Children Come First: A Report to Parliament Reviewing the Provisions and Operation of the Federal Child Support Guidelines - Volume 2

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4. SECTION-BY-SECTION REVIEW OF THE FEDERAL CHILD SUPPORT GUIDELINES AND THE DIVORCE ACT

INTRODUCTION

This part of the report examines the workings of the legislative and regulatory child support provisions introduced on May 1, 1997.[47] It analyzes the provisions in detail, identifies any unresolved issues, and recommends any required legislative and regulatory amendments.

The relevant sections of the Divorce Act and all of the provisions of the Federal Child Support Guidelines are reviewed individually with cross-references to related provisions, where required. For each section, a description of the background and application of the clause precedes an examination of selected case law and any outstanding issues. The history of an amendment to the section since the coming into force of the Guidelines is also provided. Recommendations for amendment are followed by an analysis.

SECTION 1: OBJECTIVES

BACKGROUND

This section helps parents and the courts to interpret the Guidelines. The objectives it outlines stem from the objectives and principles of the Federal-Provincial-Territorial Family Law Committee, which the Child Support Project adopted in 1991.[48] These objectives and principles were based on the state of the law in the mid-1990s and on the prospect of future amendments to child support legislation.

Section 1 has not been amended since the Guidelines came into effect on May 1, 1997.

APPLICATION

For the most part, the section 1 objectives achieved their intended goal. When deciding how to apply various sections of the Federal Child Support Guidelines, judges have turned to section 1 for guidance and even inspiration. Although the objectives are an end in and of themselves, they have also become a means, forming the very grounds on which decisions are made.

CASE LAW

Generally, the objectives have guided judges in their interpretation of all sections of the Federal Child Support Guidelines.[49]

In Francis v. Baker,[50] for example, the Ontario Court of Appeal recognized that the Guidelines were intended "to replace the haphazard with the predictable" and thus, through the application of an objective standard, "to help parents resolve child support issues as expeditiously as possible."

That judges have applied the objectives is proven by cases in which they have limited their own discretion.[51] According to the British Columbia Court of Appeal in Metzner v. Metzner,[52] "[I]t was Parliament's intention that there be a presumption in favour of the Table amounts in all cases" and that "there must be clear and compelling evidence for departing from the Guidelines figures." It seems that, across the nation, judges are generally and consistently ordering the table amounts as prescribed by the Guidelines.[53]

Judges usually see the objectives as a general starting point. However, a review of the case law suggests that judges cite objectives (a) and (d) most frequently. For example, in Hanmore v. Hanmore,[54] the Alberta Court of Appeal had to determine whether it was correct for the chambers judge to reduce the amount of child support on the basis of undue hardship. In deciding that the burden of establishing undue hardship must be heavy, the court expressly cited objectives (a) and (d):

The Child Support Guidelines provide a detailed road map for the Court to follow in deciding whether guideline amounts should be reduced because of undue hardship. ...The objectives of the Guidelines are set out in s. 1. The primary objectives are "to establish a fair standard of support for children that will ensure that they continue to benefit from the financial means of both spouses after separation," and "to ensure consistent treatment of spouses and children who are in similar circumstances." Such objectives will be defeated if the Courts adopt a broad definition of "undue hardship" or if such applications become the norm rather than applying to exceptional circumstances. That has been the consistent message of the Courts since the Guidelines came into force. ... It is evident from these authorities that the burden of establishing a claim of undue hardship is a heavy one. We agree with the comment of Wright J. that the objectives of the Guidelines will be defeated if Courts deviate from the established guidelines without compelling reasons.[55]

Even before the provinces and territories actually adopted child support guidelines, judges were citing section 1 objectives in their decisions. In Channer v. Hoffman-Turner,[56] the case of an unmarried couple, the judge said:

