Equalization Payment as a Set-Off against Future Child Support, Can It Be Done?

Case Background

On the third day of trial, the parties informed the court that they had reached an agreement to settle all issues save and except for how the equalization payment of $50,000 owed by the Applicant to the Respondent was to be paid.

Signed Minutes of Settlement were filed with the court which dealt with child support and access. After being informed of the settlement, the judge heard evidence from the parties dealing only with the unresolved issue of how the equalization payment would be paid.

It was the Applicant’s position that rather than paying the Respondent the equalization payment, the Respondent would be credited for future child support owed to the Applicant which would be a set-off against the equalization she owned to him.

It was the Respondent’s position that the $50,000 payment should be paid on a lump sum basis as the Applicant would be able to qualify for financing to fund the payment. The Applicant’s evidence was that she would have difficulty funding a lump sum payment of $50,000.

According to her sworn Financial Statement, she owned a home that she purchased in February 2018. There was a mortgage registered on title with an outstanding balance of $300,000. Her evidence was that when she applied for the mortgage she had a great deal of difficulty securing financing. As such, she did not know if she could refinance the home to secure financing for the $50,000 payment.

The Respondent claimed that he was in debt, and thus in need of the lump sum payment immediately.

Case Analysis

Section 9 of the Family Law Act sets out the powers that the court has regarding equalization claims by a spouse. In an application under section 7, the court may order the following:

  • That one spouse pay to the other spouse the amount to which the court finds that spouse to be entitled under this Part.
  • That security, including a charge on property, be given for the performance of an obligation imposed by the order.
  • That, if necessary to avoid hardship, an amount referred to in clause (a) be paid in instalments during a period not exceeding ten years or that payment of all or part of the amount be delayed for a period not exceeding ten years.
  •  That, if appropriate to satisfy an obligation imposed by the order, (i) property be transferred to or in trust for or vested in a spouse, whether absolutely, for life or for a term of years, or (ii) any property be partitioned or sold.

The judge noted that pursuant to section 9, the court had the authority to order that an equalization payment be paid in installments over time in circumstances of hardship. However, section 9 does not authorize the court to fund an equalization payment by a set-off against future child support.

This issue was addressed in the Ontario Court of Appeal case of Lutz v. Lutz. In that case, the court found that a trial judge does not have jurisdiction to set off a debt owed by a recipient parent to a payor parent against future child support owed by the payor parent.

In the recent decision of Pascual v. Pascual, Peterson J. found that she was bound by the decision in Lutz. Furthermore, based on the decision in Lutz v. Pascual, the judge found that the court does not have jurisdiction to do as the applicant requests and set-off the future child support owed from the equalization payment the Respondent.

If you need help resolving a child support dispute in Ontario, call (905) 581-7222 to schedule a consultation with our experienced legal team. We are here to serve you.

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