Pinto v. Ponciano, 2016 ONSC 6466

CITATION: Pinto v. Ponciano, 2016 ONSC 6466

COURT FILE NO.: FS-16-0084-00

DATE: 2016-11-16

ONTARIO

SUPERIOR COURT OF JUSTICE

(FAMILY COURT APPEAL)

B E T W E E N:

MARIA PINTO

Gabrielle Pop-Lazic/Sanaz Golestani, for the Appellant

Appellant

• and -

ANTONIO PONCIANO

Self-represented

Respondent

HEARD: October 17, 2016,

at Brampton, Ontario

Price J.

Reasons For Order

[On appeal from an Order of Justice Clay of the Ontario Court of Justice, Family Court, at Brampton, dated March 30, 2016, Amended on May 16, 2016]

NATURE OF MOTION

1After ignoring his disabled spouse, Ms. Pinto’s, requests for financial disclosure for nine years, in breach of the parties’ separation agreement, Mr. Ponciano ignored her application to the Ontario Court of Justice to enforce his disclosure obligations and adjust the amount of support he was required to pay for her and their child. When Mr. Ponciano failed to respond to Ms. Pinto’s application, or to make financial disclosure as the rules of court required, Justice Colvin, in an unopposed proceeding, imputed income of $100,000 to Mr. Ponciano, and ordered him to pay child support based on that amount. Three months later, Mr. Ponciano quit the $85,000 job which he had held for 11 years, and two months after that, took a less demanding job that paid him $35,000.

2Three years later, when the Canada Revenue Agency learned that the Family Responsibility Office was garnishing Mr. Ponciano’s salary for over $20,000 in support arrears that had arisen following Justice Colvin’s support order, the Canada Revenue Agency disallowed Mr. Ponciano’s claims for deductions for support he said he was paying, and began garnishing his salary for tax arrears. Only then did Mr. Ponciano disclose his financial information, in support of his own motion to the Ontario Court of Justice to change Justice Colvin’s Order.

3Based on Mr. Ponciano’s evidence that he had quit his job in 2012, and based on his taxpayer information, which showed that he had earned only $85,000 when Justice Colvin made his order, Justice Clay found that there had been a material change of circumstances that justified a reduction of the income that Justice Colvin had imputed to Mr. Ponciano from $100,000 to $85,000. Additionally, based on the fact that Mr. Ponciano had paid already paid child support for 2.5 years based on a higher level of income than he had actually earned, Justice Clay reduced the income he imputed to him even further from the date of his motion onward, to the $57,200 amount that he had earned 13 years earlier, when the parties had first separated.

4Ms. Pinto appeals from Justice Clay’s Order. She says that Justice Clay made the following errors in applying the law, or palpable and overriding errors of fact:

c) His Honour applied the wrong legal test in deciding that there had been a material change of circumstances, as he never considered whether the outcome of the proceeding in 2012 would have been any different if Justice Colvin had known Mr. Ponciano was going to quit his job three months later.

d) His Honour wrongly relied on financial and taxpayer information that Mr. Ponciano had withheld in 2012, when Justice Colvin made his order, in retroactively reducing the income that Justice Colvin had imputed to Mr. Ponciano, from $100,000 to $85,000.

e) His Honour wrongly based his decision to reduce the income he imputed to Mr. Ponciano still further, from $85,000 to $57,200, in the absence of any evidence from Mr. Ponciano that he was incapable of earning income in the greater amount, or that had tried to do so, and especially having regard to his admission that he had never made such efforts.

5For the reasons that follow, Ms. Pinto’s appeal from Justice Clay’s order will be allowed. The current regime of spousal and child support depends on self-reporting by spouses. Parliament, by the Divorce Act, directs the court, when making orders for child support, to determine the amount in accordance with the Federal Child Support Guidelines. The Guidelines require the court to base the amount of child support on the payor spouse’s income, calculated, in the first instance, by reference to the payor’s tax information. However, Parliament prohibits the Canada Revenue Agency from disclosing taxpayer information to the recipient spouse, to whom the payor spouse has a legal obligation to produce it, or to the court. This results in frequent family law litigation arising from the failure of a payor spouse, as in the case of Mr. Ponciano, to disclose the taxpayer information which he controls.

6The burden of this legislative incongruity between a dependent spouse’s need for support, and corresponding need for the payor spouse’s taxpayer information, and the prohibition on the Canada Revenue Agency from disclosing such information, must fall on the payor spouse. Mr. Ponciano, by failing to comply with the self-reporting obligation that Parliament imposed on him, exploited his privacy to Ms. Pinto’s detriment, by depriving her and their child of the support they needed, and were entitled to receive, from 2002 to 2012, and again, from 2012 to 2015. He ceased doing so only when the Canada Revenue Agency itself, by refusing to allow his deductions for support any longer, and by beginning to garnish his salary for unpaid taxes, made it expedient for him to disclose his taxpayer information for the first time to the court.

7Mr. Ponciano repeatedly withheld his taxpayer information from Ms. Pinto:

a) from 2002 to 2012, in breach of their Agreement;

b) during Ms. Pinto’s motion to change in 2012, in breach of the Family Court Rules; and

c) from September 6, 2012, to September 1, 2015, in breach of Justice Colvin’s order.

He then sought to rely on the information in support of his own motion to change in 2015.

8Retroactively reducing the income that Justice Colvin imputed to Mr. Ponciano, based on the financial and taxpayer information that he withheld from the court in that earlier proceeding, had the effect of ratifying the wrong that Mr. Ponciano had perpetrated against Ms. Pinto, both before and after Justice Colvin made his order. Allowing Justice Clay’s decision to stand, in the face of the legal errors made, would reinforce the power imbalance that existed between Mr. Ponciano and Ms. Pinto, by allowing Mr. Ponciano to exploit the privacy of his taxpayer information to his advantage and to Ms. Pinto’s detriment.

9Mr. Ponciano, who left an $85,000 position in 2012 for a less demanding $35,000 one in 2013, and who made no effort to secure higher paying employment, even when it was readily available to him, and who offered no proof that he was not capable of earning income at the higher amount, must continue paying support based on that higher amount. The support he pays can only be reduced based on a true material change of circumstances, which he has the power to bring about by making a genuine effort to employ his capacity to earn income fully, for the benefit of Ms. Pinto and their child.

BACKGROUND FACTS

10Maria Pinto (“Ms. Pinto”) and Antonio Ponciano (“Mr. Ponciano”) were married on May 7, 1983. They separated 19 years later, in August 2002. They were divorced in 2014.

11Ms. Pinto and Mr. Ponciano have two children together, Jenine Ponciano, who is currently 29 years old and independent, and Haillie Ponciano, who is now 16 (born October 10, 2000) and resides with Ms. Pinto.

12During the marriage, when Ms. Pinto was 28 years old, she was seriously injured in a car accident. She was in an induced coma for a month and suffered residual verbal and visual-spatial amnesia, which limits her ability to maintain employment. She has received CPP long term disability benefits since 1993.

Judicial Proceeding

13Shortly after the parties separated, they entered into a Final Separation Agreement dated December 4, 2002 (“the Agreement”). The Agreement gave Ms. Pinto sole custody of the children, who were to reside primarily with her. The Agreement contained the following terms, among others:

a) Paragraph 9(2) provided that Mr. Ponciano was to pay child support of $788.50 per month, based on his then income of $57,200.

b) Paragraph 12(1) provided that he was to pay spousal support of $250 per month based on his income, and based on Ms. Pinto’s disability benefits of $12,643. The spousal support was to increase annually, beginning January 1, 2004, by the percentage change from the previous year in the Consumer Price Index for Canada, as published by Statistics Canada.

c) Paragraph 9(4) provided that the parties would exchange “income tax returns with attachments on or before May 15th of each year, and any Notices of Assessment received upon receipt,” and that the child support payments would be adjusted effective June 1st, beginning June 1, 2003.

d) Paragraph 13 provided for variation of child and spousal support in the event of a material change in circumstances, by means of an application pursuant to the Divorce Act.

