Court of Appeal for Ontario

Date: July 4, 2019

Docket: C66264

Judges: Brown, Roberts and Zarnett JJ.A.

Between

Lina Colucci Applicant (Appellant)

and

Felice Colucci Respondent (Respondent)

Counsel

Surinder K. Multani, for the appellant

Richard M. Gordner, for the respondent

Heard

April 26, 2019

Appeal

On appeal from the order of Justice P.B. Hockin of the Superior Court of Justice, dated November 5, 2018, and from the costs order, dated December 17, 2018.

Reasons for Decision

Roberts J.A.:

[1] Introduction

[1] This appeal concerns a delinquent payor who was granted a retroactive reduction in his child support obligations that extended far into the past.

[2] The appellant appeals from the order of the motion judge allowing the respondent's request under s. 17(1) of the Divorce Act, R.S.C. 1985 c. 3, to vary and retroactively reduce a 1996 child support order. The respondent seeks leave to cross-appeal from the costs order awarded to the appellant.

[3] In my view, this case is governed by the principles articulated in D.B.S. v. S.R.G., 2006 SCC 37, [2006] 2 S.C.R. 231 and Gray v. Rizzi, 2016 ONCA 152, 129 O.R. (3d) 201. The motion judge erred in failing to apply those principles and the appeal should be allowed.

A. Background

[4] The parties were married on October 1, 1983. They had two daughters, born respectively on March 27, 1988 and August 4, 1989. The parties separated on February 23, 1994 and were divorced on June 14, 1996.

[5] The parties' divorce judgment, dated May 13, 1996, provided for custody of the parties' two daughters to the appellant and required the respondent to pay child support in the amount of $115 per week per child, so long as the daughters remained "children of the marriage" under the Divorce Act. At that point, their children were 8 and 6 years old.

[6] The respondent's child support obligations ended in 2012 when the daughters ceased to be "children of the marriage". By 2012, both daughters had completed post-secondary education and were employed. As a result, from 2012 forward, no further arrears accumulated apart from interest.

[7] By 2012, the respondent had fallen into substantial arrears of child support. His taxable income was in decline from 1997 onwards. In April 1998, through counsel, he asked the appellant to consider a reduction of his child support obligations, which she refused. However, he did not commence a motion to change the order with respect to his child support obligations until November 17, 2016. He made few payments and the Family Responsibility Office was required to compel payment of the respondent's support obligations.

[8] From 2001 to 2016, the respondent resided first in the United States and then in Italy. During these years, there were significant periods of time in which no voluntary support payments were made; there were also significant periods of time in which there were no support payments from income diversion or other sources. The arrears accumulated and became substantial. The respondent left Canada without notifying the appellant and the Family Responsibility Office of his whereabouts and income during his absence. As of the date the respondent's change motion was heard, the arrears with interest amounted to more than $170,000.

B. Motion to Change and Order Varying Child Support

[9] In his November 17, 2016 notice of motion, the respondent sought the following order:

a) retroactively varying the child support set out in the divorce judgment dated May 13th, 1996, commencing May 1, 1997 (the coming into force of child support guidelines in accordance with s. 14 (c) of the Federal Child Support Guidelines, SOR/97-175);

b) fixing the arrears of child support, if any, and determining the payments on those arrears in accordance with the respondent's income. The respondent alleged that he was currently employed at minimum wage.

[10] Relying on s. 14 (c) of the Federal Child Support Guidelines, the motion judge, at paras. 10-13 of his reasons, found that the coming into force of the Guidelines on May 1, 1997, subsequent to the child support order in this case, constituted a "change of circumstances", which permitted a variation order under s. 17(4) of the Divorce Act.

[11] The motion judge determined at para. 15 that "the respondent is entitled as of right to a variation and a calculation of support based on table amounts and his drop in income from employment". The motion judge, at para. 20, rejected as inapplicable the "three-year rule" suggested by the Supreme Court in D.B.S., at para. 123, that it will usually be inappropriate to delve too far into the past and make a support award retroactive to a date more than three years before formal notice is given.

