SCC sets framework re retroactive child support decreases & recission of arrears.
Friday, June 11, 2021 - Filed in: Courts
“The parties were married in 1983 and divorced in 1996. The mother was granted sole custody of the parties’ two daughters and the father was required to pay child support of $115 per week per child until they were no longer children of the marriage. In 1998, the father requested a reduction in his child support obligations, but provided no financial disclosure to support his request and the parties reached no agreement at that time. The father’s child support obligations ended in 2012. From 1998 to 2016, the father made no voluntary child support payments and only limited sums were collected through enforcement mechanisms. During the period in which the arrears accrued, the father was absent from the children’s lives and his whereabouts were unknown. In 2016, the father applied to retroactively reduce child support and rescind the arrears of approximately $170,000. He provided little documentation or financial disclosure to support his claims. The motion judge retroactively decreased support, effectively reducing the arrears owing to $41,642. He found that this variation was warranted in order to bring the child support in line with the Federal Child Support Guidelines and to reflect the father’s drop in income over the period when the arrears were accruing. The Court of Appeal overturned that decision and ordered that the father pay the full amount of the arrears."
The SCC (9:0) dismissed the appeal.
Justice Martin wrote as follows (at paras. 5-9, 137, 140-142):
"The controversy between the parties centres on whether the framework for retroactive decreases under s. 17 should reflect the flexible and discretionary approach applied to retroactive increases in D.B.S. With certain modifications, I conclude that it should. A payor who has established a past decrease in income is not automatically entitled to a retroactive decrease of support back to the date of the decrease, as suggested by the motion judge in this case. The overall decision is a discretionary one.
As I will explain further, the court’s discretion is structured by a presumption in favour of retroactively decreasing support to the date the payor gave the recipient effective notice of an intention to seek a downward adjustment of the child support obligation, up to three years before formal notice is given of an application to vary under s. 17 . This presumption is triggered as soon as a past material change in circumstances is established — it is no longer necessary to first ask whether retroactive relief is generally appropriate before moving to the question of how far back retroactive relief should extend. Discretionary factors parallel to those considered in D.B.S. may justify departing from the presumptive date in favour of a longer or shorter period of retroactivity. For consistency, this presumption-based approach should be mirrored where the recipient seeks a retroactive increase. Once a past material change in income is established, a presumption is triggered in favour of retroactively increasing support to a certain date, with the D.B.S. factors guiding the court’s exercise of discretion in deciding whether to depart from that date.
Given the informational asymmetry between the parties, a payor’s success in obtaining a retroactive decrease will depend largely on the payor’s financial disclosure and communication. Indeed, effective notice in this context is only “effective” when there has been disclosure of the changed financial circumstances. At the stage of considering the D.B.S. factors, disclosure will once again be a key consideration in assessing whether the payor’s conduct operates to shorten or lengthen the presumptive period of retroactivity.
In the courts below, it appears Mr. Colucci also sought rescission of all or part of his arrears on the basis of a current and ongoing inability to pay. Applications of this kind require a different analysis. In these cases, the court order or agreement reflects the correct amount of child support owing, but the payor has failed to keep up with payments as they fell due. The payor subsequently asks the court to forgive all or part of the accrued debt because of present financial hardship. When the arrears reflect the amount that ought to have been paid, the payor cannot rely on a past decrease in income to explain why there are arrears. In these cases, there is a presumption against rescinding any part of the arrears, as courts have a range of other remedial options. Rescission sits at the far end of the range because it wipes out a legally recognized debt. As such, rescission is only appropriate in exceptional circumstances. Such circumstances may arise where full disclosure of the payor’s financial circumstances shows that the payor is unable to pay the arrears and will be unable to pay in the future, even with a flexible payment plan.
