BC family law practitioners have come to believe that the courts will almost routinely allow for a retroactive child support correction in cases where a payor’s income has increased on an annual basis from the amount that was originally used to calculate the child support obligation.
However, it is now critical that family law lawyers in British Columbia and across Canada draft separation agreements and court orders in a way to provide for an automatic annual review. This review should also provide for a backdated correction of the child support payments once the payor’s new income has been disclosed. Failure to provide a mechanism for an automatic review annually and enforceable provisions to obtain disclosure can result in disaster for the recipient spouse and the child who is dependent upon that child support. Just as importantly, BC family lawyers who fail to provide for the annual review and mandatory disclosure may well face negligence claims by their clients.
The decision in Walsh scared family lawyers. In the decision of Walsh v. Walsh ([2004] O.J. No. 254) the Ontario Court of Appeal decided the following:
1. Judges in Ontario cannot automatically increase child support payments retroactively based on new financial information, in the absence of an application to vary support and proof of special circumstances that would justify a retroactive increase.
2. Judges in Ontario do not have carte blanche under the guidelines to recalculate support and make retroactive orders merely based upon the existence of the 1997 Child Support Guidelines.
3. Despite an increase in the payor’s income and even in the face of nondisclosure by the payor about an improvement in his income and financial situation there is no automatic right to recalculate retroactively the correct amount of child support that should have been paid. What is shocking about the analysis in the Walsh Case is that although the child support was formerly based upon of the payor’s income of $175,000 the payor’s actual salary since shortly after the original order ranged between $215,000 to $377,000.
4. The Court of Appeal seems to stress that it is the duty of the recipient to ferret out increases in salary or at the very least to make annual demands for proof of income citing section 25 of the Child support guidelines. Justice Laskin held that absent a review clause in a court order or separation agreement the “failure to disclose an increase in income does not allow a court to award a retroactive increase in child support”.
5. The Ontario Court of Appeal recognized that support was the right of a child. The court also recognized that by allowing payors to delay or refuse entirely to disclose their new income the system ultimately deprives the child of the proper standard of living that the child is entitled to. The court also concluded that the guidelines failed to provide for an automatic annual review which seems inconsistent with the principles of the guidelines. The Court opined that the legislation could be changed to provide an automatic annual review if that is what the government intended.
At first blush, the decision should evoke outrage from family law practitioners who believe that the courts should never punish children for inappropriate actions by their parents. However, the Court of Appeal decision merely concluded that there is no automatic roving recalculation power available to the courts based simply upon the existence of the 1997 Child Support Guidelines. Rather, a recipient spouse claiming retroactive child support must make an application for same pursuant to section 17 of the Divorce Act and the Child Support Guidelines and provide evidence similar to the evidence required by our BC Court of Appeal in L.S v. E.P 1999 BCCA 393 as follows:
[66] A review of the case law reveals that there are a number of factors which have been regarded as significant in determining whether to order or not to order retroactive child maintenance. Factors militating in favour of ordering retroactive maintenance include: (1) the need on the part of the child and a corresponding ability to pay on the part of the non-custodial parent; (2) some blameworthy conduct on the part of the non-custodial parent such as incomplete or misleading financial disclosure at the time of the original order; (3) necessity on the part of the custodial parent to encroach on his or her capital or incur debt to meet child rearing expenses; (4) an excuse for a delay in bringing the application where the delay is significant; and (5) notice to the non-custodial parent of an intention to pursue maintenance followed by negotiations to that end.
[67] Factors which have militated against ordering retroactive maintenance include: (1) the order would cause an unreasonable or unfair burden to the non-custodial parent, especially to the extent that such a burden would interfere with ongoing support obligations; (2) the only purpose of the award would be to redistribute capital or award spousal support in the guise of child support; and (3) a significant, unexplained delay in bringing the application.
The Appeal Court in Walsh stated the wife may very well be ultimately successful given the lack of disclosure by the father. Given what may signal a stiffening of judicial resistance to automatic retroactive awards, family lawyers need to draft annual review clauses with tough disclosure requirements or they may well be asked to pony up for lost retroactive support claims!
Interested persons can contact Lorne N. MacLean for sample clauses for automatic correction of child support or check out clauses 9.14 and 9.20 of the CLE Family Law Agreements Manual.
My only quibble with the Family Law Agreements Manual clauses is that they do not apply a correction for an increase income retroactively to the date of a salary increase.
The problem arises even on annual reviews which will often be scheduled to occur by May 31st of the year following the previous year’s taxation year. This review date is referred to in the guidelines. The May 31 annual review date is used because parties will often not file their tax returns until April 30th, of each year and Notices of Assessment will often not be received until a few weeks thereafter.
For the life of me, I can’t see why the correction should not automatically back date to January 1st of that year. Without this correction to the start of the year someone pays too much or too little for a six month period.
Matrimonial Counsel should also incorporate a clause that requires each spouse to advise the other immediately of any change in income from employment, self-employment, partnership income, corporate income and profit, trust income and all other sources of income whether up or down above a certain threshold figure or percentage. If someone’s salary changes mid year it makes no sense to wait several months to calculate what the correct payment should be.
Better yet why don’t we just lobby Ottawa for the Guidelines to be amended to provide for mandatory annual reviews which correct any new child support amount back to January 1st of each calendar year?
