Court File and Parties

COURT FILE NO.: D 365/93

DATE: 2018/02/02

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Debra Templeton

Applicant

– and –

Terry Nuttall

Respondent

Self-Represented

David Nuttall, court appointed representative for the Respondent Terry Nuttall

Ray DiGregorio, for Ministry of Community and Social Services (Assignee)

HEARD: November 14, 2017

The Honourable Madam Justice Deborah L. Chappel

JUDGMENT

PART I: INTRODUCTION

[1] The Applicant Debra Templeton ("the Applicant") and the Respondent Terry Nuttall ("the Respondent') cohabited as a couple from approximately October 15, 1990 until February 7, 1993, when their relationship ended. They were never married. The Applicant's child from a previous relationship, Danielle Kolodka, born May 2, 1987 ("Danielle") lived with the parties during this period of time. There is one child of the parties' relationship, Kassandra Nuttall, born September 20, 1991, now known as Kassandra Smrekar ("Kassandra"). The parties were involved in extensive litigation to address child support issues relating to Danielle and Kassandra following their separation. This course of litigation culminated in a final order of Steinberg, J. dated November 19, 2004. That order relieved the Respondent of his obligation to pay child support for Kassandra for a one year period, from August 25, 2003 until August 20, 2004, required the Respondent to pay child support for Kassandra in the amount of $305.00 per month commencing September 1, 2004, and directed the Respondent to pay outstanding arrears of child support owed to the Applicant pursuant to previous orders at the rate of $100.00 per month. The monthly sum of $305.00 was the Table amount under the Child Support Guidelines (Ontario), O. Reg. 391/97, as amended (the "Guidelines") at that time based on an annual income of $35,000.00.

[2] The proceeding currently before the court is a Motion to Change the order dated November 19, 2004, which the Respondent commenced on February 5, 2016. In the Motion to Change, the Respondent requested an order terminating his child support obligation respecting Kassandra effective June 30, 2014, fixing the arrears of child support which he owes at $2,085.56, and limiting enforcement of any arrears to the amount of $428.00 semi-annually. The Ministry of Community and Social Services ("the Ministry") is a party to the proceeding by virtue of an assignment from the Applicant of a previous support order of Van Duzer, J. dated December 8, 1994. This assignment was in effect from December 31, 1994 until December 31, 1995.

[3] On July 20, 2016, I made an order in this proceeding on consent of the parties terminating the Respondent's child support obligation in relation to Kassandra effective June 30, 2014. Accordingly, the outstanding issues to be decided in this case are as follows:

1. Has the Respondent established a material change in circumstances justifying a retroactive reduction of his child support obligation pursuant to the order dated November 19, 2004 ("the order"), and a corresponding reduction of the child support arrears that he owes?

2. If there has been such a material change in circumstances, is it appropriate to retroactively reduce the Respondent's child support obligation in relation to the period prior to June 30, 2014, and thereby reduce the child support arrears which the Respondent owes to the Applicant and the Ministry?

3. If it is determined that the Respondent's child support obligation should be retroactively decreased, what are the appropriate retroactive adjustments to the order?

4. Finally, should the court vary the order to place restrictions on the rate of enforcement of arrears, and if so, what is the appropriate rate at which the Respondent should be required to pay off any outstanding arrears?

[4] For the reasons that follow, I find that there has been a material change in circumstances respecting the Respondent's income since the November 19, 2004 order was made. Notwithstanding this change in circumstances, I am dismissing the Respondent's claims for a retroactive decrease of child support and a corresponding reduction of the arrears of child support which he owes to the Applicant and Ministry. However, based on the Respondent's current financial circumstances, I have varied the order to provide that all arrears of child support owed by the Respondent shall be paid at the rate of $65.00 per month commencing February 1, 2018.

PART II: BACKGROUND AND OVERVIEW OF COURT PROCEEDINGS

[5] Although this was a Motion to Change Final Order, I made an order on June 13, 2017 providing that the hearing would proceed on the basis of both the written record and viva voce evidence from the parties. The Respondent did not appear at the hearing, and his representative, David Nuttall, did not call any witnesses. However, I heard oral evidence from the Applicant. I make the findings of fact set out below based on the evidence in the Continuing Record and the Applicant's testimony.

[6] As I have indicated, the parties had a brief relationship that ended in separation in February 1993. The Respondent supported the family during the parties' relationship primarily through self-employment as a general contractor carrying out home renovations. He operated his business activities under a sole proprietorship called Better Renovations. In addition, at one point during the relationship, the Respondent was employed as a superintendent for a major construction company and did renovation work on the side through the use of sub-contractors. The Applicant's uncontroverted evidence was that the Respondent earned an annual income of well over $100,000.00 during the parties' relationship.

[7] The Applicant commenced an application soon after the parties' separation seeking, inter alia, custody of Danielle and Kassandra and child support from the Respondent for both children. On December 7, 1994, she obtained a final order granting her custody of Danielle and Kassandra. Subsequently, on December 8, 1994, Van Duzer, J. made an order finding the Respondent to be in loco parentis to Danielle, granting the Respondent reasonable access to Danielle and Kassandra and requiring the Respondent to pay the Applicant child support for both children in the amount of $200.00 per month for 12 months, and in the amount of $400.00 per month commencing December 1, 1995. The Applicant testified that the Respondent appealed this order, but that the amount of support was not changed on appeal. However, an order was made on consent at the appellate level specifying that the support of $400.00 per month related only to Kassandra, and not to Danielle. The Applicant consented to removing Danielle from the Respondent's child support obligation because she did not want the Respondent to have access to Danielle.

[8] According to the Applicant, the Respondent brought a Motion to Change child support shortly after the appeal proceedings were resolved, seeking to lower his child support obligation. The Respondent did not comply with orders for financial disclosure during the course of those proceedings, and the court eventually dismissed his request to reduce child support. However, the Applicant testified that the Respondent returned to court in 1998, seeking again to reduce his child support obligation. The Applicant stated that the Respondent once again failed to comply with his financial disclosure obligations during that proceeding, and that Genesee, J. eventually made an order reducing child support to $305.00 per month, but also granting the Applicant spousal support of approximately $300.00 per month. The Respondent appealed this order to the Superior Court of Justice, Divisional Court, and the order for spousal support was overturned on appeal. However, the court made an order on May 29, 2000 that the Respondent was to continue to pay child support for Kassandra in the amount of $305.00 per month. The Applicant testified that the Respondent was consistently in arrears in relation to these various child support orders.

[9] The Respondent suffered a stroke on or around September 3, 2003 and was admitted to the Kingston General Hospital at that time. He was transferred to the Brantford General Hospital and was admitted to the rehabilitation unit of that facility in September 2003. He was eventually discharged from hospital on October 17, 2003, with recommendations that he pursue speech therapy at Trillium Hospital, which was close to his residence. At that time, he was experiencing ongoing difficulties with his speech and his right hand functioning. A rehabilitation social worker who supported him during his stay at Brantford General Hospital, Ms. Ruth Locsis, indicated that his treatment team had concerns about his ability to achieve a full recovery. Mr. Locsis strongly recommended that the Respondent apply for either Ontario Works or Ontario Disability Support Plan ("ODSP") benefits. There is no evidence that the Respondent did so at that time.

[10] The Respondent received follow-up monitoring and treatment from Dr. Catherine LeFeuvre of the Arythmia Clinic in Mississauga in 2004. By March 2004, the Respondent continued to struggle with speech difficulties, but Dr. Lefeuvre noted in a report dated March 16, 2004 that he was not experiencing any chest pain, shortness of breath, heart irregularities or symptoms of congestive heart failure. Dr. Lefeuvre subsequently noted in a report dated November 24, 2004 that the Respondent's speech had improved significantly, that he looked quite healthy, and that overall he was doing well. She further noted that the Respondent had resumed his self-employment activities in the construction industry.

[11] In response to his health challenges in 2003 and 2004, the Respondent initiated another Motion to Change Final Order in 2004 to suspend his child support obligation. The Applicant consented to a suspension of child support for one year based on these health difficulties. The order dated November 19, 2004 which is the subject of this variation proceeding was made pursuant to Minutes of Settlement executed by the parties. As I have already indicated, this order relieved the Respondent of his obligation to pay child support for Kassandra for a one year period, from August 25, 2003 until August 20, 2004, required the Respondent to pay child support for Kassandra in the amount of $305.00 per month commencing September 1, 2004, and directed the Respondent to pay outstanding child support arrears at the rate of $100.00 per month. The monthly sum of $305.00 was the Table amount at that time based on an annual income of $35,000.00. The Statement of Account of the Director of the Family Responsibility Office that was filed in the current proceeding indicates that as of November 19, 2004, the Respondent owed arrears of child support in the amount of $13,840.52.

[12] The Family Responsibility Office ("FRO") was able to enforce the terms of the November 19, 2004 order on a fairly consistent basis until January 1, 2008. The Respondent alleges that he suffered a minor relapse in his health sometime in August, 2006, but he indicated in correspondence to the FRO in July, 2015 that this did not cause a major set-back for him. He did not adduce any medical evidence to substantiate this alleged relapse, and his current physician, Dr. Aguanno, noted in a report dated November 30, 2016 that he did not have any documentation regarding this alleged recurrence of his health difficulties in 2006.

[13] As of January 1, 2008, the Respondent had reduced his child support arrears to $12,044.92. However, the Respondent did not make any further voluntary payments of child support from January 1, 2008 until August 4, 2015, a period of more than 7.5 years. During that time, the FRO was only able to enforce $780.66 through diversion measures.

[14] The Respondent experienced health difficulties again in 2014. He was hospitalized at some point in 2014 for cardiomyopathy and rapid atrial fibrillation. The Respondent's evidence is that he remained hospitalized for 6 weeks, and that he was advised not to work for at least two months following his discharge from hospital. However, he stated in his correspondence to the FRO dated July 3, 2015 that this relapse was also minor, and that it did not result in a significant set-back for him. He did not produce any medical records from 2014 from any hospital or other treatment professionals relating specifically to this relapse. Accordingly, there is no independent information before me about when the hospitalization occurred, the length of the Respondent's hospitalization, or his prognosis and treatment recommendations that were made at that time. In Exhibit N to his affidavit sworn February 8, 2016, the Respondent indicated that his relapse occurred in the fall of 2014.

[15] Although the Respondent was optimistic about his health and his ability to earn a reasonable income in his communication with the FRO in July 2015, the evidence indicates that his income earning ability has become considerably impaired since his admission to hospital in 2014. The Respondent adduced a report of his cardiologist, Dr. Sullivan, dated July 18, 2016 as evidence in this proceeding. Dr. Sullivan noted that the Respondent has "a significant cardiac diagnosis with chronic left ventricular dysfunction and atrial fibrillation." His report included a list of multiple medications that the Respondent must take to manage his cardiac issues. The Respondent also filed a report from his family physician, Dr. Aguanno, dated November 20, 2016, in which Dr. Aguanno noted the following:

1. The Respondent had a significant cerebrovascular accident in 2003 while working in Kingston and underwent rehabilitation therapy in Brantford following the accident.

2. Since the incident in 2003, the Respondent has experienced residual weakness in his right hand as well as a significant expressive aphasia and possible cognitive deficits.

3. Despite these difficulties, the Respondent persisted in his attempts to operate his renovations business and strongly resisted applying for Ontario Works or disability benefits.

4. The Respondent had reported to him that he had experienced difficulties securing jobs due to his speech and cognitive issues, and that he was finding it difficult to complete jobs due to his right hand weakness.