In these reasons, I will set out the foundational principles established by the Guidelines and D.B.S., followed by a discussion of the centrality of financial disclosure to the child support regime. Against this backdrop, I will explain the framework courts ought to apply to determine when to retroactively reduce child support under s. 17 of the Divorce Act . In doing so, I will reconcile the divergent lines of authority on the applicability of the contextual D.B.S. factors. Finally, I will set out the analysis that applies where the payor seeks rescission of arrears based on current inability to pay rather than a past change in circumstances. Applying the framework to the facts of this case, there is no reason for this Court to intervene to reduce or forgive the debt accrued under the existing child support order. I would dismiss Mr. Colucci’s appeal.
This strict approach to rescission and suspension of arrears based on current inability to pay is justified. The interests of the recipient and child in certainty and predictability are paramount, as the payor has failed to comply with a court order or agreement without any “excuse for non-payment of support when it came due” (Templeton, at para. 47). The child’s interest in a fair standard of support is subverted when the payor directs support elsewhere; in such circumstances, “the child effectively subsidizes the payor’s improved standard of living” (Walsh v. Walsh (2004), 69 O.R. (3d) 577 (C.A.), at para. 25, with additional reasons (2004), 6 R.F.L. (6th) 432). The payor parent, on the other hand, “cannot argue that the amounts claimed disrupt his/her interest in certainty and predictability” (D.B.S., at para. 98).
The court has a range of available options when faced with proven payor hardship. A court’s refusal to rescind arrears does not mean the payor must pay the entire amount immediately (Earle, at para. 24). If the court concludes that the payor’s financial circumstances will give rise to difficulties paying down arrears, the court ought to first consider whether hardship can be mitigated by ordering a temporary suspension, periodic payments, or other creative payment options (Haisman v. Haisman (1993), 7 Alta. L.R. (3d) 157 (Q.B.) (“Haisman (Q.B.)”), at paras. 32‑33, rev’d on other grounds (1994), 157 A.R. 47 (C.A.); Templeton, at para. 47; Brown, at para. 44). MEPs may also allow the debtor to enter into a reasonable payment plan where the debtor has fallen into arrears and is struggling to keep up with payments (see, e.g., The Family Maintenance Act, C.C.S.M., c. F20, s. 56.2(2) and (3); J. D. Payne and M. A. Payne, Child Support Guidelines in Canada, 2020 (2020), at p. 476). After all, blood cannot be drawn from a stone — where the payor is truly unable to make payments toward the arrears, “any enforcement options available to the support recipient and the court are of no practical benefit” (Brown, at para. 44).
While the presumption in favour of enforcing arrears may be rebutted in “unusual circumstances” (Gray, at para. 53), the standard should remain a stringent one. Rescission of arrears based solely on current financial incapacity should not be ordered lightly. It is a last resort in exceptional cases, such as where the payor suffers a “catastrophic injury” (Gray, at para. 53, citing Tremblay v. Daley, 2012 ONCA 780, 23 R.F.L. (7th) 91). I agree with Ms. Colucci that the availability of rescission would otherwise become an “open invitation to intentionally avoid one’s legal obligations” (Haisman (Q.B.), at para. 18, citing Schmidt v. Schmidt (1985), 46 R.F.L. (2d) 71 (Man. Q.B.), at p. 73; R.F., at para. 57). Simply stated, how many payors would pay in full when the amounts come due if they can expect to pay less later? The rule should not allow or encourage debtors to wait out their obligations or subvert statutory enforcement regimes that recognize child support arrears as debts to be taken seriously.
To the extent that Mr. Colucci relies on current inability to pay in this case, his failure to adduce adequate evidence of his financial circumstances would be fatal to any application to rescind arrears. As stated by the Court of Appeal, Mr. Colucci has not provided complete and accurate disclosure of his income and assets and continued to misrepresent his financial circumstances in the course of the proceedings, including with respect to his inheritance from his mother’s estate (paras. 28 and 31‑32). As such, he has not discharged his onus of showing that he will be unable to pay now or in the future even with a flexible payment plan."
Note: The summary and body are drawn from Eugene Meehan’s SupremeAdvocacy Weekly Updates for the Law Community.