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Child Support - The Divorce Act

June 23, 2021

Ontario

,

Canada

Issue

What is the test on a motion brought by a payor parent under s. 17(1) of the Divorce Act to vary and retroactively reduce a child support order?

Conclusion

In Colucci v. Colucci, the Supreme Court of Canada recently articulated the principles and framework applicable to when a payor brings an application under s. 17 of the Divorce Act for a retroactive decrease in child support. Martin J. noted that, since child support under the Divorce Act is tied to payor income and income tends to fluctuate, a child support order or agreement reflects a snapshot in time and is never final. Section 17 of the Divorce Act is one of the various mechanisms that exist to periodically change child support orders to bring them in line with financial realities. Section 17 provides that, on application, a court “may make an order varying, rescinding or suspending, retroactively or prospectively, a support order or any provision of one”. Section 17 confers wide judicial discretion. (Colucci v. Colucci; Divorce Act)

Where the payor applies under s. 17 of the Divorce Act to retroactively decrease child support, the following analysis applies:

(1) The payor must meet the threshold of establishing a past material change in circumstances. The onus is on the payor to show a material decrease in income that has some degree of continuity, and that is real and not one of choice.

(2) Once a material change in circumstances is established, a presumption arises in favour of retroactively decreasing child support to the date the payor gave the recipient effective notice, up to three years before formal notice of the application to vary. In the decrease context, effective notice requires clear communication of the change in circumstances accompanied by the disclosure of any available documentation necessary to substantiate the change and allow the recipient parent to meaningfully assess the situation.

(3) Where no effective notice is given by the payor parent, child support should generally be varied back to the date of formal notice, or a later date where the payor has delayed making complete disclosure in the course of the proceedings.

(4) The court retains discretion to depart from the presumptive date of retroactivity where the result would otherwise be unfair. The D.B.S. factors (adapted to the decrease context) guide this exercise of discretion. Those factors are: (i) whether the payor had an understandable reason for the delay in seeking a decrease; (ii) the payor’s conduct; (iii) the child’s circumstances; and (iv) hardship to the payor if support is not decreased (viewed in context of hardship to the child and recipient if support is decreased). The payor’s efforts to pay what they can and to communicate and disclose income information on an ongoing basis will often be a key consideration under the factor of payor conduct.

(5) Finally, once the court has determined that support should be retroactively decreased to a particular date, the decrease must be quantified. The proper amount of support for each year since the date of retroactivity must be calculated in accordance with the Guidelines. (Colucci v. Colucci)

In Colucci v. Colucci, the payor father did not make any voluntary payments towards his child support obligations for over 16 years and owed approximately $170,000 in arrears. The child support obligations were set at $115 per week per child (indexed) in a 1996 Divorce Order. In April. 1998 the payor contacted the recipient to request a reduction in his child support obligations on the basis of a decrease in his income. No agreement was made at the time. From 1998 to 2012, the period during which the arrears accrued, the payor was absent from the children's lives and his whereabouts were unknown to the mother and the children. The payor commenced a motion to change in November 2016, seeking orders retroactively varying child support to the date that the Federal Child Support Guidelines came into force. The payor provided little documentation or financial disclosure to support these claims. He relied largely on unsubstantiated assertions in his affidavit about where he worked and how much he was paid, making it extremely difficult to accurately determine his income for the relevant years. On application by the payor, the motion judge retroactively decreased support, effectively reducing the arrears owing to $41,642. The Court of Appeal for Ontario overturned that decision and ordered him to pay the full amount of the arrears. Martin J. dismissed the appeal on the grounds that the payor's failure to adduce adequate evidence of his income since 2000 and his failure to show any actions on his part that constituted effective notice are fatal to his application.

Colucci v. Colucci has been considered in two applications to retroactively reduce child support: Stark v Tweedale and Shih v Shih.

In Stark v Tweedale, the parties were married for 16 years, and there was an interim consent order requiring the payor to pay $3,028 per month in child support based on the payor's income of $169,000. The payor was subsequently convicted of 12 charges of criminal assault and assault causing bodily harm against the recipient and the two oldest children. As a result of his convictions, the payor lost his employment as a lawyer and became a non-practising member of the Law Society. The payor was sentenced to 18 months imprisonment. After his sentencing, the payor applied to court to reduce his monthly support obligations, and his child support obligations were reduced to $1,422 per month based on an imputed income of $70,000. The payor brought another application under s. 17 of the Divorce Act to further reduce his child support obligations. Baker J. found that the payor had not met the threshold of establishing that there had been a material change in circumstances. There was no material change in circumstances because the payor's incarceration and inability to practice law were known to the court at the time the order was made. Baker J. dismissed the application.

