Court File and Parties

COURT FILE NO.: FC 12-1754 DATE: 2017/05/11 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Dmitri Alexander Akimov, Applicant AND Oxsana Makhnatch, Respondent

BEFORE: Justice A. Doyle

COUNSEL: Eugeny Kozlov, for the Applicant Halia Anna Michalko, for the Respondent

HEARD: April 20, 2017

Endorsement

[1] The applicant father, Mr. Akimov, brings a motion requesting a change of the order of Justice Robertson dated November 7, 2014, (Final Order) setting his child support arrears at $700.28 and an ongoing child support monthly payment of $341.57 based on his income of $38,400 per year. His position is that child support should be adjusted in accordance with his past years’ changes of income.

[2] The respondent mother, Ms. Makhnatch, disputes that there has been a change and brings a motion for the table amount of child support in accordance with his annual income. She opposes the rescission of arrears accumulated to date.

[3] The issues are:

1. Has there been a change in the father’s income pursuant to s. 37 of the Family Law Act, R.S.O. 1990, c. F.3 (“FLA”)?
2. What is the retroactive amount owing?
3. What is the ongoing amount of child support?

Background

[4] The parties commenced cohabitation in July 2011 and separated in June 2012.

[5] They have one child of the relationship Maksim, born April 6, 2012.

[6] The Final Order, which incorporated the parties’ Minutes of Settlement, provides for the following:

• the parties would have shared custody of the child;
• the mother would have physical custody of the child;
• the father would have access to the same said child;
• the father would pay the table amount of child support in the amount of $313.27 based on his income of $35,800 per year;
• as of May 1, 2015 the father would pay $384.89 based on an income of $42,640 per annum;
• Section 7 expenses would be shared in proportion to their respective incomes which included daycare costs;
• the party whose income that changes would inform the other party accordingly and provide most recent pay stubs; and
• Section 7 arrears and costs were fixed at $4000 payable by the father to the mother.

[7] On April 11, 2016, Justice Minnema presided over a settlement conference in this matter. He found that the process was really a motion to change a final order in the original application.

[8] He ordered that:

• the parties file fresh financial statements with three years of Notices of Assessment within 30 days;
• the father would clarify his insurance policy as the same irrevocable one as per the Minutes of Settlement within 15 days; and
• the section 7 arrears as per Justice Robertson’s order were set at $1,750 and they were to be enforced through Family Responsibility Office (FRO).

Has there been a change pursuant to s. 37 of the FLA?

Father's Position

[9] The father indicates that the outstanding support as per the FRO is $10,327.58 as of January 6, 2017. The statement of arrears dates back to 2013. He indicates that support should be adjusted in accordance with his annual incomes over those years.

[10] The father refers to Justice Kershman’s interim order of April 15, 2013 which provided that, commencing January 1, 2013 he was to pay $415 per month in child support based on his current income of $46,000. He owed retroactive support of $552 which should be paid by April 24, 2013. The father was recognized as a biological father of Maksim.

[11] Mr. Akimov’s income has been as follows:

• 2016: $ 13,892
• 2015: $ 33,322
• 2014: $ 28,882
• 2013: $ 46,690

[12] The father is requesting a retroactive adjustment of the table amount due and owing in accordance with his annual income. Based on his income, he states that he overpaid for certain years.

[13] He has provided a detailed calculation and receipts of his payments and the support payable based on his declared income.

Mother's Position

[14] On the other hand, the mother is stating that the father has failed to comply with orders in not providing basic financial disclosure and complete tax returns and Notices of Assessment:

• pursuant to Justice Kershman’s order of April 15, 2013, he did not provide his complete tax returns;
• in his last affidavit dated April 20, 2017, he has provided selected financial disclosure for 2013 to 2015 and 2 pay stubs from his former employer and no 2016 T4 slip;
• he did not comply with Justice Minnema’s order for disclosure; and
• he has not provided his 2016 tax return, T4 slip or Notice of Assessment for 2016. He earned $49,900 in 2012 and has the capacity to earn that income. Justice Maranger’s interim order of September 6, 2012 ordered him to pay $461 per month. He was capable of earning more than $13,000 in 2016.

