COURT OF APPEAL FOR ONTARIO
GOUDGE, FELDMAN and MACFARLAND JJ.A.
BETWEEN:
STEPHEN FRANCIS CONNELLY
Appellant (Respondent in cross-appeal)
And
ANN MARIE (ANNIE) MCGOURAN
Respondent (Appellant in cross-appeal)
Joel Skapinker for the appellant
Robert Snell for the respondent
Heard: September 9, 2005
On appeal from the judgment of Justice Myrna L. Lack of the Superior Court of Justice dated February 25, 2005, with reasons reported at [2006] W.D.F.L. 2169.
1The appeal in this case was brought by the father against the order of the application judge for child support in accordance with the Federal Child Support Guidelines, S.O.R./97-175 (the “Guidelines”), and without any reduction for the higher cost of living in London, England where he resides. The mother cross-appealed for retroactive child support in accordance with the Guidelines back to August 2000, when the husband’s income rose but he failed to disclose the increase or to pay increased child support.
2The issue on the cross-appeal was reserved by this court to await the decision of the Supreme Court of Canada in the four-case appeal in D.B.S. v. S.R.G; L.J.W. v. T.A.R.; Henry v. Henry; and Hiemstra v. Hiemstra, 2006 SCC 37, [2006] 2 S.C.R. 231. Following the release of the reasons of the Supreme Court, counsel were given the opportunity to make further submissions in writing with respect to the disposition of the cross-appeal.
3Based on the tests prescribed by the Supreme Court, I would allow the cross-appeal and send the matter back to the application judge for a new hearing.
BACKGROUND
4All of the facts in this case and the disposition made by the application judge are set out in the decision on the main appeal, (2006), O.A.C. 368 (C.A.). I will repeat them here for ease of reference:
5The parties were married in 1987 and divorced in 1998. In the divorce judgment, the mother was granted custody of the three children, who were then 8, 6 and 4 years old, child support in accordance with the Guidelines, some “add-ons” including a portion of the children’s day-care expenses and two-thirds of the children’s health expenses not covered by the father’s plan. The judgment also required the father to maintain a life insurance policy with the children named as beneficiaries.
6Paragraph 10 of the divorce judgment required the parties to make annual disclosure of their income to each other and to adjust the child support as required in accordance with the Guidelines.
7In 2001, the father applied to vary the support and access provisions of the divorce judgment. That application resulted in an order, dated July 13, 2001, based on minutes of settlement which amended the divorce judgment by increasing the child support payable by the father as of August 1, 2000, in accordance with the father’s income from the new position he began in England in August 2000, as well as by adjusting the add-ons and some other provisions. The order also incorporated a provision from the minutes of settlement that the parties’ agreement was conditional on the accuracy of the disclosure of the father’s total employment income and benefits. The order required significant disclosure by the father of the financial details of his new employment through production to the mother’s counsel of documentation, including his contract of employment, tax returns and details of benefits.
8The father failed to make the financial disclosure required by the divorce judgment and by the order of July 13, 2001. The mother wrote to the father on May 17, 2002 and August 7, 2002 requesting compliance and was ultimately obliged to bring a motion for contempt, resulting in a court order of April 29, 2004 requiring the father to provide the disclosure by May 30, 2004. The father did not comply with that court order, and on June 3, 2004, he was found in contempt of court. The application under appeal was heard in November 2004, after the father purged his contempt by making the required disclosure.
9On the issue of the level of child support, the application judge ordered the father to pay child support in accordance with the table amount under the Guidelines for the Canadian dollar equivalent of his U.K. income, which she found to be over $150,000. When converting the appellant’s U.K. income into Canadian funds under s. 20 of the Guidelines, she declined to reduce the amount payable by taking into account the higher cost of living in the U.K. than in Canada. She also declined to exercise her discretion under s. 4(b) of the Guidelines to find that the higher cost of living made the table amount inappropriate or that it would constitute an “undue hardship” under s. 10 of the Guidelines.
10On the issue of whether the new amount ordered should be made retroactive, the application judge applied and weighed the criteria set out in the following case law on retroactive awards: Walsh v. Walsh (2004), 2004 36110 (ON CA), 69 O.R. (3d) 577 (C.A.); Marinangeli v. Marinangeli (2003), 2003 27673 (ON CA), 66 O.R. (3d) 40 (C.A.); S. (L.) v. P. (E.) (1999), 1999 BCCA 393, 175 D.L.R. (4th) 423 (B.C.C.A.). These criteria include:
(i) the needs of the children and the payor’s ability to pay;
(ii) blameworthy conduct by the payor;
(iii) necessity for the custodial parent to encroach on capital or incur debt to meet the expenses of the children;
(iv) the excuse for any delay in bringing the application and the significance of that delay;
(v) notice to the payor spouse;
(vi) any unreasonable burden on the payor spouse that would interfere with the payor’s ability to pay ongoing support; and
(vii) whether the only purpose of the retroactive award is to redistribute capital or effectively award spousal support.
