Peters v Atchooay is a New Case from the Court of Appeal that Changes the Landscape of Child Support in Alberta
In this recent decision from the Alberta Court of Appeal, written by Justice Pentelchuk and concurred by Justices Paperny, Watson, Greckol, and Feehan, the Courts revisit the test for determining parents’ income for the purposes of child support.
Prior to this case, the guiding case in this area was Hunt v Smolis-Hunt, 2001 ABCA 229 (“Hunt”), which set the appropriate test to impute income to a parent for the purposes of child support as a determination whether that parent had deliberately sought to evade child support through intentional work or lifestyle choices. Notably, the requirement of deliberate intent was unique to Alberta in Canadian jurisprudence.
The court may impute income upon an individual pursuant to s. 19(1)(a) of the Federal Child Support Guidelines which states that the court may “impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following: (a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse.”
The Court, in the decision for Hunt, prioritized the personal freedom of the parent and did not wish to force all separated parents to recognize their absolute earning capacity, as such, the majority found that imputing of income should only be permitted where the payor “has pursued a deliberate course of conduct for the purposes of evading child support obligations” (para 42). There needed to be proof of a specific intention to undermine or avoid child support obligations. This was referred to as the “bad faith test” or the “deliberate evasion test.”
The dissent of Hunt, written by Justice Picard, championed a test based upon reasonableness instead of the deliberate evasion test. Picard states the reasonableness test thusly:
Given the fundamental responsibility of parents to support children, it is enough to prove that the payor has capacity to earn more than he or she does but does not do so based on a choice that is unreasonable in the circumstances (para 106).
Justice Pentelechuk advises at para 41 and 42 that it is time to do away with the deliberate evasion test and adopt the reasonableness test. She states this is so for 4 reasons:
- The principles of statutory interpretation do not support the deliberate evasion test;
- Application of the deliberate evasion test has proven impractical;
- The modern child-centered approach to child support, which only considers the best interests of the child, adheres to the reasonableness test; and
- Alberta is the only province which requires evidence of intent to undermine support to impute income.
As such, a new framework is needed. Justice Pentelechuk sets as the spine of the new analysis three questions (para 60):
- Is the parent in question intentionally under-employed or unemployed? Parents are exempt from consideration of imputing income under s. 19(1)(a) if they are under-employed or unemployed by way of lay-offs, reduced hours, or termination without cause. Some ostensible “voluntary” decisions to make less money will not always amount to under-employment where factors like age mean that present income potential is reduced from past income potential.
- Do the listed exceptions to imputation in s. 19(1)(a) apply? Is the under-employment or unemployment required by the needs of a child of the marriage or another child? These exemptions are not intended to be automatic or permanent, and their availability will depend on the circumstances of the case.
- Should judicial discretion to impute income be exercised? If the under-employment or unemployment is voluntary and the above listed exemption apply, the court may exercise its ability to impute income. However, because it is a discretionary endeavour, the question of whether to impute income involves determining if the voluntary under-employment or unemployment was reasonable, having regard to the circumstances.
The burden of proving that income should be imputed varies by circumstance and all stages of the framework require credible and cogent evidence.
If an imputation of income is sought on initial application and there is no missing financial disclosure, then the party seeking imputation must bear the onus of proving an evidentiary basis for seeking imputation. Once the evidentiary basis is proven, the onus shifts to the person opposing imputation to defend the actual income claimed. Typically, the initial evidentiary onus is a low bar which can typically be met by the person seeking imputation can point to a drop in the income of the other party.
If imputation is sought on a variation application, the onus remains on the party seeking imputation throughout. That party must prove a) there has been a material change in circumstances and then b) either the under-employment or unemployment was not voluntary, or that the underemployment or unemployment is as a result of one of the listed exceptions in s. 19(1)(a). If neither applies, the party must then establish on a balance of probabilities that their under-employment or unemployment is reasonable having regard to all existing circumstances.
It should be noted that the reasonableness test requires consideration of all relevant factors and not every voluntary change in employment which results in a lower income should be imputed to that parent’s maximum earning capacity. Payor spouses are still entitled to make career decisions so long as those decisions are reasonable at the time they are taken considering the circumstances. The weight to attribute to each factor is left up to the judge to decide.
Gauging the reasonableness of a parent making less money than they are capable begins with earning capacity. A parent’s true income must be compared to their earning capacity and the difference between the two is informative to the court and ensures a just result will flow to the child at the heart of the issue.
The effect of the reduction in income is also highly relevant. There will be some cases where no degree of under-employment will be reasonable as any drop in support for the child will result in an unfair result for the child, and in others where ultimately even a drastic change in support will not negatively effect the child.
Also relevant may be a short-term drop in income which may have long-term gain, such as dropping to reduced hours for school or starting a new job with a lower initial pay but more upward mobility. Also relevant for these situations is whether the benefit will crystalize early enough for the child to realize the benefit.
The court provides a set of seven non-exhaustive principles to be alive to for the consideration of imputation of income:
- Parents have a general duty to work when they are healthy and can work.
- A parent’s earning capacity is used to assess reasonableness in the circumstances.
- The court has discretion to impute or not impute income in situations they find is reasonable to make that choice.
- The obligation to support children is the overarching goal.
- Any agreements between the parties contextualize reasonableness in those circumstances.
- Reasonableness is not fixed in time and can change as the circumstances do.
- The ultimate onus rests on the party resisting imputation.
While specific deliberate evasion is no longer required in Alberta for an imputation of income under s. 19(1)(a), a court may still impute income upon a parent where it finds that parent had a specific intention to under mine their child support obligations. In essence, bad faith is not necessary to impute income, but it is sufficient.