[15] In addition, she says his lifestyle does not match the income he is declaring as:

• he had a large guest list at his wedding in Almonte in August 2016;
• he has not provided the income of his new partner for 2016 and 2017;
• he took their son to Florida in October 2015;
• he attended a NHL game in November 2016 with front row seats;
• he visited Disney World and Universal Studios for 10 to 11 days; and
• he obtained expensive tickets for Disney on Ice in February 2017.

The Law

[16] The governing provision dealing with a variation is s. 37 of the FLA:

(1) An application to the court for variation of an order made or confirmed under this Part may be made by,

(a) a dependant or respondent named in the order;

(b) a parent of a dependant referred to in clause (a);

(c) the personal representative of a respondent referred to in clause (a); or

(d) an agency referred to in subsection 33 (3). 1997, c. 20, s. 6.

(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. 1997, c. 20, s. 6.

(2.2) A court making an order under subsection (2.1) shall do so in accordance with the child support guidelines. 1997, c. 20, s. 6.

[17] Section 37(2.1), which adopts the meaning of “a change in circumstances” set out in s. 14 of the Child Support Guidelines (Guidelines), establishes the court’s jurisdiction on a motion to vary a child support order. Section 14 of the Guidelines provides:

For the purposes of subsection 37 (2.2) of the Act (Family Law Act) and subsection 17 (4) of the Divorce Act (Canada), any one of the following constitutes a change of circumstances that gives rise to the making of a variation order:

1. In the case where the amount of child support includes a determination made in accordance with the table, any change in circumstances that would result in a different order for the support of a child or any provision thereof.
2. 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 parent or spouse or of any child who is entitled to support.
3. In the case of an order made under the Divorce Act (Canada) before May 1, 1997, the coming into force of section 15.1 of that Act, enacted by section 2 of chapter 1 of the Statutes of Canada, (1997).

Decision

[18] Firstly, in a motion to change, the Court will not deal with interim orders that preceded the Final Order. Therefore, any arrears accumulated pursuant to Justice Kershman’s order dated April 15, 2013 and April 25, 2014 which were interim orders will not be dealt with by this Court. Those arrears should have been dealt with at the time of the Final Order.

[19] The mother states that the father never complied with Justice Kershman’s interim order dated April 15 2013, which states he was to provide all income tax returns, Notices of Assessment, supporting document and receipts. Again, outstanding financial disclosure or other issues arising from previous orders prior to the Final Order will not be dealt with by this Court.

[20] As stated in the above cases, in determining whether a change in circumstances has occurred to permit the Court to change child support, the change must be significant and constant.

[21] Therefore, in determining if there has been a change since the Final Order, the Court must ascertain the father’s income.

What is the father’s income?

The Law

[22] Subject to ss. 17 to 20, s. 16 of the Guidelines provides that the starting point for the determination of annual income is the sources of income set out under the heading “total income” in the T1 General form issued by the Canada Revenue Agency. The total of these sources of income is then adjusted in accordance with Schedule III under the Guidelines.

[23] Section 19 of the Guidelines permit the Court to impute income in certain circumstances:

19. (1) The court may impute such amount of income to a parent or spouse as it considers appropriate in the circumstances, which circumstances include,

(a) the parent or spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of any child or by the reasonable educational or health needs of the parent or spouse;

(b) the parent or spouse is exempt from paying federal or provincial income tax;

(c) the parent or spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;

(d) it appears that income has been diverted which would affect the level of child support to be determined under these guidelines;

(e) the parent’s or spouse’s property is not reasonably utilized to generate income;

(f) the parent or spouse has failed to provide income information when under a legal obligation to do so;

(g) the parent or spouse unreasonably deducts expenses from income;

(h) the parent or spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and

(i) the parent or spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust. O. Reg. 391/97, s. 19 (1); O. Reg. 446/01, s. 6.

