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SCC Says Decreasing Support Arrears Requires Disclosure

The new decision of Colucci v Colucci, 2021 SCC 24 stands for the proposition that the SCC Says Decreasing Support Arrears Requires Disclosure.  Maclean Law lawyers have set a number of precedents in the Supreme Court of Canada in winning sole custody, special costs and 100 percent reapportionment of a home for our delighted client in Young v Young, in establishing a book of business is family property in Kotar v Lightle and in setting a very low spousal support payment in Leskun v Leskun well below the SSAG low end range in a very long marriage.

Our firm handles SCC appeals and leave to appeal applications in family law cases across Canada. It pays to hire a firm with SCC experience and a track record of success.

In today’s blog all star junior associate Ana Sadovska explains a new decision on canceling arrears and what you need to do or more importantly not do to win. The key takeaway is: SCC Says Decreasing Support Arrears Requires Disclosure!

SCC Says Decreasing Support Arrears Requires Disclosure
Anastasiya Sadovska, MacLean Family Law

Vancouver SCC Says Decreasing Support Arrears Requires Disclosure 1 877 602 9900

In the past, the courts have dealt with a retroactive increase in child support. The seminal SCC case of DBS v SRG, 2006 SCC 37, set out competing interests that the courts ought to consider when retroactively increasing child support:

  1. Child’s interest in receiving appropriate support to which they are entitled;
  2. Interest in certainty and predictability;
  3. Flexibility to reflect changing incomes.

The Court in Colucci applied the following long-standing factors in their analysis: reason for delay in applying to courts and giving effective notice; payor’s conduct; circumstances of the child and any hardship suffered; and, lastly, hardship to the payor if a retroactive child support award is ordered. It also made clear that the SCC Says Decreasing Support Arrears Requires Disclosure.

What Notice Is Required To Reduce Support? 1 877 602 9900

The SCC in Colucci finally clarified the law on retroactive decrease in child support. Several questions arise. What is effective notice? What is formal notice? Will the courts order the payee parent to pay back child support if there was overpayment? Will the courts order the arrears to be rescinded (e.g. cancelled)??

The payor parent must remember that their best course of action when trying to retroactively reduce child support payments (whether arrears have accumulated or not), is to disclose changes in income, immediately. Family circumstances are dynamic and change all the time. Should the payor parent be required to pay according to inaccurate income when it has gone down since the last agreement or court order?

Why isn’t an immediate decrease in income treated fairly like an immediate increase in income for support arrears might? It may seem unfair but it is based on informational disadvantages and advantages. Once again : SCC Says Decreasing Support Arrears Requires Disclosure.

What if the payor with a catastrophic reduction in income is too depressed or afraid to hire a family lawyer to fix the financial mess? The answer is take immediate action or the courts will likely hold it against you.

In short, no, but there are nuances. The Court in SCC held, at paragraph 5, that: “A payor who has established a past decrease in income is not automatically entitled to a retroactive decrease of support back to the date of decrease.”

What should the payor parent do then, if their income has decreased and they are having trouble paying child support as it comes due? Disclose. The court held, at paragraph 32 and throughout, that: “the linchpin holding the child support regime together is financial disclosure.” Financial disclosure from the payor parent to the receiving parent also ties into, what the Court refers to, as effective notice.

Most recently, SCC held, at paragraph 42 and citing a previous case, that:

[42] … “the date of retroactivity is not relevant when a payor parent has engaged in blameworthy conduct (irrespective of the degree of blameworthiness)”, including failure to disclose material information [Michel v Graydon, 2020 SCC 24 para 36 and 33]. Payor parents are “subject to a duty of full and honest disclosure.”

[Emphasis Added].

Payor parents should remember that: “it is the payor who knows and controls the information needed to calculate the appropriate amount of support. The recipient does not have access to this information, except to the extent that the payor chooses or is made to share it.” The court also urges, at paragraph 55, that: “Payors should not be better off from a legal standpoint if they do not pay the child support the law says they owe. Nor should payors receive any sort of benefit or advantage from failing to disclose their real financial situation or providing disclosure on the eve of the hearing.”

 

The Court held that in the decrease context (e.g. application to retroactively decreasing child support): “the presumption of varying back of effective notice, up to three years before formal notice, assists the court..” This means that it is unlikely that a payor would get a retroactive decrease ten years back, even if his income did decrease ten years ago, not without proper effective notice.

Does this seems fair? Many people would say no. It you snooze you lose is the rule to be taken away from this case.

What Is Effective Notice For Support Reduction? 1 877 602 9900

The Court held, at paragraph 88, that: “in decrease cases … courts have recognized that effective notice must be accompanied by “reasonable proof” that is sufficient to allow the recipient to “independently assess the situation in a meaningful way and respond appropriately”. What is “reasonable proof”? The court does not specify, but goes on to say, at paragraph 89, that: “… the payor may not have access to full income information at the time the notice is given, but should provide proof of the change in circumstances by promptly obtaining and disclosing available documents, such as those demonstrating new employment, reduction of salary, or termination of employment.” In short, as soon as payor’s income has decreased, they should notify the recipient of their changed circumstances, and provide some documentary evidence.

Formal Notice.

The court held, at paragraph 91, that: “even where the payor has given proper effective notice, the period of retroactivity is presumed to extend no further than three years before the date of formal notice.” Formal notice is considered to be going to court, the last case resort should the parents not be able to negotiate amongst them an appropriate decrease in child support payable.

Overpayment and Reimbursement.

What happens when your income decreased several years ago and you overpaid? The Court held that: “Another relevant consideration is whether the retroactive decrease would result in an order requiring the recipient to repay support to remedy an overpayment … however, reimbursement or set-off may cause hardship for the child and recipient.” In summary, the payor whose income has decreased should move quickly to show a decrease in income, because once the overpayment accumulates, it is unlikely the payor would receive the money back. The court held, at paragraph 106, that: “in cases involving claims of overpayment, it will rarely be appropriate, given the recipient’s absence of knowledge, to retroactively decrease support to a date before the recipient could have expected that child support payments received from the payor might need to be repaid at some future date.”

Calgary SCC Says Decreasing Support Arrears Requires Disclosure 1 877 602 9900

Rescission.

Delay Is Often Fatal: SCC Says Decreasing Support Arrears Requires Disclosure

The payor should not expect that, upon non-payment of child support, that his arrears will be rescinded or “forgiven” by the Judge. The legal test for rescinding child support arrears is difficult to meet, and the court considers rescission of child support arrears to be “the last resort in exceptional cases.”

In order for the court to consider rescission of arrears, “the payor must therefore provide sufficient reliable evidence to enable the court to assess their current and prospective financial circumstances, including their employment prospect and any assets, pensions, inheritances, or other potential sources of future capacity to pay.” Subject to extenuating circumstances, such as a catastrophic injury to the payor parent and complete inability to pay arrears, the court will explore creative options on how the arrears could be repaid: such as through payment plan, or temporary suspension of arrears, amongst other creative payment options.

If you want to cancel or enforce arrears taking immediate action is key. Call us immediately so things do not get worse for you and your children.