Court File and Parties

Court File No.: D47561/09 Date: 2016-05-04

Ontario Court of Justice

Between:

S.H. Applicant

-and-

R.A.A. Respondent

Counsel:

• Stephanie Okola, for the Applicant
• Acting in Person, for the Respondent
• Patricia A. Smyth, for the assignee, The Ministry of Community and Social Services

Heard: May 2, 2016

Justice: S.B. Sherr

Reasons for Decision

Part One – Introduction

[1] This was a trial of the respondent's (the father) motion to change the court's support order dated September 8, 2009 (the existing order). The existing order imputed the father's annual income at $45,000 and required him to pay child support to the applicant (the mother) in the sum of $415 per month, being the Child Support Guidelines (the guidelines) table amount for one child. The parties' child (the child) is now 7 years old.

[2] The father asked the court to reduce his child support payments to $150 per month. He asked the court to also reduce his outstanding support arrears to $5,000 and to allow him to repay these arrears at the rate of $50 per month.[1]

[3] The mother, in her opening submissions, agreed to give the father a support credit for three years when the child was out of her care.[2] She is also agreeable to the father repaying the remaining arrears at the rate of $250 per month. She asked that the balance of the father's motion to change be dismissed.

[4] The mother assigned her interest in child support to the Ministry of Community and Social Services (the assignee) for the period from June 1, 2009 to July 31, 2010. The assignee is owed $5,810 by the father, pursuant to the existing order. It opposed any reduction in the arrears owed to it. The assignee proposed that the father repay its arrears at the rate of $75 per month.

Part Two – Background Facts

[5] The mother is 45 years old. The father is 34 years old.

[6] The parties cohabited briefly in 2007. They had the one child together.

[7] The mother issued her application for custody and child support in this court on April 6, 2009.

[8] The father did not file an Answer or attend at court. The case proceeded on a default basis and the existing order was made. The mother was awarded custody of the child and a restraining order. The father's income was imputed at $45,000 per annum and child support was ordered in the amount of $415 per month.

[9] The father deposed that he didn't file an Answer because his life was in turmoil at the time.

[10] The father did not appeal the final order. He did not move to change it until he started this motion to change.

[11] The father has married. He and his wife have three children together, all under 6 years old. The father's wife's daughter from another relationship, who is 21 years old, also lives with them.

[12] The father has one other child, who is 12 years old. The father deposed that there is a court order from the Superior Court of Justice in Brampton, requiring him to pay child support of $415 per month for this child.[3] The father said that he has also brought a motion to change that order.

[13] The father and his brother run a carpentry business. The father said that he has worked as a framer since 1998.

[14] The father's wife is an elementary school teacher. She is on maternity leave and plans to return to work in September of 2016.

[15] The mother is in receipt of Ontario Disability Support Payments.

[16] The mother acknowledged that the child was out of her care from June of 2010 until May of 2013. The child was first in the care of the Children's Aid Society of Toronto. The child then went to live with her aunt and uncle. On May 14, 2013, the child was placed in the joint care of the mother and the child's two aunts. The child lives primarily with the mother.

[17] The father has no contact with the child.

[18] The father issued this motion to change on February 6, 2015. He denied paternity of the child and sought DNA testing.

[19] On May 28, 2015, Justice James Nevins ordered DNA testing. The testing was completed and the father now acknowledges that he is the child's biological father.

[20] On October 7, 2015, Justice Debra Paulseth made a detailed financial disclosure order for the father.

[21] The father did not comply with the financial disclosure order. Another order for financial disclosure was made on January 11, 2016 and the date was set for this hearing.

[22] The father only provided some of the financial disclosure ordered.

Part Three – Legal Considerations

[23] The father's motion to change support is governed by subsection 37(2.1) of the Family Law Act which reads as follows:

Powers of court: child support

(2.1) In the case of an order for support of a child, if the court is satisfied that there has been a change in circumstances within the meaning of the child support guidelines or that evidence not available on the previous hearing has become available, the court may,

(a) discharge, vary or suspend a term of the order, prospectively or retroactively;

(b) relieve the respondent from the payment of part or all of the arrears or any interest due on them; and

(c) make any other order for the support of a child that the court could make on an application under section 33.