5. The Respondent's ventricular function has deteriorated since 2014, and his symptoms have slowly worsened since that time. He does not have medical insurance to cover the various medications that he has been prescribed, and his inability to purchase these medications may have contributed to the deterioration in his health. He was compliant with his medication regime at that time, but nonetheless experienced general fatigue and shortness of breath from walking even one city block.

[16] Dr. Aguanno concluded that the Respondent "has several disabilities that make it almost impossible for him to carry on working." He emphasized that the Respondent had tried in earnest to carry on with his construction business for the past several years with minimal success, and that he had been virtually completely unsuccessful with his business in the past year or two.

[17] Dr. Aguanno completed an ODSP application for the Respondent on November 30, 2016 based on his conclusions outlined above. As of that time, the Respondent was taking seven different medications on a daily basis. On January 17, 2017, the Respondent received confirmation from ODSP that he had qualified for disability benefits. The Respondent also applied for Canada Pension Plan (CPP) disability benefits, and on August 9, 2017, he received confirmation that he had been approved for a CPP disability pension, retroactive to March 2016. He receives $952.43 each month from this pension source.

[18] The FRO has pursued numerous enforcement measures against the Respondent over the years. The Applicant indicated that the Respondent was incarcerated on one occasion due to non-payment of support, and that the FRO has also suspended his driver's licence twice. In fact, the Respondent's current Motion to Change Final Order was precipitated by further enforcement initiatives which the FRO initiated in late 2014. On December 24, 2014, the FRO sent correspondence to the Respondent advising that he was $36,979.26 in arrears of child support, inviting him to execute a Voluntary Arrears Payment Schedule ("VAPS"), and warning him that the FRO would pursue more aggressive enforcement measures if an agreement could not be reached regarding payment of the arrears. The Respondent did not respond in a timely manner, but finally entered into a VAPS on July 3, 2015 in which he agreed to pay the sum of $428.00 every six months until the arrears were retired. As of that date, the Respondent indicated to the FRO that with the return of his licence and the progress in his recovery to date, he expected that his business would begin to improve. At that time, the Respondent also filed an Application to Discontinue Enforcement of Ongoing Support, on the basis of his position that Kassandra was no longer entitled to support. The FRO confirmed in correspondence to the Respondent dated August 28, 2015 that it had stopped enforcement of the support obligation respecting Kassandra effective June 30, 2014, but that it would continue to enforce outstanding arrears. The Respondent's driver's licence had been suspended for approximately seven years by that time due to his failure to pay support. The FRO reinstated the Respondent's driver's licence based on the Respondent's representations that he needed his driver's licence to work and his undertaking to commence a Motion to Change Final order within a few weeks. Notwithstanding this undertaking, the Respondent did not commence this Motion to Change until February 2016.

[19] As I have stated, the Respondent eventually commenced the current Motion to Change Final Order on February 12, 2016 in response to the FRO's most recent enforcement measures. At the first appearance of the Motion to Change on July 20, 2016, I made an order on consent of the parties terminating the Respondent's obligation to pay support for Kassandra effective June 30, 2014. On September 9, 2016, Edwards, J. made an order on consent of the parties permitting the Respondent to be represented in these proceedings by his brother, David Nuttall.

[20] A settlement conference was held before McLaren, J. on November 17, 2016. On that date, an order was made requiring the Respondent to use his best efforts to provide proof of any medical conditions that he was relying on to support his claims by February 14, 2017. The Motion to Change Final Order was scheduled for a hearing to the sittings commencing May 8, 2017, and deadlines were established for the filing of Facta and supplementary affidavit evidence.

[21] The matter initially came before me for a hearing on June 13, 2017. On that date, I concluded that the matter was not ready to proceed to a hearing for several reasons. First, the Applicant had not filed a Factum, and the Respondent's Factum was not in proper form. Second, although the Respondent had filed some medical information in support of his motion, there was no information that addressed his claims regarding his impaired income-earning capacity from 2004 until 2014. Third, the Respondent's income disclosure was extremely deficient and would not allow for a proper analysis of the issues to be determined in the case. Fourth, neither party had filed a Director's Statement of Account from the FRO outlining the Respondent's history of payments, and this information was required to properly address the issues. Furthermore, the Applicant had not adduced any evidence regarding Kassandra's circumstances and the impact that any rescission or reduction of arrears would have on her and Kassandra. Finally, I concluded that oral evidence was required having regard for the complexity of the issues, the fact that neither party was represented by counsel and the fact that there were credibility issues. It was not possible to hear oral evidence on that day because the Respondent chose not to appear in court. I made a detailed order for disclosure on this date. The parties required sufficient time to comply with this order, and therefore the hearing was adjourned to November 14, 2017. With respect to disclosure, I ordered that the Respondent serve and file an affidavit addressing and attaching the following by October 13, 2017:

1. He was to explain the reasons for his delay in commencing the Motion to Change Final Order;

2. He was to indicate when he gave effective notice to the Applicant that child support needed to be adjusted;

3. He was to provide a detailed outline of the history of FRO enforcement proceedings against him since 2004;

4. He was to attach copies of his complete Income Tax Returns for 2004 to 2016, including Statements of Business and Professional Activities, and was to attach proof of all expenses claimed against business income for those years;

5. He was to attach copies of any medical records he intended to rely upon relating to his health crises in 2006 and 2014 and his current impaired capacity to work;

6. He was to provide full details regarding the status of his ODSP application and attach copies of all correspondence he has received from ODSP since submitting the application;

7. He was to attach a detailed summary of his income earning activities since 2004 on a year by year basis, including whether he has hired other individuals to work for him;

8. He was to attach proof of total year to date gross income for 2017 and expenses that he intended to declare against such income; and

9. Finally, he was to attach an up to date Director's Statement of Account from the FRO.

[22] On June 13, 2017, I also made an order requiring the Applicant to serve and file an affidavit by October 27, 2013, addressing the following:

1. She was to outline in detail her knowledge of the history of FRO enforcement measures since 2004, with documentary proof of same if such proof was in her possession;

2. She was to outline in detail her knowledge, if any, respecting the Respondent's income earning activities since 2004; and

3. She was to address any concerns regarding any hardship to her and/or Kassandra if child support arrears were reduced or rescinded.

[23] The FRO's enforcement efforts have resulted in payment of some arrears of support since August 2015. The FRO garnished half of the Respondent's retroactive CPP payment in September 2017 and several amounts owing to the Respondent from government sources, including HST credits and income tax refunds that have been issued to him. As of September 14, 2017, the Respondent had only made two voluntary payments of $428.00 pursuant to his VAPS, on August 4, 2015 and March 1, 2017. Notwithstanding these various credits to his FRO account, the Respondent remained in arrears of support in the amount of $23,426.38 as of September 14, 2017. The Applicant testified that she had received $952.43 from the FRO since September 14, 2017, resulting in a balance of $22,473.95 owing as of the date of the trial. Of this amount, the sum of $2,274.00 is owed to the Minister, and $1,200.00 is owed to the FRO on account of enforcement fees. The balance of $18,999.95 was owed to the Applicant as of the date of the trial.

PART III: POSITIONS OF THE PARTIES

[24] As I have indicated, the outstanding issues to be determined in this case are whether the Respondent's child support arrears should be reduced, and whether a payment plan should be ordered respecting any outstanding arrears. At the hearing, the Respondent's representative Mr. David Nuttall ("Mr. Nuttall") requested that the arrears be completely rescinded. In the alternative, he requested an order reducing the arrears to $2,085.56, and that these arrears be paid at the rate of $428.00 semi-annually. I note that the Motion to Change Final Order does not include a request to rescind all arrears, but simply a request to reduce the amount of arrears owed to $2,085.56. Mr. Nuttall indicated at the hearing that the Respondent would agree to an order requiring him to pay the outstanding arrears of $2,274.00 which he owes to the Ministry.

[25] The Respondent's request to reduce arrears to $2,085.56 is based on his own calculation of what his arrears would be if his child support obligation were decreased retroactively from December 2004 onward in accordance with the Table amount based on his position respecting his actual income since that time. In support of this position, Mr. Nuttall submitted as follows:

1. He alleged that the Respondent never fully recovered from the cardiac crisis that he experienced in 2003, and that he has not been able to earn a meaningful income since that time. He asserted that the Respondent tried very hard to bring his income up to previous levels, and refrained from applying for Ontario Works or ODSP benefits for many years in the hope that he would be able to get back on his feet financially. However, according to Mr. Nuttall, the Respondent was overly optimistic about his prognosis and his ability to work.

2. He submitted that the Respondent's ability to work was even more significantly impaired following his last relapse with cardiac issues in 2014, and that he has gradually become completely unable to work since that time.

3. Finally, he noted that the Respondent is now on a fixed disability income of $952.43 per month, and that he is simply unable to make payments towards all outstanding arrears on such a low income.

[26] The Applicant seeks an order dismissing the Respondent's request to reduce his arrears of child support. She requests that the arrears which she is owed be paid before the arrears owed to the Ministry, and that those arrears be enforced at the rate of $476.21 per month, which represents 50% of the Respondent's monthly CPP disability benefit. She argued that the Respondent has not met the onus on him of establishing that his income has decreased since 2004. In this regard, she noted that the Respondent has not produced the financial disclosure that he was obliged to disclose and that is required for the court to obtain a full picture of his true income for child support purposes. In addition, she submitted that income should be imputed to the Respondent from 2004 onward pursuant to section 19 of the Guidelines, on the basis of the Respondent's failure to disclose income information, his unreasonable deductions from business expenses and/or his intentional under-employment.

[27] The Applicant made the following additional points in support of her position that a retroactive reduction of the Respondent's child support obligation is inappropriate:

1. She emphasized that the Respondent has a longstanding history of actively evading the FRO and dodging his child support obligations, and suggested that this most recent round of litigation is simply a further attempt on his part to avoid his support obligations;

2. She noted that the Respondent has rarely paid her child support on a voluntary basis, and that the vast majority of the payments that she has received have been the result of enforcement measures by the FRO over the years;

3. She argued that the Respondent is a highly skilled and qualified carpenter, and that he is attempting to mislead the court about his true income since 2004. She suggested that the income information set out in the Respondent's income tax documents since 2004 was completely fabricated. On this issue, she claimed that the Respondent renewed his business licence in 2013, that he has an active business website, and that he also has an active business mailbox; and

4. Finally, she testified about the financial challenges that she and Kassandra have experienced over the years as a result of the Respondent's failure to comply with his support obligations. She argued that relieving the Respondent of his support obligations would result in an injustice having regard for his irresponsible conduct and the financial struggles that she and Kassandra have faced.

[28] Mr. DiGregorio argued on the behalf of the Ministry that the Respondent's request to reduce his child support arrears should be dismissed. He consented to an order directing that arrears owed to the Applicant be paid prior to those owed to the Ministry, and suggested that a rate of enforcement in the amount of $250.00 per month would be appropriate having regard for the Respondent's current financial situation.

PART IV: THE LAW

I. STATUTORY FRAMEWORK AND GENERAL PRINCIPLES APPLICABLE ON A MOTION TO CHANGE CHILD SUPPORT

[29] Given that the parties in this case were never married, the analysis of the child support issues is governed by section 37 of the Family Law Act, R.S.O. 1990, c. F-3, as amended and the general principles relating to variation of child support. Section 37(1) of the Family Law Act, which addresses the right to commence a child support variation proceeding, provides as follows:

APPLICATION FOR VARIATION

37 (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).

[30] Section 37(2.1) of the Family Law Act outlines the test that applies on a Motion to Change child support under the Act, and the powers of the court on such a motion, as follows:

Powers of court: child support

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.