In Shih v Shih, the parties were married for 8 years and were under a shared parenting regime. As a result of the shared parenting regime, the father paid child support in the sum of, after set-off, $1,643 per month for the two children based on an imputed income of $232,700. Since that order was made, one child of the marriage began to live exclusively with the father. Forth J. found that the child's change in residence was a material change in circumstances. After considering the appropriate income to impute to the mother and father, Forth J. calculated the set-off child support amounts that would have been paid considering the parties' current imputed incomes and one of the child's new residences. On a go-forward basis, the father had an obligation to pay child support of $348 monthly. Based on the retroactive award, the father had overpaid child support in the amount of $5,693. Forth J. found that it would not be grossly unfair to order the mother to repay the $5,693 because the mother was aware of the change in the child's residence and the father requested that child support be changed in August 2020.

Law

Pursuant to section 17(1)(a) of the Divorce Act, RSC 1985, c 3 (2nd Supp), a court of competent jurisdiction can make an order varying, rescinding or suspending, retroactively or prospectively a support order on application by either or both former spouses:

17 (1) A court of competent jurisdiction may make an order varying, rescinding or suspending, retroactively or prospectively,(a) a support order or any provision of one, on application by either or both former spouses;

Section 1 of the Federal Child Support Guidelines, SOR/97-175 sets out four overarching objectives that must be borne in mind in any child support proceeding which the Federal Child Support Guidelines apply, as follows:

1 The objectives of these Guidelines are

(a) to establish a fair standard of support for children that ensures that they continue to benefit from the financial means of both spouses after separation;
(b) to reduce conflict and tension between spouses by making the calculation of child support orders more objective;
(c) to improve the efficiency of the legal process by giving courts and spouses guidance in setting the levels of child support orders and encouraging settlement; and
(d) to ensure consistent treatment of spouses and children who are in similar circumstances.

in Colucci v. Colucci, 2021 SCC 24 (CanLII), the Supreme Court of Canada recently articulated the principles and framework applicable to when a payor brings an application under s. 17 of the Divorce Act for a retroactive decrease in child support. Martin J. noted that, since child support under the Divorce Act is tied to payor income and income tends to fluctuate, a child support order or agreement reflects a snapshot in time and is never final. Section 17 of the Divorce Act is one of the various mechanisms that exist to periodically change child support orders to bring them in line with financial realities. Section 17 provides that, on application, a court “may make an order varying, rescinding or suspending, retroactively or prospectively, a support order or any provision of one”. Section 17 confers wide judicial discretion:

[28] While children should be shielded from the economic consequences of divorce to the fullest extent possible, the federal child support regime contemplates that the family as a whole — including the child — will share the rising and falling fortunes of the payor parent, just as they would have before the separation. Because child support under the Divorce Act is tied to payor income and income tends to fluctuate, a child support order or agreement reflects a snapshot in time and is never final (D.B.S., at para. 64; D.B.S. v. S.R.G., 2005 ABCA 2, 361 A.R. 60 (“D.B.S. (C.A.)”), at para. 100; Brear v. Brear, 2019 ABCA 419, 97 Alta. L.R. (6th) 1, at para. 20, per Pentelechuk J.A.). Various legal, administrative and consent-based mechanisms exist to periodically change child support orders to bring them in line with financial realities.

[29] Section 17 of the Divorce Act is one such mechanism. It provides that, on application, a court “may make an order varying, rescinding or suspending, retroactively or prospectively, a support order or any provision of one” (s. 17(1)(a)). As the wording indicates, s. 17 confers wide discretion on the judge, who “may” — but is not required to — vary, rescind, or suspend an order into the future, the past, or both. The Divorce Act expressly confers such broad powers because wide judicial discretion is necessary to respond to the multiplicity of factual situations produced by human behaviour.