I am of the view that it is appropriate to apply those guidelines in situations of both married and unmarried persons in order that children may be treated fairly. The objectives of the child support guidelines include the need to establish a fair standard of support for children that ensures that they continue to benefit from the financial means of both spouses after separation and to ensure consistent treatment of spouses and children who are in similar circumstances. In my view, in similar financial circumstances, we would be treating children of parents who were unmarried differently than children of parents who were married by using different parameters to deal with the issue of child support. I do not believe that that is appropriate nor does it ensure that children in similar circumstances are treated consistently. I am of the view, therefore, that it is appropriate to utilize the Federal Child Support Guidelines in calculating support for the two children in this case.[57]

The judge took the same approach in D.L. v. F.K.[58]

In Alberta, where, as of the publication of this report, there are no provincial child support guidelines, the Court of Appeal declared:

Therefore, equal treatment of children within Alberta through application of the [Federal] Guidelines under the Parentage and Maintenance Act would have the additional desirable effect of minimizing inconsistent treatment and increasing predictability of orders from one province or territory to another.[59]

RECOMMENDATION

No amendments to this section are recommended.

SECTION 2: INTERPRETATION

Section 2 defines various words and terms found throughout the Guidelines. It also helps both parents and judges interpret certain sections or expressions. Subsection 2(1) contains the actual definitions. Subsection 2(2) covers words found specifically in sections 15 to 21. Subsection 2(3) advises parents and judges that they must use the most current information possible when determining any dollar amount when working with the Guidelines. Subsection 2(4) sets out the particular situations, in addition to child support orders, to which the Guidelines apply. Subsection 2(5) deals with recalculations by provincial child support services.

Section 2 has not been amended since the Guidelines came into effect on May 1, 1997.

APPLICATION

Subsections 2(1), (2), (4), and (5) have generally been applied consistently and as intended.

There is confusion about whether subsection 2(3) or sections 15 to 20 (which look at various aspects of calculating income) apply when both current income information and historical income information of the paying parent are available.

Child support guidelines apply to provisional orders made under section 18 of the Divorce Act, even though subsection 2(4) does not specifically refer to provisional orders under section 18.[60]

CASE LAW

SUBSECTION 2(1)

Many courts have applied the definitions in subsection 2(1).[61] These definitions have not given the courts any difficulties.

SUBSECTION 2(3)

The Newfoundland Court of Appeal applied subsection 2(3) in Lee v. Lee.[62] The court accepted the trial judge's decision to base the paying parent's income on his foreseeable projected income rather than on his historical income. The paying parent proved that, because he lost his job and was relying on employment insurance, his income was substantially reduced from what it had been in the previous three taxation years. Although historical data usually provides the best forecast of current ability to pay, in this case the court said that it would be ignoring the reality of the situation by relying on this data. The court said that subsection 2(3) supports this analysis by inference since it requires the use of "the most current information" when determining any amounts for the purposes of the Guidelines.

The British Columbia Court of Appeal addressed this issue in Bell v. Bell.[63] This case involved a paying parent whose annual income fluctuated by as much as $50,000 from year to year. The trial judge had determined the paying parent's annual income by averaging the parent's total income for the previous three years. The Court of Appeal said that the amount that the paying parent was currently earning (which in this case was over $10,000 less than the average) was a more realistic indicator of the parent's current ability to pay than the average earnings figure. The court held that this is particularly true in an economy in which employment is often scarce and there can be wide fluctuations in income earned from year to year.

In accordance with subsection 2(3), courts have consistently held that the most current income information available should be used.[64] Lower court judges have said that subsection 2(3) obliges parents to make the most current information available to the court.[65] Judges have also said that when current information appears to be a reliable indication of current earnings, subsection 2(3) allows this information to be used rather than historical information[66] or information about anticipated earnings.[67]

In Ireland v. McMillan,[68] the paying parent admitted to earning income from a university position but would not disclose the amount because he had already disclosed his income information once that year as required under section 25. The court agreed with the paying parent. The judge said that if either parent had based his or her position on subsection 2(3) alone, the judge would have been compelled to apply section 25, because subsection 2(3) is a general section that may not override the specific disclosure provisions in other sections of the Guidelines.

