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Punzo v. Punzo, 2016 ONCA 957

In this recent decision from the Ontario Court of Appeal, the Court provides a useful and much needed reminder with respect to the proper framework for conducting a variation of retroactive support analysis. As a note for family law litigants and practitioners, this case serves as a reminder that establishing a material change in circumstances is only the first hurdle to meet when attempting to reduce support arrears, and that the party seeking such relief must establish either that they are unable, and will never be able, to pay the arrears, or that the arrears have accrued as a result of a change in the payor’s circumstances. Even if either of those scenarios can be established, the Court must conduct a thorough analysis to determine the appropriate effective retroactive date and quantum of support.

Background

On January 22, 2013, an Order for child and spousal support was granted in this case, on consent, based upon the husband’s income of $105,000 and the wife’s income of $36,000. The father, after claiming to have experience a drastic reduction in his income shortly thereafter, brought a Motion to Change the Order, claiming there had been a material change in circumstances, namely, the reduction in his income.

The wife’s position on the motion to change was that the husband’s actual income was higher than $105,000, and she was compromising by accepting this amount in the Consent Order.
The husband, who was employed in the sales industry, had an income which varied annually, depending on his commissions. It was the husband’s position that he was the party who compromised in signing the Consent by agreeing to be imputed with an income of $105,000, although he claims he never earned this much.

The motion’s judge found that a material change in circumstances had occurred, as the husband‘s employment was terminated, followed by a significant period of unemployment. She further found that if the husband had been earning that income on the date the Order was made, the parties would have agreed to different terms. The motion judge ordered the husband’s spousal and child support reduced to January 1, 2013, the date the Consent Order took effect.

The wife appealed the motion judge’s Order, claiming, in part, that the judge erred in finding that a material change had occurred, and by reducing child and spousal support retroactively.

Analysis

With respect to the motion to change analysis, it was the wife’s position that it would be unreasonable to find a material change in circumstances because if the Court was to accept $105,000 as the baseline for determining a material change in circumstances, the Order would automatically have been subject to change, as it was the husband’s own evidence that he earned less than that amount at the time the Order was granted. The wife’s position was that if this constituted a material change, she would lose the benefit of the lengthy and costly negotiations, which would have been rendered meaningless.

Notwithstanding the wife’s position, the Court of Appeal found that wife’s position did not address the issue which was actually before the Court, which was whether, at the time the Consent Order was granted, the parties would likely have come to a different bargain, had they known that the husband would lose his employment, and experience a period of unemployment. The Court found that the facts demonstrated there had been a material change, and as such, the motion judge was correct in this regard.

However, as the Court of Appeal notes, established a material change in circumstances is not the end of the inquiry in variation matters. After finding a material change, a court must consider what type of change in support is appropriate, given that finding. In the case at hand, the Court of Appeal found that the motion judge had not conducted the correct analysis, which the Court thereafter sets out.

The leading case with regards to retroactive variations of support is the Supreme Court of Canada decision in S.(D.B.) v. G.(S.R.), 31 R.F.L. (6th) 1 (S.C.C.). In the case at hand, the Court of Appeal notes that any analysis with regards to retroactive support begins with the DBS framework. As per the Court of Appeal decision in Gray v. Rizzi 74 R.F.L. (7th) 272 (ONCA), the DBSframework and factors also apply to retroactive reductions in support, such as in the case at hand.

As required by DBS, when considering a support variation, judges must conduct a two-step analysis, firstly, determining whether ordering retroactive support is appropriate, and secondly, if it is, what is the appropriate date and quantum of the retroactive support. As found by the Court of Appeal in Gray, there is a distinction between the relief granted in cases where a support payor is currently unable to pay the arrears, and cases where arrears have accrued as a result of a change in the payor’s circumstances. In the first category, the payor had the ability to pay at the time the arrears accrued. Relief for a payor in the first category is unlikely, unless the payor can satisfy the court that they cannot, and will not ever be able to, pay the arrears, which is a high threshold to meet. As per Gray, Relief granted pursuant to the second category incorporates more judicial discretion. In the case at hand, the husband sought relief pursuant to both categories, and the motions judge did not address the issue of how these types of relief differ.

In Gray, the Court of Appeal adopted factors for determining if relief should be granted pursuant to an accumulation of arrears as a result of a change in circumstances, set out as follows:

  • The natures of the support obligation
  • Ongoing needs of the support recipient and the child
  • Whether there is a reasonable excuse for a payor’s delay in making a claim for relief
  • The original financial capacity of the payor, and the payor’s ability to make payments towards outstanding arrears
  • The conduct of the payor, including whether voluntary payments have been made, and whether there has been compliance and cooperation with support enforcement authorities and requests for financial disclosure
  • Delay on the part of the recipient does not constitute a waiver of the claim for arrears
  • Any hardship that may be occasioned by a retroactive order reducing or rescinding arrears, or by an order requiring the payment of substantial arrears

Accordingly, the Court of Appeal found that the motion’s judge erred by reducing arrears to the date the order was made without determining that the husband had successfully established he could not and would not be able to pay the arrears.

The Court of Appeal then considered the four possible dates at which support may be awarded retroactively:

  • The date when the application was made to the court
  • The date when the other party was given formal notice
  • The date when the other party was given effective notice
  • The date when the amount of child and spousal support should be increased or decreased (i.e. the point in time when there was a material change in circumstances)

The Court of Appeal notes that as per DBS, the presumptive retroactive award date is when effective notice was provided, but in the case at hand, the motion’s judge erred by failing to conduct a proper analysis with respect to the appropriate retroactive award date, and the appropriate quantum of retroactive support, which must be determined in accordance with section 17(7) of the Divorce Act.

Upon review of the motion judge’s decision, the Court of Appeal ultimately held that the wife’s appeal was successful, in part. The Court found that the motion judge had correctly held that a material change had been established, but found the motion judge had erred in respect of applying the law with regards to retroactive changes in support.