IN THE PROVINCIAL COURT OF BRITISH COLUMBIA

[1]           C.C.A., whom I will refer to as Mr. C., applies to set aside and replace a clause in a separation agreement dated March 14, 2017 so as to reduce the amount of spousal support he is required to pay. The basis for the application is that the parties made a common mistake regarding Mr. C.’s income at the time of the agreement, or alternatively, the agreement was significantly unfair pursuant to s. 164(5) of the Family Law Act.

[2]           A.G.M., whom I will refer to as Ms. G., opposes the application.

[3]           The separation agreement in question is dated March 14, 2017. The essential background facts are set out in the preamble of the agreement, which I will reiterate.

[4]           The parties were married in 2009 and separated in 2016.

[5]           At the time of separation, Ms. G. was 29 years old and employed by a fitness club. She was earning approximately $7,500 per year. Mr. C. was also 29 years old. He was self-employed and ran a company called [omitted for publication]. The agreement stated that he was earning approximately $100,000 per year.

[6]           The parties have no children. There are no joint financial assets.

[7]           The preamble goes on to state as follows:

[8]           Clause 5 of the agreement states:

[9]           Clause 20 says that the agreement is to continue in effect notwithstanding any change of circumstances including but not limited to the circumstances listed in clause 19. The listed circumstances included Mr. C. becoming unemployed or ceasing to be financially self-supporting.

[10]        Also of note is clause 26 of the agreement which states:

[11]        Although clause 26 refers to paragraph 70, there is no such paragraph in the agreement.

[12]        Clause 33 of the agreement states that Mr. C. has “come to the conclusion that the terms of this Agreement reflect an equitable sharing of the economic consequences of the relationship and its breakdown…”

[13]        Mr. C. asks to set aside clause 5 of the agreement and replace it with a requirement to pay spousal support of $560 a month until September 1, 2021. No issue was taken with Ms. G.’s entitlement to support. Mr. C. says he was mistaken that he was able to earn $100,000 per annum income, which was the basis for the $2,000 a month support payment amount.

[14]        Mr. C. came to Canada in 2009 on a work permit. His background at that time was as a carpenter. His first work in Canada was for a general contractor earning $22 an hour or about $38,000 per annum. When that job ended he obtained other work that paid about $40,000 per annum. In 2011, Mr. C. and a friend went to Fort McMurray, Alberta to seek work. In August 2011 he found employment with a company called [omitted for publication], where he was paid $35 an hour. He returned to Vancouver in late 2011 and started a new job. He returned to [omitted for publication] in February 2012 and worked for them until June 2014.

[15]        Mr. C.’s 2012 T4 from [omitted for publication] showed income of $60,724.77.

[16]        While still working at [omitted for publication], Mr. C. formed his own construction company, [omitted for publication]. [omitted for publication] did not start operating until June 2014 when the [omitted for publication] work ended.

[17]        [omitted for publication] initially operated in Fort McMurray. In 2014, Mr. C. was the only employee. Work was obtained through the company. Mr. C. did not draw a salary and was instead paid through dividends. He said he was paid $30,000 to $40,000 in dividends in the first year. Excess funds of $25,000 were kept in the company.

[18]        Mr. C. further testified that [omitted for publication] would enter into contracts for the supply of workers, and that a second company called [omitted for publication] would pay those workers. The funds used to pay the workers were transferred by [omitted for publication] to [omitted for publication]. I was not told when this corporate structure was started.

[19]        Mr. C. returned to British Columbia. In June 2016, [omitted for publication] secured a contract to supply workers for a large construction project in Richmond, British Columbia. The contract was first with a subcontractor and then later it was directly with the general contractor.

[20]        The Richmond project was completed in February 2017. In March 2017, the separation agreement was executed.

[21]        During the course of the project, Mr. C. realized that due to his inexperience in operating a business he failed to provide for various costs such as WCB and GST remittances. As a result, significant tax liabilities were incurred.

[22]        Mr. C. chose to only provide me with select financial records. Additional records were disclosed to Ms. G. I asked her if she reviewed them and whether she wished to put any of the other records into evidence. Ms. G. confirmed that she did examine the records and did not wish to enter any of them into evidence. As such I can rely only on the records placed into evidence by Mr. C.

[23]        Mr. C.’s personal tax information is summarized as follows:

[24]        Mr. C.’s Financial Statement filed June 21, 2018 attached a 2017 T4 slip issued by [omitted for publication] showing employment income of $48,000.

[25]        The same Financial Statement filed June 21, 2018 listed current income as $56,500, derived from employment income of $13,900 and taxable dividends of $42,600.

[26]        An updated Financial Statement filed May 17, 2019 listed income as $60,320. The only personal debt listed was a credit card debt of $5,100.