14Mr. Ponciano made only sporadic payments of child and spousal support. As a result, on February 21, 2003, Ms. Pinto filed the Agreement with the Ontario Court of Justice, in order to secure enforcement of her support by the Family Responsibility Office (“FRO”).

15Ms. Pinto made several requests for Mr. Ponciano to comply with his disclosure obligations pursuant to the Agreement, and to provide her with his up-dated taxpayer information. Mr. Ponciano ignored these requests. Finally, Ms. Pinto applied to the Ontario Court of Justice in February 2012, to enforce Mr. Ponciano’s disclosure obligations and to adjust her child support based on his current income.

Justice Colvin’s Final Order

16Mr. Ponciano ignored Ms. Pinto’s Application, failing to deliver an Answer or to file Financial Statement in the proceeding, as the Family Law Rules required. He did not attend court, and was noted in default. Ms. Pinto proceeded to an uncontested trial before Justice T. Colvin, who made a final order on September 6, 2012. The order granted Ms. Pinto custody of Heillie, imputed income of $100,000 to Mr. Ponciano, and ordered Mr. Ponciano to pay child support, spousal support, arrears of child support, and extraordinary expenses based on that income.

17Justice Colvin’s Order additionally required Mr. Ponciano to produce up-dated financial disclosure to Ms. Pinto each year within 30 days of the anniversary of the Order, in accordance with section 24.1 of the Federal Child Support Guidelines (“the FCSG” or “Guidelines”). Mr. Ponciano ignored Justice Colvin’s Order. He failed to pay child support or spousal support at the required level, and failed to disclose his taxpayer information.

The Aftermath of Justice Colvin’s Order

18On March 15, 2013, Ms. Pinto sent Mr. Ponciano a letter requesting support. On June 9, 2013, she sent a further letter, requesting that he disclose his income. Mr. Ponciano ignored these requests. He had provided no financial disclosure to her since 2002.

19Mr. Ponciano, who had been up-to-date in 2012 in the support payments that the Agreement required based on his 2002 level of income, began to accrue arrears by failing to pay the higher amount of support that Justice Colvin had ordered in 2012. The arrears reached $21,162.36. Mr. Ponciano also failed to pay special and extraordinary expenses in the amount of $1,800, and costs in the amount of $600, required by Justice Colvin’s Order.

20Finally, the Canada Revenue Agency, discovering that the Family Responsibility Office was garnishing Mr. Ponciano’s salary for unpaid support, ceased to recognize his deductions for support, re-assessed his income tax, and began garnishing his salary for unpaid income tax. Mr. Ponciano then, in September 2015, made a motion to change the final order of Justice Colvin, and disclosed the taxpayer information that he had previously withheld.

Mr. Ponciano’s Resignation and New Employment

21Mr. Ponciano was employed at Highland Farms Inc. for over 12 years, from December 11, 2000, to December 15, 2012. In 2011, he earned income of $79,554, and withdrew $4,869 from his RRSP, with the result that he had a total Line 150 income of $84,453 that year. In 2012, he earned income from Highland Farms which, on an annualized basis, amounted to approximately $85,000.

22On December 15, 2012, three months after Justice Colvin made his order, Mr. Ponciano voluntarily quit his managerial position at Highland Farms. Two months later, on February 14, 2013, he took a less demanding job at Ferma Farms, where he earned, and still earns, $35,000.

Mr. Ponciano’s Motion to Change Justice Colvin’s Final Order

23Mr. Ponciano did not notify Ms. Pinto of his change of employment or of his reduced income until July 2015, three years after quitting his job at Highland Farms. He did so for the first time in his Motion to Change the final order of Justice Colvin. He offered no explanation as to why he had waited almost 3 years before making the motion, allowing over $20,000 in arrears of unpaid child and spousal support to accrue. He gave that explanation only at the hearing before this court, when he adverted for the first time to the Canada Revenue Agency’s disallowance of his deductions for spousal support, their re-assessment of his income tax, and their garnishment of his salary for unpaid taxes.

24In support of his motion, Mr. Ponciano filed a Change Information Form and Financial Statement, both sworn July 8, 2015. His financial disclosure was incomplete and inaccurate in the following respects:

a) He failed to produce his income tax return for 2014.

b) He failed to disclose investment accounts at AGF and PrimeAmerica which were disclosed in his bank statements.

c) He failed to list, in his Financial Statement, bank accounts for which he produced monthly statements.

d) He failed to produce monthly statements for bank accounts that were listed in his Financial Statement.

e) Although he indicated in Schedule B of his Financial Statement that he resided with a spouse or partner, he failed to disclose any financial information pertaining to her.

25Mr. Ponciano’s disclosure in his Motion to Change in 2015 showed that in 2012 he had T-4 income of $79,554 and had withdrawn $4,869 from his RRSP, with the result that his total Line 150 income was $84,453. It additionally showed that at the time when he quit his employment on December 15, 2012, he was earning income that, on an annualized basis, was approximately $85,000.

26Mr. Ponciano did not provide evidence, in his motion, of any efforts he had made to find higher paying employment from December 2012, when he quit his $85,000 position at Highland Farms, to July 2015, when he had made his Motion to Change. He stated that he had not made any such efforts, and that he preferred his current position, as it is less stressful and does not require him to work on weekends.

Justice Clay’s Decision

27On March 30, 2016, Justice Clay released his decision, allowing Mr. Ponciano’s motion to change the final order of Justice Colvin. At paragraph 34 of his reasons, Justice Clay concluded, “In this matter, I find that there was a material change in circumstances when the father quit his job on December 15, 2012.”

28Justice Clay imputed income of $85,000 to Mr. Ponciano for the period up to August 31, 2015, immediately before he made his motion to change. He did so based on the taxpayer information that Mr. Ponciano had tendered in support of his motion, even though he had withheld that information in the 2012 proceeding that had led to Justice Colvin’s Order. He thereby reduced Mr. Ponciano’s child support obligation from $880 per month to $762 per month.

29Justice Clay reduced the income that he imputed to Mr. Ponciano even further, to $57,200, for the period from September 1, 2015, onward, based on the income that Mr. Ponciano had earned 13 years earlier, in 2002. He thereby reduced Mr. Ponciano’s support obligation still further, from $880 per month based on the income imputed to him by Justice Colvin, to $519 per month based on the income Justice Clay then imputed to him.

ISSUES

30Ms. Pinto’s appeal requires the court to determine the following issues:

a) What is the applicable standard of review?

b) Did Justice Clay err in his determination of the following:

1. Was there a material change in circumstances?

2. Should there be a retroactive variation of support?

3. What income should be imputed to Mr. Ponciano?

PARTIES’ POSITIONS

31Ms. Pinto argues that Justice Clay misapplied the legal principles. In finding that Mr. Ponciano’s quitting of his job on December 15, 2012, was a material change of circumstances, and in retroactively varying the income that Justice Colvin had imputed to him. Additionally, she argues that Justice Clay made a palpable and overriding error in reducing the income he imputed to Mr. Ponciano still further, to $57,200, and in further reducing his support obligation, from September 1, 2015, onward.

32Ms. Pinto submits that His Honour incorrectly applied legal principles in respect of the following questions of law:

a) He misapplied the legal test for determining whether there has been a material change in circumstances, in determining that there was such a change on December 15, 2012, when Mr. Ponciano quit his job. He failed to consider whether the change of circumstances caused by Mr. Ponciano’s resignation, because it resulted from an unreasonable action by Mr. Ponciano, was “material”, in the sense that it would have resulted in a different outcome by Justice Colvin if it had occurred earlier, and had been known by Justice Colvin when he made his order.

b) He misapplied the legal principles governing the retroactive variation of support, by imputing income of $85,000 to Mr. Ponciano in place of the $100,000 that Justice Colvin imputed to him at an uncontested trial, based on evidence that Mr. Ponciano had wrongfully failed to disclose in the uncontested proceeding, but later relied on in support of his own motion to change Justice Colvin’s order.