[24] 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 child 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 should 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 (Drygala v. Pauli, 2002 ONCA 41868; Lawson v. Lawson, 2006 ONCA 26573).

[25] Drygala v. Pauli, 2002 ONCA 41868 states the court must consider the following three questions:

1. Is the spouse intentionally under-employed or unemployed?
2. If so, is the intentional under-employment or unemployment required by virtue of his reasonable educational needs?
3. If the answer to question #2 is negative, what income is appropriately imputed in the circumstances?

[26] There is no need to find intent to avoid child support obligations to impute income under section 19 of the Guidelines. At paragraph 28 the Court in Drygala states:

Read in context and given its ordinary meaning, "intentionally" means a voluntary act. The parent required to pay is intentionally under-employed if that parent chooses to earn less than he or she is capable of earning. That parent is intentionally unemployed when he or she chooses not to work when capable of earning an income. The word "intentionally" makes it clear that the section does not apply to situations in which, through no fault or act of their own, spouses are laid off, terminated or given reduced hours of work.

[27] There is a duty on the part of the payor to actively seek out reasonable employment opportunities that will maximize their income potential so as to meet the needs of their dependents: Thompson v. Thompson, 2013 ONSC 5500.

[28] The Court must have a rational and solid evidentiary basis to justify an imputation. The onus is on the person requesting an imputation of income to establish this evidentiary basis: Homsi v. Zaya, 2009 ONCA 322, 65 R.F.L. (6th) 17.

[29] In order to impute income to a parent pursuant to s. 19 of the Guidelines, the Court must exercise a test of reasonableness. The Court must have regard to the payor’s capacity to earn in light of his employment history, age, education, skills, health, available employment opportunities, and the standard of living enjoyed during the marriage: Algner v. Algner, 2008 SKQB 132.

Decision

[30] The father’s financial statement sworn March 23, 2017 indicates that he is employed by the Ministry of Community Safety and Correctional Services Ontario with a start date of May 22, 2017. He is currently enrolled in the Correctional officer training academy for Recruits for an eight week program from March 27, 2017 until May 19, 2017.

[31] The financial statement indicates that the father has $10,250 in debts, a car and $5,327 in his bank account.

[32] He lives with Stephanie Akimov, his wife who earns $55,000 per year and who is covering all expenses until he graduates from training.

[33] In 2014 he was working for Bairn Croft Residential Services Inc. with $38,480 to start and $39,520 after a 6 month probationary period.

[34] There are no details as to why he is not working there.

[35] He filed paystubs from his employment with the Commissionaires.

2014

[36] The father’s annual income was $28,882. The final Order (dated November 2014) stated that he would pay $313.21 based on $35,800 and as of May 2015, he would pay $384.89 based on an income $42,640. The order incorporated final Minutes of Settlement.

[37] The final order did not provide for an adjustment of child support based on the income tax returns or an annual adjustment in accordance with the parties’ incomes.

[38] There is no explanation given by the father as to why he earned 20% less than he stated he was going to earn in 2014. His estimate of income for 2015 contained in the Final Order was at the end of year (Nov. 2014).

[39] The mother relied on this agreement and settled on the basis that she would receive a certain level of support.

[40] He is a young, ablebodied man and I find that in 2014 he was capable of earning more income.

[41] The mother has satisfied her onus to demonstrate that he was underemployed in 2014.

[42] If a payor is attending court under step two to change a court order based on a change of income, he has the onus to satisfy the Court why he is underemployed and is earning less than he stated he would earn. No explanation has been provided. He did not return to school. He has provided no explanation of less hours, off work, medical needs, or other familial necessity.

2015

[43] His income was $33,322.12 which amounted to a 22% less than he stated would earn in 2015.

