Children Come First: A Report to Parliament Reviewing the Provisions and Operation of the Federal Child Support Guidelines - Volume 2

4. SECTION-BY-SECTION REVIEW OF THE FEDERAL CHILD SUPPORT GUIDELINES AND THE DIVORCE ACT (cont'd)

SECTION 18: SHAREHOLDER, DIRECTOR, OR OFFICER

BACKGROUND

When a spouse is a shareholder, director, or officer of a corporation, the court can select an amount of pre-tax business income to use to determine annual income. This can be fairer than simply accepting the total income as shown on the spouse's most recent income tax return, even when that income is adjusted in accordance with Schedule III.

The court can decide how much corporate income, if any, is the shareholder's in light of paragraphs
(a) and (b).

Under subsection 18(2), the pre-tax income of the corporation must be adjusted for any unreasonable payments (such as salaries, wages, or management fees) made to people not at arm's length.

Shareholder, director or officer

18.(1) Where a spouse is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the spouse's annual income as determined under section 16 does not fairly reflect all the money available to the spouse for the payment of child support, the court may consider the situations described in section 17 and determine the spouse's annual income to include

  1. all or part of the pre tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or
  2. an amount commensurate with the services that the spouse provides to the corporation, provided that the amount does not exceed the corporation's pre-tax income.
Adjustment to corporation's pre tax income

(2) In determining the pre tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm's length must be added to the pre-tax income, unless the spouse establishes that the payments were reasonable in the circumstances.

APPLICATION

ISSUE

Subsection 18(1) raises a range of issues:

ATTRIBUTION OF CORPORATE INCOME

When and by how much should retained earnings be encroached under paragraph 18(1)(a)? When retained earnings are added to Guidelines income one year, how does one avoid double dipping if the retained earnings are paid out in a subsequent year?

SHAREHOLDER LOANS

How should courts treat the repayment of shareholder loans from the company to the paying parent?

GROSS-UP

Should income attributed under section 18 be grossed up, since it is net of taxes? This issue is discussed in further detail under section 19 of the Guidelines.

Courts use their discretion to address all of these issues under case law, given the facts and evidence.

CASE LAW
ATTRIBUTION OF CORPORATE INCOME

Initially, several cases showed that courts were reluctant to attribute corporate income to a shareholder. In Beeching v. Beeching,[306] the court concluded that the profits of a corporation belong to the corporation, until they are declared as dividends, because directors decide how to declare dividends. As the court pointed out, that power is fiduciary in nature and must be exercised in good faith and in the best interests of the company. Moreover, the court was of the opinion that where other arm's length shareholders are involved, the court should hesitate to interfere with the management of the corporation.

In S.(L.) v. P.(E.),[307] the court held that the section 18 adjustments should be made sparingly. According to the court, section 18 should only be used when there is evidence that a spouse is structuring compensation to reduce support obligations or when the company is subsidizing the parent's personal expenses through corporate disbursements.

Similarly, in Kelly v. Kelly,[308] the court held that subsection 18(1) does not require that all of the net income be paid out as dividends and that the retained earnings be severely restricted in every instance involving a corporation. In Kelly, the court declined to attribute the balance of the corporate income to the spouse because most of the corporate profits were paid out as dividends.

However, in recent years, the courts have expanded their approach in these cases. In Baum v. Baum[309] and Stephen v. Stephen,[310] the court interpreted section 18 liberally, stating that it pierces the corporate veil and ensures that the spouse's income includes all the income available for child support.

In Giene v. Giene,[311] the father owned 51 percent of the company and his second spouse, who paid market value for the shares, owned 49 percent of the company. The court therefore attributed 51 percent of the corporate profits to the husband when determining his income.

When assessing whether to attribute corporate income to a shareholder, a court will generally consider the following factors set out in Rudulier v. Rudulier[312] and in Beeching:[313]

  • the nature of the corporation's business (for example, a consulting business, which is not capital intensive, is less likely to require its profits to be reinvested and more likely to be in a position to distribute these profits to its shareholders),
  • the internal structure and ownership of the corporation (for example, when other arm's length shareholders are involved, the court will be hesitant to interfere with the management of the corporation),
  • the financial status of the corporation (for example, a financially weak business is more likely to reinvest its profits to fund working capital requirements and future growth), and
  • the historical practice of the corporation (for example, a corporation may have historically reinvested its excess income rather than distributing it to its shareholders).

