24 June 2021
Child Support: The Supreme Court of Canada’s guide to retroactive adjustments & the forgiveness of arrears
In a recent decision, Colucci v Colucci, 2021 SCC 24 (“Colucci”), the Supreme Court of Canada (“SCC”) clarified the appropriate framework for applications made under s. 17 of the federal Divorce Act. Under this section, parties can apply to the court for a retroactive adjustment to child support, or for the cancellation of unpaid child support based on a current and ongoing inability to pay.
Colucci focuses on the importance of financial disclosure and how that ties in with the child’s entitlement to appropriate support, together with the interests of certainty and flexibility in support payments.
This blog provides a brief overview of the framework for these applications and sets out key takeaways for those who pay or receive child support.
Retroactive Adjustments to Child Support
Monthly child support is based on the payor’s income. Income can fluctuate for a variety of reasons, and when the payor’s income changes, so do their child support obligations. If the parents can’t agree to a change in child support, either party can apply to the court for a retroactive increase or decrease in child support.
In all cases, the court must balance three key interests in a way that promotes appropriate child support and the timely disclosure of financial information. These interests are:
- the child’s entitlement to appropriate support corresponding with the payor’s income
- the child’s and parents’ interest in the certainty and predictability of payments
- the need for flexibility to ensure a fair result in light of changing incomes.
Framework: Retroactive Decrease
The following framework applies where the payor seeks to retroactively reduce their child support payments based on a past material decrease to their income:
- Material Change in Circumstances
The payor must establish a past change in circumstances. This requires the payor to prove a real and material decrease in income that is neither temporary nor voluntary.
- Presumptive Date of Retroactivity
The presumptive date of retroactivity is the date the payor gave the recipient “effective notice” of the change in income, up to three years before a formal application is made.
- “Effective notice” requires the payor to clearly communicate their change in circumstances to the recipient and provide evidence of the change. The disclosure must be sufficient to allow the payee to meaningfully assess the situation.
- If no effective notice is given, child support should be varied to the date of formal notice (such as bringing a court application).
- Where the Presumptive Date is Unfair
Courts can depart from a presumptive date of retroactivity if it would be unfair. This discretion is guided by the factors set out in DBS v SRG, 2006 SCC 37, and includes the “DBS Factors”:
- if the payor had an understandable reason to delay seeking a decrease;
- the payor’s conduct, including efforts to pay and to disclose income;
- the child’s circumstances;
- hardship to the payor if a decrease is not granted.
- Quantification of Decrease
Finally, courts will calculate the decrease of support for each year since the date of retroactivity based on the Federal Child Support Guidelines.
Framework: Retroactive Increase
For applications where a recipient wants to retroactively increase child support payments based on a past material increase in the payor’s income, courts will follow a similar framework, with a few modifications:
- The recipient must establish a past material increase in income. If the payor fails to provide sufficient financial disclosure, the courts can impute income, strike pleadings, draw adverse inferences against the payor, and may award costs to the recipient.
- The presumptive date of retroactivity is the date the recipient gave effective notice to the payor. Here, effective notice only requires the recipient to broach the subject with the payor. Again, courts may depart from the presumptive date based on the DBS factors.
Forgiveness of Child Support Arrears
Finally, under s. 17 of the Divorce Act, a payor parent can ask the court to forgive unpaid child support arrears based on a current and ongoing inability to pay, without a past change in income. Payors should note, however, that this is rare and is granted only as a last resort.
In Colucci, the SCC held that the payor must provide sufficient reliable evidence of their current and future inability to pay, including employment prospects, assets, inheritances, pensions, and other sources of future financial capacity. The payor must show that, even with a flexible payment plan, they cannot and will not ever be able to pay the arrears.
- Those who pay child support are under an ongoing obligation to support their children and an ongoing obligation to disclose their income.
- If you pay child support and there is a material change to your income, you should send notice to the recipient as soon as possible. Effective notice require clear communication together with financial disclosure that demonstrates the change.
- If you receive child support and believe the payor’s income has increased, you should send notice to the payor as soon as possible and ask for financial disclosure.
- A payor’s failure to provide complete, honest, and accurate income disclosure can lead to serious consequences. For example, a failure to disclose reduced income could impact a later application for a retroactive reduction. In contrast, a failure to disclose increased income could lead to a hefty retroactive award to the recipient.
- If you are experiencing financial hardship, the worst thing you can do is ignore your child support obligations. You must communicate your circumstances to the recipient parent and then take steps to vary your support obligations.
If you have any questions about child support obligations, or any other family law matter, please reach out to the family law group at Watson Goepel LLP. Our team of legal professionals is here to help!