33Ms. Pinto additionally argues that Justice Clay made palpable and overriding errors of law in respect of a question of fact, by imputing income of $57,200 to Mr. Ponciano based on the amount of income he had earned 13 years earlier. Ms. Pinto argues that there was no evidence that Mr. Ponciano was no longer capable of earning the $85,000 that he had earned on December 15, 2012, when he quit his job at Highland Farms, or that he could have earned in May 2013 from one of his former employers at Coppa’s Fresh Market. There was also no evidence that he had tried to obtain higher paying employment and, in fact, he admitted that he had made no such efforts.

34Mr. Ponciano did not file responding material in the appeal.

ANALYSIS AND EVIDENCE

a) What is the standard of review applicable to the appeal?

(i) Appeal from a determination of fact, or mixed fact and law

35In an appeal from determinations of questions of fact, or of the factual aspect of a mixed question of fact and law, the court applies the higher standard of review based on the reasonableness of the determination. In these aspects of the present appeal, Ms. Pinto must establish that Justice Clay made a palpable and overriding error, meaning one that is plainly seen or obvious.¹

36The determination of a spouse’s income is a question of fact. An appeal court should not overturn a support order except where the motions judge made an error in principle, a significant misapprehension of the evidence, or unless the award is clearly wrong. The appellate court may not overturn a support order solely because it would have reached a different decision or balanced the factors differently.²

37Justice L’Hereux-Dubé, speaking for the Supreme Court of Canada in Hickey v. Hickey, in 1999, explained why the standard is one of reasonableness:

There are strong reasons for the significant deference that must be given to trial judges in relation to support orders. This standard of appellate review recognizes that the discretion involved in making a support order is best exercised by the judge who has heard the parties directly. It avoids giving parties an incentive to appeal judgments and incur added expenses in the hope that the appeal court will have a different appreciation of the relevant factors and evidence. This approach promotes finality in family law litigation and recognizes the importance of the appreciation of the facts by the trial judge.³ [Emphasis added]

38The court must determine whether Justice Clay made a palpable and overriding error of law in respect of the following determinations of fact:

a) Retroactively substituting his own imputation of $85,000 income for the $100,000 income that Justice Colvin had imputed to him, for the period from October 1, 2012, immediately after Justice Colvin made his order, to August 31, 2015, immediately before Mr. Ponciano made his Motion to Change, based on evidence of financial information that Mr. Ponciano had withheld in the uncontested proceeding before Justice Colvin, but that he tendered three years later, in support of his motion before Justice Clay to change Justice Colvin’s final Order made in the earlier proceeding.

b) Imputing an income of $57,200 to Mr. Ponciano for the period from September 1, 2015, when he made his Motion to Change, onward. The court must determine whether it was a palpable and over-riding error of law to impute to Mr. Ponciano the income he had earned 13 years earlier, in 2002, having regard to the following:

1. The absence of evidence that Mr. Ponciano was no longer capable of earning $85,000, which he had earned on December 15, 2012, when he quit his position at Highland Farms, or that he could have earned in May 2015 from one of his previous employers at Coppa’s Fresh Markets;

2. The absence that he had made any efforts to seek employment with a higher pay than the $35,000 he has earned at Ferma Farms since February 14, 2013; and

3. His admission that he had made no such efforts.

(ii) Appeals from a determination of a pure question of law, or a question of law involved in a mixed question of fact and law

39In an appeal from a determination of a question of law, the appellate court applies the lower standard of review of correctness. In such cases, the appellant must establish that the motions judge misapplied the legal test of legal principles. A determination of what legal test applies on a motion to vary a final order for support is a question of law which is reviewed based on the standard of correctness.

47The determination of whether there has been a material change of circumstances is a question of mixed fact and law. It involves a determination of fact, as to whether there was a change of circumstances, and as to whether that change would have resulted in a different outcome had it been known when the original order was made.

48In the present case, there is no dispute that Mr. Ponciano’s quitting his $85,000 employment on December 15, 2012, caused a change in his financial circumstances. The basis upon which Ms. Pinto appeals from Justice Clay’s order, however, is that he failed to apply the correct legal test in determining whether the change in circumstances was material. Ms. Pinto asserts that Justice Clay failed to consider whether, having regard to his finding that Mr. Ponciano’s decision to quit his employment was unreasonable, it would have resulted in a different outcome had Justice Colvin been aware of it. As that part of the determination involves a question of law, the court applies a standard of correctness in determining whether the proper legal test was applied.

49This court must determine whether Justice Clay applied the incorrect legal test or incorrect principles of law in determining whether Mr. Ponciano’s resignation from his $85,000 position at Highland Farms on December 15, 2012, was a material change of circumstances. Ms. Pinto asserts that Justice Clay erred in failing to consider whether, having regard to his finding that the resignation was unreasonable, it would have resulted in a different outcome if Justice Colvin had been aware of it on September 6, 2012, when he imputed an income of $100,000 to Mr. Ponciano.

b) Did Justice Clay make a palpable and over-riding error when he imputed an income of $85,000 in place of the $100,000 imputed to him by Justice Colvin, based on financial disclosure that Mr. Ponciano withheld in Ms. Pinto’s uncontested proceeding before Justice Colvin in 2012, but tendered three years later in support of his own Motion to Change Justice Colvin’s Order?

50Justice Clay made a finding as to the income that Mr. Ponciano earned in 2012, based on the tax information that Mr. Ponciano tendered, which he had withheld in the earlier proceeding. Justice Clay stated, at paragraph 30 of his reasons:

The mother seeks an order that the imputed income of $100,000 should continue indefinitely. I find that as there is no evidence before the court that the father ever earned more than $82,479 in his full-time work that it would not be reasonable to impute $100,000 to him after September 6, 2012.

51Justice Clay later concludes, at paragraph 48 and 49 of his reasons:

I find that the father should be imputed to have an income from September 1, 2012, to August 31, 2015, of $85,000 per year.

As to the amount of income, I note that the father earned $84,453 in 2011 albeit $4,869 of that income was due to RRSP withdrawals. I also note that he earned $82,479 in 2012 and that was for 50 weeks as he quit his job on December 15, 2012. If I add two more weeks of income he would have earned $85,778 in 2012. It is reasonable to expect that if he had not left his job the father would have earned $85,000 per year.

52Where a payor spouse seeks to vary a support order made pursuant to the Family Law Act on the basis that the payor spouse never earned the income imputed to him after he was noted in default, the party seeking such a change must establish that there has been a material change in circumstances. Section 37(2.1) of the Family Law Act provides:

37(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 33.⁴ [Emphasis added]

53Similarly, section 17 of the Divorce Act provides:

17.(1) A court of competent jurisdiction may make an order varying, rescinding or suspending, prospectively or retroactively,

(a) a support order or any provision thereof on application by either or both former spouses;

(4) Before the court makes a variation order in respect of a child support order, the court shall satisfy itself that a change of circumstances as provided for in the applicable guidelines has occurred since the making of the child support order or the last variation order made in respect of that order.⁵ [Emphasis added]

54Both the Family Law Act and the Divorce Act apply the definition of a change of circumstances contained in The Federal Child Support Guidelines (“FCSG”). Section 14 of the FCSG provides:

14. For the purposes of subsection 17(4) of the Act, any one of the following constitutes a change of circumstances that gives rise to the making of a variation order in respect of a child support order:

(a) in the case where the amount of child support includes a determination made in accordance with the applicable table, any change in circumstances that would result in a different child support order or any provision thereof;

(b) in the case where the amount of child support does not include a determination made in accordance with a table, any change in the condition, means, needs or other circumstances of either spouse or of any child who is entitled to support.⁶ [Emphasis added]

55In Trang v. Trang, in 2013, Justice Pazaratz stated:

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.

A party who argues that an impute 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 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.

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.

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

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.

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

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.