[24] The mere accumulation of arrears without evidence of a past inability to pay is not a change in or special circumstance. Present inability to pay does not by itself justify a variation order. It should only be granted if the payor can also prove a future inability to pay. Otherwise, the option is to suspend, or order repayment of arrears. See: Haisman v. Haisman, 1994 ABCA 249, 157 A.R. 47 (C.A).

[25] The Ontario Court of Appeal recently set out the considerations for the court to apply when determining a retroactive downward variation of child support by a payor in Gray v. Rizzi, 2016 ONCA 152.

[26] The court set out that where a payor seeks a retroactive decrease in support, the D.B.S. factors[4] – 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. Although those factors require some minor alteration to suit circumstances where the payor's income has gone down, not up, the fundamentals still apply.

[27] The court applied the process set out in Corcios v. Burgos in paragraphs 56 to 59 as follows:

[56] First, when applying the adapted D.B.S. principles on a motion to retroactively vary child support, one must always keep in mind the ultimate issue: namely, the best interests of the child: DiFrancesco, at para. 24. As Chappel J. stated, "Ultimately, the goal in addressing child support issues is to ensure that children benefit from the support they are owed when they are owed it, and any incentives for payor parents to be deficient in meeting their child support obligations should be eliminated."

[57] Next, a court should distinguish cases where a payor seeks relief from payment of arrears based on current inability to pay from those where arrears accumulated due to a change in the payor's circumstances that affected the payor's ability to make the child support payments when they came due.

[58] A payor's request for relief from payment of arrears based on a current inability to pay generally will not result in the rescission or reduction of arrears unless the payor has established, on a balance of probabilities, that he cannot and will not ever be able to pay the arrears. Evidence that the recipient agreed to non-payment of the support is irrelevant, as child support is the right of the child and cannot be bargained away by the recipient parent.

[59] Where, however, the payor demonstrates that a change in circumstances took place during the time that arrears were accumulating which rendered the payor unable to make child support payments for a substantial period of time, the court may provide relief by varying the child support order or rescinding arrears. As Chappel J. stated: "[the court] may determine that it is appropriate to retroactively suspend enforcement of the support order during the time when the payor was unable to pay, or decrease the amount of child support owed during that time and reduce or rescind the arrears owing accordingly."

[28] In paragraph 60, the court stated that 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. As stated by Chappel J.:

"Behaviour 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 or reduction of arrears";

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;

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. As put by Chappel J.:

[I]f a retroactive order reducing child support would result in the child support recipient having to repay money to the child support payor, this may militate against making the order, particularly if the payor has not given the recipient notice of the change in their circumstances, has not provided appropriate disclosure to support their claim for an adjustment to the child support, or has delayed initiating court proceedings to change the order.

[29] The court considered how the retroactive award should be calculated once it is decided that there should be an adjustment in paragraphs 61-64 as follows:

[61] If a retroactive reduction of child support is appropriate in light of these factors and any other relevant considerations, the court must determine the date from which the reduction should take place and the extent of the reduction. Following D.B.S., a retroactive order normally should commence as of the date of effective notice that a request is being made for a child support adjustment. It is generally inappropriate for a retroactive order to extend back more than three years before formal notice is given.

[62] Where a payor seeks a retroactive reduction in child support or rescission of arrears, effective notice requires the payor to provide "reasonable proof to support the claim for a change to the [order], so that the recipient can independently assess the situation in a meaningful way and respond appropriately." As put by Chappel J.:

A child support recipient is entitled to expect that the existing order will be complied with, and to arrange their financial affairs respecting their children accordingly, unless they are in receipt of reasonable proof that a relevant change in the payor's circumstances has occurred.

[63] This obligation to disclose and negotiate with the recipient parent is ongoing, so that the recipient can assess and react to changes in the payor's financial situation. A payor's failure to comply with his continuing notice and financial disclosure obligations most likely will impact the remedy which the court crafts.

