See, also, Spousal Support and the Under-employed Payor.
Imputing income (sometimes called "attributing income") on a support payor is very similar to pulling teeth from a lion. Assuming it is a legitimate situation of imputed income, that the payor is hiding income or is intentionally underemployed, you can be certain that they will put up a hell of a fight.
Exacerbating the situation the person needing support this a great difficulty in proving income which is by definition hidden, or intentional unemployment.
The judges run hot and cold on this. I had one judge (RIP as she's no longer with us) refuse to impute income when the payor was alleging welfare level income, and paying support accordingly, but owned a million-dollar house mortgage free! But most of the time, the judges will be sympathetic as they should be to these applications. The mere fact that they are so challenging tends to weed out those applications which are without merit.
The Code of Law
In Canada, this is one area where, thank God, the law is codified at §19 of the Federal Child Support Guidelines. Since it is codified and it is Ground Zero for these types of situations, it has to be looked at first:
19. (1) 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;
(b) the spouse is exempt from paying federal or provincial income tax;
(c) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;
(d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;
(e) the spouse’s property is not reasonably utilized to generate income;
(f) the spouse has failed to provide income information when under a legal obligation to do so;
(g) the spouse unreasonably deducts expenses from income;
(h) the spouse 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
(i) the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.
(2) For the purpose of paragraph (1)(g), the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act.
There is another avenue in the national child support regulation to impute income and that is where the pay or refuses or neglects to provide financial statement (§23 and §24).
Word From the Judges
In an Albertan case in 2001, the majority of the Alberta Court of Appeal in Hunt v. Smolis-Hunt, sent shock waves through the family law community by suggesting this:
"§19(1)(a) of the Guidelines ... should be interpreted to impute income where the obligor has pursued a deliberate course of conduct for the purpose of evading child support obligations. We read the section as requiring either proof of a specific intention to undermine or avoid support obligations, or circumstances which permit the court to infer that the intention of the obligor is to undermine or avoid his or her support obligations.... A court should only impute income under s. 19(1)(a) of the Guidelines when it has evidence of the obligor’s intention to avoid or undermine child support obligations."
In other words, evidence, albeit often circumstantial, of bad faith, mala fides is read into the statute.
But Hunt v Smolis-Hunt was not universally received in Canada. For example, this from the British Columbia Court of Appeal four years later (2005):
"With deference to the view of the majority in Hunt ... intent to evade or minimize the payment of child support is not required for a finding of intentional underemployment or unemployment, although if that intent exists that finding is required. What matters under the Guidelines is ... whether the parent is earning what the parent is capable of earning: "1
Perhaps in even simpler terms, this, from Justice Brown in M.W.B. v. A.R.B. at ¶240-241:
"Where a spouse is found to be intentionally underemployed or unemployed, section 19(1)(a) of the Guidelines permits the Court to impute income to that spouse. Such an imputation, and the child support obligation that flows from it, also affects the level of spousal support to which the recipient spouse is entitled. The focus of this analysis is whether the parent is earning what the parent is capable of earning. In determining whether a party has remained intentionally unemployed or underemployed, the Court considers whether the party has taken reasonable steps to obtain employment based on factors such as age, health, education, skill and work history."
Note that the imputation of income impacts upon, and is available in a spousal support claim.
Payors have an obligation to work and to provide financial assistance to their children. If they are unemployed, they had better provide an explanation for the employment or if they are underemployed, the need to provide an explanation for that as well.
As Justice Adair wrote at ¶122 of his judgment in Mahannah v. Mahannah:
" The question under s. 19(1)(a) of the Guidelines is whether the payor spouse has demonstrated an intention to be underemployed, with the result that the children do not benefit from the payor’s potential earning capacity. By way of example, a parent who chooses to work less than a regular work week must justify that choice by the needs of the children or suffer the loss personally. She cannot effectively transfer part of the cost of that choice to her children."2
A child or spousal support payor will shoot himself in the foot if he or she couples a suspicion of un- or under-employment with a failure to provide reliable, accurate, timely and complete financial information.