[27]        Mr. C. said he owed on a bank line of credit $75,000 and a further $200,000 to friends and other investors. No documents were provided to substantiate this and these items were not listed in the Financial Statement. These may have actually been corporate debts.

[28]        There is a discrepancy between Mr. C.’s 2015 Notice of Reassessment, which stated his income to be $12,596, and Mr. C.’s evidence that he received a salary in 2015 of $31,607.

[29]        The financial statements for [omitted for publication] can be summarized as follows:

[30]        Mr. C.’s 2016 Notice of Reassessment showed his income as $82,500 whereas Mr. C. testified that he received from [omitted for publication] total payments of $80,000. It is possible Mr. C. was not using precise language in his testimony.

[31]        The amount of retained earnings in [omitted for publication] steadily increased from $52,068 in 2015 to $495,641 in 2018.

[32]        The financial statements for [omitted for publication] can be summarized as follows:

[33]        Further evidence was submitted regarding corporate tax liabilities.

[34]        A Notice of Assessment dated April 3, 2018 issued to [omitted for publication] by the Canada Revenue Agency for the period April 1, 2017 to June 30, 2017 showed unpaid GST of $34,751.53.

[35]        A Requirement to Pay issued by the Canada Revenue Agency [omitted for publication] on April 5, 2018 sought payment of $42,485.27.

[36]        A Notice of Assessment dated April 17, 2018 issued to [omitted for publication] for the period January 1 to December 31, 2017 showed taxes owed of $62,089.60.

[37]        A Notice of Arrears issued by Canada Revenue Agency to [omitted for publication] on May 8, 2018 stated that taxes owed were $33,719.77.

[38]        A Canada Revenue Agency Account Balance statement for [omitted for publication] showed that as of June 5, 2019, the amount owed was $41,922.39.

[39]        Mr. C. said that between the two companies, total taxes owed were approximately $180,000, although the documents placed into evidence suggest an amount of about $84,500.

[40]        Mr. C. testified that a resolution was reached with the Canada Revenue Agency whereby [omitted for publication] would pay $5,000 a month starting sometime in 2018 towards the tax liabilities. As part of this settlement, there would be no personal liability against Mr. C. for unpaid GST, which had amounted to $42,583.16 as of April 2018.

[41]        Mr. C. said that since 2017, he has been seeking new clients but is living paycheque to paycheque. In one instance, he secured a contract in Kelowna but was unable to complete it, causing [omitted for publication] to withdraw from the job.

[42]        Mr. C. gave evidence of unpaid accounts owing to [omitted for publication]. A judgment against one company for $14,926.95 remains unpaid. Another company that owed [omitted for publication] $60,438 went bankrupt. A summary provided by Mr. C. shows that as of June 6, 2019 the invoices owed to [omitted for publication] totalled $464,912.19, although $310,317.86 of this has only been due 30 days or less. Four of the amounts listed as owing totalled $49,202.60 were described as bad debts.

[43]        Because of the delay in having invoices paid, Mr. C. said that a cash reserve must be kept to pay for ongoing costs such as wages and operating expenses. I was not told of the proper amount for a cash reserve. It stands to reason that the amount will fluctuate depending on how many workers are currently employed and what work is being undertaken.

[44]        Mr. C. also provided a summary of unpaid bills owed by [omitted for publication]. The summary includes some items that are not yet due. The total amount of the bills is $241,054.69. Under a description “Open Balance” is the amount $227,697.17. I was not told what “Open Balance” refers to.

[45]        Mr. C. also described personal lifestyle changes. He had to move to Richmond and then Langley in an effort to reduce his living costs. The office for [omitted for publication] has now moved to his home. He uses his garage for storage for the business.

[46]        As I set out previously, clause 26 of the separation agreement states:

[47]        Both parties have agreed they will accept this court as having jurisdiction in this matter. Notwithstanding this, I will address whether clause 26 of the agreement prevents this court from hearing applications regarding the agreement.

[48]        Section 193 of the Family Law Act sets out the jurisdiction of the Provincial Court as follows:

[49]        There are few court cases that deal directly with the question of whether parties to a separation agreement can prevent the Provincial Court from having jurisdiction over the agreement.

[50]        The decision Ball v. Carpentier, 2014 BCPC 319 was a Small Claims court action to enforce a provision of a separation agreement requiring the husband to pay the wife $20,000 to purchase her share of a condominium. The separation agreement contained a clause stating that the Supreme Court of BC had exclusive jurisdiction over the agreement. The decision reads in part:

[51]        The decision G.B. v. D.B., 2019 BCPC 69 (CanLII) involved an application to the Provincial Court to have only the Supreme Court deal with support issues. The application was refused, and it was noted that this court had already made a number of support orders. This decision is distinguishable because it did not involve a separation agreement purporting to give the Supreme Court exclusive jurisdiction.

