February 26 – Imputing Income

“Section 19 of the guidelines permits the court to impute income to the father if it finds that he is earning or capable of earning more income than he claims.

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 obligation, the parties must earn what they are capable of earning.  If they fail to do so, they will be found to be intentionally under-employed. See: Drygala v. Pauli 2002 CanLII 41868 (ON CA), [2002] O.J. No. 3731(Ont. CA).

In Duffy v. Duffy, 2009 NLCA 48 (CanLII), the court sets out the following principles:

a) The fundamental obligation of a parent to support his or her children takes precedence over the parent’s own interests and choices.

b) A parent will not be permitted to knowingly avoid or diminish, and may not choose to ignore, his or her obligation to support his or her own children.

c) A parent is required to act responsibly when making financial decisions that may affect the level of child support available from that parent.

d) The determination to impute income is discretionary, as the court considers appropriate in the circumstances.

e) A parent will not be excused from his or her child support obligations in furtherance of unrealistic or unproductive career aspirations or interests. Nor will it be acceptable for a parent to choose to work for future rewards to the detriment of the present needs of his or her children, unless the parent establishes the reasonableness of his or her course of action.

The Ontario Court of Appeal in Drygala set out the following three questions which should be answered by a court in considering a request to impute income:

1.   Is the party intentionally under-employed or unemployed?

2. If so, is the intentional under-employment or unemployment required by virtue of his or her reasonable educational needs?

3.   If not, what income is appropriately imputed?

The onus is on the party seeking to impute income to the other party to establish that the other party is intentionally unemployed or under-employed.  The person requesting an imputation of income must establish an evidentiary basis upon which this finding can be made. See: Homsi v. Zaya, 2009 ONCA 322 (CanLII), [2009] O.J. No. 1552. (Ont. C.A.).

The court stated in Drygala that there is no need to find a specific intent to evade child support obligations before income is imputed; the payor is intentionally under-employed if he or she chooses to earn less than what he or she is capable of earning.  The court must look at whether the act is voluntary and reasonable.

Once under-employment is established, the onus shifts to the payor to prove one of the exceptions of reasonableness. When an employment decision results in a significant reduction of child support, it needs to be justified in a compelling way: See: Riel v. Holland, 2003 CanLII 3433 (ON CA), 2003 CanLII 3433 (Ont. C.A.), at paragraph 23. The trial judge must determine whether the educational needs claimed by the payor are reasonable. See: Drygala, supra, paragraph 39. As a general rule, separated parents have an obligation to financially support their children and they cannot avoid that obligation by a self-induced reduction of income. See: Thompson v. Gilchrist, 2012 ONSC 4137 (Canlii) (CanLII); DePace v. Michienzi, 2000 CanLII 22560 (ON SC), [2000] O.J. No. 453, (Ont. Fam. Ct.); Drygala, supra, paragraph 39.

The court in Drygala expands on what is required to determine if the educational needs of a payor are reasonable in paragraphs 40 and 41 as follows:

[40] But, s. 19 (1) (a) speaks not only to the reasonableness of the spouse’s educational needs. It also dictates that the trial judge determine what is required by virtue of those educational needs. The spouse has the burden of demonstrating that unemployment or under-employment is required by virtue of his or her reasonable educational needs. How many courses must be taken and when? How much time must be devoted in and out of the classroom to ensure continuation in the program? Are the academic demands such that the spouse is excused from pursuing part-time work? Could the program be completed over a longer period with the spouse taking fewer courses so that the spouse could obtain part-time employment? If the rigours of the program preclude part-time employment during the regular academic school year, is summer employment reasonably expected? Can the spouse take co-operative courses as part of the program and earn some income in that way? These are the types of considerations that go into determining what level of under- employment is required by the reasonable educational needs of a spouse.

[41] The burden of proof is upon the spouse pursuing education as he or she is the person with access to the requisite information. The spouse is in the best position to know the particular requirements and demands of his or her educational program. He [page721] or she will have information about the hours of study necessary to fulfill such requirements, including the appropriate preparation time. He or she is in the best position to show whether part-time employment can be reasonably obtained in light of these educational requirements.

It is not reasonable for a payor to return to school and not pay support, unless it is justified by a sufficient increase in earning ability that will benefit the children (see my comments in Carter v. Spracklin, 2012 ONCJ 193 (CanLII), [2012] O.J. No. 1533 (OCJ)).

The third question in Drygala v. Pauli, supra, is: “If there is no reasonable excuse for the payor’s under-employment, what income should properly be imputed in the circumstances?” The court must have regard to the payor’s capacity to earn income in light of such factors as employment history, age, education, skills, health, available employment opportunities and the standard of living earned during the parties’ relationship.  The court looks at the amount of income the party could earn if he or she worked to capacity. See: Lawson v. Lawson, 2006 CanLII 26573 (ON CA), 2006 CanLII 26573 (Ont. C.A.).

The court will usually draw an adverse inference against a party for his or her failure to comply with their disclosure obligations as provided for in section 21 of the guidelines and impute income. See: Smith v. Pellegrini, 2008 CanLII 46927 (ON SC), [2008] O.J. No. 3616, (Ont. S.C.); Maimone v. Maimone, 2009 CanLII 25981 (ON SC), [2009] O.J. No. 2140, (Ont. S.C.).

A person’s lifestyle can provide the criteria for imputing income.  See: Aitken v. Aitken [2003] O.J. No. 2780 (SCJ); Jonas v. Jonas [2002] O.J. No. 2117 (SCJ); Price v. Reid, 2013 ONCJ 373 (CanLII).

Where a party receives regular gifts from his or her parent, the court may impute the amount of those gifts as income for support purposes:  See: Marrello v. Marrello, 2016 ONSC 835 (CanLII), citing Bak v. Dobell 2007 ONCA 304 (CanLII) at paragraph 75 and Korman v. Korman, 2015 ONCA 578 (CanLII), at paragraphs 47-51, 62-65 and 67.”

Ffrench v. Williams, 2016 ONCJ 105 (CanLII) at 35-47