“The controversy in the case law surrounds whether, in the case of a payor who is a shareholder, director or officer of a corporation and where the court is of the opinion that the payor’s line 150 income does not fairly reflect all the money available to the payor for the payment of support, the court is restricted to including in a payor’s annual income pre-tax corporate income from onlythe most recent taxation year. Relying on Bear v. Thompson, a decision of the Saskatchewan Court of Appeal, the husband supports this position. I would adopt a different approach.
In Bear v. Thompson, the Saskatchewan Court of Appeal conducted an extensive review of the case law relating to the proper interpretation of ss. 17 and 18 of the Guidelines and also considered the interpretation of those provisions having regard to the modern rule of statutory interpretation.
The court concluded that s. 17 is a stand-alone provision directed at allowing the court to consider the payor’s line 150 income over the last three years and to determine an amount that is fair and reasonable in light of any pattern of, or fluctuation in such income during that period or receipt of a non-recurring amount. The court found that s. 17 does not permit including pre-tax corporate income as a source of funds in making this assessment. Further, while s. 18 permits considering corporate income over the last three years to determine the amount of any pre-tax corporate income that should be added to a payor’s line 150 income, it does not permit adding to line 150 income amounts of pre-tax corporate income that exceed the corporation’s income for the most recent taxation year.
I agree that the modern rule of statutory interpretation should be used to interpret the Guidelines. Nonetheless, I would not adopt this restrictive interpretation of ss. 17 and 18. In my view, a review of the Guidelines as a whole compels a different conclusion.
In particular, as I read the Guidelines, s. 17 does not restrict a court to considering line 150 income over the last three years; rather a court may also consider amounts of pre-tax corporate income included in a spouse’s income under s. 18 for each of the last three years.
The purpose of ss. 15 to 20 is to arrive at a number that fairly and fully reflects the payor’s income. The default is that this number will simply be determined using line 150 income. Where, however, the court determines that this default determination would be unfair, the Guidelines permit an expanded view of income.
In my view, the scheme of these provisions is that s. 18 permits a court to take an annual snapshot of a spouse’s income – and include in it pre-tax corporate income from the most recent taxation year. If the corporation suffered a loss in the most recent taxation year, no amount of pre-tax corporate income may be included. Under s. 17 however, the court may determine an amount that is fair and reasonable having regard to the spouse’s income over the last three years in light of, among other things, any pattern of, or fluctuations in, income over the three-year period. And “income” for that purpose may include amounts of pre-tax corporate income added to line 150 income under s. 18 for each of those years.
As I see it, it would make little sense to permit consideration of a spouse’s income over the three-year period without permitting consideration of the spouse’s access to pre-tax corporate income in each year of the three-year period. This is particularly the case where, as here, the payor spouse now wholly owns the corporation (which was formerly owned by him and the wife). Otherwise, the exercise of considering a pattern of, or fluctuations in, income would be artificial.
Further, this interpretation, is consistent with the language of s. 17:
- (1) If the court is of the opinion that the determination of a … spouse’s annual income under section 16 would not be the fairest determination of that income, the court mayhave regard to the … spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years. [Emphasis added.]
Had it been the legislature’s intention to restrict the three-year review of the spouse’s income to line 150 income, the legislature could easily have said the court may have regard to the spouse’s annual income over the last three years as determined under s. 16. But instead of using that or similar language, s. 17 refers to the “spouse’s income over the last three years.” “Income” in this context is not restricted to the spouse’s annual income as determined under s. 16; it can fairly be read as meaning the payor’s annual income as defined under s. 15 – meaning the payor’s income as determined in accordance with ss. 16 to 20.
In addition, interpreting the sections in this way avoids any incentive to manipulate corporate income leading up to a trial or the inevitability of a variation in the event of an unusual year.
This approach is also consistent with the fundamental object of the Guidelines, which is to ensure fairness to both spouses, and to their children, in determining what amount of money is in fact reasonably available for the payment of support.”