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Overdue decision rewrites the rules around determining child support

By Graeme Kluge

A recent Alberta Court of Appeal decision has upended a long-held precedent on how to determine income when deciding on child support if the spouse is intentionally under-employed or unemployed. This unanimous decision will not only fundamentally change how income for the purpose of paying child support (“Guideline Income”) is determined in Alberta, it brings us into line with every other province on this issue.

In Peters v Atchooay, the court decided it was long past due to revisit the 2001 decision in Hunt v Smolis-Hunt, which has guided the calculation of Guideline Income in Alberta for more than 20 years.

At his trial in 1998, Terrence Stuart Allan Hunt was 45 years old. Despite having practised law for 13 years, his annual income was less than $20,000. He was heavily in debt and barely earning enough to support himself. After graduating from law school and encountering difficulties in establishing his legal practice, Hunt briefly returned to his previous employment with Statistics Canada, where in 1991 he earned $55,000. In 1995, he had a further potential opportunity to work for Statistics Canada, with expected earnings of between $37,000 and $42,000 per year.

Applying a reasonableness test, the trial judge concluded that Hunt was intentionally under-employed as he was adhering to a career path that permitted him to pay only “a level of support demonstratively inadequate to cover the needs of his children” when he had the capacity and ability to earn more. The trial judge imputed (i.e. assigned) an income for Guideline Income purposes of $55,000 per year commencing in 1994, the year of separation, nine years after Hunt received his law degree.

The circumstances when income may be imputed

The question in Smolis-Hunt was whether Hunt was intentionally under-employed within the meaning of s. 19(1) of the Child Support Guidelines, which sets out a non-exhaustive list of circumstances in which the court may impute income. These include if the spouse:

  • is intentionally under-employed or unemployed;
  • is exempt from paying federal or provincial income tax;
  • lives in a country with significantly lower income tax rates than Canada;
  • has diverted income;
  • owns property that is not reasonably utilized to generate income;
  • has failed to provide income information;
  • unreasonably deducts expenses from income;
  • derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax;
  • and is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

When Smolis-Hunt was decided in 2001, there were two interpretations of “intentionally.” One suggested income could be imputed only if there was evidence of a specific intention to evade or undermine child support obligations through under-employment or unemployment. The second required no such intention or bad faith. Instead, income could be imputed if the spouse, through intentional decisions or conduct, failed to maximize their earning capacity.

Other provinces employ a test of reasonableness

Up until Peters v Atchooay, Alberta was the only province that required the party seeking imputation of income to prove that the intentional under-employment or unemployment was specifically for the purpose of evading payment of child support. All other provinces instead employ a test of reasonableness in assessing whether to impute income to a parent under s.19 of the guidelines.

Following Smolis-Hunt, Alberta required an element of bad faith or a deliberate attempt on the part of the payor parent to evade their support obligations to impute income, as the appeal court noted that to impute income to a payor parent, the “obligor has pursued a deliberate course of conduct for the purpose of evading child support obligations.”

Writing for the court in Peters v Atchooay, Justice Dawn Pentelechuk noted, “Much has changed in the family law landscape since Smolis-Hunt was decided 21 years ago. The policy factors informing the court’s discretion to impute income should recognize the current reality and reflect the modern understanding of child support in the context of the overall best interests of the child.”

‘It is time to replace the deliberate evasion test’

She added, “It is time to replace the deliberate evasion test established by the decision in Smolis-Hunt.

The court’s ruling included that the modern approach to child support, “as evidenced by the decidedly child-centred nature of the new Divorce Act and the Guidelines as well as recent Supreme Court jurisprudence, affirms that the best interests of children must remain front and centre. This includes ensuring that children receive a proper level of support.”

Justice Pentelechuk goes on to state that the approach mandated by Smolis-Hunt has “created a silo separate from appellate authority in the rest of Canada. It is also not supported by the principles of statutory interpretation, a practical and fair approach to the imputation of income, or the child-centred nature of the Divorce Act. For all these reasons, it is time to adopt a new framework in Alberta for the imputation of income under s 19(1)(a).”

Payor’s conduct is no longer an issue

This is a well-reasoned and overdue decision. As the judgment notes, the deliberate evasion test imposed by Hunt improperly placed the burden of proof of evasion on the recipient, which is “both impractical and untenable” as the “recipient will rarely have insight into or influence over the payor’s employment decisions or conduct, nor will they have the information that the payor has on the fundamental question of whether the payor’s under-employment or unemployment is reasonable in all of the circumstances.”

The court also found that “the deliberate evasion test primes parents for continued conflict and defensive responses to allegations of ‘deliberate evasion’ can morph into offensive attacks, fuelling further conflict.”
As Justice Pentelechuk states, “Alberta is the only province in Canada requiring evidence of an intention to evade or undermine child support obligations before income can be imputed. Appellate courts of other provinces have endorsed the reasonableness test. Alberta is wrong; the rest of Canada is right.”

Contact us for assistance

If you believe a former spouse or partner is unemployed or underemployed and, as a result, should have his or her income imputed, contact Demas Schaefer Family Lawyers so that we can help guide you through the process to ensure that your children receive appropriate financial support.


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