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 there representations should be accepted by the court.⁷ [Emphasis added]

56When Mr. Ponciano sought an order from Justice Clay varying the order of Justice Colvin, he was required to establish that there had been a material change in circumstances since Justice Colvin made his order. Establishing a material change in circumstances where, in the circumstances that prevailed when Justice Colvin made his order, Justice Colvin determined that it was necessary to impute an income to Mr. Ponciano, entails establishing:

a) Why it is no longer appropriate to impute income to him; and

b) New facts or circumstances which, if known at the time, would likely have resulted in different terms of the order.⁸

57A spouse is not permitted, in such a motion, to rely on financial information that he withheld in the proceeding which led to the previous order. In Gray v. Rizzi, in 2016, Brown J.A., speaking for the Court of Appeal, stated:

To allow a party who ignores his or her financial disclosure obligations to later satisfy the requirement and argue that the late disclosure constitutes a material change in circumstances would eviscerate the financial disclosure regime. The practical dangers of such an approach were well-described by Pazaratz J. in Trang v. Trang, 2013 ONSC 1980, 29 R.F.L. (7th) 364, at paras. 53, 54 and 59, discussing motions to change where the final order imputed income to the payor:

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.

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

In this case, the trial judge relied on ss. 37(2) and 37(2.1) of the Family Law Act, R.S.O. 1990, c. F.3, which authorize the variation of spousal and child support orders not only where there is a material change in circumstances, but also on the ground that “evidence not available on the previous hearing has become available…” In her view, “[t]here seems to be no good reason why there should be different tests for varying support under the FLA as opposed to the Divorce Act”: para. 23

Where that should be so or not, the fact remains that the statutes do contain different tests. Section 17 of the Divorce Act does not recognize, as a ground for a variation, that evidence not available prior to the making of a final order later becomes available. Furthermore, while it is not necessary on this appeal to interpret ss. 27(2) and 37(2.1) of the Family Law Act, I have great difficulty in conceiving that “evidence not available on the previous hearing” could include financial information that was “not available” because of a party’s deliberate failure to meet the disclosure obligations.

The trial judge therefore erred in accepting that a motion to change is available to a payor on the basis of financial information that is new to the court because the payor had failed to meet his prior disclosure obligations.⁹ [Emphasis added]

58In the present case, the “change of circumstances” that Mr. Ponciano relied on in his motion to vary Justice Colvin’s order, and on which Justice Clay based his order, was Mr. Ponciano’s resignation from his employment at Highland Farms three months after Justice Colvin made his order. Nevertheless, the change relied upon was a change in income from that which Justice Colvin imputed to Mr. Ponciano at the default hearing before him on September 6, 2012. The court must therefore consider the evidence and facts upon which the original order was made in order to determine whether the new facts and evidence that were before Justice Clay represented a change within the meaning of the FCSG.

59It was an error for Justice Clay to vary Justice Colvin’s final order dated September 6, 2012, based on a finding that a material change in circumstances occurred in December 2012, when Mr. Ponciano resigned from his employment, without determining whether the resignation, had it taken place at the time of the hearing before Justice Colvin, would have resulted in a different outcome at that time. In Favero v. Favero, in 2013, Justice Chappel, in a decision later affirmed by the Divisional Court, stated:

The Ontario Court of Appeal has held that in determining whether to impute income on the basis that a party is intentionally underemployed or unemployed pursuant to section 19(1)(a) of the Guidelines, it is not necessary to establish bad faith or an attempt to thwart support obligations. A parent is intentionally underemployed within the meaning of this section if they earn less than they are capable of earning having regard for all of the circumstances. In determining whether to impute income on this basis, the court must consider what is reasonable in the circumstances. The factors that the court is required to consider include the age, education, experience, skills and health of the party, the party’s past earning history, and the amount of income that the party could reasonably earn if they worked to capacity.¹⁰ [Citations omitted; Emphasis added]

60Apart from the erroneous finding that Mr. Ponciano’s unjustified resignation amounted to a material change in circumstances, Justice Clay’s reassessment of Mr. Ponciano’s income was improper for the following reasons:

a) Justice Clay varied the support order retroactive to October 2012. Going behind the date of the change in circumstances constituted an improper review of Justice Colvin’s determination of Mr. Ponciano’s income.

b) With respect to the imputation of income to Mr. Ponciano from 2015 onwards, paragraph 54 of Justice Clay’s reasons suggests an improper correctness review of Justice Colvin’s final order: “I find that I should impute income to the father of $57,200 per year beginning September 1, 2015. This is the amount that the father admitted earning in December 2002 when he signed the Separation Agreement… If there had never been a Motion to Change and an uncontested order the father would still be paying support on the income he earned 13 years ago…”

Policy considerations underlying the court’s refusal to treat previously undisclosed income as a basis for re-assessing income imputed to a payor spouse

61The present regime of child and spousal support depends on self-reporting and disclosure by spouses. As noted above, s. 17(4) of the Divorce Act provides that the court shall satisfy itself that “a change of circumstances as provided for in the applicable guidelines has occurred since the making of the child support order”.

62Section 26.1 of the Divorce Act empowers the Governor in Council to establish guidelines respecting the making of orders for child support. The Federal Child Support Guidelines (“FCSG”) were promulgated in 1997, under that authority.¹¹

63The FCSG provide, in section 2, that a payor spouse’s income means his annual income, as determined by reference to the methodology set out in sections 15 to 20 of the FCSG. Sections 15 to 19 of the FCSG direct the court to proceed sequentially through four methods of determining a spouse’s income for purposes of child support until it finds the one that is the most fair.¹²

64The four methods set out in section 15 to 9, in summary, are as follows:

a) If the parties agree on the amount, the court accepts that amount.

b) If the parties do not agree, the court applies the spouse’s total income (Line 150) from the spouse’s Notice of Assessment from the Canada Revenue Agency for the most recent year for which tax information is available.

c) If a spouse’s income has fluctuated significantly, the court averages his Line 150 income in the Notices of Assessment for the past three years for which income tax information is available.

65Section 16 of the FCSG provides:

16. Calculation of annual income. -- of Subject to sections 17 to 20, a parent’s or spouse’s annual income is determined using the sources of income set out under the heading “Total income” in the T1 General form issued by the Canada Revenue Agency and is adjusted in accordance with Schedule III. [Emphasis added]

66Section 17(1) of the FCSG provides that if the spouse’s total income for the previous year would not be the fairest way of determining his income for purposes of support, the court may average his income over the last three years to determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income, or receipt of a non-recurring amount during those years.¹³

67Section 19 of the FCSG provides that, in appropriate circumstances (that is, where the previous methods have been found not to be fair), the court may impute a different amount of income to a spouse. Whichever method the court determines is the most fair, the starting point of the court’s analysis is the spouse’s taxpayer information.

68In order to enable the court to make its determinations of child support in accordance with the FCSG, as required by the Divorce Act, both the FCSG and the Family Court Rules impose obligations on the payor spouse to disclose financial information. Spouses in a proceeding where child support is claimed are under a legal obligation to disclose such information, including their tax records, even in the absence of a court order requiring them to do so.

69Sub-rule 15 of the Family Law Rules imposes on a party moving for a variation of a final order, or a party receiving such a motion, the obligation to produce financial statements and other documents at the beginning of the motion. Rule 15 provides, in part:

15. In this rule [Motions to Change a Final Order or Agreement]

(9) The following rules apply to a party who is served with a motion to change a final order or agreement:

1. If the party does not agree to the change or if the party wants to ask the court to make an additional or a different change to the final order or agreement, the party shall serve and file a response to motion to change (Form 15B), with all required attachments, within the time set out in clause (1)(a) or (b), as the case may be.