[52]        There are numerous cases recognizing the validity of exclusive jurisdiction clauses in agreements made in a commercial setting. An example of such a case is the decision in Pirrana Small Car Centres Ltd. v. Rumm, 1981 CanLII 635 (BC SC). Such clauses have also been enforced in a labour relations setting: see for instance the discussion in Viterra Inc. v Grain Workers' Union, Local 333, 2018 BCSC 787 (CanLII). These cases are distinguishable since the matter before me involves a Family Law Act proceeding.

[53]        The decision Ward v. Ward, 2002 BCSC 252 dealt with a separation agreement that sought to give the Supreme Court the jurisdiction to vary the agreement. At the time, the governing legislation was the Family Relations Act which only gave the jurisdiction to vary an agreement to the Provincial Court. The court stated at paragraph 10:

[54]        The decision Re McKittrick, 1926 CanLII 408 (ON CA) also stands for the proposition that consent cannot give a court jurisdiction. This case was cited with approval in British Columbia in the decision Nelson v. Rouilles, 1998 CanLII 4970 (BC SC), where Mr. Justice Romilly stated:

[55]        The caselaw is clear that parties cannot by consent confer jurisdiction upon a court. In my view, the converse is also true and parties cannot by consent remove jurisdiction granted to this court by the Family Law Act.

[56]        The Family Law Act provides that this court has jurisdiction in all matters under the Act subject only to the Divorce Act and the exceptions listed at s. 193(2) of the Family Law Act. There is no provision in the Family Law Act allowing the parties to contract out of the jurisdiction of the Provincial Court.

[57]        Furthermore, any agreement to deprive this court of jurisdiction granted to it by legislation would be contrary to s. 2(3) of the Provincial Court Act, which states:

[58]        I conclude that notwithstanding any agreement that the Supreme Court has exclusive jurisdiction over the separation agreement, the Provincial Court is still entitled to exercise such jurisdiction as granted to it by legislation.

[59]        I distinguish the decision in Ball v. Carpentier on the basis that the case dealt with compensation in relation to a property division, which would clearly be in the jurisdiction of the Supreme Court pursuant to s. 193(2).

[60]        Given my conclusion, I am satisfied that I have the jurisdiction to deal with this application notwithstanding clause 26 of the separation agreement.

[61]        Mr. C. argues that the term of the separation agreement setting the amount of spousal support was based on a common mistake that his earnings would be $100,000 per annum. The $100,000 income was an amount estimated by Mr. C. Ms. G. said she simply accepted Mr. C.’s estimate of income. Both parties were thus proceeding on the assumption that Mr. C.’s income would be $100,000 per annum.

[62]        The decision Hannigan v Hannigan, 2007 BCCA 365 discussed the law of mistake at paragraph 63:

[63] A useful discussion of the law of mistake is found in the decision of Chief Justice Fraser, speaking for the court, in Ron Ghitter Property Consultants Ltd. v. Beaver Lumber Co. (2003), 2003 ABCA 221 (CanLII), 17 Alta. L.R. (4th) 243 (Mr. C.) at paras. 12–13:

[64]        Preamble E of the agreement makes clear that the agreement was based upon Mr. C. earning approximately $100,000 a year. This assumption was shared by the parties.

[65]        Because Mr. C. is self-employed and can control how or when he is paid, the determination of his income is not simple. He estimates his current income at about $60,000. The evidence does satisfy me that the corporate income of [omitted for publication] is less than what it was believed to be when the separation agreement was executed. The tax liabilities are significant and had those liabilities been paid when originally due, the available income would have been reduced.

[66]        Of concern is that the retained earnings have increased over time from $52,068 in 2015 to $495,641 in 2018. I am mindful though that there are current tax liabilities of about $84,500 based on the documentary evidence or $180,000 based on Mr. C.’s evidence. There are unpaid invoices of about $230,000 to $240,000. I also accept that [omitted for publication] must maintain a cash reserve to cover ongoing operating costs.

[67]        After ignoring those items described as “bad debts”, there are about $415,000 in accounts receivables payable to [omitted for publication].

[68]        A court is entitled to consider corporate pre-tax income when determining spousal support: see Aelbers v. Aelbers, 2010 BCSC 1574 at para. 11.

[69]        Given the evidence of the corporate liabilities that were unknown to Mr. C. at the time the separation agreement was signed, I am satisfied that the income available to him to pay spousal support was not $100,000 as estimated. However, I am not prepared to accept his estimated income as $60,000 given that the retained earnings have increased so significantly and there are still significant accounts receivables payable to the company. I have concluded that I will impute to Mr. C. income at $80,000.