[64] Finally, "with respect to the quantum of any retroactive child support order, the Child Support Guidelines apply, provided that the date of retroactivity is not prior to the date when the Guidelines came into force, and subject to the principles set out in the statutory scheme under which the Court is operating."

[30] In paragraphs 51-60 of Trang v. Trang, 2013 ONSC 1980, the court discussed how courts should address support change motions when income was imputed to a payor in the existing order as follows:

51. When a court imputes income, that's a determination of a fact. It's not an estimate. It's not a guess. It's not a provisional order awaiting better disclosure, or further review. It's a determination that the court had to calculate a number, because it didn't feel it was appropriate to rely on – or wait for -- representations from the payor.

52. A party who argues that an imputed income level is no longer appropriate must go beyond establishing their subsequent "declared" income. They must address why income had to be imputed in the first place. They must present evidence of changed circumstances which establish that either:

a. It is no longer necessary or appropriate to impute income. The payor's representations as to income should now be accepted, even if they weren't accepted before.

Or,

b. Even if income should still be imputed, changed circumstances suggest a different amount is more appropriate.

53. If "declared income" automatically prevailed on a motion to change support, it would defeat the purpose of imputing income in the first place. It might even be a disincentive for payors to participate in the initial court process. They could simply ignore support Applications – as they often do. They could wait to see if the court imputes income, and how much. If dissatisfied with the amount, the payor could later return to court waving their tax returns, to suggest that the original judge got it wrong.

54. Support claimants should not be forced to go through this two-step process. Our family court system certainly can't afford it.

55. Similarly, the onus should not fall on the support recipient to establish why income should still be imputed on a motion to change. That determination has already been made. The onus is on the support payor to establish that there should be a change in the way their income is to be calculated.

56. If for example the original support order imputed income because the court concluded an unemployed payor should have been working, it would be illogical to allow the payor to extinguish that determination by returning on a motion to change, with proof that he wasn't working. That wouldn't constitute a change in circumstances.

57. If a trial judge imputed income to a self-employed person on the basis that their tax return didn't reflect cash sales and excessive write-offs, there should be a presumption that so long as the payor maintains the same business activities and accounting practices, subsequent tax returns will be equally unreliable.

58. Imputed income matters. The reason why income had to be imputed matters.

59. If an aggrieved party feels income was wrongly imputed, they can take timely steps to correct the original determination. They can appeal. They can bring a motion to set aside the order based on mistake or misrepresentation.

60. But if a payor proceeds by way of motion to change, they must face the presumption that the original order was correct – and the original imputation of income was correct. If they want to rely on their declared income, they must establish why this time their representations should be accepted by the court.

[31] The law was summarized by Justice Sheilagh O'Connell, who wrote in paragraph 38 of Nejatie v. Signore, 2014 ONCJ 653:

It is well settled law that, if income is imputed, then the issue will generally be res judicata on a motion to vary or change support. See: Bemrose v. Fetter, 2007 ONCA 637, 228 O.A.C. 311, 42 R.F.L. (6th) 13, [2007] O.J. No. 3488, 2007 CarswellOnt 5819 (Ont. C.A.). Although the court always has discretion with respect to the issue of res judicata and can consider fraud, fresh evidence, additional disclosure or issues of fairness, the principle of res judicata provides that generally, a matter cannot be re-litigated once it has been determined on its merits.

[32] A self-employed person has the onus of clearly demonstrating the basis of his or her net income. This includes demonstrating that the deductions from gross income should be taken into account in the calculation of income for support purposes. See Whelan v. O'Connor, [2006] O.J. No. 1660, (Ont. Fam. Ct.).

[33] The self-employed have an inherent obligation to put forward not only adequate, but comprehensive records of income and expenses, from which the recipient can draw conclusions and the amount of child support can be established. See: Meade v. Meade, 31 R.F.L. 5th 88 (Ont. SCJ).

Part Four – The Father's Evidence

[34] The father testified that his father trained him to become a framer. He started working as a framer in his father's business in 1998.

[35] The father formed a framing business with his brother in 2006.

[36] The father spent about 6 months in jail during 2007 and 2008. This related to a conviction for assaulting the mother.