(10) The documents referred to in paragraphs 1 and 2 of subrule (9) shall be served and filed or returned and provided,

(a) no later than 30 days after the party responding to the motion receives the motion to change and the supporting documents, if that party resides in Canada or the United States of America….[Emphasis added]

70Form 15A (for parties making a motion to change a final order) and 15B (for parties responding to such a motion) provide, in Part 2 – Information from Support Payor, the following:

26. I attach the following financial information about myself:

(a) a copy of every personal income tax return that I filed with Canada Revenue Agency for the 3 most recent taxation years;

(b) a copy of every notice of assessment or re-assessment from Canada Revenue Agency of those returns; and

(c) (applies only if you are an employee) proof of this year’s earnings from my employer as required by clause 21(1)(c) of the Child Support Guidelines. [Emphasis added]

71Rule 9 of the Family Law Rules requires a party serving documents to file them with the court. It provides:

9(12) A party serving documents shall,

(a) If the continuing record has not been separated,

(i) Serve and file any documents that are not already in the continuing record, and

(ii) Serve with the documents an updated cumulative table of contents listing the documents being filed; and

(b) If the continuing record has been separated,

(i) Serve and file any documents that are not already in the party’s separate record, and

(ii) serve with the documents an updated cumulative table of contents listing the documents being filed in the party’s separate record.

(13) A party shall not serve or file any document that is already in the record, despite any requirement in these rules that the document be served and filed. [Emphasis added]

72Rule 13(17) provides explicit authority to the court to order a party to serve and file a document. It provides:

13(17) If a party has not served or filed a document in accordance with the requirements of this rule or an Act or regulation, the court may on motion order the party to serve or file the document and, if the court makes that order, it shall also order the party to pay costs. [Emphasis added]

73Similar requirements apply to a party who makes or receives an original application for child support. The financial disclosure required by Section 21 of the FCSG,¹⁴ incorporated into the Family Law Rules by Rule 13(3.1), includes the following:

a) A copy of every personal income tax return filed by the spouse for each of the three most recent taxation years and the notices of assessment and re-assessment issued to the spouse for each of those years;¹⁵

b) Where the spouse is an employee, the most recent statement of earnings indicating the total earnings paid in the year to date, including overtime or, where such a statement is not provided by the employer, a letter from the employer setting out that information, including the spouse’s rate of annual salary or remuneration.¹⁶ [Emphasis added]

74Only the payor spouse can be required to produce his taxpayer information. Subsections 241(1) and (2) of the Income Tax Act provide that officials of the Canada Revenue Agency cannot be compelled to give or produce evidence relating to taxpayer information in civil legal proceedings, including to a recipient spouse, whom the Family Law Rules entitle to the information, as noted above. The Income Tax Act provides, in this regard:

241.(1) Except as authorized by this section, no official or other representative of a government entity shall

(a) knowingly provide, or knowingly allow to be provided, to any person any taxpayer information;

(b) knowingly allow any person to have access to any taxpayer information; or

(c) knowingly use any taxpayer information otherwise than in the course of the administration or enforcement of this Act, the Canada Pension Plan, the Unemployment Insurance Act or the Employment Insurance Act or for the purpose for which it was provided under this section. [Emphasis added]

75Subsection 241(2) provides that even the court, whom the Divorce Act requires to base its child support orders on taxpayer information, and whose rules require the payor spouse to produce such information to the recipient spouse and file it in court, cannot compel the Canada Revenue Agency to disclose the payor spouse’s taxpayer information. Subsection 241(2) provides:

(2) Notwithstanding any other Act of Parliament or other law, no official or other representative of a government entity shall be required, in connection with any legal proceedings, to give or produce evidence relating to any taxpayer information. [Emphasis added]

76The comprehensive code set out in section 241 of the ITA is designed to protect the confidentiality of all information given to the Minister for the purposes of the ITA. The Court of Appeal, in Glover v. Glover et al, in 1980, described subsection 241(2) as an all-embracing provision which applies to any legal proceeding and to the Court, unless the proceeding falls under one of the exceptions found in subsection 241(3).¹⁷

77The Court of Appeal in Glover stated that section 241 provides “a clear statement of parliamentary policy that no information obtained for the purpose of the Act shall be communicated and no official or authorized person shall be required to give evidence relating to such information in any non-Income Tax Act civil legal proceedings.”¹⁸ The Supreme Court of Canada, in Glover, upheld the Court of Appeal’s decision.¹⁹

78The Supreme Court of Canada held, in Slattery (Trustee of) v. Slattery, in 1993, that the confidentiality provisions of subsection 241(1) and (2) apply to any legal proceeding of a civil character:

… [I]n Glover, the proceedings in question had no connection whatsoever with the administration or enforcement of the Income Tax Act. As a result, this Court’s decision must be read to mean that the confidentiality provisions apply to any legal proceeding of a civil character which is not covered by the exception provided in s. 241(3). In other words, ss. 241(1) and (2) apply to civil proceedings which are not related to the administration or enforcement of the Income Tax Act.²⁰ [Emphasis added]

79Pursuant to the ITA, Taxpayer information may only be provided where one of the exceptions under section 241 of the ITA apply. Subsection 241 provides, in part:

(4) An official may

(k) provide, or allow inspection of or access to, taxpayer information, to or by any person otherwise legally entitled to it under an Act of Parliament solely for the purposes for which that person is entitled to the information; [Emphasis added]

80Because neither the Family Court Rules nor the FCSG are Acts of Parliament, officials of the Canada Revenue Agency do not comply with court orders seeking to compel them to disclose a litigant’s taxpayer information. In McAvan Holdings v. BDO Dunwoody Ltd., in 2003, an action involving an effort to compel the Canada Revenue Agency to produce taxpayer information to a Trustee in Bankruptcy, Master Albert, after reviewing the ITA and the relevant jurisprudence, concluded, “I find that the court cannot compel CCRA to produce the documents without McAvan's consent. I also find that the court cannot compel McAvan to consent against his will.”²¹

81Section 241 of the ITA authorizes the Canada Revenue Agency to disclose taxpayer information for the enforcement of child support orders made in other countries.²² The Family Orders and Agreements Enforcement Assistance Act provides:

Definitions

2 In this Part,

court means a court having jurisdiction with respect to the enforcement of family provisions; (tribunal)

family provision means a support provision, a custody provision or an access right; (disposition familiale)

Applications to court

7 Any person, service, agency or body entitled to have a family provision enforced may, by ex parte application, request that the court apply for the release to the court of information under this Part.

Release authorization

79 Notwithstanding any provision in any other Act of Parliament that prohibits or restricts the release of information, the following information may be released for the purposes of this Act:

(b) information that is necessarily incidental to the garnishment of moneys under Part II [Garnishment of Federal Moneys to Satisfy Support Orders and Support Provisions].

82In a complimentary provision, the ITA states:

241(4) An official may

(e) provide taxpayer information, or allow the inspection of or access to taxpayer information, as the case may be, under and solely for the purpose of,

(vii) section 79 of the Family Orders and Agreements Enforcement Assistance Act.

83The ITA discloses Parliament’s intention to permit the production of taxpayer information to the court to enable the courts of other nations to calculate and enforce a Canadian spouse’s obligation to pay child and spousal support, on the basis that Canada’s treaty obligations for the reciprocal enforcement of support orders prevail over a taxpayer’s right to privacy. However, Parliament does not similarly permit the production of taxpayer information to dependent spouses in Canada, as in such cases, the taxpayer’s right to privacy prevails over the rights of dependent spouses in Canada to child and spousal support.

84The Supreme Court of Canada, in S. (D.B.) v. G. (S.R.), in 2006, observed, in the context of the periodic adjustment of child support orders:

There is no doubt, of course, that the federal or provincial government could have chosen a different course. For instance, at s. 25.1, the Divorce Act contemplates a federal-provincial agreement through which provincial child support services would be created to recalculate the amount of child support at regular intervals. Such a service would respond to research suggesting that inadequate child support payments are linked to the infrequent updating of child support amounts (see Department of Justice, Children Come First: A Report to Parliament Reviewing the Provisions and Operation of the Federal Child Support Guidelines (2002), vol. 1, at p. 36). Indeed there may be beneficial outcomes associated with an approach that envisions the automatic tailoring of child support payments to new circumstances, at least in simple situations where the Table amounts in the Guidelines clearly apply. But this path has not yet been chosen and it is not for this Court to force the legislatures’ hands in this matter.