Consider these words of Justice Tindale in Sewell v Sewell at ¶33-34:
"... there is no accurate or reliable information given by the respondent as to why he is only making $14 per hour when he has a considerable skill set that would allow him to be earning an income far in excess of $26,747. In my view, the respondent is currently intentionally and grossly under employed. The respondent at a bare minimum should be able to earn $60,000 per year. I therefore impute income to the respondent in the amount of $60,000."
In a shared custody case, Trina Alfreda From v Rempel, the payor thought she could get out of paying child support by going to university instead of earning with the judge thought she could make, $40,000. $40,000 was imputed on her and she was ordered to pay child support on that basis.
The Last Word
The last word has to go to Madam Justice Chappel of the Ontario Superior Court of Justice who made a substantial contribution to the advancement of the law by writing this in Smith v Smith:
"In both spousal support and child support cases, the courts have imputed income to parties in circumstances where it is determined that they are not reasonably using their resources, or have not reasonably explained why they have no income or are underemployed.
"The principles that apply in determining whether to impute income are the same in both child support and spousal support cases.
"The relevant factors in this case for determining whether to impute income include the following:
1. The onus is on the party seeking to impute income to establish an evidentiary basis upon which to establish that the other party is intentionally unemployed or underemployed.
2. It is not necessary to establish bad faith or an attempt to thwart support obligations before imputing income. A payor is intentionally underemployed if they earn less than they are capable of earning having regard for all of the circumstances. In determining whether to impute income on this basis, the court must consider what is reasonable in the circumstances. The factors that the court should consider include the age, education, experience, skills and health of the party, the party’s past earning history and the amount of income that the party could reasonably earn if they worked to capacity.
3. There is a duty on the part of the payor to actively seek out reasonable employment opportunities that will maximize their income potential so as to meet the needs of their dependants.
4. The court will not excuse a party from their support obligations or reduce these obligations where the party has persisted in un-remunerative employment, or where they have pursued unrealistic or unproductive career aspirations. A self-induced reduction of income is not a basis upon which to avoid or reduce support payments.
5. If a party chooses to pursue self employment, the court will examine whether this choice was a reasonable one in all of the circumstances, and may impute an income if it determines that the decision was not appropriate having regard for the party’s support obligations.
6. Where a party fails to provide full financial disclosure relating to their income, the court is entitled to draw an adverse inference and to impute income to them.
7. The amount of income that the court imputes to a party is a matter of discretion. The only limitation on the discretion of the court in this regard is that there must be some basis in the evidence for the amount that the court has chosen to impute."
I'm no fan at judges trying their hand at substantial codification of the law since they are not elected. But this is a sweet, sweet legacy of concise law which, at least until the Supreme Court of Canada weighs in on the Hunt-Smolis controversy nationally, is as good as it gets.
- Federal Child Support Guidelines, SOR/97-175
- Hunt v. Smolis-Hunt, 2001 ABCA 229
- Mahannah v. Mahannah, 2012 BCSC 403, relying on Barker v Barker, op. cit.
- M.W.B. v. A.R.B., 2011 BCSC 1663
- NOTE 1: Barker v. Barker, 2005 BCCA 177. The Court added, at ¶19, "That is the view of other appellate courts in Canada who have considered the issue, as well as that of Picard J.A. in dissent in Hunt, supra: see Montgomery v. Montgomery, 2000 NSCA 2; Donovan v. Donovan, 2000 MBCA 80 and Drygala v. Pauli, 61 O.R. (3d) 711 (ONCA, 2002)." The BCCA again, more recently rejected Hunt v Hunt-Smolis in McCaffrey v. Paleolog, 2011 BCCA 378 at 53.
- Sewell v. Sewell, 2012 BCSC 1562
- Smith v Smith, 2012 ONSC 1116
- Trina Alfreda From v Rempel, 2012 SKQB 431
- Wegler v. Wegler, 2012 ONSC 5982