Martin J. considered the decision in D.B.S. v. S.R.G. and subsequent jurisprudence. Martin J. noted that, in D.B.S. v. S.R.G., Justice Bastarache set out four factors to guide the courts' discretion when determining whether a retroactive increase in child support award should be granted: (a) the recipient’s delay in seeking retroactive support; (b) the payor’s conduct; (c) the child’s circumstances; and (d) hardship entailed by a retroactive award. If a retroactive increase in child support is appropriate, the award should extend back to the date of "effective notice". Justice Bastarache set out a presumption that retroactive awards should generally extend no further than three years before the date of formal notice. However, Justice Bastarcahse also created a significant caveat to the general presumption: the date of the payor's increase in income may sometimes be a more appropriate date of retroactivity, particularly where the payor engages in "blameworthy conduct", such as failing to disclose material increases in income:

[38] The majority in D.B.S. found that a retroactive increase in support will not always be appropriate (para. 95). The court must exercise its discretion to determine whether a retroactive award should be given at all, and how far back it should extend. Justice Bastarache set out four factors to guide the courts’ discretion: (a) the recipient’s delay in seeking retroactive support; (b) the payor’s conduct; (c) the child’s circumstances; and (d) hardship entailed by a retroactive award. These factors were recently considered by this Court in Michel v. Graydon, 2020 SCC 24 (para. 29, per Brown J.; paras. 111-26, per Martin J.).

[39] Where a retroactive increase in child support is appropriate, the majority in D.B.S. suggested that the date of retroactivity should generally be the date of “effective notice” (para. 118). “Effective notice” in this context was said to simply require the recipient to “broac[h]” the subject of an increase in child support (para. 121). The majority of the Court noted, however, that recipients should be encouraged to move discussions forward after giving effective notice. To that end, the majority concluded that retroactive awards should generally extend no further than three years before the date of formal notice. This is known as the “three-year rule”, although it is a presumption only.

[40] In a significant caveat to these general rules, Justice Bastarache added that the date of the payor’s increase in income may sometimes be a more appropriate date of retroactivity, particularly where the payor engages in “blameworthy conduct” (para. 124). Such conduct includes the payor’s failure to disclose material increases in income. At para. 124, Bastarache J. said:
Not disclosing a material change in circumstances — including an increase in income that one would expect to alter the amount of child support payable — is itself blameworthy conduct. The presence of such blameworthy conduct will move the presumptive date of retroactivity back to the time when circumstances changed materially. A payor parent cannot use his/her informational advantage to justify his/her deficient child support payments.

[41] Since D.B.S., various courts have accepted and acted upon the principle that failing to disclose an increase in income is blameworthy conduct justifying variation to the date of the change (C. (M.) v. O. (J.), 2017 NBCA 15, 93 R.F.L. (7th) 59, at para. 37; Goulding v. Keck, 2014 ABCA 138, 42 R.F.L. (7th) 259, at para. 44; Brear, at para. 74, per Pentelechuk J.A.; Burchill v. Roberts, 2013 BCCA 39, 41 B.C.L.R. (5th) 217, at paras. 29-30; Greene v. Greene, 2010 BCCA 595, 12 B.C.L.R. (5th) 330, at para. 73; Carlaw v. Carlaw, 2009 NSSC 428, 299 N.S.R. (2d) 1, at paras. 23-25; Damphouse v. Damphouse, 2020 ABQB 101, at para. 72 (CanLII)). “Blameworthy conduct”, as that concept has developed in the cases, does not simply extend to the most egregious cases of deception or intentional evasion, like this case. It may also extend to cases of mere passivity and “taking the path of least resistance” (Burchill, at para. 30).

[42] Most recently, in Michel, my colleague Brown J. (speaking for the Court on this point) confirmed that “the date of effective notice is not relevant when a payor parent has engaged in blameworthy conduct (irrespective of the degree of blameworthiness)”, including failure to disclose material information (para. 36; see also para. 33). Payor parents are “subject to a duty of full and honest disclosure” (para. 33). Where the payor fails to comply with this duty and leaves the recipient unaware of increases in income, a retroactive award “will commonly be appropriate” because non-disclosure “eliminates any need to protect [the payor’s] interest in the certainty of his [or her] child support obligations” (paras. 32 and 34).

[43] In practice, then, the date of retroactivity is frequently adjusted to align with the date of the material increase in income, despite the “general rule” of varying to the date of effective notice in D.B.S. (para. 118). It would be “untenable to suggest that a parent who fails to provide financial disclosure can assume that the amount being provided is adequate because the recipient parent has not brought a court application” (Brear, at para. 74, per Pentelechuk J.A.). Further, even where the payor has disclosed increases in income, the D.B.S. factors may support extending a retroactive increase of support back to the time of the change in income.