….Thus the scheme in the Guidelines does not burden a payor parent with an automatic disclosure obligation every time his/her income increases: Walsh v. Walsh (2004), 2004 36110 (ON CA), 69 O.R. (3d) 577 (C.A.), at paras. 24-25. In crafting this system, Parliament was obviously concerned with the balance between the privacy of payor parents and the expectation of recipient parents that they will be paid the appropriateGuidelines amount based on the true income of the payor parent. This is not to suggest that court orders or separation agreements cannot themselves provide for automatic disclosure; to the contrary, if the circumstances so demand, courts may even find disclosure obligations implicit in separation agreements: see Marinangeli v. Marinangeli (2003), 2003 27673 (ON CA), 38 R.F.L. (5th) 307 (Ont. C.A.). But it is not for this Court to second-guess Parliament’s policy choice, absent indication that a court ordered, or the parties agreed, otherwise.²³ [Emphasis added]

85Because taxpayer information may be produced to a foreign spouse, pursuant to s. 241(4)(e)(vii), but not to others, the only recipient spouses whose rights to child and spousal support cannot effectively be enforced by the disclosure of the payor spouse’s taxpayer information by the Canada Revenue Agency are those residing in Canada.

86Master Albert’s solution in McAvan Holdings was to stay the action or dismiss the plaintiff’s claim. Those remedies were of no use to Ms. Pinto in the proceeding before Justice Colvin, as Mr. Ponciano was already not participating in the proceeding, and apparently had no wish to do so. The remedies available to Ms. Pinto under these circumstances for Mr. Ponciano’s failure to make financial disclosure were limited.

87Rule 1(8) of the Family Law Rules provides that if a person fails to obey an order in a case, the court may make any order it considers necessary for a just determination of the matter, including:

c) An order for costs;

c) An order striking out any…motion to change, response to motion to change, financial statement, affidavit, or any other documents filed by a party;

d) An order that all or part of a document that was required to be provided but was not, may not be used in the case;

e) If the failure to obey was by a party, an order that the party is not entitled to any further order from the court unless the court orders otherwise;

f) An order postponing the trial or any other step in the case; and

g) On motion, a contempt order. [Emphasis added]

88Motions for contempt are governed by section 31 (5) of the Family Law Rules. That section provides:

31(5) If the court finds a person in contempt of the court, it may order that the person,

(a) Be imprisoned for any period and on any conditions that are just;

(b) Pay a fine in any amount that is appropriate;

(c) Pay an amount to a party as a penalty;

(d) Do anything else that the court decides is appropriate;

(e) Not do what the court forbids;

(f) Pay costs in an amount decided by the court; and

(g) Obey any other order.

89None of the above remedies would have benefited Ms. Pinto in the proceeding before Justice Colvin. They would not have yielded the taxpayer information which the court required, under the Divorce Act and FCSG, to calculate Mr. Ponciano’s income and determine his child support obligation.

90Having regard to the fact that the Divorce Act requires the court to determine the amount of child support a spouse must pay based principally on taxpayer information, but does not entitle Ms. Pinto, or the court, to obtain that information from the Canada Revenue Agency, the consequences of Mr. Ponciano failing to disclose his taxpayer information must fall on him. It was he who failed to meet the self-reporting obligations that Parliament placed on him, for the protection of his privacy. The court should not relieve him of the consequences of his failing to do so by retroactively rescinding his arrears of support for the period from the date of Justice Colvin’s order to the date, three months later, when Mr. Ponciano quit his job, or even to August 31, 2015, when he made his motion to change. It was a palpable and over-riding error for Justice Clay to impute a lower income to Mr. Ponciano than Justice Colvin had imputed to him for that period, based on the financial information that he had previously withheld.

b) Did Justice Clay apply the correct legal test in his determination that Mr. Ponciano’s quitting his $85,000 per year employment at Highland Farms was a material change in circumstances?

91Justice Clay correctly noted, at paragraphs 26 to 29 of his reasons, that the leading case on income imputation is the Court of Appeal’s decision in Drygala v. Pauli, in 2002.²⁴ In that case, the Court of Appeal established a three-part test in the application of s. 19(1)(a) of the FCSG, governing the imputation of income, as follows:

1. Is the spouse intentionally underemployed or unemployed?

2. If so, is the intentional underemployment or unemployment required by virtue of his reasonable educational needs, the needs of the child or the marriage or reasonable health needs?

3. If the answer to #2 is negative, should the court exercise its discretion, and, if so, what income is properly imputed in the circumstances?

92Justice Clay found that Mr. Ponciano was intentionally under employed. He stated, at paragraph 35:

There was really no issue in this case as to whether the father was intentionally under employed. …In this matter the father quit a job he had held for 12 years just three months after the mother obtained the final support order….While the timing of his quitting employment was suspicious it is not necessary for me to find that his intention was to avoid support. I need only find that his intention was to quit the job in order to find intentional underemployment that permits the court to impute income pursuant to so. 19 of the CSG. [Emphasis added]

93Justice Claim implicitly found that Mr. Ponciano’s decision to quit his employment was unreasonable. He stated, in this regard, at paragraphs 36 and 37 of his reasons:

The father earned $82,479 in 2012. He was a valued 12 year employee of the company, and as such, he had received significant raises in income over the years from $57,200 in 2002 to $82,479 ten years later. The only rationale the father gave for leaving his job was that the company was going to split up and he had decided which of the two owners he wanted to work for in the future. There was no evidence that he was under any pressure to leave. He simply chose to quit and to wait until the corporate split took place at which time he thought that he would be hired to work a similar job in one of the successor companies. The father made a reckless decision. He did not have any written offer of employment and he had no firm knowledge of when the split would occur and when or if he would be able to return to earning his previous salary.

It is a particularly aggravating fact that the father left his job without considering its effect on his ability to pay support to his disabled spouse and dependent daughter. He did not even contact his former spouse to tell her that he had left his job and that she and their daughter would no longer have the use of his extended health and dental plan. The father claimed that he contacted FRO on February 14, 2013, to tell them where he was then working. The mother was never given any information by the father. After twelve years of his failure to disclose his income, despite written requests from the mother, she had finally obtained an increase to her support. Just three months after she obtained that order the father quit his job terminating her benefits and putting her ability to obtain the court ordered support at risk. The father’s conduct in this matter was inexcusable. [Emphasis added]

94Justice Clay found it equally unreasonable that Mr. Ponciano remained at Ferma Farms, five months later, when a position became available for him at Coppa’s Fresh Market, at a salary similar to the $85,000 which he had earned at Highland Farms, and $50,000 greater than the amount he was earning at Ferma Farms. Justice Clay made the following observations at paragraphs 9 to 12 of his reasons, concerning Mr. Ponciano’s decision to remain at Ferma Farms:

The father said that on December 15, 2012, he resigned his position with Highland Farms. He filed his Record of Employment. He was not entitled to Employment Insurance. He did not work until February 14, 2013, when he accepted a position at Ferma Foods, a supplier of food to grocery store chains such as his former employer Highland Farms. The father did not tell the mother that he had quit his job. He did not tell her of the termination of extended health and dental benefits for her and their child Hailie Ponciano, born October 10, 2000

The father’s position was that when he left Highland Farms he knew that the two brothers who owned the company were going to split the assets. He intended to take employment as a store manager with Louis Coppa at Coppa’s Fresh Market. The other brother Charlie Coppa was going to keep the farm and the two grocery stores known as Highland Farms. This asset split was confirmed in a letter prepared for this proceeding by Highland Farms and dated June 30, 2015. That letter also made clear that the asset split did not actually occur until May 2013.

The father said that when he left in December 2012 he did not plan to work until the asset split was completed, when he expected that Louis Coppa would hire him. He said that after 2 months he was running out of money and he obtained a job at Ferma Foods. He said when he took the job he still intended to work for Louis Coppa as soon as he could hire him. Ferma hired him as a merchandiser and he travelled to different stores with a supervisor. He was only paid $14 an hour and he worked a 44 hour week. He filed pay statements from July 2015 that showed that he still had that income which annualizes to 32,032 per year.