When a spouse is the sole shareholder of a company, courts are less reluctant to look through the corporate structure and attribute the pre-tax income of the corporation to the spouse.[314] In Desjardins v. Desjardins,[315] the court imputed half the pre-tax income of the corporation to the husband. The husband was the sole shareholder of a consulting company. He was also the only consultant and withdrew substantial employment income from the corporation. The court held that the adjusted income better reflected what Mr. Desjardins would have earned if he had not incorporated the business.

In Blackburn v. Elmitt,[316] the husband was a dentist who carried on his practice through a professional corporation that employed him. The court held that the net revenues of the company plus a salary paid to him represented the true value of his services to the company.

SHAREHOLDER LOANS

Several cases address the repayment of shareholder loans. In Beeching, the court decided that a shareholder's loan repaid to a paying parent is not income, either under the Income Tax Act or under the Guidelines. In Rudachyk,[317] the court also held that the repayment of a shareholder's loan is not income. The court did go on to say that payments on a shareholder loan under an interest-free note may be viewed as establishing an unproductive asset. In such cases, income may be imputed under paragraph 19(1)(e). Also, if a shareholder spouse receives the loan payment in lieu of income, income may be imputed under paragraphs 19(1)(a) and (d):

It would be an abuse if the wage was kept unreasonably low and the cash available to [the paying parent] was augmented during the critical years of support by payments on the shareholder loan. In such a circumstance, where it seemed appropriate, it would be open to a judge to employ the broad discretionary authority available in the following section of the Guidelines (paragraphs 19(1)(a) and (d)) to assess a more realistic level of income.

GROSS-UP

In several cases,[318] the courts found cases where a spouse arranged his or her affairs to pay substantially less income tax. Despite the spouse's ability to deduct expenses for income tax purposes, the expenses were found in fact to be personal and hence were imputed back into the spouse's income. In these cases, the income must be "grossed up" before applying the table.

The case law interpreting subsection 18(2) is fairly consistent and does not raise any difficult issues. In the case of S.(L.),[319] the court decided that subsection 18(2) of the Guidelines placed the onus on the defendant to prove the reasonableness of salaries paid to people not at arm's length. This onus arises after the plaintiff has made out a prima facie case of unreasonableness.

AMENDMENT

There have been no amendments to this section.

RECOMMENDATION

No amendments to section 18 are recommended.

SECTION 19: IMPUTING INCOME

BACKGROUND

Section 19 gives the court a mechanism for imputing income. Subsection 19(1) includes a non-exhaustive list of nine circumstances under which the court may impute income. These include the most common situations where income is hidden, diverted, unreported, or otherwise unavailable for legitimate reasons.

Subsection 19(2) confirms that an expense deduction is not necessarily reasonable just because it is permitted under the Income Tax Act.

Imputing income

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:

  1. 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;
  2. the spouse is exempt from paying federal or provincial income tax;
  3. the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;
  4. it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;
  5. the spouse's property is not reasonably utilized to generate income;
  6. the spouse has failed to provide income information when under a legal obligation to do so;
  7. the spouse unreasonably deducts expenses from income;
  8. 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
  9. the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

SOR/2000-337, s. 5

Reasonableness of Expense

(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.

APPLICATION

ISSUE

As with section 18, which allows a court to impute income when a spouse is a shareholder, officer, or director of a corporation, the "gross-up" question is also raised under section 19. When income is imputed in net dollars, courts have asked whether those net dollars should be grossed up to reflect a gross income, since the child support tables are based on gross income.

As with other sections of the Guidelines that give the court discretion to choose an amount, this inevitably leads to inconsistencies.

CASE LAW

Courts have not hesitated to impute income under section 19. In fact, there is a plethora of cases under this section.

The following are among the general principles that apply in section 19 cases:

  • any other circumstances raised to impute income must be like those already listed;[320]
  • evidence must substantiate the claim for imputing income; and[321]
  • the person claiming that income should be imputed must bear the burden of proof. [322]

As with section 18 cases, courts generally, when imputing income, gross up the imputed amount to account for taxes. For example, in Ewaniw v. Ewaniw,[323] the court imputed income to a father who had not filed an income tax return in seven years and who had acknowledged getting money "under the table" from various sources. The court grossed up the imputed income by 25 percent because no tax had been paid on it.

