• by Samantha Rich
Originally published in the OFLM 2023-7 edition
In Baswick v Kahn (2023 ONSC 3120), the court declined to impute certain business expenses to the wife’s income and emphasized that time and resources should not be expended where the process to value these kinds of benefits is disproportionate to the result. The court did not look favourably on the husband’s repetitive and irrelevant disclosure requests that had no bearing on calculating the wife’s income in order to determine support.
The court affirmed that income is the primary indicator of child support obligations and disclosure requests need to be limited to relevancy.
The court also held that the objective of child support awards is not income equalization, and that child support awards must not enter into the realm of a functional wealth transfer.
In Baswick, the husband claimed child support pursuant to s. 9 of the Federal Child Support Guidelines, ("Guidelines") up to the full table support payable. He also sought a determination of the wife's income, as this would impact the child support payments he received and the proportionate sharing of extraordinary expenses under s. 7 of the Guidelines. The parties had two children and both were gainfully employed.
Business Expenses Imputed as Income
The husband wanted certain business expenses to be imputed to the wife as income. However, the court declined to impute these expenses. The court found that the wife’s 2022 income for support purposes was $162,810. This amount reflected her base salary of $150,000 and other additional benefits she received. (para. 33)
The court assessed whether the expenses categorized as business expenses could be imputed as income due to any personal benefits enjoyed by the wife, such as taking left-over food home from a work event or accumulating points on a personal credit card for charges that were employment related.
The court found that it is not out of the ordinary for employees to incur business expenses on behalf of their employer. Generally, there are processes and procedures in place in a business to review and approve business expenses incurred by the employee for the employer and to reimburse employees accordingly. Clearly, reimbursement payments are not part of an employee’s compensation or benefits package. They are, “intended to make the employee whole for expenses incurred for the business.” (para. 35)
Therefore, purely business expenses related to reimbursement payments cannot be imputed as income to employees.
The court held that:
For the court and parents with support obligation to go through the minutiae of trying to value these types of personal benefits is inconsistent with section 1(b) of the Guidelines, which states that an objective is "to reduce conflict and tension between spouses by making the calculation of child support orders more objective. (emphasis add) (para. 37)
The court reasoned that by their nature, these kinds of benefits are difficult to value, and the effort expended to try and value these benefits is not worth the outcome. Furthermore, the time and resources utilized to value these kinds of business is inconsistent with the objectives of the Family Law Rules.
If valuation of these kinds of benefits were required, “it would increase, not reduce, conflict and tension between parents.” This would be entirely inconsistent with the objectives of the Family Law Rules. (para. 38)
Relevancy of Disclosure Requests
The husband argued that the wife had provided insufficient disclosure and that a negative inference should therefore be drawn.
The court did not agree with the husband’s position. The court also did not look favourably on the husband’s repetitive and irrelevant disclosure requests that had no bearing on calculating the wife’s income.
The court affirmed that income is the primary indicator when determining child support obligations. That being said, under section 9 of the Guidelines, consideration of a spouse's condition and means is required, which may support disclosure of information beyond income. (para. 44)
However, such a disclosure request was not applicable in this case.
The husband requested disclosure of the wife’s bank and credit card statements. In terms of this particular disclosure request, the court held that:
Bank and credit card statements can be useful in identifying deposits and expenses for parties who are self-employed and to fully appreciate the legitimacy of business expenses. It is less relevant for T4 employees who only have one job and one source of income. (para. 47)
Furthermore, the court held that:
It would be disproportionate, would overly complicate the determination of the parties' child support obligations, and be inconsistent with the objectives of the Guidelines to demand that the parties produce bank and credit card information in a case such as this. The Guidelines' objectives include reducing conflict and tension between spouses and improving the efficiency of legal process when fixing the levels of child support. (emphasis added) (para. 49)
Determining Child Support Obligations
The table amount of child support for the wife, with an income of $162,810 for two children was $2,230.72 per month.