In Giene v. Giene,[69] the issue was whether the judge, when estimating corporate income, should take an average according to section 17, look at the most recent taxation year according to paragraph 18(1)(a), or consider the projected loss under subsection 2(3). The judge found that subsection 2(3) should not be interpreted to mean that the most current information is limited to information regarding a time period that has not yet expired; otherwise, judges could never look at the most recent taxation year when a parent was able to project the subsequent year's income. The judge also said that "the 'most current information' refers to the most current information where an amount is determined on the basis of specified information."[70]

The judge found that section 17 allowed the corporation's historical pattern of income to be considered, as well as the evidence that the upcoming year would not be as profitable as past years had been. The judge reasoned that the spirit of the Guidelines is to arrive at a fair and equitable determination of income on which to base child support so that the children benefit from the financial means of both spouses after separation. Thus, a strict interpretation of any one section often would not produce this result, particularly when a judge uses a "snapshot" of the corporate income at any one time.

SUBSECTION 2(4)

While there has been no difficulty applying the Guidelines to provisional orders under the Divorce Act, in some early cases under provincial and territorial guidelines, judges were reluctant to apply those guidelines in provisional hearings. For example, see Wieler v. Switzer,[71] where Justice Raven concluded that British Columbia's child support guidelines do not apply to provisional hearings.[72]

However, the issue of whether provincial or territorial guidelines apply in provisional hearings appears to have been settled. In Dunne v. Kehler,[73] the mother appealed. The appeal court judge concluded that provincial child support guidelines were applicable to provisional orders.[74]

Referring to subsection 2(4), judges have said that the Guidelines apply to interim orders[75] and to orders varying a child support order.[76] For example, the British Columbia Court of Appeal found in Shankland v. Harper[77] that, under subsection 2(4), the inescapable conclusion is that Parliament intended all variation orders, retroactive or prospective, to follow the Guidelines, as nothing in the Guidelines refers specifically to arrears nor suggests that a distinction be made between a retroactive and a prospective variation order.

RECOMMENDATION

The federal Department of Justice recommends no amendments to section 2 for the time being. The Department is reviewing sections 18 and 19 in light of the anticipated implementation of the Inter-jurisdictional Support Orders Act at the provincial and territorial level. Subsection 2(4) will be amended to reflect any changes to sections 18 and 19.

SECTION 3: AMOUNT OF CHILD SUPPORT

SUBSECTION 3(1): PRESUMPTIVE RULE

Subsection 3(1) sets out that the starting point for a child support order is the basic amount in the applicable table for the appropriate number of children and the income of the paying parent.[78] Any additional amount for section 7 "special" expenses may be added to that basic amount.[79] The table amount represents the minimum amount of child support that the paying parent must pay, but judges may reduce or increase the child support amount when the Divorce Act or Guidelines allow.

Subsection 3(1) has not been amended since the Guidelines came into effect on May 1, 1997.

APPLICATION

This subsection has generally been applied consistently and as intended.

CASE LAW

Judges regularly order the child support amounts listed in the applicable table, basing the order on the income of the paying parent and the number of children involved plus any additional amount for special or extraordinary expenses under section 7.[80]

In Meuser,[81] the father argued that despite the fact that his children were from two marriages (two families), he should be considered a father of three children (one family) for the purposes of the Guidelines. That is, the father argued that his child support obligation should reflect the table amount for three children, which is less than the sum of the table amounts calculated separately for two children and one child. The judge rejected this argument saying that subsection 3(1) deals with this situation by stating that the relevant child support amount pertains to children "to whom the order relates," indicating that there is one order for each family.