[31] A proceeding to vary child support is not an appeal of the original order. The court hearing the case must assume that the existing order accurately addressed the financial needs of the child and took into consideration the appropriate legal considerations. The correctness of the previous order should not be reviewed on the motion (Willick v. Willick, 1994 28 (SCC), [1994] 3 S.C.R. 670 (S.C.C.), at para. 20; Gray v. Rizzi, 2016 ONCA 152 (C.A.), at para. 26).

[32] Section 37(2.1) of the Family Law Act reinforces the point that a child support variation proceeding is not an appeal of the original order by delineating two alternative threshold issues that must be established in order to bring such a motion. Specifically, it stipulates that the moving party on a Motion to Change must as a preliminary matter establish one of the following:

1. That evidence that was not available at the hearing respecting the order has now become available; or

2. That there has been a change in circumstances within the meaning of Guidelines.

[33] Once the threshold test is satisfied, the second stage of the analysis on a Motion to Change requires the court to determine the variation, if any, which is appropriate on the facts of the case (Willick; Punzo v. Punzo, 2016 ONCA 957 (C.A.)). On a Motion to Change, the onus is on the moving party to prove both the changes in circumstances they are relying on to justify the requested variations and the appropriateness of the relief that they are seeking (Punzo, at para. 26). In determining whether the moving party has met this onus, the court must consider the evidence and arguments of both parties (Punzo, at para. 26).

II. THE MEANING OF "MATERIAL CHANGE IN CIRCUMSTANCES"

[34] In determining the type of change in circumstances that is sufficient to ground a child support variation claim under the Family Law Act, it is useful to draw upon the case-law respecting child and spousal support variation proceedings under both the Family Law Act and the Divorce Act, R.S.C. 1985, c. 3, (2nd Supp.), as amended, since all such proceedings require the court to consider whether a change in circumstances has occurred. With respect to the "change in circumstances" criterion, the Ontario Court of Appeal held in Gray v. Rizzi in the context of a variation proceeding under the Divorce Act that the change(s) that the moving party relies on must have occurred since the existing order was made. Although section 37(2.1) of the Family Law Act does not specify that the change must have occurred since the last order was made, common sense dictates that this requirement applies equally to a variation proceeding under the Family Law Act.

[35] The case-law has held that a change in circumstances will only meet the threshold test for a variation proceeding if it is "material," both in terms of the nature of the change and its duration. The concept of "material change in circumstances" must be viewed flexibly, so as to accommodate a host of factual developments that may have evolved since the existing order was made (Brown v. Brown, 2010 NBCA 5 (C.A.); Willick). The court must consider the unique facts of every case and determine whether the alleged change was "significant and long lasting; whether it was real and not one of choice" (Brown; Haisman v. Haisman, 1994 ABCA 249 (C.A.), leave to appeal to the S.C.C. refused, [1995] 3 S.C.R. vi (S.C.C.)). Trivial, insignificant or short-lived changes will not justify a variation (Haisman; Hickey v. Hickey, 1999 691 (SCC), [1999] 2 S.C.R. 518 (S.C.C.); Marinangeli v. Marinangeli, 2003 27673 (ON CA), 2003 CarswellOnt 2691 (C.A.)).

[36] Where a payor parent relies on the child's loss of eligibility for support to meet the threshold test for variation, the proceeding is essentially a matter of giving effect to the intent that the original order should only continue for so long as eligibility existed (Erskine v. Erskine, 2011 CarswellBC 1888 (S.C.)). If the proceeding is based on other alleged changes in circumstances, the changes must be such that if they had been known at the time the order was made, they would likely have resulted in different terms. The corollary of this principle is that if the circumstance relied upon to meet the threshold test was known or demonstrably contemplated when the order was made, it generally cannot be relied on to meet the threshold test for a variation (Willick, at para. 100; B.(G.) v. G.(L.), 1995 65 (SCC), [1995] 3 S.C.R. 370 (S.C.C.); L.M.P. v. L.S., 2011 SCC 64, [2011] 3 S.C.R. 775 (S.C.C.), at para. 44; Stevenson v. Smit, 2014 ONCA 521 (C.A.); Mason v. Mason, 2016 ONCA 725 (C.A.); Dedes v. Dedes, 2015 BCCA 194 (C.A.)). However, a key consideration in determining whether a circumstance that was known or contemplated can later be relied upon in a variation proceeding is whether the circumstance was factored into the decision-making at the time the order or agreement was made. A circumstance that the parties were aware of and contemplated during negotiations or court proceedings relating to the existing order may not have been built into the framing of the agreement or order for any number of reasons. If the evidence indicates that the circumstance was for any reason taken off the table as a consideration in crafting the order or agreement, it may later qualify as a change in circumstance in a variation proceeding (Stones v. Stones, 2004 BCCA 99 (C.A.)). Furthermore, the fact that a change was objectively foreseeable does not necessarily mean that it was contemplated by the parties and factored into the agreement they reached regarding support (L.M.P.; Dedes).

[37] Section 14.1 of the Guidelines is critical to the issue of whether a change in circumstances has occurred that will meet the threshold test on a variation proceeding. It provides that where the amount of child support set out in the existing order includes a determination made in accordance with the Tables under the Guidelines, any new circumstances that would result in a different order for the support of the child will constitute a change within the meaning of section 37(2.1) of the Family Law Act. Accordingly, a change in the payor's income, a change in the child's primary residence or evidence that the child is no longer entitled to child support under the Family Law Act would satisfy the threshold test. Section 14.2 of the Guidelines stipulates that where the amount of child support does not include a determination made in accordance with the Tables, any change in the condition, means, needs or other circumstance of either parent or spouse or of any child who is entitled to support will constitute a change in circumstances that justifies a variation order.

III. DETERMINATION OF THE APPROPRIATE VARIATION ORDER

[38] The second stage of the analysis on a Motion to Change involves a determination of the variation, if any, that should be made to the existing order. Even if the threshold test of a change in circumstances is met, this does not necessarily follow that a variation of the existing order should be ordered (Willick, at para. 104; Punzo, at para. 41). The decision as to whether changes are warranted, and if so, the specifics of any variation involve a careful analysis of all issues that are relevant to the claim, including consideration of entitlement to support, the appropriateness of any retroactive or ongoing claims, the parties' respective incomes, the effective date of any variation and calculation of the quantum of support payable based on the applicable legislation and Guidelines (Punzo, at paras. 38, 41). Furthermore, the variation requested must be justified having regard for the material change in circumstances that met the threshold test (Willick, at para. 104; Punzo, at paras. 26, 43). For example, loss of entitlement to support would justify an order terminating child support, but would not open the door for retroactive changes to support prior to the termination date based on minor fluctuations in income that would not meet the threshold material change in circumstances test.

IV. LEGAL PRINCIPLES RELATING TO CLAIMS FOR RETROACTIVE DECREASES IN CHILD SUPPORT AND RESCISSION OR REDUCTION OF ARREARS

[39] On a Motion to Change Final Order, the court has a broad discretion to grant a payor retroactive relief from the terms of an existing order. The court's powers in this regard include the following:

1. It can retroactively discharge (terminate) the existing order or one or more terms of the order as of a specified date, and order that arrears be re-calculated accordingly;

2. It can retroactively vary one or more terms of the order. This authority includes the power to retroactively decrease the amount of child support payable and either reduce any arrears payable by the Respondent or order the support recipient to reimburse the payor for any overpayment of support;

3. It can suspend all or part of the order on a retroactive or prospective basis for a specified period of time or until certain conditions are met, with the result that there will be no support payable during the period in question;

4. It can decline to vary the order on a retroactive basis, but nonetheless exercise its discretion to either reduce the arrears that have accumulated pursuant to the order or rescind them entirely; and

5. It can also vary the existing order by implementing an appropriate payment plan respecting any arrears that have accrued.

[40] The Ontario Court of Appeal has held that there is no fixed formula for determining how the court should exercise its discretion in cases where a payor seeks retroactive relief from an existing child support order (Filipich v. Filipich, 1996 1294 (ON CA), 1996 CarswellOnt 3263 (C.A.)). However, it concluded in Gray v. Rizzi and reiterated in Punzo and more recently in Colucci v. Colucci, 2017 ONCA 892 (C.A.) that general guidance can be found from the basic principles that the Supreme Court of Canada articulated respecting retroactive child support claims by recipients in D.B.S. v. S.R.G.; L.J.W. v. T.A.R; Henry v. Henry; Hiemstra v. Hiemstra, 2006 SCC 37, [2006] S.C.J. No. 37 (S.C.C.) (hereinafter referred to as "D.B.S"). Drawing from the Reasons for Judgment in D.B.S., Gray v. Rizzi, Punzo, and other appellate case-law from across the country, the general principles that govern the determination of claims for retroactive decreases of child support and rescission or reduction of child support arrears can be summarized as follows:

[41] First, there is no automatic right to pursue retroactive relief with respect to child support. When such relief is requested, the court must as a starting point analyze the governing legislation to determine if it establishes parameters, criteria or conditions regarding retroactive claims (D.B.S.).

[42] There are four general stages to dealing with a claim by a support payor for retroactive relief from an existing child support order, as follows:

1. As discussed above, the court must first determine whether the threshold test on a Motion to Change has been satisfied;

2. Second, the court must determine whether retroactive relief is appropriate;

3. Third, if the court concludes that retroactive relief is appropriate, it must craft a remedy that is fair and just based on all of the facts of the case. If the court determines that a retroactive reduction of support is appropriate, it must at this stage of the analysis determine the appropriate date of retroactivity; and

4. Finally, after determining the general framework for the appropriate remedy, the court must quantify any adjustments to support that are required as a result of the remedy, and any overpayment that the recipient must reimburse to the payor. The court should also determine whether it is appropriate to include terms in the order relating to the manner of payment of any arrears, including terms to address any potential concerns regarding financial hardship.

[43] There are three main interests that must be carefully considered and balanced in determining whether retroactive relief is appropriate and crafting an appropriate remedy, as follows:

1. The child's interest in receiving the appropriate amount of support;

2. The interest in fostering certainty and predictability when financial obligations appear to be settled; and

3. The need for overall fairness and flexibility in order to ensure a just result (D.B.S.; Gray v. Rizzi; Colucci).

[44] In claims for retroactive reductions of support and reduction or rescission of arrears, the interests in certainty and predictability lie with the recipient, since the payor's support obligation was legally settled and the recipient had every reason to expect that the payor would comply with their duty to pay support.

[45] The court's analysis of claims to retroactively decrease child support or to rescind or reduce child support arrears must also be guided by the following fundamental principles relating to child support which the Supreme Court of Canada set out in D.B.S:

1. Child support is the right of the child that arises upon the child's birth and exists independent of any statute or court order. It survives the breakdown of the parents' relationship.

2. Child support should, as much as possible, provide children with the same standard of living they enjoyed when their parents were together. The amount of child support owed will vary based upon the income of the payor parent.

3. The provincial power to regulate child support matters in contexts not involving divorce remains unfettered. Accordingly, when retroactive child support is sought, the court must consider and apply the relevant provisions of the statutory scheme in which the application is brought.

4. The child support analysis must not lose sight of the fact that child support is the right of the child. Accordingly, the child should not be left to suffer if one or both parents fail to monitor child support payments vigilantly.

5. 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. Accordingly, any incentives for payor parents to be deficient in meeting their child support obligations should be eliminated.

6. The specific amounts of child support owed will vary based upon the income of the payor parent.

[46] In determining whether retroactive relief to a payor is appropriate at the second stage of the analysis described above, a distinction must be drawn between the following two types of cases:

1. Situations where the payor had the ability to pay child support when it came due, and they now seek retroactive relief in relation to arrears based solely on their current inability to pay; and

2. Situations where the payor experienced a genuine change in circumstances during the period when arrears accrued which rendered them unable to keep up with their child support payments as they came due.

