Alberta has come a long way with the latest Court of Appeal decision of Peters v. Atchooay, 2022 ABCA 347. This decision has changed how imputing income will be reviewed and departs from the previous approach in Hunt v. Smolis-Hunt, 2001 ABCA 229 (“Hunt”) of the “deliberate evasion test.” Under the Hunt test, proof of a specific intent to avoid child support obligations was required. This approach was a high standard and different from the rest of Canada’s statutory interpretation of Section 19(1)(a) of the Child Support Guidelines, where a reasonableness test is used to determine whether or not a parent is intentionally unemployed or under-employed.
In the recent Court of Appeal case, Ms. Peters and Mr. Atchooay were in a common law relationship until 2013 and had two children. After separation, the children resided with Ms. Peters. In 2014, Ms. Peters successfully sought child support from Mr. Atchooay and he was ordered to pay $1,865.00 per month based on his 2012 tax return income. In 2021, Mr. Atchooay sought to retroactively reduce the amount of child support payable on the basis that his reported income was considerably less than what he earned in 2012. In support, he provided his income tax returns for 2014 to 2018 and a few supporting factors regarding his setbacks and challenges to earning a higher income, including mental health struggles and an impaired driving charge. The Chambers Justice found that Mr. Atchooay’s reduction in his historical income constituted a material change in circumstances and child support was adjusted retroactively.
Ms. Peters appealed the decision claiming the Chambers Justice erred in the approach of imputing income and in finding a material change in circumstances. The Appellate Court agreed and held that Mr. Atchooay’s child support obligation should not have been retroactively adjusted simply because of a drop in his historical income (for which he only recently provided financial disclosure to support). The Court of Appeal placed the burden on Mr. Atchooay to establish that the drop in his historical income was beyond his control and not voluntary, which he was unable to do.
Instead of determining whether Mr. Atchooay deliberately lowered his historic income to evade his child support obligations, the Court took the approach that is common among the rest of Canada and applied the “reasonableness test.”
At paragraphs 41 and 42 of the decision, Justice Pentelechuk states why it is time to change the approach from a “deliberate evasion test” to a “reasonableness test” as follows:
- Statutory interpretation of imputing income for child support purposes does not support the deliberate evasion test found in Hunt v. Smolis.
- The deliberate evasion test is not practical anymore and often leads to an onerous burden on the recipient.
- A reasonableness test promotes fairness to the child.
- Alberta is the only province that requires proof of an intent to evade child support obligations.
As a result, the approach in Hunt has been replaced by a three-factor application for considering imputing income under Section 19(1)(a) of the Child Support Guidelines going forward. They are:
- Is the parent in question intentionally under-employed or unemployed?
- Do the listed exceptions to imputation in Section 19(1)(a) of the Child Support Guidelines apply (i.e. is it required by needs of a child or by reasonable education or health needs of a parent)?
- Should judicial discretion to impute income be exercised?
The onus for imputing income was further shifted to the party opposing imputation. In initial applications, the person seeking an imputation has an initial onus to establish an evidentiary basis; however, once a prima facie case for imputation is made out, the onus shifts to the person opposing imputation. In variation applications, once the threshold requirement of a material change in circumstances is met, the onus remains on the party opposing imputation.
Not all cases of a reduction in income will support imputing income to the payor parent. While ”a parent’s personal goals and life-style choices do not take priority over their obligation to financially support their children,” the Court also held that the reasonableness test does not require a payor to do everything possible to maximize their income (for example, work out of town to the detriment of their parenting time, take on a second job, etc.). The Court further stressed that timely financial disclosure is key for such applications. As displayed in this case, late financial disclosure will not establish a material change in circumstances for a retroactive adjustment of child support.
After a number of difficulties and hardships as a result of the “deliberate evasion test,” this decision has paved the way for Alberta to not only be in-line with the other Canadian provinces and their approach but to further support this child-centered approach and to promote fairness to the child.