“Bad Faith” and the Imputation of Income in Alberta

A recent decision of the Alberta Court of Appeal has called long-standing authorities on child support and variation into question, particularly around the concepts of support when parenting is shared equally, under-employment and “bad faith”.

In the case at hand, the mother and father had a brief romantic relationship that resulted in the birth of their child. Both parents were high income-earners when the child was born. The mother, a lawyer, was employed in the energy sector in Calgary, earning an average of $229,000 per year between 2015-2018. Once her contract position came to end in 2018, she was unable to secure new work and anticipated earning $0 in 2019. The father’s salary ranged between $92,000-$157,000 during the same period. Both parents shared parenting on a week on/week off basis, and each had considerable assets.

The father had successfully petitioned for equal shared parenting in 2017, and in July 2019, he sought to vary his child support both retroactively and going forward. The father’s petition was successful, with the court ordering a set-off of the Guidelines amount for the period of July 2017-December 2018, and then ordering no support beginning January 2019. The mother appealed the decision.

Child Support When Parenting is Shared Equally

While child support amounts are calculated using the Federal Child Support Guidelines (the “Guidelines”), s. 9 of the Guidelines permits a court to use its discretion when parenting is shared. Further, a 2005 decision of the Supreme Court of Canada called Contino v. Leonelli-Contino (“Contino“) set out nine factors and several key issues for courts to use as a framework when determining the factors set out under s. 9. According to Contino, courts should have freedom to modify the amount of support when the set amount would result in significantly different standards of living at each home due to the income levels of the parents.

The court in the case at hand points out that the framework set out in Contino, a binding authority on courts across the country, is not only cumbersome but has resulted in a great deal of uncertainty given the level of judicial discretion it permits.

Imputing Income for an Underemployed Parent

The Guidelines, in s. 19, also allow a court to impute income to a parent who is underemployed or unemployed. A 2001 ABCA decision called Hunt v Smolis-Hunt (“Hunt“) is the leading authority in the province on this matter and creates an additional requirement before imputing income in Alberta family decisions.

According to the Court in Hunt, income can only be imputed for child support purposes where “the obligor has pursued a deliberate course of conduct for the purpose of evading child support obligations”. This creates a need to prove that a parent is underemployed or unemployed specifically because they are trying to evade support obligations. The Court went on to say that intention could be inferred “where the unemployment, under-employment or other acts of the obligors indicate a deliberate refusal to live up to the obligation to support one’s children”.

Alberta is the only jurisdiction in Canada that has interpreted s 19(a) of the Guidelines in this way, requiring an element of bad faith before imputing income. Each of the other jurisdictions impose a standard of reasonableness instead.

In the end, the Court in the case at hand disagreed with the lower court’s reasoning for putting a stop to child support in 2019 owing to the mother’s refusal to work, which the lower court called ‘unreasonable’. On appeal, the Court found that unreasonableness was insufficient to satisfy the “bad faith” element required under Hunt. However, a holistic analysis of the financial situations of the two parents demonstrated that their child would enjoy a reasonably similar standard of living at each home without an order for child support, despite the fact that the mother was not working. As a result, the order was not varied in any way.

Hunt and Contino May Need Updating

The ABCA concluded the decision by commenting in general on the legacies of both Contino and Hunt. With respect to Contino, the Court stated that few s. 9 cases ever reach litigation for the simple reason that a full Contino analysis is too complex and prohibitively expensive for most litigants. The evidentiary record it demands is too robust and creates further delay in the overall process. Add to this the fact that courts are granted exceptional discretion, leading to unpredictable results, many litigants opt to instead go with a simple analysis under the Guidelines without invoking s. 9.

With respect to Hunt, the ‘bad faith’ standard imposed in Alberta, distinguishing it from every other jurisdiction in the country, may be too narrow an interpretation. The Court concluded the decision with an excerpt from another matter called R. v Arcand:

“The law, as with society, changes with time. How do the courts ensure that the common law continues to be responsive to the dynamic and evolving fabric of our society? The modern approach to changing precedent allows courts to reconsider and overrule past precedent in accordance with a defined reconsideration process.”

To Discuss Child Support Obligations or Variations, Contact Mincher Koeman

Support obligations can be ever-changing depending on family circumstances. If you are unsure about your rights or obligations regarding support, or if your circumstances have changed, the family lawyers at Mincher Koeman can provide necessary guidance.

Our exclusive focus on family law helps our clients navigate the emotional and financial challenges a family law matter can present. Our team remains fully operational, and we have implemented various technologies that allow us to continue to advise clients seamlessly during this time. If you have a family law issue that you need assistance with, please contact us online or phone at (403) 901-3000 to talk with one of our lawyers today.