[12] Imputing income to the respondent at minimum wage or at his actual earned income, and following the table amounts of the Guidelines, the motion judge recalculated the arrears and reduced them to $41,642.

C. Issues

[13] The appellant submits the motion judge made the following three errors:

i. He failed to apply the principles respecting retroactive support variations as articulated in D.B.S. and Gray; more specifically, the motion judge erred by failing to conduct a further inquiry, after accepting that the threshold for material change in circumstances had been met due to the coming into force of the Guidelines, as to whether it was appropriate to retroactively reduce the respondent's child support obligations far into the past.

ii. He failed to apply the three-year rule, as set out in D.B.S., and determine whether a retroactive support variation should be made for support amounts owing more than three years prior to the date of the respondent's motion to vary.

iii. He incorrectly imputed income to the respondent.

The respondent seeks leave to appeal costs, on the basis that the motion judge erred in principle by failing to apply the presumption in r. 24 of the Family Law Rules, O.Reg. 114/99, that a successful party is entitled to costs.

D. Analysis

(1) Governing Principles: D.B.S. and Gray

[14] In my view, the motion judge erred in his approach to the retroactive child support variation requested by the respondent. As the appellant conceded and the respondent submitted, the motion judge was correct to find that the enactment of the Guidelines amounted to a change in circumstances that permitted the respondent to seek a variation: Guidelines, s. 14 (c); Marinangeli v. Marinangeli (2003), 66 O.R. (3d) 40. I agree that the threshold for variation has been met. However, the motion judge erred by continuing on to conclude that the respondent was entitled "as of right" to a retroactive reduction extending years into the past without any consideration of the principles relating to retroactive variation set out in D.B.S. and Gray, including the application of the "three-year rule".

[15] Specifically, the motion judge erred in distinguishing D.B.S. and failing to follow Gray. While D.B.S. involved an application for a retroactive increase in support, the factors articulated by the Supreme Court were intended to serve as general principles applicable, with appropriate adaptation, to retroactive support variations that would decrease the quantum of child support. In Gray, this court adapted and applied D.B.S. to a motion, like here, to vary retroactively a child support order under s. 17 of the Divorce Act, on the basis that the payor's income had decreased substantially. In Gray, like in the case at bar, the motion judge's order had the effect of respectively eliminating and reducing support arrears.

[16] This court in Gray clarified the approach to be followed when the threshold for a retroactive variation of support had been met. Specifically, at paras. 44-54, the court made it abundantly clear that the four factors governing retroactive support orders identified in D.B.S., subject to exceptional circumstances, should be adapted to apply to applications to decrease support retroactively in cases like the present:

i. Whether there was a reasonable excuse as to why a variation in support was not sought earlier;

ii. The conduct of the payor parent;

iii. The circumstances of the child; and

iv. Any hardship occasioned by a retroactive award.

[17] Gray rejected the notion that D.B.S. and its factors for analysis are inapplicable in cases of arrears, at para. 51:

[A] payor who has let arrears accumulate has no claim to resist an increase in support on grounds of certainty and predictability. A delinquent payor cannot use the principle of predictability as a shield against paying the full amount of support to which his child is entitled.

In contrast, where a payor seeks a retroactive decrease in support, the S. (D.B.) factors — such as taking into account the circumstances of the child, the conduct of the payor parent, the hardship of a retroactive award, and the reason for delaying in seeking a variation in support — remain relevant. [Emphasis added.]

[18] At paras. 45 and 61-62, the court also endorsed the general rules from D.B.S. that the date of effective notice should serve as the date to which the award should be retroactive and that it usually will be inappropriate to make a support award retroactive to a date more than three years before formal notice was given ("the three-year rule"). While D.B.S. framed these rules in the context of giving certainty and predictability to the payor parent when the change is an increase sought by the recipient parent, Gray clarified that the same underlying principles apply when the change is sought by the payor parent: see D.B.S., at para. 123; Gray, at para. 61.

[19] The court in Gray, at para. 60, adopted in its entirety Chappel J.'s analysis in Corcios v. Burgos, 2011 ONSC 3326, and, in particular, her adaptation of the D.B.S. principles to a motion to change child support retroactively and effectively rescind arrears based on a payor's reduced income.