AMENDMENT

Paragraph 19(1)(h) was amended on November 1, 2000, to clarify that income can also be imputed from such tax-exempt income sources as workers' compensation benefits or disability benefits from a private insurer.[324]

RECOMMENDATION

No amendment to this section is recommended. Section 19 is one of the most litigated areas of the Federal Child Support Guidelines because these cases are contentious, not because of any deficiencies in the law. Courts consistently look at various fact patterns and determine whether income should be imputed. A change to section 19 would likely not reduce this type of litigation.

SECTION 20: NON-RESIDENT

BACKGROUND

This section ensures that a spouse's income properly reflects the amount that would be available if that spouse resided in Canada.

Non-resident

20. Where a spouse is a non resident of Canada, the spouse's annual income is determined as though the spouse were a resident of Canada.

APPLICATION

ISSUE

Section 20 has been applied consistently and as intended. Section 19 allows a court to impute income when a paying parent lives in a country with lower effective income tax rates, but there is no equivalent provision for paying parents living in countries with higher effective tax rates.

CASE LAW

Little case law has interpreted section 20. In Fibiger v. Fibiger,[325] the court said the Guidelines allowed it to convert foreign currency and to then apply the Guidelines tables. In Williams v. Williams,[326] the Newfoundland Court of Appeal determined the income of a father living outside Canada by converting the foreign income into Canadian income. The court did not compare Canada's cost of living or tax structure to that of the country where the father lived. 

In Schmid v. Smith,[327] the court said that section 20 does not address the inequities that may arise from higher taxes or a higher cost of living in a foreign jurisdiction. Any such issues should be addressed either under paragraph 19(1)(c) (imputing income) or section 10 (undue hardship).

AMENDMENT

There has been no amendment to this section.

RECOMMENDATION

This section should be amended to recognize that some parents live in countries with higher effective income tax rates than Canada's.

SECTION 21: OBLIGATION OF APPLICANT

Obligation of applicant

21.(1) A spouse who is applying for a child support order and whose income information is necessary to determine the amount of the order must include the following with the application:

  1. a copy of every personal income tax return filed by the spouse for each of the three most recent taxation years;
  2. a copy of every notice of assessment and reassessment issued to the spouse for each of the three most recent taxation years;
  3. where the spouse is an employee, the most recent statement of earnings indicating the total earnings paid in the year to date, including overtime or, where such a statement is not provided by the employer, a letter from the spouse's employer setting out that information including the spouse's rate of annual salary or remuneration;
  4. where the spouse is self-employed, for the three most recent taxation years
    1. the financial statements of the spouse's business or professional practice, other than a partnership, and
    2. a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the spouse does not deal at arm's length;
  5. where the spouse is a partner in a partnership, confirmation of the spouse's income and draw from, and capital in, the partnership for its three most recent taxation years;

SOR/2000-337, s.6(1),(2)

BACKGROUND

In child support and financial settlements, it has always been hard to get accurate and current financial information about the paying parent. Guidelines cannot be applied accurately without a complete financial picture of the paying parent and, where certain expenses are to be divided proportionately, of the receiving parent. Section 21 ensures that parents disclose the relevant financial information.

APPLICATION

ISSUES

Initially, many people felt that the disclosure requirements in the Guidelines were unfair because the receiving parent usually does not have to disclose information.[328]

Since then, many have come to realize that the disclosure requirements are fair and reduce the procedural burden. In 1999, as part of the federal Department of Justice's consultations on technical issues asked[329]: "Should the Guidelines require the receiving parent to disclose income information to the other parent in all cases?" Less than half the respondents said that this was a significant concern.  Other questions about section 21 disclosures were also asked in that document.[330]

Under the Guidelines, the recipient spouse must disclose income in many cases, such as when he or she seeks special expenses, or when one of the parties is claiming undue hardship under subsection 21(3), or when the income of the paying parent is over $150,000, under subsection 21(4).

Quebec uses the income of both parents to calculate the child support amount. However, a review of its Report to Parliament reveals the following:

According to the Rapport du Comité de suivi du modèle québécois de fixation des pensions alimentaires pour enfants, in 50 percent of cases studied by the Committee one parent assumes all of the financial responsibility for a child because the other parent does not have available "income."


21.(1)...

  • f. where the spouse controls a corporation, for its three most recent taxation years
    1. the financial statements of the corporation and its subsidiaries, and
    2. a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the corporation, and every related corporation, does not deal at arm's length;
  • g. where the spouse is a beneficiary under a trust, a copy of the trust settlement agreement and copies of the trust's three most recent financial statements; and
  • h. in addition to any income information that must be included under paragraphs (c) to (g), where the spouse receives income from employment insurance, social assistance, a pension, workers' compensation, disability payments or any other source, the most recent statement of income indicating the total amount of income from the applicable source during the current year, or if such a statement is not provided, a letter from the appropriate authority stating the required information.