[44] The mother has satisfied her onus to demonstrate that he was underemployed in 2015. He declared he would earn $42,640 in 2015.

[45] Again, there is no explanation by the father to explain his reduction of income especially when he agreed to pay child support based on an income of $42,640. There is no evidence that he returned to school or pursued training. If someone signs an agreement which is incorporated into a final order, the payor has a duty to be frank and candid in his estimate of income earned that year. If he commits to payment in the subsequent year, then he must provide an accurate income as the recipient is relying on this child support and signs the agreement on the basis of his representations. If there has been a change; whether it is within his control or not, he should provide the Court with the reasons. Therefore, I find his imputed income for 2015 is $42,640 per annum.

2016

[46] The father’s annual income was $13,892. He was in continuing education and began full time employment in September 2016. He had further training for 8 weeks from March to May 2017.

[47] Hence the mother has shown he was underemployed in this year. Here, the father has satisfied the onus that he was underemployed for the purposes of pursuing education.

[48] His education and training has provided him the skills to now earn an income of $38,480 for 2017.

[49] Therefore, support payable in 2016 was $75.95 per month based on an annual income of $13,892.

Financial Documents

[50] The Court does not make a finding that the father breached the financial disclosure of the final order or of Justice Minnema’s Order. The father produced the following financial documents:

• updated financial statement and pay stubs;
• 2013 tax return summary
• 2014 tax return summary and notice of assessment of $28,882
• 2015 tax return summary and Notice of Assessment showing an annual income of $33,322; and
• his 2016 tax assessment showing an income of $13,892 and his 2016 tax summary.

[51] I find that the father has provided all financial disclosure required pursuant to the Final Order.

What is the retroactive amount owing?

The Law

[52] Once a moving party has met the threshold of establishing that there has been a change in circumstances within the meaning of section 37(2.1) of the FLA, or that evidence that was not available at the time the order was made is now available, the issue is whether a retroactive change to rescind arrears or reduce the amount of support payable is justified in the context of the changed circumstances. (DiFrancesco v. Couto, 2001 ONCA 8613).

[53] In the case of D.B.S. v. S.R.G.; L.J.W. v. T.A.R; Henry v. Henry; Hiemstra v. Hiemstra, 2006 SCC 37 (hereinafter referred to as “D.B.S.”). In D.B.S., the Court concluded that the court should consider the following factors in dealing with such cases:

1. Whether there was a reasonable excuse for why support or increased support was not sought earlier;
2. The conduct of the payor parent. The court characterized “blameworthy conduct” as “anything that privileges the payor parent’s own interests over his/her child’s right to an appropriate amount of support”. It emphasized that a payor cannot simply hide their income increases from the recipient parent in the hopes of avoiding larger child support payments;
3. Consideration of the present circumstances of the child; and
4. Any hardship that may be occasioned by a retroactive Order.

[54] In Trembley v. Daley, 2012 ONCA 780, the Court of Appeal clarified the Court’s jurisdiction:

[17] As can be seen, the court’s power is set out in three different paragraphs. Paragraph 37(2.1)(b) empowers the court to make an order relieving the respondent from the payment of part or all of the arrears that exist under the original order while leaving the original order intact. That is exactly the type of order that appellant’s counsel submits the court should have made in a case like this.

[18] Paragraph 37(2.1)(a) must mean something else. Paragraph 37(2.1)(a), on an ordinary and grammatical reading, gives the court the power to vary the original order retroactively wherever there has been a change in circumstances. In interpreting a statute, a court may depart from an ordinary and grammatical reading of the text where such an interpretation results in absurdity, or if another meaning that the text can reasonably bear is more consonant with the purpose of the legislation. Counsel for the appellant offered no alternative meaning of the words of paragraph 37(2.1)(a) other than their plain meaning. Moreover, the plain meaning of the text is consonant with the evident intention of the provision to give the court a broad discretion on a motion to change.