[47] In the first scenario, the interests of predictability and certainty with respect to child support orders should be considered paramount, given the lack of excuse for non-payment of support when it came due and the necessity of ensuring that parents comply with their obligation to support their children. Accordingly, in such circumstances, the court should generally require full compliance with the existing order unless there are compelling reasons not to do so. Generally, the court should only exercise its discretion to retroactively decrease support or reduce or rescind arrears in this type of case where the payor has established on a balance of probabilities that they cannot pay and will not ever in the future be able to pay the arrears (Gray v. Rizzi, at para. 58; Punzo, at para. 46; see also Haisman; Gray v. Gray, (1983), 1983 4531 (ON SC), 32 R.F.L. (2d) 438 (Ont. H.C.); Corcios v. Burgos, 2011 ONSC 3326 (S.C.J.); Morden v. Pippy, 2016 ONSC 6886 (S.C.J.)). If the court declines to grant the payor retroactive relief in such circumstances, it may nonetheless consider varying the order to implement a payment plan for arrears that addresses any concerns about potential hardship to the payor. For instance, if the payor has some financial means to pay, the court may consider fixing the rate of payment of arrears to a specified monthly amount that is more manageable for the payor. Alternatively, if the payor has no present means to pay, but the evidence indicates that they will have the means to pay in the future, the court may grant an order staying enforcement of the arrears for a period of time, and that the arrears be paid at a manageable fixed monthly rate thereafter. In these types of cases, evidence that the recipient agreed to non-payment of the support is generally irrelevant, since child support is the right of the child and cannot be bargained away by the recipient parent (Gray v. Rizzi; Corcios).

[48] In the second type of situation referred to above, there is greater room for discretion to retroactively decrease support and to rescind or reduce arrears, since there was a legitimate reason for the payor's failure to keep up with child support payments when they came due (Gray v. Rizzi; Punzo). However, the fact that the payor experienced a genuine change in circumstances which affected their ability to pay does not in and of itself automatically entitle them to a retroactive decrease of support, or a rescission or reduction of arrears. The court has a broad discretion to determine whether or not to grant the payor retroactive relief from the existing order. Although there is no fixed test that the court must follow in determining whether retroactive relief is appropriate, the relevant factors and considerations include the following:

1. The nature of the obligation to support, whether contractual, statutory or judicial, and the specific terms of any existing agreement or order. (Gray v. Rizzi; Gray v. Gray; Filipich; DiFrancesco v. Couto, 2001 8613 (ON CA), 2001 CarswellOnt 3858 (C.A.). Corcios; Szitas v. Szitas, 2012 ONSC 1548 (S.C.J.)).

2. Whether there is a reasonable excuse for the payor's delay in pursuing relief (D.B.S.; Gray v. Rizzi; Gray v. Gray; Filipich; DiFrancesco; Corcios; M.(D.) v. A.(S.), 2008 CarswellNS 367 (N.S.F.C.)).

3. The ongoing financial means of the payor, and in particular, their ability to make payments towards the outstanding arrears (Gray v. Rizzi; Gray v. Gray; Filipich; DiFrancesco; Corcios; Szitas).

4. The ongoing needs of the child and the support recipient; (D.B.S.; Gray v. Rizzi; Gray v. Gray; Corcios).

5. The conduct of the payor in relation to child support. In relation to conduct, the court should consider both positive conduct and any evidence of blameworthy conduct. An expansive view of what constitutes "blameworthy conduct" is appropriate in claims for retroactive relief, and the phrase encompasses "anything that privileges the payor parent's own interests over his/her child's right to an appropriate amount of support" (D.B.S., at para. 106). The analysis of the payor's conduct should include the following inquiries:

i. Whether they have made any voluntary payments on account of arrears;

ii. Whether they have cooperated with enforcement agencies in addressing the issue of child support;

iii. Whether they have kept the recipient fully apprised of the changes in their circumstances over time as those changes occurred;

iv. Whether they have complied with obligations and requests for financial disclosure in an effort to address the child support issue;

v. Any evidence respecting their willingness to support the child or alternatively to avoid their child support obligation. Behaviour that indicates wilful non-compliance with the terms of the order or failure to work cooperatively to address the child support issue is a factor that militates against even partial rescission of or reduction of arrears (D.B.S.; Gray v. Rizzi; DiFrancesco; Corcios). Further, failure to disclose a material change in circumstance to the recipient for an extended period of time may also be relevant (M.(D.) v. A.(S.)).

vi. The motivating factors behind the payor's decision to pursue relief may also be relevant. Where the payor has only initiated Motion to Change proceedings to seek relief from significant arrears due to default proceedings by the FRO and under threat of coercive enforcement measures, this may influence the court to either deny relief altogether or to carefully circumscribe the relief granted to the payor. To allow retroactive relief as a matter of course in such circumstances would provide an incentive to payor parents to simply declare an inability to pay, ignore child support orders, and abandon their children financially unless the FRO comes knocking on their door (Szitas; Morden).

6. Delay on the part of the child support recipient, even a long delay, in enforcing the child support obligation, is not relevant and does not in and of itself constitute a waiver of the right to claim arrears (Haisman; Brown).

7. Any hardship that may be occasioned by an order retroactively decreasing support, reducing arrears, rescinding arrears, or requiring the payment of substantial arrears (D.B.S.; Gray v. Rizzi; Gray v. Gray; Filipich; DiFrancesco; Corcios; Morden). Key points that are relevant to the hardship analysis include the following:

i. A broad consideration of hardship is appropriate in determining whether retroactive relief is appropriate, and the focus of this analysis may extend to the parties' other children (D.B.S., at para. 114).

ii. While hardship to the payor is relevant, it will be much less of a concern where it is the by-product of the payor's own blameworthy conduct (D.B.S., at para. 116; P.(S.) v. P.(R.), 2011 ONCA 336 (C.A.)).

iii. The hardship analysis must include consideration of hardship to the recipient. For example, if a retroactive order reducing child support would result in the child support recipient having to repay money to the child support payor due to overpayment, this may militate against making the order, particularly if the payor has not given the recipient notice of the change in their circumstances, has not provided appropriate disclosure to support their claim for an adjustment to the child support, or has delayed initiating court proceedings to change the order (M.(D.) v. A. (S.); Gray v. Rizzi).

iv. In deciding how much weight should be given to hardship to the payor in determining whether retroactive relief is appropriate, the court should give careful consideration to whether hardship concerns can be addressed at the remedy phase of the analysis by crafting an order that will alleviate any potential hardship to the payor. For instance, as discussed above, the court can stay enforcement of arrears for a period of time or establish a schedule for the payment of arrears that is realistic having regard for the payor's financial situation (Gray v. Rizzi; Haisman; M.(D.) v. A. (S.); Corcios).

v. A payor who claims hardship in support of retroactive relief must adduce concrete proof in support of this claim. Hardship will not be inferred from vague allegations regarding financial difficulties and stress. Furthermore, a payor alleging hardship should adduce evidence relating to their overall net worth, and not just their day-to-day cash flow situation (Greene v. Greene, 2010 BCCA 595 (C.A.); Vincent v. Vincent, 2012 BCCA 187 (C.A.); Tschudi v. Tschudi, 2010 ABCA 170 (C.A.); Hunchak v. Hunchak, 2016 SKCA 44 (C.A.); Goulding v. Goulding, 2016 NLCA 6 (C.A.)).

[49] None of the factors outlined above are determinative in deciding whether retroactive relief is appropriate, and there may be other factors unique to the case that should guide the court's decision.

[50] If the court decides that retroactive relief is appropriate, it must then determine the appropriate remedy. At this stage, the court must carefully consider and balance the various interests at stake in retroactive claims as previously discussed, the fundamental principles relating to child support, the discretionary factors outlined above and any other relevant considerations to frame a remedy that is fair and just. If the court concludes that a retroactive decrease in support is appropriate, it must determine the date from which any decrease should take effect, and the extent of the reduction. In D.B.S., the Supreme Court of Canada established that generally, a retroactive child support order should commence as of the date of effective notice that a request is being made for an adjustment to child support. It further held that in most cases, it will be inappropriate to make a support award retroactive to a date more than three years back from when formal notice was given of the requested change. These principles apply equally to claims for a retroactive downward variation of child support (Gray v. Rizzi; Punzo). Effective notice is any indication by the payor that child support requires a review and adjustment. Effective notice does not require the payor to take legal action; what is required is that the topic be broached (D.B.S., at para. 121; M.(D.) v. A. (S.), at para. 77). The Supreme Court of Canada did not define the notion of "formal notice" in D.B.S. However, in discussing the various possibilities for the timing of retroactive awards, the court distinguished between formal notice and the date on which the proceeding seeking relief was commenced. Accordingly, formal notice can be earlier than the commencement date of the proceeding.

[51] Where a payor seeks to retroactively reduce child support or reduce or rescind arrears, effective notice requires that the payor provide the recipient with reasonable proof to support the claim for a change to the order, so that the recipient can independently assess the situation in a meaningful way and respond appropriately. A child support recipient is entitled to expect that the existing order will be complied with and to arrange their financial affairs respecting their children accordingly, unless they are in receipt of reasonable proof that a relevant change in the payor's circumstances has occurred. The absence of a disclosure requirement on the payor in determining the date of effective or formal notice in these cases would unfairly impose a burden on the support recipient to attempt to confirm the alleged change in circumstances through their own means in order to decide how to respond to the payor's claim for an adjustment (Gray v. Rizzi; Corcios).

[52] The guidelines which the Supreme Court of Canada set out for the timing of retroactive claims were presumptions only, and the court must vigilantly consider the circumstances of the case before it to determine whether or not those presumptive rules will lead to a fair and just result. The court should also consider whether there are any terms in an existing order or agreement which are relevant to the issue of timing for retroactive relief (Punzo, at para. 52). In appropriate circumstances, retroactive relief may go further back than three years from the date of formal notice. Similarly, the date of effective notice is not determinative, and the court may conclude that a shorter period of retroactivity is appropriate. In this regard, it is important to note that a payor who has given notice that they wish to reduce or terminate support has an ongoing obligation to engage in meaningful dialogue with the recipient, advise the recipient of changes in their circumstances that may impact their ability to pay support and voluntarily disclose pertinent information so that the recipient can continue to independently assess the situation and react appropriately. They also have a duty to respond to reasonable requests for disclosure from the recipient. If they fall short with respect to any of these obligations after giving effective notice, this will likely impact on the remedy which the court crafts, and in particular may cause the court to shorten the period of retroactivity (Gray v. Rizzi; Corcios). In addition, if a payor gives effective notice, but then allows an unreasonable amount of time to pass before taking formal steps to address the child support issues, this may also push the commencement date for relief to later than the date of effective notice.

[53] With respect to the quantum of any retroactive child support order, the Guidelines apply, provided that the date of retroactivity is not prior to the date when the Guidelines came into force, and subject to the principles set out in the statutory scheme under which the Court is operating (D.B.S.; M. (D.) v. A.(S.); Gray v. Rizzi; Corcios).

V. THE RELEVANT LAW RESPECTING INCOME DETERMINATION

A. General Principles

[54] The incomes of the parties is relevant in child support variation proceedings both to the initial question of whether the threshold test has been met and to the calculation of child support if the threshold is satisfied and a variation is found to be appropriate. Sections 15 to 20 of the Guidelines are the starting point for the calculation of a party's income for child support purposes. Section 15(1) provides that subject to section 15(2), a party's annual income is determined by the court in accordance with sections 16 to 20 of the Guidelines. Section 15(2) stipulates that where both parties agree in writing on the annual income of a party, the court may consider that amount to be the party's income for the purposes of the Guidelines if it thinks that the amount is reasonable.