[44] In settling on the date of effective notice as the “general rule”, D.B.S. represented a kind of compromise between the pre-Guidelines world — with its payor-focused concepts of laches and hoarding — and the child-centered era of the Guidelines. In the pre-Guidelines era, notice was considered important because it was viewed as unfair to surprise payors with a retroactive award when they could not know the extent of their child support obligation until it was determined by the court (D.B.S. (C.A.), at para. 79). After the Guidelines became law, parents knew about the existence and extent of their obligations, but courts continued to show reluctance to grant retroactive awards and pre-Guidelines concepts like notice and laches retained some influence. This background helps explain the majority’s wariness in D.B.S. about changing the rules for payors mid-stream. Since D.B.S., however, expectations of and for payors have evolved. The Guidelines and s. 17 of the Divorce Act are clear and D.B.S. itself gave notice to payor parents that they must pay more support as income rises and that this obligation may be enforced after the fact.

[45] In light of the existing approach to blameworthy conduct and the pervasiveness of non-disclosure, it may be necessary in a future case to revisit the presumptive date of retroactivity in cases where the recipient seeks a retroactive variation to reflect increases in the payor’s income. A presumption in favour of varying support to the date of the increase would better reflect the recipient’s informational disadvantage and remove any incentive for payors to withhold disclosure or underpay support in the hopes that the status quo will be maintained. Such a presumption would accord with other core principles of child support and reinforce that payors share the burden of ensuring the child receives the appropriate amount of support.

Martin J. also noted that the jurisprudence that has developed under the Federal Child Support Guidelines and D.B.S. v. S.R.G demonstrate how fundamental adequate, accurate and timely financial disclosure is to the child support system. The payor's duty to disclose information is a corollary of the legal obligation to pay support commensurate with income:

[48] After applying the Guidelines and D.B.S. for many years, it has become clear just how much the child support system, including s. 17 variations, depends upon adequate, accurate and timely financial disclosure. The centrality of disclosure in child support matters has been recognized in a rich body of jurisprudence both before and after D.B.S. (see, e.g., Shamli v. Shamli, 2004 CanLII 45956 (Ont. S.C.J.), at para. 8; Hietanen v. Hietanen, 2004 BCSC 306, 7 R.F.L. (6th) 67, at para. 11; Gray, at para. 63; M.K.R. v. J.A.R., 2015 NBCA 73, 443 N.B.R. (2d) 313, at paras. 14 and 20; Francis v. Terry, 2004 NSCA 118, 227 N.S.R. (2d) 99, at para. 9; Goulding, at para. 44). Simply stated, disclosure is the linchpin on which fair child support depends and the relevant legal tests must encourage the timely provision of necessary information.

[49] The pivotal role of disclosure comes as no surprise since the premise underlying the Guidelines “is that the support obligation itself should fluctuate with the payor parent’s income” (D.B.S., at para. 45). The structure of the Guidelines thus creates an informational asymmetry between the parties. In a system that ties support to payor income, it is the payor who knows and controls the information needed to calculate the appropriate amount of support. The recipient does not have access to this information, except to the extent that the payor chooses or is made to share it. It would thus be illogical, unfair and contrary to the child’s best interests to make the recipient solely responsible for policing the payor’s ongoing compliance with their support obligation.

[50] This is why frank disclosure of income information by the payor lies at the foundation of the child support regime. In Roberts v. Roberts, 2015 ONCA 450, 65 R.F.L. (7th) 6, the Court of Appeal described the duty to disclose financial information as “[t]he most basic obligation in family law” (para. 11). A payor’s failure to make timely, proactive and full disclosure undermines the policies underlying the family law regime and “the processes that have been carefully designed to achieve those policy goals” (Leitch v. Novac, 2020 ONCA 257, 150 O.R. (3d) 587, at para. 44). Without proper disclosure, the system simply cannot function and the objective of establishing a fair standard of support for children that ensures they benefit from the means of both parents will be out of reach (Michel, at para. 32, per Brown J.; Brear, at para. 19, per Pentelechuk J.A.).

[51] Full and frank disclosure is also a precondition to good faith negotiation. Without it, the parties cannot stand on the equal footing required to make informed decisions and resolve child support disputes outside of court. Promoting proactive payor disclosure thus advances the objectives — found in s. 1 of the Guidelines — of reducing conflict between the parties and encouraging settlement.