[70]        Even at an income level of $80,000, the difference between the estimate of $100,000 and $80,000 remains considerable. I find that the parties did make a common mistake about the level of Mr. C.’s income and that this was a fundamental error allowing the court to set aside and replace the spousal support provision of the agreement: see Brandt v Brandt, 1998 CanLII 4297 (BC SC), [1998] B.C.J. No. 448 at paras. 39 to 41.

[71]        Given my finding of a common mistake, I need not consider whether the separation agreement was significantly unfair to Mr. C. The unexpected assessment of the taxes though would be a change of circumstances as referred to at s. 164(5)(b) and a basis to set aside or replace the agreement.

[72]        There is no issue regarding entitlement to support. What is left to be determined is the amount and duration of support.

[73]        At present Ms. G. estimates her income to be between $2,800 and $3,000 a month. Using a mid-range of $2,900, her annual income is $34,800. This is significantly better than the income she was earning at the time of separation.

[74]        Mr. C. paid spousal support of $2,000 a month until May 2018 when he paid $650 a month for two months. Since July 2018, he has paid $560 a month toward his spousal support obligation. He proposes to pay spousal support of $560 a month until September 1, 2021 based on an income of $60,000.

[75]        This court receives guidance about the amount and duration of spousal support payable by way of reference to the Spousal Support Advisory Guidelines. The decision H.S.S. v. S.H.D., 2018 BCCA 199 states that clear reasons are required if an award of spousal support departs from the range set out in the Guidelines. In the decision T.K.M. v. D.C.C., 2017 BCPC 193, this court stated at paragraph 27:

[76]        I have considered that the amount of spousal support that should have been paid based on Mr. C. earning an income of $80,000 and Ms. G. earning an income of $7,500, which is the amount referred to in the separation agreement. Using the Spousal Support Advisory Guidelines as calculated by way of the DivorceMate software program, the range for spousal support using the “Without Child Support” formula, is from a low of $634 to a high of $846 for a duration of 3.5 to 7 years.

[77]        Based on Mr. C. earning an income of $80,000 and considering Ms. G.’s current income of $34,800, the Spousal Support Advisory Guidelines provide a range for spousal support from a low of $396 to a high of $527 for a duration of 3.5 to 7 years. Mr. C.’s proposal to pay $560 a month thus exceeds the highest monthly amount set out in the Guidelines.

[78]        Mr. C.’s payment of $2,000 a month from September 1, 2016 to April 1, 2018 was well in excess of the suggested spousal support amount. He then paid $650 a month for May 1 and June 1, 2018, which is at the low end of the range based on Ms. G.’s income of $7,500. It is still above the suggested range when Ms. G.’s income is set at $34,800.

[79]        Starting July 1, 2018, Mr. C. has been paying $560 a month, which is higher than the range based on Ms. G.’s current income of $34,800.

[80]        I have considered the excess payments of support by Mr. C. and that he is also not seeking any repayment of the excess amounts. Given the circumstances, I will set the amount of support payable to coincide with the amounts actually paid. The amount of ongoing support will be fixed at $560 a month.

[81]        As for how long support should be paid, the mid point in the range suggested by the Spousal Support Advisory Guidelines is not a default choice. Many factors come into play in determining the appropriate duration of the spousal support, including the strength of any compensatory claim, the recipient’s needs, the needs and ability to pay of the payor, work incentives for the payor, property division and debts, and self-sufficiency incentives.

[82]        Ms. G. testified that during the marriage she remained home and attended to household matters so that Mr. C. could focus on work. Ms. G. had some minor involvement in trying to operate the business but did not really have any knowledge or experience to contribute to it. Although the separation agreement provided that Ms. G. was waiving any entitlement to a share in the business, at the time of separation the business was only of limited value.

[83]        Ms. G. testified about having emotional or panic attacks and depression after the separation, including one suicide attempt, but there was no medical evidence that this was due to the separation.

[84]        Since the separation, Ms. G. has taken steps to become self-sufficient. She is holding down two jobs, one of which involves product demonstrations and has the potential for more pay.

[85]        Spousal support has been paid since September 1, 2016.

[86]        Furthermore, the parties did reach an agreement that payment of spousal support for a period of five years was appropriate.

[87]        Given all the factors set out above I conclude that a term of five years is appropriate starting from the date of separation.

[88]        Spousal support of $560 a month will continue up to and including August 1, 2021. The support obligation as set out in the separation agreement was for five years and accordingly the last payment is actually due August 1, 2021 with no support payable September 1, 2021 and thereafter.

[89]        I order as follows:

[90]        I direct counsel for Mr. C. to draft the order for filing with the registry. Pursuant to Provincial Court (Family) Rule 18(4), the applicant is not required to sign the order and so there is no need to dispense with any requirement for her signature on the form of the order.

[91]        I am no longer seized of this file.