[20] First, at paras. 56-59 of Gray, the court identified the overarching considerations on a request to retroactively reduce child support, which I summarize as follows:

i. The best interests of the child is the paramount issue. Parents cannot bargain away their children's rights to support when they need it. Delinquency in paying support should not be incentivized.

ii. There is a distinction to be made between (i) requests for a reduction of arrears based on a current inability to pay and (ii) arrears arising from a change in financial circumstances that affected the payor's ability to make the support payments when they came due. A current inability to pay will generally not result in a reduction unless the payor can demonstrate on a balance of probabilities that he or she cannot and will not ever be able to pay the arrears. However, a change in circumstances while arrears were accumulating, which rendered the payor unable to make support payments for a significant period of time, may allow for a retroactive decrease in the amount of child support owed during that time and a reduction of the accumulated arrears.

[21] Next, at para. 60 in Gray, the court set out the following key factors of the Corcios/D.B.S. analysis to guide a court in deciding whether to grant retroactive relief, the date of retroactivity, and the appropriate quantum of relief:

i. The nature of the obligation to support, whether contractual, statutory or judicial;

ii. The ongoing needs of the support recipient and the child;

iii. Whether there is a reasonable excuse for the payor's delay in applying for relief;

iv. The ongoing financial capacity of the payor and, in particular, his or her ability to make payments towards the outstanding arrears;

v. The conduct of the payor, including whether the payor has made any voluntary payments on account of arrears, whether he or she has cooperated with the support enforcement authorities, and whether he or she has complied with obligations and requests for financial disclosure from the support recipient;

vi. 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

vii. 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.

(2) The Motion Judge Erred by Failing to Apply These Governing Principles

[22] The motion judge made no reference to D.B.S. (and none to Gray) other than to reject the application of the "three-year rule", reasoning at para. 20: "[t]his is not a retroactive support order but a case where arrears have accumulated and require adjustment. In any event, it would be wrong to limit the calculation in view of the respondent's delinquency."

[23] This was an erroneous approach and the motion judge's reasons disclose a clear error in principle that justifies appellate intervention: Gray, at para. 18; Hickey v. Hickey, [1999] 2 S.C.R. 518, at paras. 11-12. While the motion judge correctly determined that the respondent met the threshold for a retroactive variation of the support order and was delinquent, he erred by failing to go on to consider whether and to what extent a variation order should be made in the light of the D.B.S. factors as adapted by this court in Gray.

[24] Instead, the motion judge appears to have relied only on this court's decision in Wright v. Zaver (2002), 59 O.R. (3d) 26 (C.A.) and failed to consider how that decision and D.B.S. interact.

[25] In Wright, this court determined that the enactment of the Ontario Child Support Guidelines ("the Guidelines") in 1997 created a right to vary pre-existing child support orders to bring prospective support in line with the amount specified in the Guidelines. The court further held that the discretion not to apply the Guidelines, again prospectively, was limited to the circumstances set out in s. 37 (2.3) and (2.5) of the Family Law Act.

[26] The decision in Wright in no way determines that a request for retroactive support reductions, including requests to bring historical support in line with the Guidelines, will be automatic. In such cases, the support amount provided for in the prior order or agreement will have formed a part of the recipient parent's budget and the support recipient often will have undertaken financial obligations premised on the continuation of the support set out in the order. As such, the guiding principles relating to retroactive requests set out in D.B.S. and Gray clearly apply.

(3) D.B.S. and Gray Applied

[27] Given the motion judge's errors, it falls to this court to carry out the appropriate analysis. Applying the D.B.S. factors as adapted by this court in Gray, I am of the view that the respondent is not entitled to a retroactive variation order more than three years from November 17, 2016, the date he commenced his motion.

[28] Given the respondent's failure to make full and accurate financial disclosure, I am unable to determine whether the facts of this case give rise to a current inability to pay arrears on his part or from a change in financial circumstances that affected his ability to make the support payments when they came due. I agree with the appellant's submission that the outcome is the same under either scenario because of the respondent's delay and other blameworthy conduct. As already noted, the conduct of the child support payor is one of the factors to consider when deciding whether to grant retroactive relief, the date of retroactivity, and the appropriate quantum of relief.

