In the recent case of Colucci v Colucci, 2021 SCC 24, (“Colucci”), the Supreme Court of Canada contemplates retroactive adjustments of child support arrears. Colucci is the second major decision by the Supreme Court of Canada in less than a year following the decision of Michel v. Graydon, 2020 SCC 24  (Michel) which was released in September 2020. The case marks the Supreme Court of Canada’s attempt to address confusion following its 2006 seminal decision DBS v SRG, 2006 SCC 37 (DBS) which has resulted in divergent lines of authority across the country.

Facts

In 2016, the Applicant (the “Payor”) of child support sought a reduction in the arrears to reflect his actual income over the years, and further (later on at appeal) a reduction on the basis that he had a current and ongoing inability to pay. At this time of his Application, the Payor owed approximately such $170,000.

The arrears accumulated from 1998 to 2012 (with interest accruing thereafter) following the Payor’s 1998 request to reduce ongoing child support. The 1998 request by the Payor was not supported with any disclosure and the parties were unable to reach an Agreement to vary the Payor’s child support obligations as originally determined in their 1996 Divorce Order. During the 14-year period when arrears accrued, the Payor:

1. Failed to make any voluntary child support payments;
2. Failed to provide any meaningful supporting financial disclosure; and
3. Failed to take any steps to vary the Divorce Order.

Procedural History

The matter was first heard in 2016 before the Ontario Superior Court. The motions Justice reduced the Payor’s arrears to $41,642 dating back to 1997, the year in which the Federal Child Support Guidelines were implemented. This reduction was made notwithstanding the Payor had provided little disclosure to support his Application for a reduction of arrears which rendered the Court unable to actually ascertain his income over the years in question.

The motions decision was appealed by the Respondent (the “Recipient”) to the Ontario Court of Appeal whom ultimately heard the matter twice before determining in 2019 that a reduction of arrears was not warranted in the given circumstances.

The Payor appealed the Ontario Court of Appeal decision shortly thereafter to the Supreme Court of Canada.

Issue

What is the appropriate framework for determining applications to retroactively decrease (or increase) the amount of child support owing or forgive child support arrears under section 17 of the Divorce Act, RSC 1985, c 3 (2^nd Supp)?

What is the appropriate framework for determining applications to rescind child support under section 17 of the Divorce Act, RSC 1985, c 3 (2^nd Supp) based on a current and ongoing inability to pay?

More specifically, which principles guide the Court’s exercise in discretion in determining whether to retroactively decrease support owed by a payor of child support to reflect their actual income?

Finding of the Court

After completing a thorough and substantive review of relevant case law, the Court clarifies the appropriate analysis and framework to be applied when a payor applies to decrease child support retroactively:

1. The payor must evidence that a past material change in circumstance has occurred (generally, the historical decrease in the payor’s income).

The burden of proof is on the payor, who must show that the change in income was significant, had some degree of continuity, and was not of the payor’s own choice.

Trivial deceases in income or short-lived decreases in income will often not constitute a material change in circumstance.

Further, to prove that a material change in circumstances has occurred, the payor must provide sufficient and reliable disclosure to the Court, so that it can confirm the change in income was significant, long-lasting and involuntary.

Additionally, the payor cannot come to the Court with unclean hands: payors who had their income previously imputed cannot later argue that there was a material change in income.

2. Where a material change in circumstance is proven, a presumption arises in favor of decreasing child support back to the date of effective notice, up to a maximum of three years before formal notice of an application to vary.

What is effective notice? Generally, the payor must communicate the income change to the recipient and provide sufficient supporting disclosure so that the recipient can independently assess and respond to the payor’s request to reduce child support: the timing and extent of disclosure is highly relevant in determining whether effective notice has occurred.

The Court has also remarked that the payor, upon communicating and evidencing his income change, must engage in meaningful dialogue with the recipient about variation of child support and must take reasonable action to formalize a decrease in child support.

The Court’s presumptive 3-year rule is intended to:

1. incentivize parties to take steps to formally alter the governing Court Order or Agreement if they are unable to solve matters amicable; and

1. to prevent situations where the Court and parties must recalculate child support years after it was due, with the best forms of evidence no longer available.

