(FAMILY DIVISION)
Citation: Carlaw v. Carlaw, 2009 NSSC 428
Date: 20090916
Docket: 1201-060825
Registry: Halifax
Between:
Keith Martin Carlaw
Petitioner
v.
Colleen Elizabeth Carlaw
Respondent
Judge: The Honourable Justice Elizabeth Jollimore
Heard: September 14 - 16, 2009 in Halifax, Nova Scotia
Written Decision: February 3, 2011
Counsel: Stephanie J. Atkinson for Keith Carlaw
Deborah I. Conrad and Robert Meidema for Colleen Carlaw (now Spencer)
By the Court:
[1] This is a divorce action in which Ms. Spencer (as she now calls herself) claims retroactive child support dating from January 2002 when the parties signed a separation agreement.
Retroactive awards
[2] Retroactive awards are neither automatic nor exceptional. In considering whether I should make a retroactive award, I am to take a holistic approach, balancing the competing principles of certainty and flexibility, while respecting the core principles of child support. Those core principles are that: child support is the right of children; the children's right to support survives the breakdown of the relationship between the children's parents; child support should, as much as possible, perpetuate the standard of living the children experienced before the parents' relationship broke down; and the amount of child support varies, based upon the parent's income.
[3] In determining whether a retroactive award is appropriate, I am to consider: the reason for Ms. Spencer's delay in claiming support; Mr. Carlaw's conduct; the children's past and present circumstances; and whether a retroactive award would result in hardship. All of these factors must be considered and none is dispositive on its own, according to Justice Bastarache, who wrote the unanimous decision of the Supreme Court of Canada in D.B.S. v. S.R.G., L.J.W. v. T.A.R., Henry v. Henry, Hiemstra v. Hiemstra, 2006 SCC 37 at paragraph 99.
Ms. Spencer's delay
[4] My first consideration is the reason for Ms. Spencer's delay in claiming support. Ms Spencer has a positive duty to seek a variation in child support as Mr. Carlaw's ability to pay increases. According to Justice Bastarache at paragraph 103 of D.B.S. v. S.R.G., L.J.W. v. T.A.R., Henry v. Henry, Hiemstra v. Hiemstra, 2006 SCC 37: "Recipient parents must act promptly and responsibly in monitoring the amount of child support paid". An unreasonable delay in seeking a variation militates against a retroactive award. Acceptable reasons for delay include: whether Ms. Spencer had reasonable fears that Mr. Carlaw would react vindictively to a claim for increased support; whether she had deficient legal advice or insufficient financial or emotional wherewithal to pursue the claim.
[5] It is Ms. Spencer's argument that she did not unreasonably delay ‑ or delay at all ‑ in claiming an increase in child support. The factual circumstances of Baldwin v. Funston (ultimately decided at 2007 ONCA 381) are described at (2004), 2 R.F.L. (6th) 235 (ON S.C.). While the reasons do not provide a comprehensive checklist of circumstances to consider, they do illustrate a number of relevant considerations:
· Ms. Baldwin knew her former husband’s circumstances had improved, though she did not know the extent of the improvement;
· Ms. Baldwin had the financial ability to pursue her request for more support;
· Ms. Baldwin (with her new husband, a lawyer), had the knowledge and awareness of her "rights necessary to enforce those rights"; and
· one of the closest friends of Ms. Baldwin's new husband was a leading family lawyer in Toronto.
[5] Ms. Spencer and Mr. Carlaw finalized a separation agreement in January 2002. That agreement recited Mr. Carlaw's annual income as $86,676.00. The agreement contained no provision requiring Mr. Carlaw to provide his wife with ongoing disclosure of his income. Based on the income stated in the agreement, Mr. Carlaw was to pay monthly support for Emma and Nicola, his daughters, of $1,040.00 pursuant to section 3 of the Federal Child Support Guidelines, SOR/97‑175. Tax information is not available for Mr. Carlaw for 2001.