There are situations when the judge can deviate from the table amount. For example, when the paying parent can demonstrate that undue hardship, under section 10 of the Guidelines, would result from him or her having to pay the table amount, the judge can order another amount.[82] Similarly, when the income of the paying parent exceeds $150,000, the judge, under section 4, may order an amount higher or lower than the table amount.[83]

RECOMMENDATION

No amendments to this subsection are recommended.

SUBSECTION 3(2): CHILDREN AT OR OVER THE AGE OF MAJORITY

Parents and judges determine whether older children qualify for child support by referring to section 2 of the Divorce Act.[84] When these children are eligible for support, the amount is decided in accordance with subsection 3(2). Judges must apply the Guidelines as if the children were under the age of majority, unless that approach is inappropriate.[85]

Parents who feel that an order of the table amount plus section 7 expenses is inappropriate must convince the judge of this. When this is the case, judges are free to order an amount they consider appropriate, keeping in mind the list of factors set out in paragraph 3(2)(b). Older children who are still dependent on their parents may have child support needs different from those of younger children; older children may have part-time jobs or reside away from home.[86] Some families may have already decided on financial arrangements that conflict with the Guidelines approach. For these reasons, judges may decide support for children at or over the age of majority on a case-by-case basis.

Subsection 3(2) has not been amended since the Guidelines came into effect on May 1, 1997.

APPLICATION

There is no definition of the word inappropriate in the Guidelines, nor is there any further explanation of its meaning. When deciding whether to order the table amount,

I. APPLICATION OF THE CHILD SUPPORT TABLES

Judges have used several methods to apportion the support amount when at least one child is at or over the age of majority and at least one is under it, and when all children are eligible for support.

Some judges have determined the table value for the children at or over the age of majority and then determined the table value for the children under the age of majority and added these two amounts together.[87] This amount would be larger than the table amount for the total number of children involved because it would not reflect the economies of scale in the table amounts for more than one child.

Other methods of applying the table amounts include the one the judge used in Cornborough v. Cornborough,[88] when there were three children, one of whom was over the age of majority. The judge found that the child over the age of majority was partially self-sufficient, and so calculated the support order using the tables as though there were

In Bowering v. Bowering,[89] the judge took an approach more consistent with the intended application of subsection 3(2). In this case, there was one child over the age of majority and three children under the age of the majority. The judge said that when paragraph 3(2)(a) applies, the table amount for the total number of children—in this case four—is used when calculating support.

II. DIRECT PAYMENT OF SUPPORT TO OLDER CHILDREN

Judges have made child support payments payable directly to children at or over the age of majority, although the authority to do so is not expressly stated in the Divorce Act or the Federal Child Support Guidelines.[90]

Some paying parents suggest that support should always be paid directly to children at or over the age of majority. Many say that older children should be accountable for their own financial decisions, especially when they live away from their parent's home. Direct payments to children may also help ease tension between the parents because paying parents will be assured that the children are receiving the benefits of the support order.

However, parents who receive child support note that they have ongoing expenses, such as maintaining the home, even when the children are away at school for part of the year. When support is paid directly to the children, paying parents may not be compensated for those costs.

Direct payment to children may reduce their right to receive financial assistance, such as student loans and grants.[91] In addition, children who receive direct payments may have to be involved in enforcing the child support order. Children have not traditionally been a part of legal proceedings and historically courts have not wanted to directly involve children of any age in their parents' case. As well, older children may not have the experience or ability to manage large amounts of money.

III. DISCLOSURE

Many parents want proof that their older children are in school and are therefore still entitled to the child support they are paying. Many people suggest that receiving parents and older children should have to show that there is an ongoing need for child support. Paying parents could be allowed to ask once a year for information such as school records, lease agreements, or other financial documents.

Other parents believe that the current rules and methods for disclosure are sufficient and that additional requirements would be intrusive.[92] Some parents think that involving children in their parents' dispute may have negati

RECOMMENDATION

SUBSECTION 3(3): APPLICABLE TABLE

Subsection 3(3) directs parents and judges to the appropriate table when determining child support amounts.