[52] In line with these realities, courts have increasingly recognized that the payor’s duty to disclose income information is a corollary of the legal obligation to pay support commensurate with income (Brear, at paras. 19 and 69, per Pentelechuk J.A.; Roseberry v. Roseberry, 2015 ABQB 75, 13 Alta. L.R. (6th) 215, at para. 63; Cunningham v. Seveny, 2017 ABCA 4, 88 R.F.L. (7th) 1, at paras. 21 and 26). As explained by Brown J., speaking for the full Court in Michel, payor parents “are subject to a duty of full and honest disclosure — a duty comparable to that arising in matrimonial negotiations” (para. 33, referencing Rick v. Brandsema, 2009 SCC 10, [2009] 1 S.C.R. 295, at paras. 47-49). Courts and legislatures have also implemented various mechanisms to incentivize and even require regular ongoing disclosure of updated income information by the payor, along with tools to move proceedings forward in the face of non-disclosure. Those mechanisms include imputing income to payors who have failed to make adequate disclosure, striking pleadings, drawing adverse inferences, and awarding costs. By encouraging timely disclosure, these tools reduce the likelihood that the recipient will be forced to apply to court multiple times to secure disclosure.

[53] Following D.B.S., lawyers and courts also began implementing “proactive strategies to avoid tedious and conflicting arguments related to ‘asking versus telling’ about income increases”, such as the use of mandatory annual disclosure obligations in child support orders in Alberta and Ontario (M. L. Gordon, “An Update on Retroactive Child and Spousal Support: Five Years after S. (D.B.) v. G. (S.R.)” (2012), 31 C.F.L.Q. 71, at p. 72; see also Sawatzky v. Sawatzky, 2018 MBCA 102, 428 D.L.R. (4th) 247, at para. 58; Roseberry, at para. 64). In Ontario, the legislature has echoed this trend by amending the guidelines to include a requirement that payors disclose income information annually without the requirement of a request from the recipient (Child Support Guidelines, O. Reg. 391/97, s. 24.1(1)). Similarly, in British Columbia, s. 5(1) of the Family Law Act, S.B.C. 2011, c. 25, imposes a general duty to disclose “full and true information” for the purpose of resolving family law disputes.

[54] In keeping with these developments, the exercise of judicial discretion and the setting of legal standards under s. 17 of the Divorce Act must encourage financial disclosure and in no way reward those who improperly withhold, hide or misrepresent information they ought to have shared. Proactive disclosure of changes in income is the first step to ensuring that child support obligations are tied to payor income as it fluctuates. Inadequate disclosure breeds “a backlog of [retroactive] support applications” (Roseberry, at para. 61). Indeed, with full, frank and regular disclosure, long-term arrears — such as Mr. Colucci’s — should be rare.

Martin J. set out the framework applicable to a payor's application for a retroactive decrease in child support based on a material change in circumstances, specifically where a payor had experienced a material drop in income that affected their ability to make payments as they came due. A payor seeking a retroactive decrease in child support must first show a past change in circumstances, as required under s. 17(4) of the Divorce Act. To meet the threshold based on a material change in income, the payor must demonstrate that the decrease in income was significant. had some degree of continuity. and it was real and not one of choice. The Court must have reliable, accurate, and complete information regarding the material decrease in income to find that the payor met the threshold:

[59] Like any applicant seeking a retroactive variation under s. 17 of the Divorce Act, a payor seeking a downward retroactive change must first show a past change in circumstances, as required under s. 17(4). Section 14 of the Guidelines lists situations constituting a change in circumstances for the purpose of s. 17(4) of the Divorce Act, including the coming into force of the Guidelines (s. 14(c)). A change in circumstances could also include a change that, if known at the time, would probably have resulted in different terms, such as a drop in income (Guidelines, s. 14(a); Willick v. Willick, 1994 CanLII 28 (SCC), [1994] 3 S.C.R. 670, at p. 688; Gray, at para. 39).

[60] The onus is on the party seeking a retroactive decrease to show a change in circumstances (Punzo v. Punzo, 2016 ONCA 957, 90 R.F.L. (7th) 304, at para. 26; Templeton, at para. 33). In some cases that may be relatively straightforward: for example, establishing that the children are no longer legally entitled to support because they are no longer children of the marriage.

[61] Most commonly, the retroactive variation claim will be based on a material change in income. To meet the threshold, a decrease in income must be significant and have some degree of continuity, and it must be real and not one of choice (Willick, at pp. 687-88; Earle v. Earle, 1999 CanLII 6914 (B.C.S.C.), at para. 27; MacCarthy v. MacCarthy, 2015 BCCA 496, 380 B.C.A.C. 102, at para. 58, citing Earle; L.M.P. v. L.S., 2011 SCC 64, [2011] 3 S.C.R. 775, at para. 33; Gray, at para. 39; Brown v.
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