“The leading case on imputation of income is Drygala v. Pauli (2002), 2002 CanLII 41868 (ON CA), 61 O.R. (3d) 711 (Ont. C.A.) (“Drygala”). At paragraph 23 of Drygala, the Court of Appeal set out a three-part test to determine whether income should be imputed:
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- Is the spouse intentionally under-employed or unemployed?
- If so, is the intentional under-employment or unemployment required by virtue of his reasonable educational needs?
- If the answer to question #2 is negative, what income is appropriately imputed in the circumstances?
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The Ontario Court of Appeal set out the following principles in Drygala:
a. There is no need to find a specific intent to evade child support obligations before income can be imputed;
b. “Intentionally” means a voluntary act. The parent required to pay is intentionally underemployed if that parent chooses to earn less than he or she is capable of earning. That parent is intentionally unemployed when he or she chooses not to work when capable of earning an income;
c. There is no requirement of bad faith for income to be imputed;
d. A court cannot arbitrarily impute an amount of income. There must be some factual basis in the evidence for the amount imputed. If the parent does not provide evidence on types of jobs available, hourly rates, and available hours of employment, a court may impute a percentage of what the person had been earning;
e. A parent who changed jobs to increase career satisfaction is not intentionally underemployed;
f. The Guidelines depend on full disclosure to determine support. A payor who fails to make full disclosure cannot complain if a court draws an adverse inference against him or her on the basis of the available facts;
g. Section 1 of the Guidelines stipulates that one of its objectives is to establish a fair standard of support for children to ensure that they benefit from the financial means of both parents after separation. Imputing income is one method by which the court gives effect to the joint and ongoing obligation of parents to support their children. In order to meet this legal obligation, a parent must earn what he or she is capable of earning;
h. There is a duty to seek employment in a case where a parent is healthy. As a general rule, a parent cannot avoid child support obligations by a self-induced reduction of income. Thus, once it has been established that a spouse is intentionally unemployed or under-employed, the burden shifts to that spouse to establish what is required by virtue of his or her reasonable educational needs. A spouse is not to be excused from his or her child support obligations in furtherance of unrealistic or unproductive career aspirations;
i. When imputing income based on intentional under-employment or unemployment, a court must consider what is reasonable in the circumstances. The factors to be considered are: age, education, experience, skills, health, availability of job opportunities, the number of hours that could be worked in light of the parent’s overall obligations, and the hourly rate one could reasonably be expected to obtain;
j. The purpose of child support is to assist the custodial parent in meeting the day-to-day expenses of raising children. A party seeking retroactive child support must provide evidence that the child suffered from a lack of financial support during the period in question. Ability to pay, as well as need, must be considered by the trial judge in the exercise of his or her discretion; and
k. The court has the discretion to award retroactive child support that is fit and just in the circumstances.
As indicated, the burden initially rests on the party seeking the imputation of income to demonstrate that the other party is intentionally under-employed or unemployed. The person requesting an imputation of income must establish an evidentiary basis upon which this finding can be made. If the court is not satisfied that the party is intentionally under-employed or unemployed, the analysis ends.
If the party seeking the imputation of income is able to meet the burden, that burden then shifts to the other party to demonstrate that the intentional under-employment or unemployment is required based on their needs.
The second step of the Drygala test is generally treated as an overall test of reasonableness: Pey v. Pey, 2016 ONSC 1909 (Ont. S.C.J.). Once a party seeking the imputation of income presents the evidentiary basis suggesting a prima facie case, the onus shifts to the individual seeking to defend the income position he is taking: Lo v. Lo, 2011 ONSC 7663, 15 R.F.L. (7th) 344 (Ont. S.C.J.); Charron v. Carrière, 2016 ONSC 4719.
The Court must have a rational and solid evidentiary basis to justify an imputation. The onus is on the person requesting an imputation of income to establish this evidentiary basis: Homsi v. Zaya, 2009 ONCA 322, 65 R.F.L. (6th) 17 (Ont. C.A.); Charron v. Carrière, supra; Sullivan v. Sullivan, 2014 ONSC 930 (Ont. S.C.J.).
There is a duty on the part of the payor to actively seek out reasonable employment opportunities that will maximize their income potential so as to meet the needs of their children: L. (N.) v. P. (B.), 2000 CanLII 22516 (ON SC), [2000] O.J. No. 2574, 2000 CarswellOnt 2487 (Ont. S.C.J.).
The determination to impute income is discretionary, as the court considers appropriate in the circumstances. Therefore, the court may decide not to impute income where the payor establishes the reasonableness of his or her decision or his or her situation: Cole v. Freiwald, 2011 ONCJ 395 (Ont. C.J.).
Regardless of the basis upon which income is imputed, the amount of income that the court imputes to a party is a matter of discretion. The only limitation on the discretion of the court in this regard is that there must be some basis in the evidence for the amount that the court has chosen to impute: Thompson v. Thompson 2013 ONSC 5500 (CanLII), [2013] CarswellOnt 12392 (Ont. S.C.J.)]; Korwin v. Potworowski, 2007 CarswellOnt 6852 (Ont. C.A.).”