This article should be read with Imputing Income in Support Cases.

They are but words on a piece of paper but as they've been legislatively blessed by the Royal Assent Governor General, the Holy words of the Child Support Guidelines are law in Canada. They are words with give a child support applicant a clear advantage over a spousal support applicant.

They are those words of the Child Support Guidelines, §19 to be exact, which allow a Court to put a payor under the judicial microscope and impute income on a child support parent (aka payor) where he or she is: "intentionally under-employed or unemployed...."

How sweet those words are but how bitter they can be to the spousal support applicant who faces trial against a schmuck who quit his or her job just before or after the date of separation, or before trial, only to find, after a thorough search through provincial spousal support legislation or the Divorce Act, no such magic words.

Where the spousal support application tags along with a child support application, that instantly allows the applicant to rely on §19 of the Child Support Guidelines. Once income is imputed because of the Guidelines, that income can also be used to set spousal support (that's what the court did in Kripotos, cited below).

This article is mostly concerned with spousal support applicants who have no grounds to invoke the Child Support Guidelines but nonetheless face a prospective payor that appears to be intentionally under-employed.

Family law lawyers always say there are two steps to spousal support.

First, there must be a need.

Secondly, there must be an ability to pay on the part of the prospective payor.

Over a beer, or to sound smart in Court, lawyers call this the "needs-means test".

microscopeThe quasi-biblical statement of the law of Justice L'Heureux-Dubé of Canada's Supreme Court in Moge only indirectly addresses the issue of imputing income in a spousal support case:

"In so far as economic circumstances permit, the (Divorce) Act seeks to put the remainder of the family in as close a position as possible to the household before the marriage breakdown."

By that measure, by implication, a prospective payor would be held to a measure of support measured against what was in place "before the marriage breakdown" regardless as to whether or not he/she quit his/her job or took such other measures that all too conveniently tended to minimize his/her exposure to pay spousal support.

Errant spousal support payors are easily dinged where the Court has in hand some matrimonial property to distribute. There, they freely wield the hammer of an unequal division, giving the spousal support recipient the lion's share (such as, for example, in Hall or Cordwell). But where the prospective payor appears to be judgment proof, the Court is faced with an unenviable task, with a heavy cry for justice echoing.

The grand-daddy of cases on this issue appears to be the Marquis case of Ontario. That case is rather ambitiously summarized in Hainsworth's book as follows:

"Because the court is required to take into account a spouse's 'means', the court can impute income to a spouse. When the court imputes income to a spouse, it considers the spouse as having earned a certain level of income despite the fact that the spouse is not currently earning such income. Before the court can impute income to a spouse, there must be a substantial foundation in the evidence to justify the imputation."

Outside of those case where the Chid Support Guidelines apply, or the court has matrimonial property to address the intentionally under-employed issue, to borrow from the 2007 issue of the Annual Review of Family Law:

" (The) courts appear less willing to impute income in spousal support cases than in child support cases."

On the west coast of Canada, circa 1989, British Columbia's Court of Appeal was seized with the Babowich case. The payor was a poster-boy for spousal support evasion, refusing to provide financial disclosure and being described as:

"... an unknown quality. After 10 days of trial the judge was unable to conclude what he does for a living, except that he is a businessman; he appears to be living well.

"The husband now lives in (an) ... apartment and he collects the rent on the other one, if it is rented, which is a subject of some mystery. The husband has never accounted for any of these rents.

"He has maintained that he was regularly employed as a salesman of industrial equipment on behalf of European firms. According to his evidence, he has been paid in European currencies in European bank accounts. He stated that sometimes he was paid in cash for tax reasons. At various times during his testimony he stated that he earned between $60,000 and $70,000 per year, between $80,000 and $90,000 per year, between $30,000 and $40,000 per year and, on one occasion, testified that he made between $600 and $700 per month. He had no knowledge of his taxable income because, he said, his wife filed his income tax."

The Court of Appeal held the payor to a lump sum payment of $10,000, and a substantial award in costs, referring to:

"... the allegation that the husband is now subsisting on some form of social assistance.

"That impresses me not at all having regard to his earning capacity and his conduct in the course of these proceedings.

"His conduct leads reasonably to the conclusion that he is on social assistance because he wants it that way, possibly for the purposes of these appeals."

"... I regard that as probably being an arrangement of convenience."

In Kripotos, Justice Prowse imputed an income of $200,000 on the husband and a $6,000 spousal support award to the wife, in noting that the:

"... duty (of full financial disclosure) is of particular significance where, as here, one of the parties has relevant information unknown to the other.

"(The) husband can hardly complain if, when he leaves gaps in the court's knowledge, the court does not draw inferences in his favour. On the contrary, when he leaves a gap such that two alternative inferences may be drawn, the court will normally draw the less favourable inference."

In Mikan, a 2004 Ontario case, the Court was not impressed with the wife quitting her job when she received the husband's application for spousal support, even though she had a doctor's letter urging stress leave.

"That letter cited, her 'medical condition' as justifying her decision to cease employment.

"Of course, that decision, following hard on the heels of an application for spousal support is, to say the least, suspect. No cause has been shown why Mother should be permitted to stop her employment. She has a duty commensurate with the Father’s to earn as much income as she reasonably can to support her family. I assess her income at $210,000, which is roughly the sum which she earned in the last year for which we have reliable information."

Sheppard v Sheppard is a 1992 case from Newfoundland in which Justice Cameron of the Court of Appeal held an intentionally under-employed teacher to an imputed income of $30,000.

"The (Newfoundland) Family Law Act shares the obligation to support a child between the parents according to their capacities . The legislature is clearly directing courts not only to the assets and income of parents but also to their ability to earn income.

".... the situation would be no different under the Divorce Act , as the word 'means', as used in that Act, has been interpreted to include one's earning capacity.

"For most parents their capacity to earn can be equated with what they are earning, and therefore attribution of income does not arise.

"I see no grounds to restrict the attribution of income to those cases where the payor has demonstrated an intention to try to reduce his or her income, and thereby support payments. Just as it is not unusual to find a payor required to reduce expenses or renegotiate debts to meet obligations to dependants it may be appropriate to require a payor to maximize his or her earning potential for the same reason. Courts should, however, approach the attribution of income with common sense."

Final words:

  • The courts impute income reluctantly in spousal support cases even though, there seems to be no basis for this reluctance in law.
  • Further, the courts are also prepared to impute income on an applicant for spousal support if it is of the view that she/he is intentionally under-employed merely to increase the quantum of support. So open Pandora's Box carefully.