[55] Section 16 of the Guidelines provides that subject to sections 17 to 20, a party's annual income is determined using the sources of income set out under the heading "total income" (line 150) in the T1 General Form issued by the Canada Revenue Agency, and by then making the adjustments provided for in Schedule III to the Guidelines. Federal child-related tax benefits and GST/HST tax credits for children are not included in the calculation of income for the purposes of child support (Guidelines, Schedule I, para. 5). Section 16 does not require the court to use the previous year's total income as reported by the party in the T1 General Form for the previous year as a basis for determining the quantum of support in the following year. Rather, the intention of section 16 is to direct the court to ascertain the payor's income based on the sources set out in the T1 form (Coghill v. Coghill, 2006 21778 (ON SC), [2006] O.J. No. 1489 (S.C.J.)). By virtue of section 2(3) of the Guidelines, the court is required to determine issues relating to income based on the most current information available. This requires the court to ascertain, if possible, the payor's estimated actual annual income in each year for which the quantum of child support is being determined (V. (L.R.) v. V. (A.A.), 2006 BCCA 63 (C.A.); Lavergne v. Lavergne, 2007 ABCA 169 (C.A.); Chalifoux v Chalifoux, 2008 ABCA 70 (C.A.); Morrissey v. Morrissey, 2015 PECA 16 (C.A.)). One exception to this principle is where the payor's current income situation is uncertain or speculative, in which case fairness to the payor may require the court to rely on historical income information (Morrissey).

[56] Schedule III to the Guidelines must also be carefully considered in determining the parties' incomes for support purposes, as it sets out a number of adjustments that must be made to income. For the purposes of calculating the Table amount of child support, section 3 of the Schedule provides that any spousal support received from the other parent or spouse and any universal child care benefit that is included to determine the parent or spouse's total income in the T1 General Tax Form must be deducted. Section 3.1 establishes special rules for the calculation of income for the purpose of determining an amount under section 7 of the Guidelines. Finally, section 4 of Schedule II directs that any amount of social assistance income that is not attributable to the parent or spouse should be deducted.

B. Relevant Principles Respecting Imputation of Income

[57] As previously indicated, the Applicant submits that the Respondent has not met the onus on him of proving that his income has changed since 2004, as he has not produced the necessary disclosure to allow her and the court to determine his true income for support purposes. She also argues that income should be imputed to the Respondent on the basis of the deficiencies in his financial disclosure, his intentional under-employment, and his unreasonable deductions from his self-employment income. A review of the general principles regarding imputation of income is therefore required.

[58] The Guidelines provide that the court may impute income to a party in appropriate circumstances. The relevant section of the Guidelines is section 19, which provides as follows:

Imputing income

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.

Reasonableness of expenses

(2) For the purpose of clause (1) (g), the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act (Canada). O. Reg. 391/97, s. 19 (2).

[59] Income imputation provides a means by which the court can ensure that parents meet their joint and ongoing obligation to support their children (Drygala v. Pauli, 2002 41868 (ON CA), [2002] O.J. No. 3731, 2002 CarswellOnt 3228 (C.A.), additional reasons 2003 48241 (ON CA), 2003 CarswellOnt 17 (C.A.); Tillmans v. Tillmans, 2014 ONSC 6773 (S.C.J.); B.(G.T.) v. B.(Z.B.), 2014 ONCJ 382 (O.C.J.); Morden). As the Ontario Court of Appeal stated in Korman v. Korman, 2015 ONCA 578 (C.A.), at para 51:

[t]he courts retain discretion to impute income to a payor spouse in excess of that spouse's presumptive income where the imputed income is supported by the evidence and is consistent with the objective of establishing "fair support based on the means of the parents in an objective manner that reduces conflict, ensures consistency and encourages resolution" Bak, at para. 36; Drygala v. Paul (2002), 2002 41868 (ON CA), 61 O.R. (3d) 711, 29 R.F.L. (5th) 2983 (Ont. C.A.), at para 44."

[60] The specific inclusion in the Guidelines of authority for the court to impute income highlights that the fundamental obligation of a parent to support their children takes priority over the parent's own interests and choices. It also reinforces that parents must act responsibly when making financial decisions that may affect the level of income available from them for the support of their children (Duffy v. Duffy, 2009 NLCA 48 (NLCA)). The list of circumstances set out in section 19 in which the court may impute income is not exhaustive, and therefore it does not circumscribe the court's general discretion to impute income in other situations where it considers it appropriate to do so. These other situations need not be analogous to the circumstances listed in section 19 in order to provide a foundation for imputation of income (Bak v. Dobell, 2007 ONCA 304 (C.A.); Riel v. Holland, 2003 3433 (ON CA), [2003] O.J. No. 3901, 67 O.R. (3d) 417 (C.A.); Korman).

[61] The imputation of income to a party is a fact-driven exercise that turns on the unique circumstances of the case before the court (Bak, at para. 73; Korman, at para. 49). Regardless of the basis upon which income is imputed, the amount of income that the court imputes to a party is a matter of discretion. The only limitation on the discretion of the court in this regard is that there must be some basis in the evidence for the amount that the court has chosen to impute (Korwin v. Potworowski 2007 CarswellOnt 6852 (C.A.); Froelich-Fivey v. Fivey, 2016 ONCA 833 (C.A.); Korman).

[62] The Ontario Court of Appeal addressed the issue of imputation of income pursuant to section 19(1)(a) of the Guidelines on the basis of intentional unemployment or under-employment in Drygala and more recently in Lavie v. Lavie, 2018 ONCA 10 (C.A.). The following general principles derive from those decisions and other cases which have considered section 19(1)(a):

1. Section 1 of the Guidelines stipulates that one of the objectives of the Guidelines is to establish a fair standard of support for children so as to ensure that they benefit from the financial means of both parents after separation. To this end, there is a duty on the part of the payor to actively seek out reasonable income-earning opportunities that will maximize their earning potential so as to meet the needs of their children. If a parent is earning less than they reasonably could be, they are intentionally underemployed and income may be imputed to them (Drygala; Lavie).

2. A finding of deliberate under-employment or unemployment does not require evidence of bad faith on the part of the payor parent or an attempt on their part to evade support obligations. A parent is intentionally under-employed within the meaning of this section if they earn less than they are capable of earning having regard for all of the circumstances. The parent is intentionally unemployed when they choose not to work when capable of earning an income (Drygala; Lavie).

3. In determining whether a party is intentionally under-employed or unemployed, the court should consider the party's capacity to earn income in light of their age, education, health, work history and the availability of work that is within the scope of the party's capabilities (Marquez v. Zapiola, 2013 CarswellBC 3038 (B.C.C.A.); Lawson v. Lawson, 2006 26573 (ON CA), 2006 CarswellOnt 4789 (C.A.)).

4. A self-induced lack of income or reduction of income with no realistic prospect of future financial advancement is not a basis upon which to avoid or reduce child support payments. Accordingly, the court may find the party to be deliberately under-employed and impute income where the party has persisted in un-remunerative employment or self-employment, or where they have pursued unrealistic or unproductive career aspirations (Hanson v. Hanson, 1999 6307 (BC SC), 1999 CarswellBC 2545 (B.C.S.C.); Drygala; Donovan v. Donovan (2000), 2000 MBCA 80, 190 D.L.R. (4th) 696 (Man. C.A.); Lawson; Blake v. Blake, 2000 CarswellOnt 2477 (S.C.J.))

5. The court may also impute income to a party on the basis of deliberate under-employment or unemployment if the party quits their employment for selfish or bad faith reasons (Ronan v. Douglas Walsh (1994), 1994 3826 (ON CJ), 5 R.F.L. (4th) 235 (Ont. Prov. Div.)), or if they engage in reckless behaviour which affects their income-earning capacity (Rogers v. Rogers, 2013 ONSC 1997, 2013 CarswellOnt 4068 (S.C.J.); Costello v. Costello, 2012 ONCJ 399 (O.C.J.); Aboagye v. Sakyi, 2012 ONCJ 56 (O.C.J.); Tillmanns).

6. When a party experiences an involuntary loss of employment or self-employment, they may be given a "grace period" to investigate options and seek out income earning opportunities in their field at a comparable rate of remuneration before income will be imputed to them (Lavrinenko v. Lavrinenko, 2014 ONSC 4097 (S.C.J.); Tillmanns). However, if they have been unable to secure comparable employment within a reasonable time frame, they will be required to accept other less remunerative opportunities or options outside of the area of their expertise in order to satisfy their obligation to contribute to the support of their children (Barta v. Barta, 2005 CarswellOnt 74 (S.C.J.); M. (S.D.) v. M. (K.F.), 2004 CarswellBC 70 (S.C.); Quintel v. Quintel, 1997 CarswellOnt 3213 (Gen. Div.); D. (P.) v. D. (C.), 2011 CarswellNB 442 (Q.B)).

7. Even if the court determines that the payor parent is deliberately under-employed or unemployed, the court has the discretion to decide whether or not to impute income to them. This decision will turn on the court's overall assessment of the reasonableness of the payor's decisions and actions in relation to their income. If an employment decision results in a significant reduction of income, it must be justified in a compelling way (Riel; Rilli v. Rilli, 2006 34451 (ON SC), 2006 CarswellOnt 6335 (S.C.J.); Tillmanns).

8. Finally, in determining the amount of income to impute on the basis of deliberate under-employment or unemployment, the court must consider what is reasonable in the circumstances of the particular case. The factors that the court is required to consider include the age, education, experience, skills and health of the payor, their past earning history and the amount of income that the payor could reasonably earn if they worked to capacity (Drygala; Lawson; West v. West, 2001 28216 (ON SC), [2001] O.J. No. 2149 (S.C.J.); Tillmanns).

[63] As I have noted, the Applicant also argued that income should be imputed to the Respondent on the ground that he unreasonably deducted expenses from his self-employment income. In order to impute expenses that have been deducted against income for tax purposes back into a parent's income pursuant to section 19(1)(g) of the Guidelines, it is not necessary to establish that the party who claimed the deductions acted improperly or outside the norm for claiming expenses in the income tax context. Section 19(2) specifically provides that the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act (Canada). Rather, the issue is whether the full deduction of the expense results in a fair representation of the actual disposable income that should be available to the party for personal expenses and child support (Halliwell v. Halliwell, 2017 ONCA 349 (C.A.)). In determining whether expenses claimed by a party as against income are unreasonable, the court must balance the business necessity of the expense against the alternative of using those monies for the purposes of child support (Osmar v. Osmar, 2000 22530 (ON SC), 2000 CarswellOnt 1928 (S.C.J.); Izyuk v. Langley, 2015 ONSC 2409 (S.C.J.)). In carrying out this analysis, the court must keep in mind the principle which the Supreme Court of Canada established in D.B.S. that payor parents should not be permitted to manipulate their financial affairs so as to prefer their own interests over those of their children.

[64] If it is determined that expenses claimed by a party should be added back into that party's income on the basis that they were unreasonably deducted, the amount added to income should be grossed up by the party's marginal tax rate to place the party's real income on par with what it would be for a person with a salaried income who would be taxed on the amount in question (Williams v. Williams, 2011 CarswellOnt 6588 (S.C.J.); Riel; Orser v. Grant, 2000 CarswellOnt 1354 (S.C.J.); Joy v. Mullins, 2010 CarswellOnt 7477 (S.C.J.); Szitas).

