Child Support, Spousal Support, and COVID-19

Family Law

The global economy has taken a hit from the COVID-19 pandemic and Canada has not been immune to the financial effects of the crisis. Businesses across the country are closing their doors, staff are being laid off in record numbers, and the stock market has plunged.  In this bleak economic landscape, many Canadians may find themselves unable to meet their support obligations and in many cases, even their own basic living expenses and debt obligations.

One question that now comes up with increasing frequency is whether support payors are permitted to reduce support payments considering that their income has dropped because of the COVID-19 pandemic.

The answer to this question depends on the nature of the document (or lack thereof) which sets out the payor’s support obligations. Typically, support obligations will be set out in one of three ways:

  1. Court order or filed separation agreement;
  2. Unfiled separation agreement; or
  3. No separation agreement or court order, in which case it is a legislative obligation (i.e. Divorce Act or Family Law Act statutory obligations).

This question is further complicated by the fact that the courts have currently suspended their regular operations and are only hearing urgent family matters, which do not appear to include child and spousal support matters. The BC Supreme Court has issued a notice about what essential and urgent family matters can be heard. The Provincial Court has also issued a notice. Once the courts resume regular operations, parties may wish to bring on court applications addressing child and spousal support obligations retroactive to the commencement of the pandemic. This is elaborated on further below in this article.

Court Order/Filed Separation Agreement

Parties who have gone through the court process to have a judge determine their support obligations will typically have an interim or final court order. Parties who commenced court proceedings but settled outside of court will likely have a consent order. Parties may also have a separation agreement which was then filed with the court, and thus is enforceable as if it were an order of the court. Failure to pay in accordance with a court order or filed separation agreement will land a party in contempt of court, which can carry punishments ranging from fines to, in the most extreme circumstances, jail time.

Payors whose obligations are set out in a court order must continue to pay support in accordance with that order until they have either:

  1. obtained the consent of the recipient to lower support. As a best practice, this consent needs to be documented in a consent order or amendment to the separation agreement; or
  2. applied to the court to have a judge vary the support order.

When a recipient is deciding whether to agree to a reduction in support, it is important to be reasonable or the recipient risks facing cost consequences against them if the payor must commence an application to reduce support payments and is ultimately successful. The recipient also risks having to return the overpayment of support received from the date of the change in the payor’s income. When negotiating reduced support, the payor should provide the recipient with financial documents evidencing their drop in income.

If the support recipient does not agree to a reduction of support, once the courts resume regular operations, the payor must commence a court application to vary the court order to reduce ongoing support payments and retroactively recuperate overpayments from the date of the material change in circumstances (i.e., the date the job loss or significant reduction in business or investment income occurred) to the date of the court application.

To reduce ongoing support, the payor must provide evidence to the court that their income has decreased, that the decrease was due to circumstances outside of the payor’s control, and that the decrease is expected to continue moving forward.

In determining whether to award a retroactive reduction of support, the BC Court of Appeal in GMW v. DPW, 2014 BCCA 282 held that the factors cited in DBS v. SRG, 2006 SCC 37 apply to applications for retroactive reduction. Therefore, Court will look at the following DBS factors:

  1. reason for delay in seeking reduction;
  2. the payor parent’s conduct;
  3. the children’s circumstances; and
  4. the hardship occasioned by a retroactive award.

To successfully make out a claim for retroactive reduction of support, the payor is encouraged to put the recipient on notice that she or he will be pursuing this claim, make reasonable attempts to negotiate a reduced support figure outside of court, provide financial documents evidencing the decrease in their income, and commence the application with in a reasonable timeframe, following the courts resuming regular operations.

In addition, parties should keep in mind that while court orders and agreements for child and spousal support are often prefaced on the parties’ incomes from the previous tax year, where the parties’ current incomes can be determined, current income is likely the more appropriate income on which to base child and spousal support calculations. For example, in MT v JS, 2020 BCSC 203, a BC Supreme Court case, the court found that in circumstances where there have been dramatic falls of income without a reasonable prospect of near term recovery, it is the payor’s currently available income and not the income from previous tax years that should apply (paras. 45 to 50).

Payors should also keep in mind that court orders and filed separation agreements can be registered with the Family Maintenance Enforcement Program (FMEP), which will take steps to enforce the child and spousal support payments, including garnishing the payors’ wages, pensions, income tax refunds or GST credits, bank accounts or other assets, register a lien against personal property (including a car, boat, or manufactured home), report the payor to the credit bureau, instruct ICBC to refuse to issue or renew the payor’s driver’s license, and charge default fees, amongst other things. Therefore, it is advisable that payors take the correct legal steps if they wish to vary their support obligations.

Unfiled Separation Agreement

Unfiled separation agreements are not enforceable as court orders, which means that a payor will not be found in contempt of court if they unilaterally reduce support payments. However, it is a simple procedural step to file a separation agreement, which then puts the payor into the territory of being found in contempt.

Furthermore, even if the separation agreement is not filed, the payor will still be in breach of the agreement, and face possible cost consequences as a result of the breach. Thus it is not recommended that payors unilaterally reduce support payments.

The procedure to vary support obligations in an unfiled separation agreement is essentially the same as the procedure to vary support obligations in court orders and filed separation agreements. The first step is to approach the other party directly, or through a lawyer, to explain the situation and ask that support payments be temporarily reduced. If the other party does not consent, once the courts resume regular operations, an application must be commenced to vary the terms of the separation agreement on the basis that there has been a material change in circumstance since signing the agreement (i.e., a decrease in the payor’s income).