Soon after taking the Ferma’s job, the father said that he liked the fact that he worked shorter hours and no weekends. He decided to not even pursue a job with Louis Coppa. Since February 14, 2013, the father has not sought any other work. He has been content to earn $32,032 and then supplement his income with withdrawals from his RRSP. In 2013, he earned $24,626 from Ferma’s and withdrew $9,938 from his RRSP. In 2014 he had a total income of $42,653. He did not provide his income tax return as required and there was no breakdown of his income filed. He testified in cross-examination that his income from Ferma’s had not changed so that the difference between $32,032 and $42,653 was another RRSP withdrawal. He admitted that over time, Ferma’s let him use a company car to get to and from work on weekdays so that he saved money on gas and other operating costs. [Emphasis added]

95Justice Clay, having found that Mr. Ponciano’s resignation from Highland Farms was unreasonable, failed to proceed to the next stage of the legal test for determining whether his resignation was a material change in circumstances; that is, whether it would have resulted in a different outcome, had it been known to Justice Colvin when he made his order on September 6, 2012.

96Justice Clay was required to proceed to this stage of the analysis in order to make a proper legal determination as to whether Mr. Ponciano’s resignation, which was obviously a change in his financial circumstances, was a material change, in the sense that it would have resulted in a different outcome had it been known by Justice Colvin when he made his Order. In addressing that question, Justice Clay was required to consider that Mr. Ponciano left his $85,000 position when it was not necessary to do so. The split of the owners of the business did not take place until five months later, in May 2013. Even then, Mr. Ponciano declined to seek employment with one of those owners, Louis Coppa, at his new establishment, Coppa’s Fresh Market, which would have paid Mr. Ponciano approximately the same income that he had earned at Highland Farms. Instead, he continued his new employment at Ferma Farms, where he was earning only $35,000.

97The Court of Appeal, in Riel v. Holland, in 2003, discussed the necessity of the court considering whether, if a change of employment entails a significant reduction in income, it can be considered a material change in circumstances, for purposes of a motion to vary child support. In that case, the Court of Appeal affirmed the motion judge’s finding that the Applicant’s decision to quit his business and take a salaried position at a lower income was not a material change in circumstances that justified varying a final order for child support. In coming to his conclusion, Justice MacPherson adverted to the fact that, in the determination of whether a voluntary change of employment is a material change in circumstances, the income earned in the previous business and the income earned at the new salaried position, and the impact of the difference on the child support payable, are relevant considerations. He stated:

Riel contends that the trial judge erred in two respects: first, by giving no or insufficient weight to Riel’s explanation for the change in his employment status; and second, by refusing to admit into evidence an expert’s report which Riel wanted to use to corroborate his contention that he acted reasonably, from a financial standpoint, in not continuing his independent contracting business.

I do not agree with these submissions. Riel’s explanation for his decision to take a salaried position with another company – lack of credit, difficulty financing jobs, bad debts, trouble finding big jobs due to a lack of regular employees, was belied by the strong financial results of Dominion Electric in 1990, 1999, and 2000. I agree with the appellant’s submission that “the numbers are not everything” in an “intentional underemployment” analysis. However, the numbers must certainly be an important part of the analysis. Here, Riel claims that he made an employment decision that he says reduced his income by more than half. He coupled that decision with an almost immediate attempt to seek a reduction by almost half in his child support payments. It seems to me that an employment decision that would lead to two children receiving $912 instead of $1732 per month needs to be justified in a compelling way. There was nothing in Riel’s conduct or testimony that came close to providing such a justification.²⁵ [Emphasis added]

98Justice Clay noted, at para. 29 of his reasons, that the Court of Appeal in Lawson v. Lawson, in 2006, citing Drygala, applies a test of reasonableness in determining whether a payor spouse is intentionally under-employed. The Court of Appeal, in Lawson, stated:

Section 19(1)(a) of the Guidelines is perceived as being a test of reasonableness. The court must have regard to the parent's capacity to earn income in light of such factors as employment, history, age, education, training, skills, health, available employment opportunities and the standard of living earned during the marriage. The court looks at the amount of income the payor could earn if he or she worked to capacity.²⁶[Emphasis added]

99As noted above, Justice Chappel, applied the Court of Appeal’s decision in Lawson v. Lawson in her decision in Favero v. Favero, in 2013, affirmed by the Divisional Court in 2015.²⁷ Justice Laliberte applied both decisions in Sullivan v. Sullivan, in 2014.²⁸

100Justice Clay did not find that Mr. Ponciano’s ability to earn $85,000 ceased at some time after May 2013. Indeed, Mr. Ponciano offered no evidence that would support such a finding.

101Justice Clay properly noted that the onus was on Mr. Ponciano to prove that he was no longer capable of earning income at the level he had earned at Highland Farms. Justice Clay adverted to the jurisprudence that establishes that the payor’s salary level prior to quitting his employment should be imputed to him. Minnema J., in Thompson v. Gilchrist, in 2012, stated:

The onus is on the payor parent to justify the decision to reduce his income. Given that Mr. Thompson’s position was that support should simply be calculated based on the income he actually receives, he led no evidence of comparative employment beyond his efforts to seek employment in Atlantic Canada. The result is that the Court has little more than his past earning history to consider. I find, as Judges in other cases have, that his previous income is a rational basis on which to impute income, as it is the amount that Mr. Thompson would have continued to earn but for his decision to leave his job.²⁹ [Emphasis added]

102Justice Clay found that in May 2013, when Louis Coppa split his operation from that of Highland Farms, a position became available for Mr. Ponciano at Coppa’s Fresh Market. Had he gone there, he could have earned the same level of income he had earned at Highland Farms. Justice Clay stated, at paragraph 42 of his reasons:

No matter what the father’s rationale was in December 2012 it is now clear that shortly after February 14, 2013, he decided that he liked his new job. The reality is that the father made a decision to earn $30,032 when he knew that he could have obtained a job with the successor company that would pay him about $85,000 per year. He did not pursue any job that paid him more than $14 an hour. The issue is whether I should assume that the father could always get a job making $85,000 a year so that he should be imputed to have that income for as long as he has a support obligation.

The facts here do not favour the father. He did not look for other work so he had no evidence that it was not available. He provided no evidence as to how long he could have expected to continue working at the managerial salary he had in December 2012. The father was born on May 19, 1963, so he was only 49 years old when he quit his job and he will only be 53 this May. He provided no evidence of any health issues.

The only evidence that may indicate that the father could not be sure of continuing to earn the same income was the fact that the company did split up and the job he would have had after that took place would not be exactly the same as the one he had held for 12 years. The father basically said he was being pro-active in deciding which successor company to join as he knew the status quo was ending. He did not provide any evidence though as to any risks to his income that might be present as a result of the corporate split.

It is reasonable to expect that if he had not left his job the father would have earned $85,000 per year. [Emphasis added]

103Justice Clay departed from an evidence-based analysis, and based his decision the assumption that Mr. Ponciano could not still get a job paying $85,000, for which there was no evidentiary support. He stated, at paragraph 45:

No matter what the father’s rationale was in December 2012 it is now clear that shortly after February 14, 2013, he decided that he liked his new job. The reality is that the father made a decision to earn $30,032 when he knew that he could have obtained a job with the successor company that would pay him about $85,000 per year. He did not pursue any job that paid him more than $14 an hour. The issue is whether I should assume that the father could always get a job making $85,000 a year so that he should be imputed to have that income for as long as he has a support obligation. [Emphasis added]

104Later, Justice Clay stated:

There are strong policy reasons for continuing to impute to a payor who quits a job to the income that he was earning when he had that job. To do so sends a strong message to payors that they cannot so easily frustrate court orders. I have no hesitation in finding in this case that the father should be required to pay support in 2013 based upon the amount he earned in 2012. The more difficult question is at what point the court must consider the new reality that the father no longer earns his 2012 income and may never be able to earn it again.

