More or less confusion and uncertainty than before?

by Shelley Bentley

During recent meetings of the Vancouver and Victoria Family Law Subsections Dr. Julien Payne, QC delivered an abridged version of his monograph on the Federal Child Support Guidelines (FCSG). The FCSG which were implemented in May 1997 apply to child support in all Divorce Act matters where the province in which the payor lives has not established its own guidelines.

In his discussion, Dr. Payne focused on the areas of uncertainty created by the fusing of a fixed payment regime with a system allowing quite broad judicial discretion. He quoted Mr. Justice Warren:

“It is proving to be a vain hope that the introduction of the Federal Child Support Guidelines would make the task of setting child support easier and hence lead to settlements. If anything, fresh areas for dispute have arisen and certain aspects are at least as difficult and contentious as before.” [footnote, Crick v. Crick, <1997> B.C.J. No. 222 (B.C.S.C.)]

He identified the following problem areas encountered where judicial discretion has been preserved within the fixed payment regime of the FCSG:

Spouses Who Stand in the Place of Parents
Under the Divorce Act a support obligation may arise over children who are not the common offspring of the spouses. A spouse who stands in the place of a parent of his or her partner’s child may be required to provide ongoing support. The court may face the challenge of apportioning the support obligation between the natural parent and the spouse who has stood in the place of that parent. The FCSG offer very little guidance:

“5. Spouse in place of parent.- Where the spouse against whom a child support order is sought stands in the place of a parent for a child, the amount of a child support order is, in respect of that spouse, such amount as the court considers appropriate, having regard to these Guidelines and any other parent’s legal duty to support the child.”

Dr. Payne points out that Ontario courts have had little difficulty in imposing the primary support obligation on a stepparent rather than the natural parent in cases where the stepparent has played a more substantial role in parenting than the natural parent. Arguably it appears that the courts in Ontario and Alberta have endorsed an approach which favors imposing the primary obligation on the person who is most easily accessed by the jurisdiction of the court. However, BC courts have taken a more conservative approach. Southin, J.A. of the B.C.C.A. made the following observations:

“The question of the extent to which someone who is not a parent either by blood or adoption should continue to be held responsible, perhaps for years, for children who may have no interest in him or her at all and whose natural parent may have acquired a new spouse, is a troubling one which appears to be arising more frequently and is deserving of more than cursory attention. It is not a question to be answered by the ‘blunt instrument’ approach.”

The absence of statutory authority, the difficulty in tracing a parent, or ascertaining that parent’s financial circumstances, the high cost of litigation and the problems surrounding enforcement of orders, add to the difficulty of resolving the multi-parent support obligation issues. Dr. Payne suggests that the problems will become more focused when provinces introduce fixed child support schedules, but judicial discretion must remain in order to allow justice to be served in the circumstances of each individual case.

Income Tax
In May, 1997 the income tax rules changed so that child support payments were no longer taxable in the hands of the receiving parent and no longer deductible in the hands of the payor. Commentators have pointed out that the old income tax regime may continue to apply to post May 1997 agreements where the agreement or court order operates retroactively and the paying parent made a payment before that date. Under the FCSG the court is not authorized to vary an order by keeping part of it intact and adding on extra expenses. This will result in the disturbance of the old tax regime.

The change in income tax rules will increase federal revenue considerably. It remains to be seen whether spouses can trade-off child support against increased spousal support. Because spousal support is taxed in the hands of the receiving spouse, such a strategy would open the door to the benefits of income splitting. It is not clear whether this strategy would be permitted under current Canadian law.

Incomes Over $150,000
Under the FCSG, where the income of the payor spouse is over $150,000, the court is permitted to choose between methods of calculating the amount of support. Unfortunately, the court is given no guidance to determine which method to use and in what circumstances. The court should apply its discretion to depart from the table figures. Dr. Payne warns that the objectives of the FCSG will not be promoted if the court departs from the FCSG too readily.

Determination of Income
The FCSG provide that where income or any other amount is to be determined on the basis of specified information, the most recent information is to be used. Although the payor’s future earning potential must not be considered, the court may reserve the right for counsel to re-address child support on a “more realistic” basis.

Ongoing Disclosure
Under s. 25(1) of the FCSG there is a continuing obligation to provide income information. The payor must provide information annually upon the written request of his or her spouse. Dr. Payne pointed out that under the former regime of judicial discretion, judges could index a child support order to the cost of living. It is now questionable whether judges will provide a cost of living adjustment in orders where child support tables are being used because these tables are not premised on the cost of living but on the payor’s income. Dr. Payne believes it is possible that judges will index awards in order to counteract the likelihood that spouses will not take advantage of the right to disclosure.