No Separation Agreement or Court Order (Legislative Obligation)

If there is no agreement or court order setting out support obligations, then the payor cannot be found in contempt or in breach of an agreement. However, federal and provincial legislation still require that spousal and child support be paid commensurate with the payor’s income. For parties who are married, sections 15.1 and 15.2 of the Divorce Act, which is federal legislation, govern child support and spousal support respectively. For both married and unmarried parties, Part 7 of the Family Law Act, which is provincial legislation, provides for child and spousal support.

The absence of a separation agreement or court order does not extinguish a person’s obligation under the law to pay support. The distinction under this category is that the payor does not need to commence a court application or seek the agreement of the other party to vary support, although it is recommended that the parties try and reach an agreement as to the amount of support. The payor should first have a discussion with the other party prior to reducing support so that the other party may plan their own financial future accordingly. Payors should also keep in mind that any unilateral reductions in support could reflect poorly on the payor when the issue is brought before a judge, as the judge will want to see parents cooperating and working together to try and agree on matters, especially during these critical times. Further, any reductions in support that were not justified (i.e., based on an appropriate calculation of the payor’s income) can result in the judge awarding retroactive child and spousal support amounts, based on what the payor should have actually paid, and costs consequences for the payor.

Arrears of Child and/or Spousal Support

In some cases, arrears of child or spousal support have accrued due to the payor failing to make payments, or paying less than what was required under the court order or separation agreement. In such cases, once the courts resume regular operations, in addition to an application to retroactively reduce support, the payor may wish to bring an application reducing or cancelling arrears. However, payors should bear in mind that applications to reduce or cancel arrears are subject to a high bar of “grossly unfair”. The payor is essentially coming to the court with “unclean hands”, since they are in breach of a court order or separation agreement already, by not having paid the required support payments, and judges typically do not look fondly on parties in breach of an order or agreement.

Section 174 of the Family Law Act provides for the reduction or cancellation of arrears, as follows:

Reducing or cancelling arrears

174   (1) On application, a court may reduce or cancel arrears owing under an agreement or order respecting child support or spousal support if satisfied that it would be grossly unfair not to reduce or cancel the arrears.

(2) For the purposes of this section, the court may consider

(a) the efforts of the person responsible for paying support to comply with the agreement or order respecting support,

(b) the reasons why the person responsible for paying support cannot pay the arrears owing, and

(c) any circumstances that the court considers relevant.

(3) If a court reduces arrears under this section, the court may order that interest does not accrue on the reduced arrears if satisfied that it would be grossly unfair not to make such an order.

(4) If a court cancels arrears under this section, the court may cancel interest that has accrued, under section 11.1 of the Family Maintenance Enforcement Act, on the cancelled arrears if satisfied that it would be grossly unfair not to cancel the accrued interest.

Payors should also keep in mind that this is a discretionary remedy, meaning the judge does not have to reduce or cancel arrears, but rather have the option to do so if they find that the situation is grossly unfair. In the case of D.W.T. v. B.S.T., 2016 BCSC 1978, the Court stated as follows:

[72]        When applying to cancel or reduce support arrears, an applicant must prove both a material change in circumstances that is significant and long lasting and that it would be grossly unfair not to reduce or cancel the arrears: Semancik v. Saunders, 2011 BCCA 264 at para. 25.

[73]        It is well settled law that an applicant seeking to cancel or reduce arrears bears a heavy burden. In Earle v. Earle, 1999 BCSC 289, Martinson J. held that payors can only obtain a reduction or cancellation of arrears if they provide detailed and full financial disclosure that: 1) the change he or she points to is significant and long lasting; 2) the change was real and not one of choice; and 3) every effort was made to earn money (or more money) during the time in question and those efforts were not successful: para. 27.

[74]        What constitutes “gross unfairness” will be determined on a case-by-case basis. In this regard, I agree with Butler J. in Ohlsen v. Chester, 2016 BCSC 605, when he held:

[12]      It is not possible to summarize the kind of circumstances which will satisfy the test of gross unfairness. The assessment must be determined on a case by case basis. What is certain is that the bar is set very high and that it will be a rare case where arrears are cancelled or reduced. Establishing gross unfairness is a more onerous test than proving simple unfairness: L.B. v. J.K., 2012 BCPC 231 at paras. 52-54. Before cancelling arrears, a court must conclude that maintaining the arrears is so unfair that it would serve to impose an injustice on the payor which the court could not countenance.

[75]        In this context, the court is also to consider principles set out by the Supreme Court of Canada in D.B.S. v. S.R.G., 2006 SCC 37. Although D.B.S. dealt with applications by a recipient parent to retroactively increase support, the same analysis has been found to apply to an application by a payor to reduce support: G.M.W. at paras. 40-42.

Final Considerations

Matters of child and spousal support need to be considered on a case-by-case basis, particularly now, as many people’s financial situations are in flux. Both parties bear responsibility for financially supporting their children, but also have financial obligations to pay basic living expenses and the like, so parties must be reasonable and try to make things work. It is advisable to speak to a lawyer about the best approach to address child and spousal support obligations in these difficult times.

Fanda Wu
Lawyer, Family Law Group
Lindsay Kenney LLP – Vancouver Office