[37] The father also spent about 8 months in jail, starting on June 16, 2011. He stated this also related to his assault against the mother and subsequent breaches of release terms.

[38] The father deposed that his business closed in 2008 and when he was released from jail he went to work for another brother– also as a framer. The father said he was paid $14 or $15 per hour by his brother. The father worked for this brother (except when he was in jail) until May of 2012.

[39] The father started a new framing business with his brother[5] in May of 2012. They continue to operate this business as equal partners.

[40] In his financial statement, the father deposed that he earned $30,762 in 2015. He claimed that his current annual income is $24,000.

[41] The father filed Notices of Assessment indicating his income has been as follows:

• 2009 – 0
• 2010 – 0
• 2011 – not provided
• 2012 - $12,386
• 2013 - $30,086
• 2014 - $30,761
• 2015 – not provided

[42] The father claimed that he never earned $45,000 per annum. He testified that a letter produced by the mother to the court in 2009, stating that he earned this income was fraudulent.[6]

Part Five – Analysis

[43] The mother conceded that there was a change in circumstances for three years (from 2010 to 2013), affecting child support, as the child was not in her care. The father will receive full credit for the support accrued during this period. The mother was in receipt of social assistance for one month while the child was out of her care. Accordingly, the arrears owing to the assignee will be reduced by one month of child support ($415) and the arrears owing to the mother will be reduced by 35 months of child support ($14,425).

[44] The father did not meet his onus to show that there should be any further changes to the existing order.

[45] The father testified that he earned no income for the 8 months he was in jail from June of 2011 until February of 2012. However, he will not receive any support credit for this period. His change in circumstances arose out of being convicted for assaulting the mother and breaching the terms of his release. The child should not be deprived of support for this period because of the father's criminal behaviour. Where the underemployment or unemployment is the result of one's own actions (an event over which the payor had some control) or misconduct, the support obligations will not be reduced or cancelled. See: Rogers v. Rogers, 2013 ONSC 1997; Maurucci v. Maurucci, 2001 CarswellOnt 4349 (SCJ); Sherwood v. Sherwood; Clark v. Jones, [2003] S.J. No. 346 (SKQB).

[46] The father was not a credible witness. He relied on his Notices of Assessment to support his submission that he earned no income in 2009 or 2010. However, when questioned, the father admitted that he was working 30 hours per week as a framer for his brother during this time and was earning $14 to $15 per hour. The father said that he is being reassessed by Revenue Canada and acknowledged that the Notices of Assessment are not an accurate reflection of his income.

[47] The father failed to comply with two financial disclosure orders in a timely or complete manner.

[48] The father failed to produce any income tax returns. He did not provide any Statements of Business or Professional Affairs. The bank records he was ordered to provide were incomplete. He did not provide his personal bank records for 2015. There was no documentation provided about his business expenses or whether any of these expenses might have been personal. The father's evidence about his income was very unreliable. An adverse inference is drawn against him for his failure to provide meaningful financial disclosure.

[49] The father did not raise the issue that the letter used to impute his income in the 2009 court decision was fraudulent until he testified at this trial. His allegation was not contained in his motion to change, even though he was represented by counsel at the time.

[50] The mother explained that the letter was written for the father's Brampton child support case. She said that she still had a copy of the letter and submitted it to the court in support of her child support claim. The father fell well short of showing that the letter was fraudulent.

[51] The father failed to produce any meaningful evidence that the income imputed to him in the existing order was inaccurate or should be changed. He does not get a do-over in 2016, when he chose not to participate in the court case or file financial disclosure in 2009.

[52] The father claimed that he has a very low income, yet agreed that framers are paid on average about $26 per hour. A full-time framer should earn about $55,000 per annum. The father has over 16 years of experience as a framer and could not adequately explain the reason for his low income.

[53] The evidence showed that the revenue of the father's business has been increasing. The father deposed that the gross revenue of the business in 2014 was $93,132. A review of the business' bank receipts for the first 11 months in 2015 showed deposits of over $121,000.

[54] The father was unable to explain why annual deposits into his personal bank account significantly exceeded the income he has been claiming on his tax returns. For instance, his personal bank deposits totaled $31,476 in 2012 and he claimed income of under $13,000.

