rozen's 2000 Guidelines income, is to make an order that he pay $4,946 from 1 January 2000.
Costs
[45] The parties' submissions in their factums with regard to costs of the application in chambers and of this appeal have become irrelevant with the admission of the fresh evidence. A respondent who deliberately misleads a court is guilty of conduct deserving of the rebuke of special costs. Had Mr. Rozen made proper disclosure on 16 May 2001 to the trial court, it is highly unlikely this appeal would have been necessary. Thus, Ms. Rozen is entitled to her costs of the
application in the Supreme Court and of this appeal, both assessed as special costs.
“The Honourable Madam Justice Huddart”
I AGREE:
“The Honourable Madam Justice Rowles”
I AGREE:
“The Honourable Madam Justice Ryan”