[29] Particularly apposite is Chappel J.'s statement in Corcios, at para. 55, stating "[b]ehaviour that indicates wilful non-compliance with the terms of the order or failure to work cooperatively to address the child support issue is a factor that militates against even partial rescission of or reduction of arrears".

[30] The respondent has been, at best, a recalcitrant payor who over 23 years has made few support payments, particularly when he disappeared and was out of the country for 15 years. The respondent was underemployed and left the appellant to carry alone the heavy responsibility of raising and supporting their two daughters. The respondent has placed a substantial financial burden on his family's shoulders. His daughters have accumulated considerable debt in their pursuit of post-secondary education. Any alleged hardship arising from the substantial arrears that the respondent has permitted to accumulate results from his own blameworthy conduct.

[31] The respondent has not discharged his onus to explain his significant failure to make support payments and his extraordinary delay in proceeding with his application to vary, nor has he produced reliable evidence of his inability to pay while arrears were accumulating, particularly during the periods when he absconded without a trace to the United States and Italy, and was in receipt of a substantial inheritance from his mother's estate. The plain fact remains that even if the motion judge's order should remain unaltered, the respondent still owes substantial arrears that he has failed to reduce.

[32] Not only has he failed to honour his support obligations to his children, in the course of these proceedings, the respondent has continued to be in breach of the ongoing requirement to make full documentary and financial disclosure. Throughout his motion, the respondent misrepresented his inheritance from his mother's estate and failed to produce relevant and comprehensive financial documentation about his income and assets, which was only partially remedied by some financial disclosure made in 2018. This is simply unacceptable and, in my view, should have been fatal to the respondent's motion to change. As Brown J.A. for this court underlined in Gray, at para. 31:

"[T]he disclosure rules and the sanctions for non-compliance are the centrepiece of the Family Law Rules": Shamli v. Shamli, at para. 88. As this court emphasized in Roberts v. Roberts, 2015 ONCA 450, at paras. 11-13:

The most basic obligation in family law is the duty to disclose financial information. This requirement is immediate and ongoing.

Failure to abide by this fundamental principle impedes the progress of the action, causes delay and generally acts to the disadvantage of the opposite party. It also impacts the administration of justice. Unnecessary judicial time is spent and the final adjudication is stalled.

Financial disclosure is automatic. It should not require court orders – let alone three – to obtain production. [Citations in original.]

[33] I do not accept the respondent's submission that his support obligations should be retroactively varied to April 1998 when he purported to give notice to the appellant that he sought to reduce his support obligations.

[34] The respondent took no steps to further his request to reduce his support obligations between 1998 and his motion in 2016: he produced no proof of his changed financial circumstances, nor, after his initial request for a reduction in 1998, did he instigate any further negotiations, mediation or court proceedings. Given the appellant's refusal of his request, it was incumbent on the respondent to initiate proceedings in a timely manner: Templeton v. Nuttall, 2018 ONSC 815, at para. 52; Corcios, at para. 55(8). However, in the case at bar, the respondent unreasonably failed to do anything for 18 years. As a result, the effective date of notice should be November 17, 2016, the date he commenced his motion to change.

[35] November 17, 2016 as the effective date of notice does not affect the amount of the accumulated arrears to 2012 when the respondent's support obligation ceased. Nor does it reduce the interest that has been accruing on the accumulated arrears from November 17, 2013 forward.

[36] Accordingly, I would allow the appeal and order no reduction to the arrears owing by the respondent to the appellant.

[37] Given my proposed disposition of this appeal, it is unnecessary to deal with the question of whether more income should have been imputed to the respondent, or with the cross-appeal.

E. Disposition

[38] I would allow the appeal and set aside para. 2 of the motion judge's order. I would dismiss the cross-appeal.

[39] The appellant is entitled to her partial indemnity costs of the appeal in the amount of $5,816. She seeks no variation of the costs awarded to her on the motion.

Released: July 4, 2019

"L.B. Roberts J.A."

"I agree. David Brown J.A."

"I agree. B. Zarnett J.A."