Courts cannot retroactively increase child-support payments solely because the parent making the payments failed to tell his or her ex-spouse of a salary increase in the years since the initial support order was made, the Ontario Court of Appeal ruled yesterday.
The three-judge panel of the appeal court said it must be shown that the children needed more money during the period in question or that other factors had come into play, such as a revelation that the non-custodial parent had failed to disclose the full extent of his or her financial situation before the original agreement was struck.
In addition, the court said, the custodial parent must explain his or her delay in asking for an adjustment.
"Parliament did not create a regime where child support varies annually with a payor's change in income," Judge John Laskin said in a unanimous decision that overruled an Ontario Superior Court ruling of a year ago.
"Retroactive support is tied to need [of the child]in part to ensure that a retroactive payment does not amount to a wealth transfer to the [other parent]disguised as child support."
This decision contrasts with an earlier Court of Appeal decision that implied there was a duty on the part of the non-custodial parent to disclose such changes in income.
It will affect similar child-support cases across Canada, said Harold Niman, the lawyer for Michael Walsh, a vice-president of institutional investments at a large insurance company who had been asked to make such payments retroactively.
Had the original judgment been allowed to stand, Mr. Niman said, all that "the custodial parent would have to do would be simply get the tax returns and come to court and say, 'I want to get child support dating back' to whatever year they separated forward."
The Walshes arrived at an initial support agreement in 1997 after a lengthy trial. They were granted joint custody, but Mrs. Walsh, who had given up a financial-services job in 1992 to take care of their two children, was to be the primary caregiver.
Mr. Walsh was ordered to pay child support of $2,021 a month, an amount that corresponded with accepted guidelines for his annual salary, which was then $175,000.
But Mr. Walsh changed jobs and, between 1998 and 2001, saw his annual income climb to $376,957, something Mrs. Walsh discovered in 2002 only after obtaining copies of his tax returns for the intervening years. She went back to court, and Mr. Walsh agreed to increase the payments to $3,071 a month for the two children.
Mrs. Walsh then asked that the increase be made retroactive to 1998. That case has yet to go to trial, but Madam Justice Lorna-Lee Snowie of Ontario Superior Court retroactively recalculated the payments and ordered Mr. Walsh to pay $42,917.88 in the interim.
There may be valid grounds for ordering such payments because, when support is not automatically adjusted "as the payor's income increases, the child effectively subsidizes the payor's improved standard of living," Judge Laskin said in his ruling yesterday. But such recalculations are not permitted under Canadian law, he said.
Instead, "Mrs. Walsh had to establish, and the motions judge had to find, that the children needed more support and that Mr. Walsh was able to pay more support during the relevant period."
Carole Curtis, the lawyer for Mrs. Walsh, said she was not as convinced as Mr. Niman that the decision would have wide application, pointing out that it struck down a temporary order as opposed to a permanent judgment.