[6] Ms. Spencer acted promptly when she became aware that her husband's income had improved. She lacked the financial resources to pursue an appropriate level of support. Mr. Carlaw lived in Nova Scotia and Ms Spencer and the children lived variously between Nova Scotia and different locations in Newfoundland, leaving her caught between two legal aid systems, not deriving the benefit of either. Ms. Spencer represented herself during a portion of this proceeding. There is no indication that Ms. Spencer had knowledge of her right and obligation to seek appropriate child support by virtue of personal connections to lawyers or others who might make her aware of it.
Mr. Carlaw's conduct
[7] My second consideration is Mr. Carlaw's conduct and whether it is blameworthy. Blameworthy conduct promotes a retroactive award and the absence of blameworthy conduct militates against one. Blameworthy conduct is an act or omission that puts the payor's interests before the children's right to an appropriate amount of support. On its face, it is not blameworthy for a payor to adhere to the terms of the prevailing order or agreement. However, if a payor receives a significant increase in income and this is not disclosed, this is a blameworthy conduct. Justice Bastarache wrote, at paragraph 106 of D.B.S. v. S.R.G., L.J.W. v. T.A.R., Henry v. Henry, Hiemstra v. Hiemstra, 2006 SCC 37, that "a payor parent cannot hide his/her income increases from the recipient parent in the hopes of avoiding larger child support payments".
[8] The Supreme Court was not express in whether there was an obligation to disclose changes in income: it said at paragraph 107 of D.B.S. v. S.R.G., L.J.W. v. T.A.R., Henry v. Henry, Hiemstra v. Hiemstra, 2006 SCC 37, "a payor parent who knowingly avoids or diminishes his/her support obligation to his/her children should not be allowed to profit from such conduct". Mr. Carlaw's subjective belief that his child support obligation is being met is "helpful" in determining whether there is blameworthy conduct, according to the Court at paragraph 108 of D.B.S. v. S.R.G., L.J.W. v. T.A.R., Henry v. Henry, Hiemstra v. Hiemstra, 2006 SCC 37. In some cases, a presumption that adhering to the prevailing order or agreement is not blameworthy "may be rebutted where a change in circumstances is shown to be sufficiently pronounced that the payor parent was no longer reasonable in relying on the order and not disclosing a revised ability to pay" according to the Supreme Court at paragraph 108 of D.B.S. v. S.R.G., L.J.W. v. T.A.R., Henry v. Henry, Hiemstra v. Hiemstra, 2006 SCC 37.
[9] Mr. Carlaw abided by the terms of the separation agreement as it related to paying child support. Mr. Carlaw said that he paid support for Emma and Nicola based on earnings of $150,000.00 because child support on any amount of earnings in excess of that was discretionary.
[10] Blameworthy conduct includes: diverting or concealing income, misleading a recipient as to income, consciously ignoring a support obligation or intimidating a recipient from pursuing increased support.
[11] It is possible for Mr. Carlaw to provide for Emma and Nicola in ways other than the payment of support to Ms. Spencer. Where this is done, his conduct may not be considered blameworthy. Mr. Carlaw provided extensive evidence of how he provided otherwise for Emma and Nicola, arguing that these efforts should be weighed against the assertion that he is blameworthy.
[12] In 2006, when Ms. Spencer and the girls were experiencing financial difficulties in Newfoundland, Mr. Carlaw arranged for them to move to his home in Halifax, where he provided for them and continued, for the most part, to meet his child support obligation. At another time, he paid the property taxes on the home occupied by Ms. Spencer and the children in Newfoundland. He ensured that utilities to the home would not be disconnected. He provided a security system for Ms. Spencer's car. These efforts were to the benefit of his children.
[13] Mr. Carlaw offers evidence of other and much greater efforts he made to provide for his daughters. Emma and Nicola are 12 and 10, respectively. These other efforts centre on his access time with the girls and gifts he has given to them. With Mr. Carlaw, the children live in a large home. With their mother, they have lived in much more modest circumstances. The girls have travelled to the Quebec resort of Mont Tremblant and to Disneyworld with their father. He has given them iPods, a DVD player, three digital cameras, a laptop computer, clothing and jewellery.