Under paragraph 3(3)(a), when one seeks an order against a spouse who resides in Canada, one uses the applicable table for the province or territory in which the spouse ordinarily resides at the time of the application. There are further provisions for situations when the spouse has changed residence since the application was made or is expected to do so soon. In these cases, the appropriate table is the one for the province or territory where the spouse now resides or is about to reside.

Under paragraph 3(3)(b), if one is seeking an order against a spouse whose residence is unknown or outside Canada, one uses the table for the home province or territory of the spouse seeking the order.

Subsection 3(3) was amended in 1997 to allow judges, when informed before making an order that the paying parent's place of residence had or would change, to use the table for the new place of residence when determining the child support amount. Prior to the amendment, judges had to use the table for the paying parent's province or territory of residence at the time the application was made, even when that meant that the paying parent would be subject to a different income tax rate.

APPLICATION

This subsection has generally been applied as intended.

CASE LAW

Judges have applied paragraph 3(3)(a) consistently and straightforwardly, using the table for the province or territory in which the parent who will be paying the child support ordinarily resides.[93]

Paragraph 3(3)(b) has also been applied consistently and as intended. In Barrie v. Barrie,[94] for example, the paying parent lived in Bermuda. Thus, the child support order was determined using the table for Alberta, where the other spouse lived when applying for support. Similarly, in Butzelaar v. Butzelaar,[95] because the paying parent's place of residence was unclear due to the variable nature of his employment, the judge used the child support tables for the province where the other spouse lived.

RECOMMENDATION

No amendments to this subsection are recommended.

SECTION 4: INCOMES OVER $150,000

Section 4 helps parents and judges assess child support when the paying parent's income is over $150,000. Under this section, child support can be calculated by one of two methods: by using the table amount alone, or by using the table amount for the first $150,000 and adding a discretionary amount for the balance of the income. An amount for section 7 (special) expenses may also be included.

When the Guidelines were developed, it was decided that child support tables would list child support amounts for incomes up to $150,000 and would recognize that judges should have discretion to set the child support amount for the portion of income over $150,000. This discretion is based on whether the judge considers the table amount to be inappropriate given the circumstances of the case.

The $150,000 threshold was selected because in the mid-1990s incomes of $150,000 were regarded as being at the high end of the income spectrum. At that time, only a small percentage of Canadians earned this amount or more each year. As a result, the vast majority of cases would involve lower incomes, to which the table amounts would apply.

APPLICATION

This section has generally been applied as intended.

CASE LAW

In Francis v. Baker,[96] the Supreme Court of Canada held that the word inappropriate in section 4 should be defined expansively to mean unsuitable rather than simply inadequate, as the Ontario Court of Appeal had said. This would give judges the discretion to either increase or decrease the amount of child support when the table amounts would be far in excess of, or insufficient to meet, the children's needs. This, in turn, would allow for a proper balance between the predictability, consistency, and efficiency components of the Guidelines' objectives and the principles of fairness, flexibility, and recognition of the "condition, means, needs and other circumstances of the children."

The Supreme Court held that the Guidelines include a presumption in favour of the table amounts. The parent requesting a deviation from the table amount must successfully argue against this presumption. The parent must also present clear and compelling evidence showing that the applicable table amount is inappropriate, although he or she does not have to testify. Judges do not accept arguments based on the sheer size of the order, given the presumption in favour of the table amounts and the fact that these arguments do not take into account the needs of the children.

SUBSEQUENT LITIGATION: TABLE AMOUNT ORDERED

In Hollenbach v. Hollenbach,[97] the British Columbia Court of Appeal applied the Supreme Court's reasoning in Francis, stating that there was no basis for deviating from the table amount ($7,276 per month for two children based on the paying parent's annual income of $711,544). This was because the paying parent had not provided clear and compelling evidence of the inappropriateness of the amount. The Court of Appeal held that the Supreme Court decision required judges to look at the unique economic situation of high-income earners at the threshold stage and "that the level of expenses, which would support the table amount, must be unarguably excessive."[98] In this case, the paying parent had to demonstrate that, in the context of the standard of living of other children of wealthy parents, the table amount was not useful to the children. The court acknowledged that this placed a formidable onus on the paying parent.