[55] The father was unable to adequately explain how he is meeting his expenses. He lives in a home that is owned 99% by his wife (and 1% by her father). It was purchased for $520,000 in August of 2014. The house costs about $2,600 per month to maintain – more than the father claims that he earns in a month. The father deposed that his wife is only receiving $1,500 per month on maternity leave.

[56] The father provided no excuse for his delay in bringing this motion to change for over 5 years.

[57] The father deposed that he has kept his child support payments for his child in the Brampton case in good standing. He is heavily in arrears for this child.

[58] The father had the ability to pay the child support ordered. He chose not to.

[59] The father deposed in his financial statement that he spends $225 per month on alcohol and tobacco.

[60] The child needs the support ordered.

[61] The father has not acted in good faith. He failed to produce annual financial disclosure as required in the existing order. He has preferred the interests of his other children to the child. He failed to properly comply with the court's financial disclosure orders and tried to represent he has been earning far less income than he has actually earned.

[62] The father did not plead undue hardship pursuant to section 10 of the guidelines. Even if he had made such a claim, the evidence did not support it. The father did not establish that the guidelines amount is exceptional, excessive or disproportionate, not merely awkward or inconvenient. See: Hanmore v. Hanmore, 2000 ABCA 57. The father also had the onus of providing sufficient documentation to demonstrate that his standard of living is lower than the mother's. See: Van Gool v. Van Gool. The father did not establish that he has a lower standard of living than the mother. The evidence was to the contrary.

[63] The court acknowledges that the father has created a financial mess for himself. He now has five children to support. It might take a while to pay the support arrears, but these factors can be addressed with a reasonable repayment arrangement.

[64] The court will order that the father may repay the outstanding arrears at the rate of $75 per month, as requested by the assignee. However, if he is more than 30 days late in making any ongoing or arrears support payments, the entire amount of arrears shall immediately become due and payable. In recognizing that the father's financial circumstances will be strained until his wife returns to work in the fall, he will not have to start making the arrears payments until October 1, 2016. He is to continue paying the ongoing child support payments of $415 per month.

Part Six – Conclusion

[65] A final order shall go as follows:

a) The father's support arrears owing to the mother shall be reduced by $14,525. This is a credit of 35 months at $415 per month for the time the child was not in the mother's care between 2010 and 2013.

b) The father's support arrears owing to the assignee shall be reduced by $415. This is a credit of 1 month, when the child was not in the mother's care and she had assigned support to the assignee.

c) The arrears presently owing to the assignee are now $5,395. The balance of the support arrears are owed to the mother.

d) There shall be no further changes to the existing order. The balance of the father's motion to change is dismissed.

e) The father may repay the balance of arrears at the rate of $75 per month, starting on October 1, 2016. However, if he is more than 30 days late in making any ongoing or arrears support payment, the entire amount of arrears owing at the time, shall immediately become due and payable.

f) Nothing in this order precludes the Director of the Family Responsibility Office from collecting arrears from any government source, such as HST or income tax refunds, or any lottery or prize winnings.

g) A support deduction order shall issue.

[66] If any participant in this case seeks costs they shall serve and written submissions by May 18, 2016. The other participants shall then have until May 30, 2016 to serve and file a written response. The submissions shall not exceed two pages, not including any offer to settle or bill of costs.

Released: May 4, 2016

Justice S.B. Sherr

Footnotes

[1] The court was not provided with a statement of arrears. The father deposed that the arrears were over $22,000 in January of 2016. The mother said they are now over $25,000.

[2] This is a significant credit - $415 per month x 36 months = $14,940.

[3] The father did not produce a copy of the Brampton order.

[4] See: D.B.S. and S.R.G. v. T.A.R. and L.J.W., 2006 SCC 37, 2 S.C.R. 231.

[5] This was the first brother, who was the father's partner in the framing business that was formed in 2006.

[6] This letter, on the father's business letterhead, said that the father had worked for the business for 9 years and his annual salary was $45,000. It stated that the father's current position is "Framer".