C. Onus of Proof Issues in the Income Determination Analysis

[65] Where a support payor initiates variation proceedings to reduce their child support obligation based on alleged reductions in their income, they have the onus of proving that their income did in fact decrease. However, where a party requests that the court impute income to a party, the onus is on the party advancing the imputation argument to prove the grounds to support the request (Homsi v. Zaya, 2009 ONCA 322, 2009 CarswellOnt 2068 (C.A.), additional reasons 2009 CarswellOnt 3112 (C.A.); Drygala; Morrissey). An exception to the onus issue with respect to imputation of income is where income was imputed to a payor under the existing order, and the payor subsequently seeks to reduce support based on an alleged decline in income. In Trang v. Trang, 2013 ONSC 1980, 2013 CarswellOnt 4069 (S.C.J.), Pazaratz, J. held that once a court imputes an income to a payor, the onus no longer rests with the support recipient in a variation proceeding based on alleged changes to the payor's income to establish why income should continue to be imputed on the same basis as in the previous proceeding. In these circumstances, the court has already made a determination of fact respecting income, and the onus therefore shifts to the payor to establish that their income should now be calculated in a different way (see also Morden v. Pippy, at para. 32). A payor in such circumstances who argues that an imputed income is no longer appropriate must go further than simply establishing their subsequently declared income for income tax purposes.

[66] I have reviewed the evidence to determine whether the child support amount set out in the existing order dated November 19, 2004 was based on an imputed income figure for the Respondent. There is no evidence suggesting that income was imputed to the Respondent for the purposes of that order. Accordingly, in this case, the Respondent has the onus of demonstrating that his income has decreased since November 2004. The Applicant in turn has the onus of proving that income should be imputed to the Respondent in the amount of at least $35,500.00, which was the amount that the child support order was based on.

D. The Nexus Between Income Disclosure Requirements and Onus of Proof Respecting Income

[67] In determining whether a parent has satisfied the onus on them of proving their stated income, the court must consider whether they have complied with all of their income disclosure obligations. A party cannot ask the court to make income findings that are favourable to them and contrary to another party's interests while at the same time shielding information that is relevant to the determination of their income behind a protective wall. Parents involved in child support proceedings have a positive obligation to disclose all relevant evidence required to enable the other parties and the court to obtain a true and complete picture of their income for support purposes. This requirement flows from the standard obligation upon all litigants to produce any information that is relevant to the issues in the case. Pursuant to this obligation, a party whose income must be determined in a support case must provide full and frank disclosure of all personal and business information required to properly assess their reported earnings, their income earning potential, efforts which they have made to maximize their earnings, and the appropriateness of any deductions that they seek to claim against their income. On the latter issue, a parent who seeks to deduct expenses from their income for child support purposes must as part of their basic general disclosure obligation explain the reasons for the expenses and how they were calculated, and must provide documentary proof of significant expenses in an organized manner so that the court can make a proper determination as to the reasonableness of the expense from the standpoint of the child support calculation (Szitas; MacGillivray v. Ross, 2008 CarswellNS 631 (S.C.); R.(P.C.J.) v. R. (D.C.), 2003 CarswellBC 788 (C.A.); Manchester v. Zajac, 2011 CarswellOnt 13546 (S.C.J.); Williams v. Williams, 2011 CarswellOnt 6588 (S.C.J.); Meade v. Meade, 2002 2806 (ON SC), 2002 CarswellOnt 2670 (S.C.J.); Wilcox v. Snow, 1999 NSCA 163 (C.A); Izyuk). This is particularly important in situations where the expenses reported on the party's income tax returns fluctuate from year to year (Armstrong v. Armstrong, 2010 CarswellBC 3252 (S.C.)). Similarly, where a party argues that income should be imputed to another party, the other party must produce any information within their possession or control that may be relevant to the imputation claim. If a party fails to provide all of the relevant evidence required for the court to gain a full appreciation of their true income, the court may draw an adverse inference and conclude that the party has not satisfied the onus of proving their stated income (Orser v. Grant, 2000 CarswellOnt 1354 (S.C.J.); Izyuk).

[68] In addition to the general disclosure obligations discussed above, the Guidelines and the Family Law Rules set out clear requirements respecting the income disclosure required from the Respondent in the circumstances of this case. These legal requirements must also be considered in determining whether the Respondent has met the onus of proving a reduction in his income. Concluding that a party has met the onus of proving their position regarding their income for support purposes when they are materially in breach of these disclosure obligations undermines the financial disclosure regime established by law and is inimical to the court's obligation to ensure that children receive the full support that is due to them in a timely manner.

[69] Turning first to the relevant Family Law Rules, the starting point is Rule 13(4.2), which provides that in a contested Motion to Change child support, the parties must serve and file financial statements:

FINANCIAL STATEMENT WITH MOTION TO CHANGE FINAL SUPPORT ORDER OR SUPPORT AGREEMENT

13(4.2) Subject to subrule (1.3), the following rules respecting financial statements apply if a motion is made under rule 15 requesting a change to a final support order or a support agreement:

1. The party making the motion shall serve and file a financial statement (Form 13 or 13.1) with the motion to change (Form 15).

2. The party responding to the motion shall serve and file a financial statement within the time for serving and filing the response to motion to change (Form 15B) or returning the consent motion to change (Form 15C) to the party making the motion, as set out in subrule 15 (10). Any response to motion to change (Form 15B) shall be served and filed at the same time as the financial statement.

3. Parties who bring the motion by filing a consent motion to change (Form 15C) shall each file a financial statement with the form, unless they indicate in the form that they agree not to do so.

4. Parties who bring the motion by filing a consent motion to change child support (Form 15D) do not need to serve or file financial statements. O. Reg. 151/08, s. 2 (6); O. Reg. 69/15, s. 3 (4).

[70] Rule 13(5.01) directs that unless the court orders otherwise, the parties in a contested Motion to Change support must also attach additional financial information to their financial statements, as follows:

ADDITIONAL REQUIRED FINANCIAL DISCLOSURE, MOTION TO CHANGE SUPPORT

(5.0.1) A party who is required under subrules (4) to (4.3) to serve and file a financial statement shall serve with the financial statement the following information, unless the court orders otherwise:

1. The documents referred to in subrule (3.1).

2. A current statement of arrears from the Family Responsibility Office.

3. One of the following for each year for which the party is seeking to change or cancel arrears, as proof of the party's income:

i. The party's income tax return and,

A. the party's notice of assessment and, if any, notice of reassessment, or

B. if a notice of assessment and a notice of reassessment are unavailable for the year, a copy of the Income and Deductions printout provided by the Canada Revenue Agency for the party.

ii. If the party is not required to and has chosen not to file an income tax return because of the Indian Act (Canada), some other proof of income. O. Reg. 69/15, s. 3 (6).

[71] Subrule 13(5.01)(1) references documents referred to in Rule 13(3.1). That Rule requires additional disclosure, as follows:

ADDITIONAL REQUIRED FINANCIAL DISCLOSURE, SUPPORT CLAIM

13(3.1) A party who is required under subrules (1) to (3) to serve and file a financial statement in relation to a claim for support shall, before the deadline set out in subrule (3.2), serve with the financial statement the following information, unless the court orders otherwise:

1. The income and financial information referred to in subsection 21(1) of the child support guidelines.

2. If the party became unemployed within the last three years,

i. a complete copy of the party's Record of Employment, or other evidence of termination, and

ii. a statement of any benefits or income that the party is still entitled to receive from his or her former employer despite or as a result of the termination.

3. In the case of a claim for the support of a child, proof of the amount of any special or extraordinary expenses, within the meaning of section 7 of the child support guidelines. O. Reg. 69/15, s. 3 (2).

[72] Rule 13(3.1)(1) requires an exchange of financial disclosure in accordance with section 21(1) of the Guidelines, which stipulates as follows:

21. (1) A parent or spouse who is applying for an order for the support of a child and whose income information is necessary to determine the amount of the order must include with the application,

a) a copy of every personal income tax return filed by the parent or spouse including any materials that were filed with the return for each of the three most recent taxation years;

b) a copy of every notice of assessment and reassessment issued to the parent or spouse for each of the three most recent taxation years;

c) where the parent or 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 parent's or spouse's employer setting out that information including the parent's or spouse's rate of annual salary or remuneration;

d) where the parent or spouse is self-employed, for the three most recent taxation years;

i. the financial statements of the parent's or spouse's business or professional practice, other than a partnership, and

ii. a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the parent or spouse does not deal at arm's length;

e) where the parent or spouse is a partner in a partnership, confirmation of the parent's or spouse's income and draw from, and capital in, the partnership for its three most recent taxation years;

f) where the parent or spouse controls a corporation, for its three most recent taxation years,

i. the financial statements of the corporation and its subsidiaries, and

ii. a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the corporation, and every related corporation, does not deal at arm's length;

g) where the parent or spouse is a beneficiary under a trust, a copy of the trust settlement agreement and copies of the trust's three most recent financial statements; and

h) in addition to any information that must be included under clauses (c) to (g), where the parent or spouse receives income from employment insurance, social assistance, a pension, workers compensation, disability payments or any other source, the most recent statement of income indicating the total amount of income from the applicable source during the current year or, if such a statement is not provided, a letter from the appropriate authority stating the required information.

[73] Rule 13(12) of the Family Law Rules is also relevant. It requires each party to update the information in any Financial Statement that is more than 30 days old by serving and filing either a new financial statement or an affidavit stating that the information in the last Financial Statement has not changed and is still true. The moving party in the proceeding must serve and file this updating information at least 7 days before a trial date in the matter.

[74] In determining if a party has proven their stated income, the court should also consider whether they have complied with court orders respecting income disclosure, since such orders are specifically crafted to address additional production requirements based on the facts of the case at hand. In this regard, my order dated June 13, 2017 set out additional detailed disclosure obligations on the Respondent. The terms of that order were crafted having regard for the income imputation arguments that the Applicant has raised regarding the Respondent's income, including her positions that the Respondent was deliberately under-employed and that he had unreasonably deducted business expenses from his self-employment income. The purpose of the order was to ensure that the Respondent disclosed all relevant information required for the court to properly assess his income for child support purposes.

PART V: ANALYSIS

I. ISSUE #1: HAS THE RESPONDENT PROVEN REDUCTIONS IN HIS INCOME SINCE NOVEMBER 2004 WHICH CONSTITUTE A MATERIAL CHANGE IN CIRCUMSTANCES?

A. Overview

[75] Although Mr. Nuttall did not specifically address the threshold test in his submissions at the hearing, it is clear from the grounds set out in the Motion to Change and from Mr. Nuttall's submissions that the Respondent relies on two alleged material changes in circumstances since the November 19, 2004 order was made. First, he relied on the end of Kassandra's entitlement to request a termination of his child support obligation effective June 20, 2014. This aspect of his claim has already been resolved. Second, he relies on material changes in his income since 2004 to justify his claims for a retroactive downward decrease of his child support obligation and a corresponding reduction of his child support arrears. It is therefore necessary to determine whether there have been material changes in his income since that time.

[76] For the reasons that follow, I conclude that the Respondent has not established that he experienced any material changes in his income from 2004 until 2014. However, I am satisfied that he experienced a significant reduction in his income commencing sometime in 2015, and that his capacity to earn income became increasingly impaired after that time. I have concluded that these changes satisfy the threshold test required under section 37(2.1) of the Family Law Act. Although I have found that the material change in circumstances occurred sometime in 2015, I have set out my findings respecting the Respondent's income since 2004 because these findings are relevant to the second portion of the analysis, which involves a determination of whether a retroactive reduction of support is appropriate in the circumstances of this case.