[14] In contrast with the gifts and travel they enjoy with their dad, Nicola and Emma live a very different sort of life with their mother. In March 2005, Ms. Spencer declared bankruptcy. Without Mr. Carlaw's assistance, the utilities to the children's home would have been disconnected. At least one of the children wears secondhand clothing to school and Emma has experienced bullying when another student recognized the clothing Emma was wearing as her own.
[15] Approximately three percent of Canadians have an annual income of more than $150,000.00: the tables provided for by section 3 of the Federal Child Support Guidelines address child support obligations for the vast vast majority of support payors. Mr. Carlaw is in a very small group of Canadians who can be considered wealthy. His actions in underpaying his child support have deprived the children of their entitlement and, moreso, left them living with the threat that their home will be without utilities, wearing second hand clothing.
The children's past and present circumstances
[16] My third consideration is the children's past and present circumstances. Emma and Nicola's circumstances include their needs at the time support should have been paid. If needs were met and the children's lifestyle was comfortable (even without the support which ought to have been paid), then it may not be appropriate to make a retroactive support award. The shortfall in the children's financial needs was met, to some degree in the past, by the generosity of Ms. Spencer's family. However, this did not bridge the gap between what was provided and what should have been, as evidenced by the needs the girls continued to have.
[17] Emma and Nicola's present needs are also to be considered. Children who currently have a high standard of living will benefit less from a retroactive support award than those whose standard of living is lower. Ms. Spencer currently cohabits, as does Mr. Carlaw. Her cohabitation does not bring sufficient financial resources into her home to supplant what Mr. Carlaw should have provided. The girls' needs, as outlined in the Statement of Special or Extraordinary Expenses Ms. Spencer filed, indicate present circumstances of need. Additionally, while Ms. Spencer was left debt‑free following her 2005 bankruptcy, she has now accumulated $35,000.00 in debt.
Creation of hardship by a retroactive award
[18] My final consideration is whether a retroactive award would result in hardship. I am to consider whether Mr. Carlaw is able to satisfy a retroactive award. "Hardship" is to be considered broadly ‑ not within the confines of section 10 of the Guidelines. The breadth of this consideration encompasses other children Mr. Carlaw may support ‑ in this case, his obligation to support his son Chris has ended.
[19] By his own evidence, Mr. Carlaw has RRSPs with a pre‑tax value of approximately $125,000.00. According to his 2008 Statement of Property, this amount was $88,000.00. Their value has grown. He has various business interests including a twenty percent shareholding interest in Alscott Air System Limited, sole ownership of Keith Carlaw Holdings Limited, and shares in DM Alscott Marine Offshore HVAC Limited. In public interviews, he asserts that the financial future for his corporate endeavors is promising. New companies are on the horizon. Alscott Air Systems (a company in which he has an ownership interest) has experienced growth in its net profit and retained earnings annually since 2005. He has not provided any evidence that these retained earnings are not cash, that they are not accessible or that they must be retained within the company to maintain bank lending ratios or are required to meet some other corporate need. He owns a home.
[20] Based on all the considerations outlined in D.B.S. v. S.R.G., L.J.W. v. T.A.R., Henry v. Henry, Hiemstra v. Hiemstra, 2006 SCC 37, I hold that it is appropriate to award child support on a retroactive basis.
[21] Having made the decision to make a retroactive award of child support, I must fix the presumed commencement date. The presumed commencement date is the date of effective notice which is the date on which Ms. Spencer made known an interest to review and adjust child support. Notice is to be viewed very expansively. As soon as notice is given, Mr. Carlaw cannot safely assume that the current state of affairs is fair and his reliance on certainty is less appropriate.
[22] First written notice of Ms. Spencer's claim for retroactive support came from Ms. Spencer’s then-counsel in correspondence of July 13, 2006. Prior to this, at various times, Ms. Spencer demonstrated a need for greater support. Through 2005, Mr. Carlaw paid an increased amount of child support. When his obligation to pay spousal support ended he was entitled to reduce his total payments to Ms. Spencer. He maintained the level of his support payments and the portion which had been allocated for the support of Ms. Spencer and which was, as a result, taxable to Ms. Spencer, began being received by her on a tax‑free basis. Despite this increase in support, Mr. Carlaw was still underpaying his obligation to his children when that obligation is measured against the Guidelines.