105Justice Clay did not find that Mr. Ponciano could no longer earn $85,000 per year. Indeed, in noting that “he is still only 52 years old”, it appears that he considered it likely that Mr. Ponciano could, indeed, “find such a job tomorrow”. I am forced to conclude that what prevented Justice Clay from continuing to impute that amount of income to Mr. Ponciano was his discomfort with the fact that Mr. Ponciano had paid support for 2.5 years based on income that he had, albeit voluntarily, not earned. Respectfully, that fact should not have guided Justice Clay’s determination of the amount of income to impute to him.

106The imputation of income must result from a determination as to the income that Mr. Ponciano was capable of earning. That is the statutory basis for the amount of his child support obligation. Justice Clay, in basing his decision on the fact that, even if he were able to earn $85,000 “tomorrow”, “he will still have paid support for over 2.5 years on income he chose not to make,” treated the imputation of income by Justice Colvin as a penalty, from which Mr. Ponciano should be relieved, as the passage of 2.5 years made its further continuation excessive.

107Justice Clay did not find that Mr. Ponciano could no longer earn $85,000 per year. Indeed, in noting that “he is still only 52 years old”, it appears that he considered it likely that Mr. Ponciano could, indeed, “find such a job tomorrow”. I am forced to conclude that what prevented Justice Clay from continuing to impute that amount of income to Mr. Ponciano was his discomfort with the fact that Mr. Ponciano had paid support for 2.5 years based on income that he had, albeit voluntarily, not earned. Respectfully, that fact should not have guided Justice Clay’s determination of the amount of income to impute to him.

108Although Justice Clay found that Mr. Ponciano was, at a minimum, able to earn the income he had earned 13 years earlier, when the parties separated, he made no finding as to the maximum amount he could earn, or as to the amount he was realistically capable of earning, after September 1, 2015. In imputing an income of $57,200 per year to Mr. Ponciano beginning on that date, Justice Clay stated, in paragraph 54:

This is the amount that the father admitted earning in December 2002 when he signed the Separation Agreement….If there had never been a Motion to Change and an uncontested order the father would still be paying support on the income he earned 13 years ago so I find to impute income to any lower amount would not be reasonable. The amount of table child support on this income is $519 per month and it will begin on September 1, 2015. [Emphasis added]

109In failing to make a finding as to what income Mr. Ponciano was capable of earning from September 1, 2015, onward, or in making a finding, in the absence of any evidence to support it, that he was incapable of earning more than the amount he had earned 13 years earlier, Justice Clay made a palpable and over-riding error. The onus was on Mr. Ponciano to adduce evidence that, after the material change in circumstances, he was no longer able to earn the $85,000 that Justice Clay found he was capable of earning on December 15, 2012, when he quit his job at Highland Farms, and in May 2013, when he could have obtained employment at the same salary at Coppa’s Fresh Market.

CONCLUSION AND ORDER

110For the reasons stated above, it is ordered that:

1. Ms. Pinto’s appeal is allowed.

2. The order of Justice Clay dated March 30, 2016, is set aside.

3. Antonio Ponciano shall pay to Maria Pinto the following:

(a) child support in the amount of $880 per month to Maria Pinto, beginning February 14, 2014, for the support of the Child of the Marriage, Hailie Ponciano, born October 10, 2000, based on an imputed income of $100,000;

(b) spousal support in the amount of $311 per month beginning January 1, 2016.

(c) spousal support arrears as set out in the Family Responsibility Office Statement of Arrears dated February 5, 2016.

(d) Costs on a partial indemnity scale, which I fix in the amount of $5,000, based on the amount claimed. I find that this amount is significantly less than Ms. Pinto’s counsel, based on their experience, were entitled to charge her and which, had they done so, they were entitled to claim from Mr. Ponciano. These costs shall be enforced as child support.

4. Unless this Support Order and the accompanying Support Deduction Order are withdrawn from the Office of the Director of the Family Responsibility Office, the Support Order shall be enforced by the Director, and amounts owing under the Support Order shall be paid to the Director, who shall pay them to Ms. Pinto, to whom they are owed.

Price J.

Footnotes

1. 1Housen v. Nikolaisen, 2002 SCC 33, at paras. 5, 6, 27, and 28.
2. 2Gray v. Rizzi, 2016 ONCA 152, at para. 18; Hickey v. Hickey, 1999 691 (SCC), [1999] 2 S.C.R. 518 (S.C.C.), at paras. 11 and 12
3. 3Hickey v. Hickey, [1999] 2 SCR 518, 1999 691 (SCC), at para. 12
4. 4Family Law Act, R.S.O. 1990, c. F.3, as am.
5. 5Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), as am.
6. 6Federal Child Support Guidelines, SR/97-175, as am.
7. 7Trang v. Trang, 2013 ONSC 1980, at paras. 51 to 60
8. 8Trang v. Trang, 2013 ONSC 1980, at paras. 39-46
9. 9Gray v. Rizzi, 2016 ONCA 152, 129 O.R. (3d) 201, para. 34
10. 10Favero v. Favero, 2013 ONSC 4216, at para. 101; aff’d 2015 ONSC 1264 (Ont. Div. Ct.)
11. 11Federal Child Support Guidelines, SOR/97-175, as am.
12. 12Federal Child Support Guidelines, SOR/97-175, as am.
13. 13Federal Child Support Guidelines, O.Reg. 391/97, s. 17(1)
14. 14Federal Child Support Guidelines, SOR/97-175, as am., s. 21
15. 15FCSG, s. 21(1)(a) and (b)
16. 16FCSG, s. 21(1)(c)
17. 17Glover v Glover et al 1980 63 (ON CA), [1980] O.J. No. 3676, 29 OR (2d) 392 (OCA) at paras. 9 and 10, affirmed by Glover v. Canada, 1981 3010 (ON CA), [1981] SCJ No. 97, 130 DLR (3d) 383 (SCC).
18. 18Glover v. Glover et al (OCA), supra, at para. 11.
19. 19Glover v. Canada, supra. See also endorsement of Greer J. dated December 11, 2006, in Santos v. Santos, Court File No. 03-FP-285589FIS; and Order of Emery J. dated May 30, 2014, in Mahalingam v. Ormerod, Court File No. CV-08-1297-00.
20. 20Slattery (Trustee of) v. Slattery, 1993 73 (SCC), [1993] SCJ No 100, 106 DLR (4th) 212 (SCC) at para. 32
21. 21McAvan Holdings v. BDO Dunwoody Ltd., 2003 ONSC 64222, para. 31
22. 22Family Orders and Agreement Enforcement Assistance Act.
23. 23D.B.S. v. S.R.G.; L.J.W. v. T.A.R.; Henry v. Henry; Hiemstra v. Hiemstra, [2006] 2 SCR 231, 2006 SCC 37, per Bastarache J., on behalf of himself and McLachlin C.J., LeBel and Deschamps JJ., at paras. 57 and 58
24. 24Drygala v. Pauli, 2002 ONCA 41868
25. 25Riel v. Holland, 2003 3433 (ON CA), paras. 22 and 23
26. 26Lawson v. Lawson, 2006 ONCA 26573, para. 36
27. 27Favero v. Favero, 2013 ONSC 4216, at para. 101; aff’d 2015 ONSC 1264 (Ont. Div. Ct.)
28. 28Sullivan v. Sullivan, 2014 ONSC 930, at para. 18
29. 29Thompson v. Gilchrist, 2012 ONSC 4137, para. 39, citing: Olah v. Olah (2000), 2000 22590 (ON SC), 7 R.F.L. (5th) 173 (Ont. S.C.); Weir v. Therrien, supra; Vitagliano v. Di Stavolo (2001), 2001 28202 (ON SC), 17 R.F.L. (5th) 194 (Ont.S.C.); Zagar v. Zagar,2006 ONCJ 296; Laing v. Mahmoud, 2011 ONSC 4047.