The husband’s 2022 income of $114,390 (annual salary plus benefits) was not in dispute. The table amount of child support for the husband is $1,647.84.
Thus, the set-off amount of child support was $582.88, payable by the wife. (para. 57)
The children resided with both parents equally. The wife’s children's budget identified total family expenses of $13,380.36, and that 41.4% of those expenses, or $5,536.26, were expenses for the children. (para. 58)
The husband’s children's budget identified total family expenses of $10,959.21, and that 46.8% of those expenses, or $5,128.35, were expenses for the children. (para. 59)
The parties’ budgets were not unreasonable and were in fact very similar. While there were high costs identified by the wife, with the set-off of $582, the court held that the husband should be in a position to spend an equal amount on the children.
The court then proceeded to do a Contino analysis noting that the starting point of a s. 9 analysis is table child support based on the parties’ income. However, the analysis does not end there. The court must look at the financial and personal circumstances of the parties as a whole, including their spending habits regarding expenses related to the children as well as a comparative analysis of each party’s standard of living (i.e., the condition, means, needs, and other circumstances of each spouse). (Contino v. Leonelli-Contino  3 S.C.R. 217)
The court held that the ratio of income between the wife and husband was 59:41. The total child related expenses in both households was $10,664. If the wife was responsible for 59% of this cost, this meant her share was $6,291. The wife was already paying $5,536 in childcare costs, resulting in a difference of $755. Set-off was calculated at $582 per month. This suggested the wife should pay slightly more than the set-off amount in child support, and up to $173 more per month. (para. 66)
The court held that this approach appears to have household equalization as an objective. As stated in A.E. v. A.E. (2021 ONSC 8189) at para. 240:
The objective of the child support provisions of the Divorce Act and the Guidelines is to ensure the reasonable support of children rather than household equalization or spousal support. One of the purposes of section 4 is to ensure that child support does not enter into the realm of a functional wealth transfer or de facto spousal support to the recipient parent. Table amounts that so far exceed a child's reasonable needs that they become a transfer of wealth between the parents or spousal support under the guise of child support will be inappropriate… (para. 67)
The court further reasoned that the authority suggests that the objective of child support under s. 9 of the Guidelines is not household equalization. The objection of s. 9 of the Guidelines is, “so that children do not suffer a noticeable decline in their standard of living as between their two homes”. (para. 68)
The court held that the wife should pay an amount that slightly exceeded the set-off and fixed the amount at $100. The court made this finding primarily due to the concern that the children's standard of living in their two parents’ homes would be noticeably different and thus the court had to ameliorate that difference. (para. 78)
The court held that the objective of child support is not income equalization. Therefore, a significant payment above the set-off would be inappropriate in the circumstances as the parties spend relatively equal amounts on the children. (para. 80)
The court declined to draw any negative inference or impute income to the wife for any reimbursement she received relating to business expenses made on behalf of her employer. The court was not persuaded that either the wife or the husband took on a greater share of the childcare or household responsibilities. Based on each party’s testimony, the court found that they shared these responsibilities equally. The court held that the wife was to pay a set-off of child support in the amount of $582 per month plus a further $100 per month pursuant to s. 9 of the Guidelines. The court held that the parties shall share s. 7 expenses proportionally based on their respective incomes.
Baswick reminds us that it is important when making disclosure requests, to ensure you get all relevant documentation to paint a clear picture of the compensation package if there is one. Standard and easily quantifiable non-taxable benefits should be included when calculating income.
However, time and resources should not be expended more than necessary on quantifying the kinds of benefits discussed above, as this would be contrary to the spirit and objectives of the Guidelines.
Once again, we see the court trying to steer litigants away from overcomplicated disclosure requests when determining income, particularly in circumstances such as this where the wife’s compensation package as an employee is relatively straightforward.
Rightfully so, this case is another example of the courts attempting to reduce conflict and tension between spouses during family law proceedings. One way of doing so is not to make disclosure requests that are irrelevant and simply unnecessary.