[23] Justice Bastarache accepted section 25(1)(a) of the Guidelines as a rough guideline for retroactive awards at paragraph 123 of D.B.S. v. S.R.G., L.J.W. v. T.A.R., Henry v. Henry, Hiemstra v. Hiemstra, 2006 SCC 37: "it will usually be inappropriate to make a support award retroactive to a date more than three years before formal notice was given to the payor parent." There is an exception to the three year limitation. If the payor has committed some blameworthy act that has interfered with the pursuit of support, the commencement date for the retroactive support is the date the payor's income changed.
[24] Mr. Carlaw's income changed almost as soon as the parties signed their agreement. The separation agreement referenced income of $86,000.00 in 2001. In 2002, Mr. Carlaw's income was approximately twenty percent higher than that amount. In 2003, his income was almost two and one‑half times the amount it was when the agreement was signed.
[25] It is certainly clear that Mr. Carlaw delayed the provision of financial disclosure to his wife. He delayed the provision of his personal financial information when requested. He delayed the provision of corporate financial disclosure even when ordered to provide it. He failed to provide property disclosure that would allow Ms. Spencer and me to determine the appropriateness of a retroactive support award.
[26] Additionally, Mr. Carlaw exacerbated the situation by "evicting" his wife and children from the home they occupied in Nova Scotia in 2005 and by threatening to deduct the cost of storing her furniture from the child support he owed to her ‑ at a time when she could ill‑afford to relocate and store the items. He did this because, in part, he wanted to park his car in the garage being used to store Ms. Spencer's belongings.
[27] The retroactive period should begin at January 2002. In 2002, Mr. Carlaw’s income was approximately twenty percent higher than the amount on which his child support obligation was based.
Determining Mr. Carlaw's income
[28] Ms. Spencer asks that I impute income to Mr. Carlaw. The starting place for determining income is section 16 of the Guidelines. In her submissions, Ms. Spencer argued that Mr. Carlaw owned shares in companies where there was money. I've not been given any authority for the suggestion that this, alone, is a circumstance where calculation of his income under section 16 of the Guidelines is not a fair reflection of all money available to pay support. The existence of the money does not lead to the conclusion that calculating child support pursuant to section 16 is not a fair reflection of what's available to pay child support. I decline to impute income on this basis.
[29] Section 19 of the Guidelines enumerates various circumstances where it's appropriate to impute income to a support payor. Particularly relevant in this case is Mr. Carlaw's failure to disclose. Specifically, this is referenced in section 19(1)(f), which refers to a failure to provide income information when under a legal obligation to do so. Mr. Carlaw correctly notes that his statutory duty to disclose did not extend to corporate information. Through the correspondence between counsel that has been provided it's apparent that Ms. Spencer repeatedly sought disclosure of corporate materials. It was not until this past summer that it became obvious there was a dispute about Mr. Carlaw's disclosure of corporate materials and, ultimately, a court order was required to obtain those materials. They were provided, following an order to disclose, which was granted at the August 10, 2009 hearing. Disclosure was made in a fashion that was adequate for Ms. Spencer's purposes on the first of the day when this matter was scheduled for trial. The trial's commencement was delayed for one day to allow for this disclosure.
[30] I do not find this is an appropriate basis on which to impute income. Disputes about disclosure should be identified quickly so that they can be resolved quickly. The fact that Mr. Carlaw was not going to provide corporate disclosure did not become obvious until weeks before the trial and resolving the dispute and the impact of that being done at a late date has had an undesirable effect on both parties' expenses in litigating this case.
Calculating the retroactive amount
[31] The information Mr. Carlaw provided for 2002 shows he earned $70,720.00 from Alscott Air Systems (a company in which he has a twenty percent ownership interest) and he earned $35,400.00 from Carlaw Systems, a business which he controlled in its entirety. His total income for the purposes of the Child Support Guidelines in 2002 was $106,120.00. This would generate child support payments of $1,307.00 per month. This amount was $267.00 more than he was paying each month. A retroactive award for 2002 equals the shortfall of $3,204.00.