B. Analysis of the Respondent's Income Since November 19, 2004

[77] As I have indicated, I do not accept the Respondent's position that his income from 2004 until 2014 was lower than the $35,000.00 that formed the basis of the child support order dated November 19, 2004. My conclusions respecting the Respondent's income during those years are based in large part on serious deficiencies with respect to the Respondent's disclosure of information relevant to his income. On a general level, I note that the Respondent did not comply with paragraph 2(e) of the June 13, 2017 order, which required him to produce any medical records from 2006 relating to the health crisis which he alleges he experienced in that year, and which he stated impaired his income earning capacity. Furthermore, he failed to comply with paragraph 2(g) of the June 13, 2017 order, which required him to file a detailed summary of his income earning activities since 2004, on a year to year basis, including whether he had other individuals who worked for him. The Respondent also breached Rule 13(12) of the Family Law Rules by failing to serve and file an updated Financial Statement or an affidavit confirming that the information in his last Financial Statement continues to be true. The only Financial Statement that he filed in this proceeding was sworn on February 5, 2016.

[78] I turn now to my analysis of the Respondent's income on an annual basis from 2004 until 2017.

2004

[79] The Respondent asserts that his 2004 income was $23,500.00. The only proof of income that he filed is a Notice of Assessment which shows this sum as his line 150 income. The deficiencies in the Respondent's income disclosure for this year are as follows:

1. He did not produce his Income Tax Return with attachments, as required by Rule 13(5.01)(3)(i);

2. He did not produce a Notice of Reassessment, as required by Rule 13(5.01)(3)(i)(A), or in the alternative an Income and Deductions printout provided by the Canada Revenue Agency;

3. He did not provide any evidence respecting his gross business income;

4. He failed to adduce any evidence respecting expenses that he claimed against income, contrary to the terms of the June 13, 2017 order. Accordingly, there is no evidence upon which the court can determine whether any expenses that he claimed against income were unreasonably deducted; and

5. Finally, he did not provide an explanation for why his total income for 2004 was lower than $35,000.00, which was the income upon which the November 19, 2004 order was based.

[80] Based on these deficiencies, I conclude that the Respondent has not met the onus of proving that his total 2004 income was lower than $35,000.00. In the alternative, I impute an income of $35,000.00 to him pursuant to s. 19(1)(f) of the Guidelines on the basis of his failure to provide financial information required to properly assess his income for child support purposes.

2005

[81] The Respondent states that his total 2005 income was $23,750.00. The only evidence that he filed respecting his income for this year was a Notice of Assessment which reflects this amount as his line 150 income. The deficiencies respecting his income disclosure for 2015 are as follows:

1. He did not produce his Income Tax Return with Schedules and attachments, as required by Rule 13(5.01)(3)(i);

2. He did not produce a Notice of Reassessment, as required by Rule 13(5.01)(3)(i)(A), or in the alternative an Income and Deductions printout provided by the Canada Revenue Agency;

3. He did not provide any other evidence respecting his gross business income for the year;

4. He failed to adduce any evidence respecting expenses that he claimed against income, contrary to the terms of the June 13, 2017 order; and

5. Finally, he did not provide a reasonable explanation or documentary proof for why his total income for 2005 was lower than $35,000.00. He alleged in Exhibit N to his affidavit sworn February 8, 2016 that he lost a major contract for work due to his health issues in 2005, and that this resulted in a drop in his income that year. However, he did not give any specifics about the contract in question, and moreover, the income that he reported in 2005 was actually higher than his reported 2004 income.

[82] Again, based on these deficiencies, the Respondent has not met the onus of proving that his total 2005 income was lower than $35,000.00. In the alternative, I conclude that he should be imputed an income of $35,000.00 pursuant to s. 19(1)(f) of the Guidelines on the basis of his failure to provide financial information required to properly assess his income for child support purposes.

2006 to 2012

[83] The Respondent's evidence was that his income from 2006 to 2012 was as follows:

2006 $10,772.00

2007 $10,000.00

2008 $12,000.00

2009 $11,000.00

2010 $11,500.00

2011 $6,000.00

2012 $12,000.00

[84] The only evidence that the Respondent adduced respecting his income for these years were Income and Deductions printouts provided by the Canada Revenue Agency, which showed his gross business and net income figures as being identical in each year. The shortcomings respecting the Respondent's disclosure for these years are as follows:

1. He did not provide any explanation for why his gross self-employment income and net income were identical each year. This simply does not make sense, given that he was in the renovations business. Furthermore, as discussed below, the Income Tax Returns that he produced for 2013 and 2014 showed significantly higher gross business income than net income. Mr. Nuttall acknowledged that the inclusion of identical figures for gross and net income for the years 2006 to 2012 was problematic, and indicated that he had completed the Respondent's Income Tax Returns for these years because the Respondent had failed to do so for many years. He explained that he had done his best in completing the returns with the little information that he had obtained from the Respondent. I conclude that the Income and Deductions Printouts for these years cannot be relied on at all to provide a full and complete picture of the Respondent's income for child support purposes;

2. He did not provide his complete Income Tax Returns with all Schedules and attachments for these years;

3. He did not provide documentary proof of any expenses that he declared against his income for tax purposes in these years;

4. With respect to the year 2006, he stated that he experienced a major relapse in his medical condition that year which significantly undermined his income earning abilities. However, as I have already noted, he failed to provide any medical records from that time to indicate the specific nature and severity of the relapse and the expected recovery time; and

5. He failed to provide any explanation for the alleged decreases in his income for 2007 to 2012, other than his health issues. However, he did not file any medical disclosure from those years to support his claim that his income earning potential was impaired during this period.

[85] Once again, given the shortcomings in the Respondent's financial disclosure for 2006 to 2012, he has not met the onus of proving that his income was less than $35,000.00 in those years. In any event, I would impute an ongoing income to him of $35,000.00 based on his failure to meet his disclosure obligations.

2013

[86] The Respondent stated that his 2013 income was $11,500.00. He filed his 2013 Income Tax Return and Notice of Assessment as proof of his income. A review of his 2013 Income Tax Return reinforces my concerns that the 2006 to 2012 Income and Deductions Printouts are unreliable as proof of income for those years, as it shows that the Respondent's gross business income for that year was $45,073.00. The deficiencies in the Respondent's disclosure for 2013 are as follows:

1. He did not include the required Statement of Business and Professional Activities to his Income Tax Return, which would have detailed the business expenses of $33,573.00 which he appears to have claimed against his gross business income;

2. He did not adduce any other evidence of the expenses he declared against income, and did not provide an explanation for why his expenses accounted for 74% of his gross income;

3. He did not provide any medical evidence from this year to support his claim that his income earning ability remained impaired;

4. He did not produce his Notice of Reassessment, which he was required to produce pursuant to s. 21(1) of the Guidelines; and

5. He did not comply with his obligation pursuant to s. 21(1)(d) of the Guidelines to produce the financial statements for his business, or a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom he did not deal at arm's length.

[87] Having regard for these disclosure shortcomings, the Respondent has not met the onus of proving a decrease in his income this year either. Again, I conclude in the alternative that he should be imputed an ongoing income of $35,000.00 based on these deficiencies.

2014

[88] The Respondent's evidence is that his 2014 income was $10,730.00. In support of this claim, he filed copies of his 2014 Notice of Assessment and Income Tax Return. The Income Tax Return shows gross business income of $46,500.00, which again provides insight into what his true gross income figures were for previous years. Based on this gross business income figure, I find that he deducted business expenses of $35,320.00, which represents 77% of his gross income. The Respondent's explanation for a decrease in his income in 2014 as compared to 2004 was that he suffered another relapse in regard to his health. However, his gross income for 2014 was actually more than in 2013. The Respondent did not provide any medical records from 2014 relating to the specific nature or severity of his health challenges that year, or when exactly his relapse occurred. Although he indicated in his application for Ontario Works benefits dated March 21, 2016 that he was hospitalized at the Centenary Hospital from February 15, 2014 until February 22, 2014, I did not receive any medical records relating to this admission. Moreover, as I have previously indicated, the Respondent stated in Exhibit N to his affidavit sworn February 8, 2016 that his relapse occurred sometime during the fall of 2014. Given that his gross income for 2014 was in fact higher than in 2013, I conclude that the relapse that he relies on as impairing his income earning capacity in 2014 occurred later in the year.

[89] Unfortunately, in addition to the deficiencies respecting medical disclosure, there are also serious problems with the Respondent's financial disclosure for 2014. Specifically:

1. He did not include the required Statement of Business and Professional Activities that should have been attached to his Income Tax Return, and which would have detailed the business expenses of $35,320.00 which he appears to have claimed against his gross income;

2. He did not adduce any other evidence of the expenses that he declared against income, and did not provide an explanation for why his expenses accounted for 77% of his gross income;

3. He did not produce his Notice of Reassessment, which he was required to produce pursuant to s. 21(1) of the Guidelines; and

4. He did not comply with his obligation pursuant to s. 21(1)(d) of the Guidelines to produce the financial statements for his business, or a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom he did not deal at arm's length.

[90] The Respondent's material lack of disclosure respecting his 2014 income leads me to conclude once again that he has not met the onus of proving a decrease in his income in that year as compared to his 2004 income. Again, I would in any event impute an income of $35,000.00 to him as a result of his failure to comply with his disclosure requirements.

2015

[91] The Respondent indicated that his 2015 income was $8,270.00. In support of his position, he filed his 2015 Income Tax Return and Notice of Assessment. His Income Tax Return indicated that he earned gross business income of $26,120.00 and net income of $8,270.00. Accordingly, it appears that he claimed $17,850.00 in expenses against his 2015 income, which represents 68% of his gross income. The Respondent once again fell far short of his legal disclosure obligations respecting his 2015 income. In particular:

1. He did not include the required Statement of Business and Professional Activities that should have been attached to his Income Tax Return, and which would have detailed the claimed business expenses of $17,850.00;

2. He did not adduce any other evidence of the expenses he declared against income, and did not provide an explanation for why his expenses accounted for 68% of his gross income;

3. He did not produce his Notice of Reassessment, which he was required to produce pursuant to s. 21(1) of the Guidelines; and

4. He did not comply with his obligation pursuant to s. 21(1)(d) of the Guidelines to produce the financial statements for his business, or a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom he did not deal at arm's length.

[92] Notwithstanding these deficiencies in the Respondent's financial disclosure, I am satisfied based on the medical evidence adduced at the hearing that his health deteriorated fairly quickly and significantly after his relapse with his cardiac issues in late 2014. As discussed above, the evidence of the Respondent's family physician, Dr. Aguanno, and his cardiologist, Dr. Sullivan, support this conclusion. I find based on this evidence that although the Respondent attempted to secure work in 2015, he was unable to earn a significant income by this point due to his health challenges.

2016

[93] The Respondent filed a Notice of Assessment for 2016 which indicated that his line 150 income for that year was only $2,670.00. That Notice of Assessment was issued on March 27, 2017. Subsequently, on August 9, 2017, the Respondent received confirmation from Service Canada that he was eligible for a CPP disability pension in the amount of $952.43 per month, retroactive to March 2016. However, he received the retroactive amount for 2016 sometime in 2017. Again, there were many deficiencies respecting the Respondent's income disclosure for 2016. Specifically, he did not produce his Income Tax Return with all attachments or his Notice of Reassessment. It is unclear whether his income for this year was from employment, self-employment, or any other source. If it was from self-employment, he failed to serve and file proof of all expenses that he declared against income and copies of the financial statements from his business. Despite these disclosure problems, I am satisfied based on the medical information discussed above that the Respondent continued to earn a minimal income in 2016.

