The Supreme Court of BC released a lengthy and complicated decision canvassing a variety of issues on August 4, 2015. Shapiro v. Shapiro 2015 BCSC 1361 deals generally with income available for child support and entitlement to spousal support. Justice Butler's offers a rich income analysis, which I will explore in this article, and I intend to comment on his spousal support entitlement analysis in a later article. First off, the case has a lengthy and bizarre procedural history and Justice Butler is clearly unimpressed. The problem is that this three day trial only dealt with child and spousal support. All parenting issues were scheduled for a subsequent ten day trial before a different judge. It is understandable why the parties would set two trials: surely a 13 day trial would not come available for some time. The problem with this approach, as Justice Butler makes clear, is that a trial judge cannot do their job without all the issues before them.
Indeed, Justice Butler refused to make any final orders with respect to child and spousal support, stating: "The suggestion that spousal support is a standalone issue will usually be illusory where children are involved, and no determination has been made as to the division of parenting time and responsibilities." He continues: "Before setting out my analysis of the issues, I will state once again, that the attempt to determine spousal support, child support and parenting issues at two separate trials before different judges should be avoided wherever possible." This is the first lesson to lawyers that this rich case offers. Absent true urgency, it will often be better to set matters down for lengthy trials at far off dates and obtain interim orders/agreements than bifurcate the issues. Failing to do so runs the risk of turning the first bifurcated trial into a de facto chambers application for an interim order. The second lesson to lawyers is how to impute income under unusual circumstances like these. Here, the Claimant was licenced as both a real estate agent and financial analyst and also served as a director and officer of the family business. Despite ostensibly having three jobs, the Claimant worked very little and well short of full-time hours. But he lived quite a luxurious life owing to the success of the family business. His line 150 income was $182,000. Justice Butler's income analysis is lengthy, detailed, and complex. In short, the proper analytical approach is as follows:
- General rule: Section 16 of the Child Support Guidelines establishes that Line 150 "Total income" of the CRA T1 is to be used to established income.
- Exception: Section 18 and 19
- Section 18 applies where the payor is a shareholder, director or officer of a corporation and the court finds that the line 150 income does not fairly reflect all the money available to the payor.
- The Guidelines provide no actual guidance on how arrive at a proper amount, but Justice Butler summarizes the current approach, which seems to be that the court can use section 17 (1), section 17 (2), section 18 (1) (a), section 18 (1) (b), and section 19.
i. Section 17 (1) allows the court to look at the payor's pattern of income over the past three years to determine an amount that is fair and reasonable.
ii. Section 17 (2) allows the court to take into account a non-recurring capital or business investment loss borne by the payor in arriving at a fair and reasonable amount.
iii. Section 18 (1) (a) allows the court to attribute all or part of the corporation's pre-tax income to the payor in determining a fair and reasonable amount.
iv. Section 18 (1) (b) allows the court to attribute an amount commensurate with the services provided by the payor to the corporation as long as the amount does not exceed the corporation's pre-tax income.
v. Section 19 allows the court to impute income under a variety of circumstances, such as where the payor is intentionally unemployed or underemployed; their property is not reasonably being used to generate income; and where the payor has made excessive business deductions.
Section 17 is useful in anomalous circumstances; where the payor has had an extraordinarily profitable or unprofitable year, for instance. Section 18 is useful where the payor is a controlling mind of a corporation and presents a line 150 income that is suspicious under the totality of circumstances. Section 19 is useful in a variety of circumstances united by the common thread of intentional efforts to minimize support obligations. In Shapiro, Justice Butler could not use section 17 because the payor's pattern of income was not anomalous. He instead grappled over use of section 18 (1) (a) and (b). He cited Kowalewich v. Kowalewich, 2001 BCCA 450 which suggests that where the payor wholly controls the corporation, (b) should be used and where the payor is a partial owner, (a) should be used. Subsection (a) was used in this case and the payor's income was imputed at $285,000. Shapiro is a long and somewhat difficult read, but provides useful guidance to family lawyers needing to impute income.