BC Court of Appeal addresses new partner income under section 9(c) of the Guidelines: B.P.E. v. A.E., 2016 BCCA 335

In B.P.E. v. A.E., 2016 BCCA 335, the Court of Appeal addressed new partner income under section 9(c) of the Guidelines as well as the intersection of sections 4 and 9 of the Guidelines.   Section 4 applies when a payor’s guideline income is $150,000.00 or over.  Section 9 applies when parties share custody of the children.  The case is important because it sheds some light on when spousal support and new partner income will be relevant to a s. 9 analysis for child support.

The parties separated in 2011.  They had three children, all of whom were younger than 19.  In 2012, they entered into a separation agreement.  The agreement provided that the husband would pay to the wife $7,900.00 per month, but explicitly stated that both parties were at liberty to fully argue the issue of child support when child support was reviewed in April, 2015.  The agreement also provided that at the time of the review child support could be made retroactive to January 1, 2015, if appropriate.

On October 19, 2015, the wife filed a notice of application seeking child support in the amount of $11,440.00 per month commencing January 1, 2015 based on the husband having a guideline income of $790,514.00, and her having a guideline income of $58,593.00.  The husband was ordered to continue paying child support of $7,900.00 per month.

The wife’s arguments on appeal included that the trial judge had erred by

1. failing to apply the principles embodied in s. 4 of the Guidelines by failing to regard the set-off of table amounts of child support as the presumptive level at which support should be set; and
2. applying s. 9(c) of the Guidelines in such a manner as to relieve the respondent of the obligation to pay the Guidelines set-off  amount, on the basis that would involve a “wealth transfer” to the appellant.

With respect to whether the trial judge erred by failing to apply the principles embodied in s. 4 of the Guidelines, the Court of Appeal applied Contino v. Leonelli-Contino, 2005 SCC 63 and confirmed that s. 9 creates “a distinct and separate regime” with different criteria (at para. 21).  There is no discretion as to whether s. 9 applies once the 40 percent threshold is met.

Once s. 9 is triggered by shared custody, the court has to consider the three factors listed in that section to determine the appropriate amount of child support:

(a) the amounts set out in the applicable tables for each of the spouses;

(b) the increased costs of shared custody arrangements; and

(c) the conditions, means, needs and other circumstances of each spouse and of any child for whom support is sought.

With respect to s. 9(b), the trial judge considered that $7,900.00 was sufficient for the mother to meet the children’s expenses, particularly in light of the fact that she had received a lump sum spousal support payment in the amount of $390,000.00. Under her analysis for s. 9(c), the trial judge considered the income of both households, and the fact that “the Children are well cared for in the homes of both of their parents. While there may be some difference in household incomes, I find that the Children enjoy comfortable homes, vacations, outings and high standards of living at each of their parent’s homes.”  The trial judge found that any child support over $7,900.00 would be a de facto wealth transfer or spousal support to the mother.

The Court of Appeal held that the trial judge placed too much emphasis on whether the children’s needs were being met.  Children should generally benefit from an increase in the payor parent’s income, and where the payor’s income is very high child support should “include a large element of discretionary spending”: Tauber v. Tauber, 2000 CanLII 5747 (ON CA).

The Court of Appeal further held that the fact that the appellant received lump sum spousal support should have been given little weight as the trial judge did not consider the net worth of each spouse as the Court did in Evetts v. Evetts, 2004 BCCA 297.

Household Income

Perhaps most importantly, the Court of Appeal considered the role of household income in determining child support under s. 9.  Under the Family Law Act and the Guidelines, a natural parent bears the obligation for child support.  Under the Family Law Act, a stepparent is not liable for child support until separated from the natural parent.  However, the purpose of s. 9 is to reduce the difference in standards of living between households.

The Court of Appeal rejected the approach that new partner income should presumptively be considered household income under s. 9 and discussed the policy reasons for doing so (see paras. 59-62).

A new partner’s income is only relevant under s. 9(c) to “to assess whether basic needs can be met and whether disparate standards of living between households can be avoided” (at para. 62).   In this case, the mother’s household income was less than the father’s income.  The payment of the set-off amount did “not create a disparity in living standards” and therefore the set-off amount did not need to be adjusted.

Remaining Discretion – Using section 4 cases where the table amount has been reduced to guide application of section 9

The Court of Appeal agreed that s. 4 cases where the table amount has been reduced can assist in guiding discretion under s. 9.  The Court of Appeal stated:

[70]        In R.A.C., Griffin J. adopted the statement of principles at para. 27 of Archibald v. Archibald, 2007 ABQB 486, when considering the question whether, and if so when, the high income of a payor should justify departure from the set-off under s. 9:

[27]      The leading decision on s. 4 is Francis v. Baker, [1999] 3 S.C.R. 250 where the payor in a sole custody situation had an income of approximately $1 million. Some of the principles from that case which are relevant here are:

1.   High income earners are in a unique economic situation in that expenses which may in other situations be considered unreasonable, may, in a high income situation be reasonable. Therefore, in order to challenge budgets, payors in high income situations must demonstrate that budgeted expenses are so high as to exceed the generous ambit within which reasonable disagreement is possible.

2.   In situations where the table amount is so excessive in comparison to the reasonable needs of the children that support under the table is no longer just child support but a de facto wealth transfer or spousal support, the table amount should be reduced. This is in keeping with s. 26.1(2) of the Divorce Act which dictates that maintenance of children, rather than household equalization or spousal support, is the object of support payments.

3.   Child support payments will often produce an indirect benefit to the custodial parent and the court should not be too quick to find that Guideline figures enter the realm of wealth transfer or spousal support.

4.  An award of discretionary expenses is not unreasonable and may be high in high income situations.

[71]        Applying those principles she saw no reason to depart from the support order generated by set-off of the Guidelines table amounts, a monthly payment of $12,758 from income of $900,000 for the support of two children. In doing so, I am of the view she correctly followed the principles underlying the Court’s analysis in Francis and was right to apply them in a s. 9 case.

Conclusion

The Court of Appeal allowed the appeal and ordered the father to pay monthly child support in the amount of $11,080 from January 1, 2015 onward.

Key takeaways from this case:

1. In a shared custody situation, section 9 must be applied.
2. Spousal support (or at least lump sum spousal support) should only be considered under s. 9(c) if it is being considered as part of a complete net worth analysis of the parties.
3. A parent’s partner’s income can be relevant under s. 9 only “to assess whether basic needs can be met and whether disparate standards of living between households can be avoided” (at para. 62).
4. Section 4 principles, in particular those set out in Francis, can inform the judge’s discretion under s. 9.