An Ontario court recently set out the applicable principles relating to a demand for the reduction of support arrears and obligations after a father’s income was significantly reduced.
What Happened?
The parents separated and, on November 22, 2010, by way of a settlement agreement (the “Agreement”), the father was ordered to pay spousal support in the amount of $450 per month, and also child support in the amount of $1,457 per month (the “Order”). Both the child support and spousal support were based on the father’s income of $104,424 and the mother’s annual income at the time of $40,457.
The Order also provided that the parties annually review together the payment of any of their children’s special and extraordinary expenses (example: extracurricular, medical expenses, post-secondary educational costs, etc.). The costs of these expenses would be shared between the parents in proportion to their respective incomes.
The Agreement also required the father to take out a life insurance policy in the amount of $250,000 to cover any outstanding spousal and child support obligations in the case of his death. The life insurance policy was to be irrevocable and in favour of the mother.
However, the father lost his job in 2015 and he was not able to find similar work. As a result, his income dropped from over $100,000 per year to around $45,000 per year. Additionally, he had taken on the responsibility of a new family, which included two step children from the new marriage.
Given the change in his employment, the father had been having problems making the support payments. Accordingly, the outstanding arrears had begun to accrue. At the time of trial, his spousal support arrears amounted to $47,264 and his child support arrears totalled $24,911.
The father asked that the arrears be set aside and that he should not be required to pay any additional support on the basis of his changed financial circumstances. He also took the position that he should not be required to pay anything further and the arrears should be offset by his overpayments; according to the father, both of his children from the marriage were now adults, and his wife was in a better financial position than he was.
Decision
The court began by setting out the general principles for the rescission or reduction of arrears under s. 37(2.1) of the Family Law Act which allows a court to retroactively discharge or rescind child support arrears where therehas been a change in circumstances within the meaning of the Child Support Guidelines.In a case such as this one, where the amount of child support was determined in accordance with the table, any change in circumstances that would result in a different order for child support constitutes a change in circumstances that gives rise to a variation.
However, the court noted that an accumulation of arrears without evidence of a past inability to pay does not constitute a change in circumstances. Additionally, a present inability to pay does not by itself justify a change order; such an order should only be granted if the payor can also prove a future inability to pay. The other option is to suspend or order repayment of arrears.
The court stated that, while there is no fixed formula a court must follow when exercising its discretion in this circumstance, the following factors should guide a court in determining whether to grant retroactive relief, the date of retroactivity, and the quantum of relief:
1. The nature of the obligation to support, whether contractual, statutory or judicial;
2. The ongoing needs of the support recipient and the child;
3. Whether there is a reasonable excuse for the payor’s delay in applying for relief;
4. The ongoing financial capacity of the payor and, in particular, his ability to make payments towards the outstanding arrears;
5. The conduct of the payor, including whether the payor has made any voluntary payments on account of arrears, whether he has cooperated with the support enforcement authorities, and whether he has complied with obligations and requests for financial disclosure from the support recipient;
6. Delay on the part of the support recipient, even a long delay, in enforcing the child support obligation does not, in and of itself, constitute a waiver of the right to claim arrears; and
7. Any hardship that may be occasioned by a retroactive order reducing arrears or rescinding arrears, or by an order requiring the payment of substantial arrears.
Applying these principles to the case, the court refused to vary the child support arrears and ordered that the father be required to pay ongoing child support. It found that the support payments were proper given the father’s ongoing obligation to his daughter.
However, the court did deduct the spousal support for the period while the father was earning less than the mother, which left spousal support arrears in the approximate amount of $32,800. Moving forward, the court ordered that the father no longer be obliged to pay spousal support.
Accordingly, the total arrears were fixed at $57,711.
As a result, the total monthly support payment were ordered to be $600 per month, with $250 to be directed towards arrears, and the remaining $350 to be directed towards ongoing child support for their daughter. The court concluded:
“I recognize that [the father] is in a tight financial situation. However, the materials reflect various discretionary expenses that can be reduced with a view to satisfying his arrears and ongoing support obligations.
[The father] will still be required to provide an update of his income to [the mother] on an annual basis. If his salary changes substantially, [the mother] can seek to increase the amount of the child support.”
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Separation and divorce are challenging for everyone involved. When dealing with custody or access disputes, matters involving spousal and child support, the division of assets, and other family issues, emotions can be your worst enemy. Having an experienced family lawyer on your side can help you stay focused and resolve disputes as quickly and amicably as possible.
At Campbell Bader LLP our family team has collectively spent more than twenty years advising clients about family disputes, including those involving high net worth individuals or complex matters.
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