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Taylor v Sherlow, 2014 ONSC 6614

This case considers whether any or all of a child support payor’s income from a Veteran’s Affairs Canada (“VAC”) pension should be included in income for the purposes of calculating child support.


The parties married and had two children together, and the father’s son from a prior relationship was adopted by the mother.  During marriage, the father was awarded a VAC pension for his major depression resulting from his military service, which also included a portion benefiting the children and a portion for his spouse.  They used the monthly pension as part of their income for the family’s expenses.

When they divorced in 2006, the father was ordered to pay child support pursuant to the Federal Child Support Guidelines (Guidelines) for the two children who stayed with the mother.  The support he paid was offset as the eldest son remained with him.

In 2013, the father was released from military service because of a medical disability and has since been unemployed.  His VAC pension was increased accordingly and a new Order was made to reflect the father’s change in income.

In 2013, the mother commenced a motion vary the 2012 child support order when eldest son began residing with her.  Among other claims, she sought increased child support, child support for the eldest son, and arrears for the three children of the marriage.

Issue & Positions of the Parties

Prior to 2012, a spouse’s VAC disability benefits were included in their income for the purposes of calculating support.  However, the Federal Court in 2012 in Manuge v R held that these monthly benefits to members of the Canadian Forces were not intended as a form of income replacement, but were compensation for their loss and sacrifices arising from disabling injuries incurred during service.  The jurisprudence across Canada has been conflicting since this decision.

The father argued that, as per Manuge, since the personal and spousal portions are not replacement income, only the portion of VAC pension allocated for the children should be included and grossed up.

The mother claims that all of the VAC pension should be grossed up and included, especially since they always did so in the past and the judge making the 2012 Order intended it be included in the future.


In the majority of child support cases, the annual income of the payor as determined under section 16 of the Guidelines is usually achieved by looking to Line 150 of “Total income” on their income tax returns with adjustments made pursuant to Schedule III of the guidelines.  Where Line 150 income would not be the fairest determination of income available for payment of child support, sections 17-20 provide the court with discretion to make adjustments to income.

Section 19 specifically, permits the court to impute income to a spouse as it considers appropriate in the circumstances such as the spouse being intentionally under-employed or unemployed, or deriving a significant portion of income from tax exempt sources.

The Court saw no evidence that the father was intentionally under or unemployed as he was obviously found to be disabled for the purposes of receiving disability income from his pension plans.  If he were able to become employed, he would have not been entitled to his sources of disability income.

Furthermore, the Court distinguishes the current case from Manuge as that decision was dealing specifically with ‘replacement income’ in the context of interpreting a contract of insurance.  Here, the issue determining the father’s income to satisfy his obligation to maintain the children in accordance with his ability to contribute as per the principles of the Guidelines and Divorce Act.

The father’s current financial situation is little different from the situation during marriage where he used the taxable and non-taxable amounts from VAC to support ongoing daily living expenses.  After gross-up, the portion of the father’s income that was non-taxable exceeded his taxable income.  In these circumstances, it was appropriate for the Court to exercise its discretion under Section 19 of the Guidelines to impute the father’s income to better reflect his ability to contribute to the support of his children.

As such, the Court held that the full amount of the father’s VAC pension was to be gross-up and included in his income for the calculation of child support.