3. If no effective notice has occurred, the date for retroactive adjustment will often be the date of formal notice.

However, the date for adjustment may be even later than formal notice where the payor fails to provide supporting disclosure at the time of formal notice.

4. The Court may depart from the presumptive date of retroactivity (effective or formal notice) if the result would be unfair inconsideration of the DBS

The 4 DBS factors to be considered in an application to retroactively decrease child support are as follows:

1. Whether the payor has an understandable (and good) reason for delay;
2. The payor’s conduct (has the payor engaged in conduct where the payor’s rights are privileged over the child’s right - regardless of the payor’s subjective intention);
3. The child’s circumstances; and
4. Hardship for the payor, in light of hardship to the recipient and child if support is decreased.

5. If the Court has determined that support should be decreased to a particular date, the decrease should be quantified in accordance with the Federal Child Support Guidelines (the “Guidelines”).

As the Guidelines determine quantum, all mechanisms available under the Guidelines may be used to ascertain income and determine the correct amount of child support payable. Additionally, a determination of costs or interest on child support owing may be appropriate depending on whether there is blameworthy conduct.

Where it is a recipient claims a retroactive adjustment, the Court has set out a similar (albeit nuanced framework) that takes into account the informational asymmetry as between the parties:

1. The recipient must evidence that a past material change in circumstance has occurred.

However, the payor’s failure to provide disclosure allows the Court to impute income, strike pleadings, make adverse inferences, and award costs and the Court may do so, without the recipient having to make repeated Applications to compel disclosure.

2. Once a material change in circumstances is proven, a presumption arises in favor of increasing child support back to the date of effective notice, up to a maximum of three years before formal notice of an application to vary.

Effective notice for recipients is not the same as effective notice for payors. To give effective notice, the recipient must merely broach the subject of increasing child support with the payor.

3. If no effective notice is given by the recipient, child support adjustment should generally occur from the date of formal notice.

4. The Court may depart from the presumptive date of retroactivity (effective or formal notice) if the result would be unfair in consideration of the DBS factors as stated in Michel.

Notably, the Court has indicated that where the payor has failed to disclose material increases in income, such conduct would be blameworthy conduct warranting a retroactive adjustment to the date of increase in income.

5. If the Court has determined that support should be increased to a particular date, the increased should be quantified in accordance with the Federal Child Support Guidelines (see above).

Finally, the Court briefly review the remedy of recission on the basis of a payor’s current and ongoing inability to pay and made the following comments:

1. The payor must provide sufficiently reliable evidence so that the Court can assess the payor’s current and prospective finances including employment (ongoing and prospective) and the payor’s property/net worth (current and prospective).

2. The payor must evidence, on a balance of probabilities, that he or she cannot and will not ever be able to pay the arrears.

3. Recission is an exception remedy.

4. Non-disclosure or insufficient disclosure will be fatal to an Application for recission.

5. Child support arrears are a legal debt that must be treated with the same severity that other legally enforceable debts are treated.

Outcome

In the present case, the Court determined that a retroactive adjustment of child support was inappropriate given the Payor’s failure to provide adequate disclosure, his blameworthy conduct and his delay in bringing the Application. The Court also found that the Payor’s failure to adduce sufficient disclosure was fatal to his claim for recission because the Court could not make a finding that he was and would always be unable to pay off the arrears. Consequently, all relief was denied.

Takeaways

Provide disclosure. Vary child support.

Retroactive adjustments to child support can be messy, time consuming, and are not guaranteed. Both recipients and payors should be consistent in requesting disclosure annually and adjusting child support, if necessary. Neither party should allow a status quo in child support to persist when a material change in income occurs. This is particularly true for payors who (arguably) run the greatest risk given the more stringent obligations placed upon them by the Guidelines and the onus of proof they bear in Applications to rescind arrears and / or retroactively decrease support.

If you have any questions or concerns about retroactive adjustments to child support or rescission of child support, you can set up a consultation by calling our office at 587.440.3070 or by using the Contact form on our website. Our office is set up to work virtually and we can assist you with any family or divorce issues you may have during the COVID-19 pandemic.

The above information regarding child support as detailed above does not constitute legal advice. EBL Family Law is not liable for any reliance on the above information.