SOR/2000-337, s.6(1), (2)

Under paragraph 21(1)(f), a spouse who controls a corporation must disclose that corporation's financial information. Some case law has asked what controls a corporation means. Does it mean the legal power to manage a corporation (de jure control) or does it mean the potential influence that a person may have, directly or indirectly, over the affairs of the corporation (de facto control)?

21.(1)...
Obligation of respondent

(2) A spouse who is served with an application for a child support order and whose income information is necessary to determine the amount of the order, must, within 30 days after the application is served if the spouse resides in Canada or the United States or within 60 days if the spouse resides elsewhere, or such other time limit as the court specifies, provide the court, as well as the other spouse or the order assignee, as the case may be, with the documents referred to in subsection (1).

Special expenses or undue hardship

(3) Where, in the course of proceedings in respect of an application for a child support order, a spouse requests an amount to cover expenses referred to in subsection 7(1) or pleads undue hardship, the spouse who would be receiving the amount of child support must, within 30 days after the amount is sought or undue hardship is pleaded if the spouse resides in Canada or the United States or within 60 days if the spouse resides elsewhere, or such other time limit as the court specifies, provide the court and the other spouse with the documents referred to in subsection (1).

Income over $150,000

(4) Where, in the course of proceedings in respect of an application for a child support order, it is established that the income of the spouse who would be paying the amount of child support is greater than $150,000, the other spouse must, within 30 days after the income is established to be greater than $150,000 if the other spouse resides in Canada or the United States or within 60 days if the other spouse resides elsewhere, or such other time limit as the court specifies, provide the court and the spouse with the documents referred to in subsection (1).

Making of rules not precluded

(5) Nothing in this section precludes the making of rules by a competent authority, within the meaning of section 25 of the Act, respecting the disclosure of income information that is considered necessary for the purposes of the determination of an amount of a child support order.

CASE LAW

In Gray v. Gray,[331] the court confirmed that section 21 of the Guidelines requires that a spouse applying for child support file income information only when necessary to determine the amount of the order in the following situations:

  • a child has become an adult;
  • the paying spouse's income exceeds $150,000;
  • the paying parent is a step-parent;
  • a claim is made for special or extraordinary expenses ("add-ons") under section 7 of the Federal Child Support Guidelines;
  • each spouse has custody of one or more children of the marriage ("split custody");
  • each spouse has the child not less than 40 percent of the time ("shared custody".); or
  • one spouse seeks to invoke the "undue hardship" provision in section 10 of the Federal Child Support Guidelines.

In Cuddie v. Cuddie,[332] the father claimed undue hardship and sought disclosure of income from the mother. The mother resisted disclosure because she had already conceded her household income was higher than the father's. The court held that the mother had to disclose because it needed a precise financial picture of the recipient's household to decide by how much to reduce the support. The court added:

Counsel for [the mother] conceded that in the absence of the Guidelines legislation, she would have to disclose as requested. It seems a curious result to interpret legislation that is intended to address the needs of children in this restrictive way. Surely the intent is for more disclosure, not less.[333]

In the Nova Scotia Court of Appeal case of Wilcox v. Snow,[334] the Court said that the father, a self-employed businessperson, must do more than file an income tax return to show enough of a change of circumstances to warrant a variation. In the case, the father had filed only 1997 and 1998 income tax returns and comparative income and expense statements for those two years. He had not filed all of the financial information required by subsection 21(1) of the Guidelines.

The case law on the meaning of controls a corporation has been inconsistent. In Goerlitz v. Paquette,[335] the court, in a side statement, said that the phrase should be interpreted as meaning has a controlling interest in a corporation. The court declined to order a spouse to disclose corporate information where she was a director but her live-in partner was the sole shareholder. The court in Fielding v. Fielding[336] adopted the same approach, holding that paragraph 21(1)(f) only required income disclosure in de jure situations: when the respondent, with a third party, jointly controlled the corporation, no disclosure was necessary, as the respondent did not control the company.