[32] Mr. Carlaw's 2003 tax information indicates he had earnings of $141,000.00 from Alscott Air Systems and actual dividends of $60,000.00 from the same source. I am using the actual dividends received, not the taxable amount, as required by section 5 of Schedule III to the Guidelines.
[33] This year brings me to consider the issue of child support payments for a parent whose annual income exceeds $150,000.00. From Francis v. Baker, [1999] 3 S.C.R. 250, I know that Parliament intended that there be a presumption in favour of the amount calculated pursuant to sections 3 and 7, even when a paying parent has annual income which exceeds $150,000.00. The amount of child support generated by the Guidelines can only be increased or reduced under section 4 if the party seeking the deviation has rebutted that presumption of appropriateness. Specifically, it is for Mr. Carlaw to rebut the presumption that the amount payable pursuant to sections 3 and 7 is appropriate. The evidence in its entirety must be sufficient to raise a concern that the applicable amount is inappropriate. Only after examining all of the circumstances of the case, including the factors expressly listed in section 4(b)(ii), should I find the amount dictated by the table to be inappropriate and craft a more suitable child support award.
[34] Specifically, section 4(b) directs me that if I consider the amount generated by applying sections 3 and 7 to be inappropriate, I may determine child support in an alternate fashion. The alternate approach requires me to total three figures: the table amount for the first $150,000.00 of the payor's income; the amount I consider appropriate having regard to the payor's income, the children's condition, means, needs and other circumstances and each spouse's financial ability to contribute to the support of the children; and, lastly, any amount determined under section 7.
[35] Mr. Carlaw has not questioned the condition, means, needs and other circumstances of the children in the context of contesting the appropriateness of the amount generated pursuant to section 4(a) of the Guidelines. His means are considerable and Ms. Spencer’s are modest.
[36] To the extent that Ms. Spencer produced a child expense budget for Emma and Nicola (in the form of a Statement of Special or Extraordinary Expenses), this was not questioned by Mr. Carlaw in the affidavit he filed on the eve of trial or in cross‑examination. A proper balance is struck by requiring paying parents to demonstrate that budgeted child expenses are so high as to exceed the generous ambit within which reasonable disagreement is possible. This was not done.
[37] There is no basis for me to find that application of the Guidelines to Mr. Carlaw's income when it exceeded $150,000.00 was inappropriate at any time.
[38] Mr. Carlaw asks that his child support obligation be fixed to match the expenses Ms. Spencer has outlined for the children's extracurricular activities, school needs, vacations and childcare. This request ignores the day‑to‑day expenses that exist for the children: the cost of their housing, their food, household operating costs, clothing and transportation. In effect, he asks me to determine child support as if the Guidelines had never been enacted. The only basis on which I can deviate from the Guidelines is section 4 and Mr. Carlaw has not established that I should do so.
[39] Returning to Mr. Carlaw's circumstances in 2003, his income, for child support purposes, for this year was $201,000.00. On this income, he would pay monthly child support of $2,365.20, instead of the $1,040.00 he paid. Each month in 2003, his payment fell short by $1,325.20. For the 2003 year, the shortfall was $15,902.40.
[40] In 2004, Mr. Carlaw's income was comprised of earnings of $150,000.00 from Alscott Air Systems. Additionally, he received actual dividends of $102,000.00 from the company. His total income for child support purposes was $252,000.00. For two children, this income means a monthly child support payment of $2,936.40 rather than the $1,040.00 he paid for eleven months. He began to pay $1,540.00 in December. So, Mr. Carlaw paid $12,980.00 in 2004. In 2004, the shortfall between what was paid and what should have been paid was $22,256.80.
[41] In 2005, Mr. Carlaw's income was comprised of actual dividends of $50,000.00 and earnings of $150,000.00. Both originated with Alscott Air Systems. On a total income of $200,000.00, Mr. Carlaw was required to pay child support of $2,354.00 per month, rather than the $1,540.00 he did pay. His 2005 shortfall was $9,768.00.