[19] Given that the motions judge’s finding that there was a change in circumstances is uncontested, she had jurisdiction under paragraph 37(2.1)(a) to make the order that she did.

[20] There is in this case no basis for interfering with the motion judge’s discretion in exercising that jurisdiction. After finding a change in circumstances, she carefully addressed the question whether she should vary the original order and did so on the basis that it had been based on inaccurate information.

[55] In Gray v. Rizzi, 2016 ONCA 152, the payor had a serious and “catastrophic injury” as a result of which he could no longer perform the manual work which had been the sole source of his income. The Court took into consideration the ability of the payor to satisfy the support arrears giving his diminished earning capacity as a result of his injury.

[56] In Corcios v. Burgos, 2011 ONSC 3326, Chappel J. adapted the D.B.S. principles to a motion to change a child support order where the payor requested a retroactive decrease in support or rescission of arrears. She states the following:

[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.

Decision

[57] Having determined that the father established a change in 2016, I need to determine whether the arrears accumulated should be rescinded or reduced based on a retroactive downward change to child support payable.

[58] I will not permit the father’s request to rescind the arrears that accumulated in 2014 and 2015.

[59] At this time the father will be resuming work on May 17, 2017 after 8 weeks’ training. Therefore, he will be currently gainfully employed on a full time, permanent basis earning $38,480 per year. There is no evidence to suggest that he is unable to pay off arrears of child support, and any concern regarding hardship can be addressed by means of a reasonable payment plan that takes into account the Respondent’s current income.

[60] Based on the relevant factors set out in DBS, I am persuaded that the father is entitled to a downward adjustment to child support payable commencing January 1, 2016 to December 1, 2016 the amount of $75.95 per month. Firstly, the needs of the child should be considered. The mother’s income was limited and the child was in need of support. There is no hardship to him as he is indeed working, living with a wife who has a good income, and in the past year has demonstrated that he has surplus funds to travel to Florida, Disney and attend an NHL game. He will need to divert monies for his recreational activities to pay his outstanding child support obligations. Regarding delay, he brought this motion in 2016 and does not explain the delay. Instead, he allowed the arrears to accumulate and then was forced to deal with these accumulated arrears. He has not provided a reason for his delay.

[61] The mother settled the matter in November 2014 and had expectations that he would pay. With that agreement in hand, she arranged her financial affairs and spending regarding the child accordingly.

[62] Reviewing the FRO statement of arrears, except for one payment of $1,700 (support adjustment) there were no child support payments for the first 12 months, for which he does not provide an explanation.

[63] He will pay the arrears accumulated in 2014 and 2015 at $200 per month commencing July 1, 2017.

[64] Therefore, for the years 2014 and 2015, there will be no adjustment.

[65] For 2016, support he should have paid at $75.95 per month.

Ongoing Support

[66] Since the Court has found a change of circumstances, child support for 2017 shall be based on his annual income of $38,480. Hence support shall be $341.57 commencing January 1, 2017.

Conclusion

[67] The father will pay the outstanding s. 7 arrears as per Justice Robertson’s order set at $1,750 and they were to be enforced through Family Responsibility Office (FRO).

[68] Commencing January 1, 2016 to and including December 1, 2016, the father will pay to the mother the amount of $75.95 per month as child support based on an income of $13,892.

[69] Commencing January 1, 2017, the father will pay $341.57 based on annual income of $38,480.

[70] There will be no change of child support payable for 2014 and 2015.

[71] Commencing July 1, 2017, the father will pay to the mother the amount of $200 per month on the accumulated arrears.

[72] If the parties cannot agree on the issue of costs, the father must provide his two-page written submissions with his bill of costs and any offers to settle by May 19, 2017 and the mother must provide her two-page written submissions with her bill of costs and any offers to settle by June 3, 2017. The father may submit a one-page reply by June 10, 2017.

Madam Justice A. Doyle Date: 2017/05/11