In these jurisdictions, only the income of the paying parent is used to calculate the basic child support amount:1

  • France
  • Germany
  • Norway
  • United Kingdom
  • New Zealand
  • US states using the percentage of income standard model

The income of both parents is considered in these jurisdictions:

  • Quebec
  • Australia (only recipient parent's income over A$31,351 is considered)
  • US states using the income shares model or the Melson/Delaware child support formula

1 Child Support Schemes: Australia and Comparisons. Australia: Client Research Unit, Child Support Agency, March 2001.

On the other hand, in Weldon v. Weldon,[337] the court ordered the father to disclose income information of corporations in which he held less than half of the shares.

However, in some cases, the courts have ordered the disclosure of corporate documents that would not otherwise be disclosed under paragraph 21(1)(f). To do this, they have used provincial rules or general discretion under sections 17 and 18 of the Guidelines.[338]

In the Manitoba Court of Appeal case of Bates v. Welcher,[339] the Court reviewed the jurisprudence interpreting control and concluded the following:

[T]he word control in this subsection refers to de jure control. The jurisprudence under the Income Tax Act and the cases of Goerlitz and Fielding clearly leads to the conclusion that the word control as used in s. 20(2)(g) of the Manitoba guidelines and s. 21(1)(f) of the federal guidelines refers to majority ownership control.[340]

However, the Court went on to say that it had residual discretion under the Guidelines to order the disclosure of relevant financial information:

[F]inancial disclosure is by its nature an invasive process. There must be a balancing of the interests of all parties and that balancing is accomplished by requiring the applicant to satisfy the court that the information requested is relevant and reasonably necessary to the facts as opposed to a fishing expedition.[341]

AMENDMENT

Section 21 was amended on November 1, 2000, as follows:

PARAGRAPH 21(1)(B)

The paragraph was amended by changing the word or to and. This clarified that both the notice of assessment and, if issued, reassessment are required.[342]

PARAGRAPH 21(1)(H)

Several documents were added to the list of items that must be disclosed in child support cases. This helped parents and the court determine income by providing them with information not necessarily disclosed in the other income documents listed in subsection 21(1).[343]

RECOMMENDATION

In support cases, the disclosure of income information is crucial. Generally, section 21 has been applied liberally and in keeping with the objectives set out in section 1 of the Guidelines. It is recommended that section 21 not be amended.

SECTION 22: FAILURE TO COMPLY

BACKGROUND

When a spouse fails to disclose the income information set out in section 21, the court may order financial and other relief to the other spouse.

The requesting spouse may ask for the matter to proceed or for an order requiring the other spouse to produce the documents. When the court makes such an order, it may also make an order for costs of the proceedings.

Section 22 makes effective tools available to provide relief when a spouse is not forthcoming about income disclosure.

Failure to comply

22.(1) Where a spouse fails to comply with section 21, the other spouse may apply

  1. to have the application for a child support order set down for a hearing, or move for judgment; or
  2. for an order requiring the spouse who failed to comply to provide the court, as well as the other spouse or order assignee, as the case may be, with the required documents.
Costs of the proceedings

(2) Where a court makes an order under paragraph (1)(a) or (b), the court may award costs in favour of the other spouse up to an amount that fully compensates the other spouse for all costs incurred in the proceedings.

APPLICATION

ISSUE

This section has generally been applied as intended.

CASE LAW

There is very little case law applying section 22. In the case of Seidlikoski v. Hall,[344] the court confirmed that under paragraph 22(1)(a), when a spouse fails to provide income information, the other spouse can apply to have the application set down for a hearing and may move for judgment.

AMENDMENT

There has been no amendment to this section.

RECOMMENDATION

No amendments to this section are recommended.

SECTION 23: ADVERSE INFERENCE

BACKGROUND

If the court proceeds to a hearing under paragraph 22(1)(a), the court can make an unfavourable finding and impute income against the spouse who failed to disclose income.

Adverse Inference

23. Where the court proceeds to a hearing on the basis of an application under paragraph 22(1)(a), the court may draw an adverse inference against the spouse who failed to comply and impute income to that spouse in such amount as it considers appropriate.

Section 23 and paragraph 19(1)(f)[345] give the court another tool for providing relief when a spouse refuses to disclose income.

APPLICATION

ISSUE

This section has generally been applied as intended.

CASE LAW

There is very little case law applying section 23.

AMENDMENT

There has been no amendment to this section.

RECOMMENDATION

No amendment to this section is recommended.

SECTION 24: FAILURE TO COMPLY WITH COURT ORDER

BACKGROUND

Section 24 sets out what a court can order in situations where a spouse fails to disclose information after having been ordered to do so under paragraph 22(1)(b). It empowers the court to impose further sanctions.