2017 and Ongoing Income

[94] The evidence before me indicates that the Respondent's sole source of income in 2017 was CPP disability benefits. As I have indicated, he received a retroactive payment of $9,524.30 for the period from March to December 2016 sometime in 2017. In addition, he received $952.43 per month commencing January 1, 2017. Accordingly, his total income from CPP disability benefits in 2017 would have been approximately $20,953.46 ($9,524.30 on account of the retroactive payment for March to December 2016 and $11,429.16 on account of payments for January to December 2017). Commencing January 2018, his annual income from CPP disability benefits will be approximately $11,429.16.

[95] By way of summary, based on my findings as set out above, I am satisfied that the Respondent's income decreased significantly as compared to his 2004 income commencing in 2015. I conclude that this change in income constitutes a material change in circumstances that meets the threshold test under s. 37(2.1) of the Family Law Act for a Motion to Change Final Order.

II. ISSUE #2: IS IT APPROPRIATE IN THIS CASE TO GRANT THE RESPONDENT RETROACTIVE RELIEF FROM THE ORDER DATED NOVEMBER 19, 2004?

[96] Having determined that the Respondent has met the threshold test, I must decide whether it is appropriate in this case to retroactively decrease the Respondent's child support obligation respecting Kassandra since December 2004, and to reduce the Respondent's support arrears accordingly. For the reasons that follow, I am dismissing the Respondent's claim for a retroactive reduction of child support.

[97] My conclusion that the Respondent did not experience a material change in his income from 2004 until 2014 has figured prominently in my decision to deny a retroactive decrease in child support. The Respondent's obligation to pay support was terminated effective June 30, 2014, and therefore the arrears in question accrued prior to that time. Accordingly, this was not a case in which the payor was unable to pay the support because of material changes in circumstances that occurred when the support came due. Rather, the Respondent seeks relief now due to decreases in his income that occurred after his child support obligation ended. In such circumstances, the court should generally not reduce or rescind arrears absent compelling circumstances, such as clear inability to pay either now or in the future. I am not satisfied that there are any compelling circumstances in this case that warrant the relief that the Respondent is requesting. With respect to the Respondent's ability to pay the arrears now or in the future, I accept that he currently has a very modest, fixed monthly income of only $952.43. In addition, his net worth as noted on his Financial Statement sworn February 5, 2016 is only approximately $5,500.00, which consists primarily of the house boat that is his residence. However, a review of his Financial Statement indicates that his total monthly expenses are approximately $885.00 per month. The Financial Statement notes his expenses to be $895.00 per month but the Respondent made a slight miscalculation. Accordingly, he has a monthly surplus of approximately $67.00 per month that could be applied towards his child support appears. In addition, any tax refunds and credits due to him could be applied towards arrears.

[98] I have also considered the discretionary factors that apply in circumstances where the payor has experienced material changes in circumstances that affected their ability to pay support when it came due. Even if this had been the situation in this case, I would have declined to grant the Respondent retroactive relief. A careful weighing of those factors in this case supports my conclusion that retroactive relief is inappropriate. Dealing first with the issue of delay in seeking relief, the Respondent has failed to provide a reasonable explanation for his delay in commencing court proceedings to address his arrears until February 2016. Although he has suffered challenges with his health since 2004, I am not satisfied that those health concerns would have rendered him unable to commence court proceedings during the period from 2008, when he stopped paying support, until 2016. The Respondent continued to earn income from his business until sometime in 2015, and therefore he was not so incapacitated that he was unable to address his child support situation. I conclude based on the evidence before me that the Respondent simply attempted to avoid his child support obligation over the years. It is clear that the only reason the Respondent began to finally address his child support arrears in 2015 was due to the FRO's decision to ramp up its enforcement measures against him. Once that occurred, he secured the assistance of his brother, Mr. Nuttall, to help him manage his affairs.

[99] I have taken into consideration the Respondent's ongoing financial means and his ability to make payments towards outstanding arrears. Given that the Respondent's monthly income is only $952.43, he will no doubt experience difficulty paying arrears of child support. However, as I have indicated, it appears from the only Financial Statement that he filed in this proceeding that he will have a monthly surplus of $67.00. Any concerns about hardship can be addressed by implementing an appropriate payment plan respecting the arrears. The other discretionary considerations in this case tip the balance in favour of dealing with hardship concerns through an appropriate payment plan rather than rescinding or reducing arrears.

[100] The Respondent's conduct in relation to his child support obligation has been a major consideration in my decision to dismiss his claim for a retroactive decrease in support. I find that the Respondent engaged in many forms of blameworthy conduct. For instance:

1. The December 8, 1996 order required him to deliver a copy of his complete Income Tax Return to the Applicant each year by April 30th, so that the Applicant could determine whether the amount of support should be adjusted. This term was not varied by the November 19, 2004 order, and therefore it remained in full force and effect. The Respondent failed to comply with this annual income disclosure obligation;

2. The Respondent did not make any voluntary payments of support for a period of more than 7.5 years, from January 2008 until August 4, 2015. The FRO was only able to collect $220.00 from January 2008 until February 2014. It was able to collect $560.66 through diversion measures in late February 2014;

3. The Respondent did not make any efforts to address his child support arrears situation with the Applicant over the years. He simply stopped paying support without giving the Applicant advance notice or advising her of any changes in his situation. Furthermore, he did not give notice to the Applicant at any point from January 2008, when he stopped paying support, until February 10, 2016, when he served her with the Motion to Change Final Order, that he required adjustments to the existing order;

4. I accept the Applicant's evidence that the Respondent has been resistant to paying child support since the parties separated, and that the FRO has been compelled to implement numerous enforcement measures over the years. In particular, as I have already indicated, the FRO has suspended the Respondent's driver's licence twice, with the last suspension occurring in 2008 and continuing approximately 7 years. In short, obtaining support from the Respondent has been a very arduous uphill battle from the start;

5. There is no evidence that the Respondent ever took the initiative to contact the FRO to discuss his increasing arrears and enter into a voluntary payment arrangement prior to 2015;

6. The Respondent only began to work with the FRO to address his significant child support arrears in 2015 after the FRO ramped up its enforcement efforts in late 2014. As of that time, the Respondent's arrears totalled $36,979.26. Despite being advised by the FRO in December 2014 that it would commence more aggressive enforcement measures if he did not make arrangements for payment, the Respondent did not produce a Financial Statement to the FRO until July 2015;

7. Although the Respondent agreed with the FRO in July 2015 to make payments of at least $428.00 bi-annually, he had only voluntarily made two such payments as of September 14, 2017. Any other amounts that the FRO was able to enforce from July 2015 until September 2017 were on account of diversion measures;

8. The FRO reinstated the Respondent's driver's licence in 2015 based on the VAPS that he executed and his undertaking to commence a Motion to Change Final order. However, the Respondent did not initiate this Motion to Change until 7 months later, in February 2016; and

9. The Respondent was given ample opportunity during the course of this proceeding to comply with his disclosure obligations respecting his income. When the matter proceeded to a hearing on June 13, 2017, he was given further time to produce the documentary evidence that he was obliged to disclose. Despite having been given these opportunities to produce the materials required to support his case, the Respondent remained substantially non-compliant with his basic income disclosure obligations at the time of the second hearing date in this matter. He failed to show up at court for the two hearing dates scheduled in this matter, and therefore he was not present to account for his shortcomings respecting disclosure. This failure to comply with his disclosure obligations has been a constant theme in the parties' litigation respecting child support since their separation.

[101] I have taken into account the ongoing needs of Kassandra and the Applicant in reaching my decision, and whether an order granting the Respondent the relief that he has requested would cause hardship to them. I find that Kassandra incurred OSAP loans to fund her university education, and there is ongoing need on her part with respect to those loans. I am also satisfied that the Applicant bore the burden of supporting Kassandra almost entirely on her own from January 2008 until June 2014, when the Respondent's support obligation ended, and that she incurred many significant expenses in addition to basic living costs for Kassandra. Those expenditures would have clearly impacted her overall financial situation in a significant way. The additional expenses included:

1. Ballet lessons, which Kassandra's physician recommended to address issues with bow-leggedness;

2. Very high expenses for medications and prescription eye-glasses following an accident in 2004 when Kassandra suffered a serious eye injury;

3. High expenses for physiotherapists, chiropractors and massage therapists for Kassandra following another unfortunate accident in 2008 when she was dropped on her head, neck and right shoulder during a hip hop dance practice session;

4. Additional transportation expenses for Kassandra because she would not ride the bus to and from high school due to the pain that she experienced from her accident in 2008;

5. All medical and dental expenses for Kassandra, as the Applicant did not have coverage under any benefits plans; and

6. Significant contributions to Kassandra's post-secondary studies from approximately 2009 until June 2014.

[102] Finally, I have considered any hardship that may inure to the Respondent from an order dismissing his claim for a retroactive reduction of child support. I acknowledge that the Respondent will experience some hardship as a result of this order. However, this hardship is almost entirely attributable to his irresponsible and cavalier attitude with respect to his child support obligation over the years. Moreover, I am satisfied that any hardship can be appropriately addressed by means of a variation of the November 19, 2004 order to provide for a reasonable payment plan respecting arrears.

III. ISSUE #3: SHOULD THE COURT ORDER A PAYMENT PLAN RESPECTING OUTSTANDING CHILD SUPPORT ARREARS OWED BY THE RESPONDENT?

[103] I conclude that it is necessary to implement a payment plan with respect to the Respondent's outstanding child support arrears so that the Respondent will be able to meet his own basic day-to-day needs. Based on my finding that he will have a surplus of approximately $67.00 per month, I conclude that the sum of $65.00 per month is a reasonable rate for the payment of outstanding arrears, plus garnishment of any government refunds or credits payable to the Respondent. I acknowledge that this is a relatively low amount, having regard for the quantum of outstanding arrears. However, I note that pursuant to section 34(4) of the Family Law Act, this order binds the Respondent's estate. I am including an order that in the event that any arrears of child support remain outstanding at the time of the Respondent's death, the outstanding arrears shall become payable in full forthwith pursuant to s. 34(4). This provision will afford the Applicant an additional degree of protection with respect to any outstanding child support arrears.

PART VI: TERMS OF ORDER TO ISSUE

[104] Based on the foregoing, a final order shall issue upon the following terms and conditions:

1. The Respondent's claims for a retroactive reduction of his obligation to pay child support to the Applicant and a corresponding reduction of his child support arrears owed to the Applicant and the Ministry of Community and Social Services ("the Ministry") are dismissed.

2. The Respondent shall pay $65.00 per month to the Applicant on account of his child support arrears owed to the Applicant, in addition to garnishment of any government refunds or credits payable to the Respondent, commencing February 1, 2018 and continuing on the first day of each month that follows until those arrears are paid in full.

3. Once the arrears of child support owed to the Applicant are paid in full, the Respondent shall pay $65.00 per month to the Ministry on account of the child support arrears which he owes to the Ministry, in addition to garnishment of any government refunds or credits payable to the Respondent, until those arrears are paid in full. The Respondent shall pay the arrears owed to the Ministry on the first day of each month, commencing in the first month after the month in which the arrears owed to the Applicant are paid in full.

4. In the event that any arrears of child support owed by the Respondent to the Applicant or the Ministry remain outstanding at the time of the Respondent's death, those arrears shall become payable in full forthwith, pursuant to section 34(4) of the Family Law Act.

5. Mr. DiGregorio shall draft this order and serve it by regular mail on the parties once it is issued. Approval of the draft order as to form and content by the Applicant and the Respondent is dispensed with.

The Honourable Madam Justice Deborah L. Chappel

Released: February 2, 2018

COURT FILE NO.: D 365/93

DATE: 2018/02/02

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Debra Templeton

Applicant

– and –

Terry Nuttall

Respondent

REASONS FOR JUDGMENT

Chappel J.

Released: February 2, 2016