The British Columbia Court of Appeal in Metzner[99] held that the actual "condition, means, needs, and other circumstances of the children" are questions of fact, so appeals court judges should defer to the findings of trial judges. In this case, the paying parent failed to provide any evidence of the inappropriateness of the table amount ($12,359 per month for two children based on the paying parent's annual income of $1.25 million) so the court found that there was no reason not to order the table amount.

In Simon v. Simon,[100] the Ontario Court of Appeal held that the trial judge erred in not ordering the table amount ($9,215 per month for one child based on the paying parent's annual income of US $1 million) as the parent failed to show that the table amount was inappropriate. Moreover, the court held that the needs of the child and the income of the paying parent were the only relevant factors in a section 4 analysis.[101] However, the judge in Tauber v. Tauber[102] held that in cases applying section 4, the basic needs of the children need not be the dominant consideration, and that reasonable discretionary expenses may be included.[103]

SUBSEQUENT LITIGATION: DEPARTURES FROM TABLE AMOUNTS

Some paying parents have successfully rebutted the presumption in favour of the table amount.[104] In Tauber,[105] the Ontario Court of Appeal said that the paying parent had provided evidence that the table amount ($17,000 per month for one child based on the paying parent's annual income of $2.5 million) clearly exceeded the needs of the child and was, therefore, inappropriate. The judge could determine the child support amount based on the factors in subparagraph 4(b)(ii).

The judge in O.M.[106] had no hesitation in concluding that the table amount ($25,567 per month for three children based on the paying parent's income of $1.9 million) was inappropriate for a variety of reasons: the needs of the children could be met by continuing the $40,000 per year support amount; the parents never had the kind of lifestyle that could result if the table amount were ordered; and the paying parent's substantial increase in income was only significant if the needs of the children were not being met by the initial support amount. The judge felt that any increase in child support beyond that needed to meet the children's needs would be akin to allowing the custodial parent to share in the paying parent's higher income.

The judge in R. v. R.[107] said that the testimony of the paying parent about the family's comfortable and conservative pattern of living prior to separation constituted clear and compelling evidence of the inappropriateness of the table amount (approximately $70,000 per month for four children based on the paying parent's income of $4 million). The paying parent was also able to convince the judge of the unreasonableness of the budgeted expense items.[108] The judge decided that the children's needs could only be assessed in the context of the family's history and situation before the separation. The judge said that the more the income of the paying parent surpassed the $150,000 threshold, the more likely it was that the table amount would be considered inappropriate.

Judges have said that all children of wealthy parents should receive similar treatment, regardless of what the parents chose to do with their money and the lifestyle they choose for themselves.[109] Judges have also pointed out that the custodial parent is entitled to an appropriate level of discretionary spending for the children, one that reflects the paying parent's income.[110]

TRUSTS

The issue of trusts often arises in cases involving section 4. In Simon,[111] the judge held that the trial judge erred in increasing the amount that was to be paid into a trust account for the child as neither parent had requested such a variation. The judge went on to say that the discretion of the custodial parent as to how child support is spent should remain unfettered unless the paying parent can establish a valid reason for interfering. In other words, unless there is a good reason to impose a trust, judges should refrain from doing so as the custodial parent is presumed to do his or her best to provide for the children's immediate and future needs.[112]

In O.M.,[113] the judge imposed a trust on the parents to ensure the children's privileged lifestyle--especially their educational opportunities--continued long after the paying parent's exceptional earning power had ceased. The judge felt compelled to do so because of the parents' evident inability to properly manage their financial affairs.

RECOMMENDATION

No amendments to this section are recommended.

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