Distinction Between Ordinary and Extraordinary Expenses
Under section 7 of the FCSG, some expenses must be “extraordinary” in order to warrant an award. Child care expenses, medical and dental insurance, health related expenses and post-secondary educational expenses need not be extraordinary to be awarded. However primary and secondary school education and any education programs which meet a child’s particular needs and extracurricular activities must be extraordinary in order to be allowed. It appears that “extraordinary expenses” must imply exceptional or out of the ordinary in nature or amount compared to the expenses usually incurred. In assessing this, one must keep in mind that the basic table amounts increase with the payor’s income and take into account the fact that expenses increase as financial circumstances improve. Accordingly, in Dr. Payne’s view, a court should not routinely add expenses for extracurricular activities.

Extraordinary Educational Expenses; Private School
With any extraordinary expense the court must look at the necessity of the expense, in relation to the child’s best interests and the reasonableness of the expense considering the means of the parents and the spending pattern prior to separation. Dr. Payne quotes Laura W. Morgan, an American commentator, who has identified relevant factors for consideration: “whether one or both parents attended private school; whether the child has been enrolled in private school prior to the divorce; whether there has been an expectation that the child would have a private education, by express agreement or otherwise; whether the parents can afford a private education; and whether the child has a special need for private school that public schools cannot provide, making private education in the best interest(s) of the child.” [Footnote: Laura W. Morgan, Child Support Guidelines: Interpretation & Application, Looseleaf Service, Aspen Law & Business, S. 4.05(b)]

Split Custody
Under section 8 of the FCSG in cases where both spouses have custody of one or more children, child support is calculated by taking the difference between the amount that each would pay if the order were sought against each of them.

Access or Shared Custody for Forty Per Cent of the Year
In the case of access or shared custody for not less than 40 per cent of the year, the court is not bound by the strict formula that applies to split custody in section 8. In the former case, the court must take into account (a) the amounts set out in the applicable tables for each of the spouses, (b) the increased costs of shared custody arrangements; and (c) the conditions, means, needs and other circumstances of each spouse and of the child. The court must weigh a, b and c carefully and should have regard to section 26 of the Divorce Act which imposes a joint financial obligation on the spouses in accordance with their relative abilities to contribute. This is an area of broad judicial discretion which is exercised after consideration of what each parent would pay under the applicable table.

Dr. Payne notes that while many are skeptical and believe that the 40 per cent rule will cause more custody and access disputes, the evidence so far in the several hundred cases decided is that there is no appreciable difference. Dr. Payne has noted a trend in B.C. towards more joint guardianship but no significant shift in actual time sharing i.e. joint physical custody.

In Dr. Payne’s estimation, and from a strictly financial point of view, it does not “pay” to have the children, even under the new FCSG’s.

Priority of Child Support Over Spousal Support
The FCSG give priority to child support over spousal support where the application is for members of the same family. Presumably a variation in child support will give rise to a change in circumstances allowing a spouse to apply for an award in cases where insufficient funds were available to satisfy both obligations. Regrettably, the FCSG do nothing to resolve the difficulties of awarding support in successive family situations.

Effect of Order or Agreement
The court has discretion to deviate from the FCSG if it is satisfied that (a) special provisions in an order or agreement respecting financial obligations of the spouses or the division or transfer of property, directly or indirectly benefit a child, or that special provisions have otherwise been made for the benefit of the child; and (b) the application of the FCSG would result in an amount of child support that is inequitable given those special provisions. An example of where this section might be invoked is a situation where a comprehensive agreement has been made and the financial arrangements include an agreement that one parent maintain the former family residence for the benefit of the children while in that parent’s care.

In the context of an application to vary an order or agreement, unless the above- mentioned provisions have been met the court must follow the FCSG. This is so even when a custodial parent is willing to take less than that set out under the FCSG. It should also be noted that a court is not obliged to reduce child support because it was agreed upon at an amount in excess of the FCSG.

Variation of Orders
The court may vary an order made under the applicable provincial or territorial table whenever there has been change which would result in a different order under the table.

Variation of an order under the FCSG where the amount was not determined under a provincial or territorial table is available when there has been a change in the condition, means, needs or other circumstances of either spouse or of an entitled child. The fairness of the original award is not reviewable. There must be a change in circumstances which is substantial, unforeseen and continuing.

Note
The above information was presented to the Vancouver and Victoria Family Law Subsections of the CBA. Julian Payne’s comprehensive unbound monograph on the Federal Support Guidelines (125pp.) is available for $40 per copy (including postage).

Contact:
Marilyn A Payne
Vice-President, Danreb Inc
1188 Morrison Drive
Ottawa ON K2H 7L3

This article originally appeared in the February 1998 issue of BarTalk and is reproduced here with permission of both the author and the Canadian Bar Association, British Columbia Branch.