11The application judge concluded that as a result of the father’s failure to pay the higher Guidelines amount of child support in accordance with his income and his failure to disclose that income, it did not appear that the children’s reasonable financial needs were being met and that the father’s conduct was blameworthy. Furthermore, the application judge noted that the mother had been required to increase her line of credit to meet the children’s expenses, although she had also been reducing her long-term mortgage debt. The application judge was concerned about the mother’s delay in bringing the application, but was satisfied that she had been trying to pursue the issue with the father out of court.
12The application judge concluded, based on the record before her, that “the obligation to pay arrears may impact on [the father’s] ability to meet the ongoing obligation,” but felt that she could not condone the father’s conduct in breaching court orders: [2006] W.D.F.L. 2169 at para. 89 [emphasis added]. Weighing the factors together, the application judge awarded retroactive child support from January 1, 2003, but not from August 2000.
ISSUE
13Did the application judge err in her application of the factors subsequently set out by the Supreme Court of Canada in D.B.S. v. S.R.G. et al., supra, for deciding whether and to what extent to award retroactive child support?
ANALYSIS
14Bastarache J. begins his majority reasons by pointing out that the issue of “retroactive” child support is a misnomer, because the child support sought is only retroactive in the sense that it had not been ordered to be paid during the relevant period, even though it was owed in accordance with the Guidelines.
15Before discussing the factors a court is to consider prior to ordering retroactive child support, he stressed that such awards should not be seen as exceptional (at para. 97):
It cannot only be exceptional that children are returned the support they were rightly due. Retroactive awards may result in unpredictability [for the payor parent], but this unpredictability is often justified by the fact that the payor parent chose to bring that unpredictability upon him/herself. A retroactive award can always be avoided by appropriate action at the time the obligation to pay the increased amounts of support first arose.
16Bastarache J. identified four factors that should be considered when determining whether to order a retroactive award:
(1) unreasonable delay by the recipient parent in applying for the support;
(2) conduct of the payor spouse;
(3) circumstances of the child; and
(4) hardship occasioned by the retroactive award.
He further indicated that none of these factors is decisive, and that “a court should strive for a holistic view of the matter and decide each case based on its particular factual matrix” (para. 99).
(1) Unreasonable delay by the recipient parent
17This is a factor because of the payor parent’s interest in certainty. However, because the right to child support is the right of the child, any delay by the recipient parent is merely a factor that allows the judge to “examine the balance between the payor parent’s interest in certainty and fairness to his/her children, and to determine the most appropriate course of action on the facts” (para.104). In fact, it is the conduct of the payor parent that often determines the reasonableness of the delay by the recipient parent in bringing the application, including whether the payor parent informs the recipient parent of income increases in a timely manner and does not pressure or intimidate the recipient.
(2) Conduct of the payor parent
18Bastarache J. strongly condemns blameworthy payor parent conduct, that is, “anything that privileges the payor parent’s own interests over his/her children’s right to an appropriate amount of support” (para. 106). And: “[p]ut simply, a payor parent who knowingly avoids or diminishes his/her support obligation to his/her children should not be allowed to profit from such conduct” (para.107).
(3) Circumstances of the child
19This includes considering the child’s needs both at the time when the support should have been paid as well as at the time of the application.
(4) Hardship occasioned by a retroactive award
20This is the hardship that the payor parent may suffer because he or she will be paying out of today’s income for a past obligation and because the payor parent may have more children who also rely on him or her for support. In light of these considerations, the court should attempt to minimize hardship by structuring the payments in the best way possible for the payor. However, Bastarache J. also recognized that: “it will not always be possible to avoid hardship. While hardship for the payor parent is much less of a concern where it is the product of his/her own blameworthy conduct, it remains a strong one where this is not the case” (para. 116).
21Bastarache J. also discusses how a court should assess and award the correct amount of retroactive support, including the date from which it will be payable and the quantum. He concludes that the fairest retroactive date is the date when “effective notice” was given by the recipient spouse to the payor spouse that child support needed to be renegotiated. He stated that all that is required for effective notice is that the subject be broached. However, if after broaching the subject, the recipient parent does not pursue the matter, the payor parent may again begin to rely on the status quo. For that reason, Bastarache J. concluded that it will usually be inappropriate to select a date more than three years prior to the formal notice of the claim.
22However, the date of retroactivity can be extended back in time for a payor parent who withholds information about a material change in circumstances, such as income increases that would entitle the child to increased support. In those circumstances, the presumptive date will be the date of the material change, as “[a] payor parent cannot use his/her informational advantage to justify his/her deficient child support payments” (para. 124).