Failure to comply with court order

24. Where a spouse fails to comply with an order issued on the basis of an application under paragraph 22(1)(b), the court may

  1. strike out any of the spouse's pleadings;
  2. make a contempt order against the spouse;
  3. proceed to a hearing, in the course of which it may draw an adverse inference against the spouse and impute income to that spouse in such amount as it considers appropriate; and
  4. award costs in favour of the other spouse up to an amount that fully compensates the other spouse for all costs incurred in the proceedings.

APPLICATION

ISSUE

This section has generally been applied as intended.

CASE LAW

There is very little case law applying section 24. In Le Page v. Porter,[346] the court stated that in a hearing under 24(c), the court can draw an adverse inference or impute income to the defaulting spouse.

AMENDMENT

There have been no amendments to this section.

RECOMMENDATION

No amendments to this section are recommended.

SECTION 25: CONTINUING OBLIGATION TO PROVIDE INCOME INFORMATION

Continuing obligation to provide income information

25.(1) Every spouse against whom a child support order has been made must, on the written request of the other spouse or the order assignee, not more than once a year after the making of the order and as long as the child is a child within the meaning of these Guidelines, provide that other spouse or the order assignee with

  1. the documents referred to in subsection 21(1) for any of the three most recent taxation years for which the spouse has not previously provided the documents;
  2. as applicable, any current information, in writing, about the status of any expenses included in the order pursuant to subsection 7(1); and
  3. as applicable, any current information, in writing, about the circumstances relied on by the court in a determination of undue hardship.

Below minimum income

(2) Where a court has determined that the spouse against whom a child support order is sought does not have to pay child support because his or her income level is below the minimum amount required for application of the tables, that spouse must, on the written request of the other spouse, not more than once a year after the determination and as long as the child is a child within the meaning of these Guidelines, provide the other spouse with the documents referred to in subsection 21(1) for any of the three most recent taxation years for which the spouse has not previously provided the documents.

BACKGROUND

Even after a child support order has been made, spouses must still provide relevant income information. This obligation cannot be limited in a court order or separation agreement.

In addition, spouses must provide current information on the status of special or extraordinary expenses as well as information on the circumstances that the court used to find undue hardship.

This section ensures that the parents are kept informed of any changes in income or circumstances so that they can keep their court orders current.

APPLICATION

ISSUE

This section has generally been applied as intended.

CASE LAW

There is very little case law applying this section. Courts have confirmed that the disclosure is required once yearly.[347] In the case of Desjardins v. Desjardins,[348] the court stated that, aside from undue hardship applications, the spouse's obligation to disclose income information did not extend to the new spouses of the litigants.

AMENDMENT

This section has not been amended.

RECOMMENDATION

This section should be amended to allow courts to order disclosure in cases involving adult children. See the clause-by-clause review of section 3 for further details.

25. ...
Obligation of receiving spouse

(3) Where the income information of the spouse in favour of whom a child support order is made is used to determine the amount of the order, the spouse must, not more than once a year after the making of the order and as long as the child is a child within the meaning of these Guidelines, on the written request of the other spouse, provide the other spouse with the documents and information referred to in subsection (1).

Information requests

(4) Where a spouse or an order assignee requests information from the other spouse under any of subsections (1) to (3) and the income information of the requesting spouse is used to determine the amount of the child support order, the requesting spouse or order assignee must include the documents and information referred to in subsection (1) with the request.

SOR/97-563, s. 3

Time limit

(5) A spouse who receives a request made under any of subsections (1) to (3) must provide the required documents within 30 days after the request's receipt if the spouse resides in Canada or the United States and within 60 days after the request's receipt if the spouse resides elsewhere.

Deemed receipt

(6) A request made under any of subsections (1) to (3) is deemed to have been received 10 days after it is sent.

Failure to comply

(7) A court may, on application by either spouse or an order assignee, where the other spouse has failed to comply with any of subsections (1) to (3)

  1. consider the other spouse to be in contempt of court and award costs in favour of the applicant up to an amount that fully compensates the applicant for all costs incurred in the proceedings; or
  2. make an order requiring the other spouse to provide the required documents to the court, as well as to the spouse or order assignee, as the case may be.
Unenforceable provision

(8) A provision in a judgment, order or agreement purporting to limit a spouse's obligation to provide documents under this section is unenforceable.

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