[42] In 2006, Mr. Carlaw's income was derived from actual dividends of $100,000.00 and earnings of $150,000.00 from Alscott Air Systems. On this income, he was required to pay child support of $2,354.00 per month from January through to April ($9,416.00) and $2,473.00 per month from May to December ($19,784.00). The 2006 year is segmented to reflect the 2005 amendments (SOR/2005-400) to the Child Support Guidelines which changed the table amounts as of May 2006. Mr. Carlaw's child support obligation for the first four months of 2006 was $9,416.00 and his obligation for the last eight months of 2006 was $19,784.00, for a total of $29,200.00. In 2006, he paid $19,005.00, which leaves a shortfall of $10,195.00.
[43] In 2007, Mr. Carlaw's income was comprised of $300,873.00 in earnings from Alscott Air Systems. He had no other income in that year. Mr. Carlaw paid child support of $22,956.00 when he should have paid support of $43,233.33. His 2007 shortfall was $20,277.33.
[44] In 2008, Mr. Carlaw's income was comprised of earnings of $300,000.00 from Alscott Air Systems. He owed support of $43,116.00 and paid $22,956.00, creating a $20,160.00 gap.
[45] Until June of 2009, Mr. Carlaw has been on pace to earn $300,000.00. He has produced an email from Alan Wyllie, the majority shareholder of Alscott Air Systems, stating that payscales were being reduced to reflect first and second quarter results. These results have not been produced and appear to be in stark contrast to Mr. Carlaw's remarks to the media about the company's future prospects in an interview published in March, 2009. Mr. Wyllie was not present to be cross‑examined on this email. Mr. Carlaw says that the pay adjustment is not retroactive for the first half of 2009, so he was still being paid at rate for $300,000.00. The pay rate going forward from June 29, 2009 will be at annual rate of $200,000.00.
[46] On the basis of this information, Mr. Carlaw might expect an income of $250,000.00 this year, if he is paid bi‑weekly: twenty‑six weeks at rate of $300,000.00 per year and twenty‑six weeks at rate of $200,000.00 per year. The email from Mr Wyllie says that Mr. Carlaw's income may return to the annual level of $300,000.00 by the end of the year. Mr. Wyllie's email is, as noted, in contrast with Mr. Carlaw's published interview.
[47] I understand from Mr. Carlaw's evidence that his income was reduced to demonstrate to the bank an appreciation of the company's reduced circumstances. There was no evidence the bank required this. This is a step that Mr. Wyllie took on his own and doesn't reflect a reduced ability to pay an annual salary of $300,000.00 to Mr. Carlaw. The adjustment was to make a show for the bank. Accordingly, I do impute an income of $300,000.00 to Mr. Carlaw for 2009. I do this based on section 19(1)(d) of the Guidelines: this is a circumstance where income has been diverted which would affect the level of child support determined by the Guidelines. At an annual income of $300,000.00, Mr. Carlaw should have paid monthly child support of $3,593.00. So far this year he's paid $17,217.00, so he owes $15,120.00.
[48] The table below shows the annual retroactive amounts and calculates the total retroactive award of $116,883.56.
|
Year |
Retroactive award |
|
2002 |
3,204.00 |
|
2003 |
15,902.40 |
|
2004 |
22256.8 |
|
2005 |
9,768.00 |
|
2006 |
10,195.00 |
|
2007 |
20277.33 |
|
2008 |
20,160.00 |
|
2009 |
15,120.00 |
|
Total |
116883.56 |
[49] I order the retroactive award be paid within sixty days. Given Mr. Carlaw's assets (his RRSP and the receivable owed to his HoldCo.), I have not structured the award to allow him an extended period to make the payment. The retroactive award arises over a seven year period and Mr. Carlaw has the means to satisfy it immediately.
[50] I order that Mr. Carlaw pay prospective monthly child support of $3,593.00, starting on October 1, 2009.
[51] The parties shall annually disclose their tax returns, completed and with all attachments, and annual notices of assessment on or before June 1. Mr. Carlaw shall annually provide Ms. Spencer with all corporate financial statements, tax returns, completed and with all attachments, and notices of assessment for all companies in which he owns shares on or before June 1. Ms. Spencer shall not disclose or release this information to anyone except as incidental to these proceedings.
_______________________________
Elizabeth Jollimore, J.S.C. (F.D.)
Halifax, Nova Scotia