23Bastarache J. concludes as follows (at para. 125):
The proper approach [for determining the date of retroactivity] can therefore be summarized in the following way: payor parents will have their interest in certainty protected only up to the point when that interest becomes unreasonable. In the majority of circumstances, that interest will be reasonable up to the point when the recipient parent broaches the subject, up to three years in the past. However, in order to avoid having the presumptive date of retroactivity set prior to the date of effective notice, the payor parent must act responsibly: (s)he must disclose the material change in circumstances to the recipient parent. Where the payor parent does not do so, and thus engages in blameworthy behaviour, I see no reason to continue to protect his/her interest in certainty beyond the date when circumstances changed materially. A payor parent should not be permitted to profit from his/her wrongdoing.
24In terms of quantum, the Guidelines amount is the presumptive amount, subject to undue hardship under s. 10, or other circumstances recognized by the Guidelines in ss. 3(2), 4 and 9. The quantum can also be adjusted by reducing the time period for retroactive payment in order to achieve fairness in all the circumstances, for example, where there has been some unreasonable delay by the recipient parent.
25As I stated earlier, the application judge did not have the benefit of the Supreme Court decision in D.B.S. v. S.R.G. et al., supra, when deciding this case. However, she did refer to the factors set out by the Supreme Court as well as to other additional factors.
26She first addressed the needs of the children. She noted, correctly, that the objective is to provide the children with the standard of living they would have enjoyed had the family remained together, and that the Guidelines amount is presumptively appropriate to meet the needs of the children. Consequently, when a parent’s ability to pay support increases, the children’s needs are presumed to increase commensurately. The application judge had concluded earlier in her judgment that the reasonable financial needs of the three children were not being met at the level of support that was being paid.
27The application judge next considered the father’s blameworthy conduct. This included his failure to disclose his financial information in the face of the divorce decree, the parties’ agreement and several court orders culminating in a contempt finding, all at a time when he knew he was depriving his children of an increase in support.
28She next referred to the fact that the mother had to increase her debt-load during this period, but was also repaying her mortgage at an accelerated rate. Consideration of this factor is now excluded by the Supreme Court.
29The application judge then considered the reason for the mother’s delay in commencing her application. The father’s first default in disclosing financial information under the court order was in August 2001, while the application was not commenced until March 2004. The record showed that the mother wrote to the father in May 2002 and in August 2002 requesting full disclosure in accordance with court orders. The father claimed he had moved.
30Finally, the application judge addressed what she stated was the most significant consideration for not awarding retroactive child support, which was the financial burden that accumulated arrears would place on the father, because although his financial statements showed substantial income, he did not have accumulated capital. She concluded, therefore, that an obligation to pay arrears “may impact on his ability to meet the ongoing obligation.” [Emphasis added.] However, earlier in the reasons on the main appeal, the application judge had discussed the issue of undue hardship under s. 10 of the Guidelines. She concluded that undue hardship had not been shown and observed in that context that “[a] payor earning in excess of $300,000 bears a heavy onus in persuading a court that he will suffer undue hardship” (para. 49).
31The application judge concluded her analysis by saying that in order to strike a balance among the factors and not to condone the father’s conduct in breaching court orders which had the effect of thwarting the effectiveness of the variation provisions of the divorce judgment, she would make the increased child support order retroactive, but only back to January 1, 2003, that is, to just over one year prior to the date when the application was commenced in March 2004.
DISPOSITION
32In my view, the reasons of the Supreme Court in D.B.S. v. S.R.G. required the application judge to place significant emphasis on the father’s conduct in this case. He breached the divorce decree and several court orders by failing to make the financial disclosure that he knew would require him to increase his child support payments. His blameworthy conduct escalated to the point that he was found in contempt of court. The Supreme Court effectively found that a payor parent should not be permitted to gain any advantage from engaging in blameworthy conduct of this kind.
33Although the application judge took the father’s blameworthy conduct into account, she severely limited the retroactive award because of the possibility that a greater obligation “may impact on his ability to meet the ongoing obligation.” This concern, however, does not reflect the application judge’s earlier strong finding of no undue hardship on the husband.
34Also, the application judge did not consider, as was suggested by the Supreme Court, methods of payment that might alleviate or at least reduce the difficulty of making a retroactive payment. Rather, the effect of her order is to deprive the children of their support, in the amount of approximately $30,000, which, as teenagers, they could use to great advantage as they grow toward adulthood, and to allow the father to profit from his breach of obligation to the mother, to the children and to the court.
35I again emphasize that the application judge did not have the benefit of the reasons of the Supreme Court when making her decision. However, those reasons make it clear that in this type of case, in conducting the balancing process, the blameworthy conduct presses very heavily on the scale in favour of awarding very significant, if not full retroactive child support.
36I would therefore set aside the decision of the application judge on the cross-appeal and order a new hearing with costs of the cross-appeal to the mother, the cross-appellant, in the amount of $2,500, as requested.
RELEASED: August 27, 2007 “STG”
“K. Feldman J.A.”
“I agree S. T. Goudge J.A.”
“I agree J. MacFarland J.A.”
