In a recent case, the court upheld parties’ ability to contract out of the child support guidelines as long as the outcome is to the children’s advantage.
As a result, creative solutions tailored to a family’s circumstances are now something family lawyers must consider with some options being more popular than others.
With the increase in mediated and negotiated settlements in child support matters, there has been an exploration of alternatives to the child support guidelines.
One such agreement came under scrutiny from the Ontario Court of Appeal in Stevenson v. Smit.
In their separation agreement, the parties recorded an intention to share equally the major expenses for the children, such as private school tuition, activity and camp fees, and post-secondary education. It recognized that the father was forming a new company and had minimal income but substantial assets from which he intended to satisfy his obligations.
After three years, he defaulted and alleged he could no longer meet the terms of the agreement.
When the mother asked the court for an assessment of arrears, he claimed there had been a material change in circumstances and the child support guidelines should apply. He lost the initial trial and subsequent appeal to the Superior Court before the Court of Appeal considered the case and released its dismissal in July.
Frances Wood, a partner at Wood Gold LLP in Brampton, Ont., believes it’s important for clients to have finality and says this case delivers that promise. “If the change is foreseeable, it can’t ground a claim for material change of circumstances,” she says.
“In the future, when people are signing, they will know they can’t go back for another kick at the can.”
In the Stevenson case, the parties were aware of the father’s financial circumstances at the time of the agreement. The court found he had untapped income-earning potential and had chosen to resort to his capital. “In our view, the father’s remaining grounds of appeal are similarly without merit,” wrote appeal court Justice Karen Weiler.
“Contrary to his contention, the application judge did not fail to consider the guidelines. To the contrary, she expressly recognized that, in this case, the parties freely and knowingly elected to enter into special arrangements regarding child support, outside the parameters of the guidelines. The parties were entitled to do so, as long as the children’s needs for and entitlement to support were not bartered away. That did not occur in this case.”
“The court has a parens patriae jurisdiction,” says Wood.
“If it does barter away the children’s support, the court is likely to intervene. If there is a fundamentally respectable amount of support, the court wants it to be final.”
Nathalie Boutet of Boutet Family Law in Toronto says the case is significant because the parties made the arrangements in a way that made a lot of sense at the time of negotiation.
“It highlights that people can be creative for the benefit of the children but it has to make sense,” she says.
“The husband was uncomfortable making a commitment on a monthly basis because of his low income. This worked well and gave him the freedom to get on with his life. The court told him to keep doing it. When it is no longer suiting your purpose, you can’t renege on a bargain made in full contemplation of your financial future. The court is saying: ‘If you don’t manage your property so your wife can get what you agreed, that’s your problem.’”
Boutet’s practice focuses on mediation, collaboration, and negotiation. “I make these sort of arrangements all the time, but there has been a fear that the support payer won’t honour his or her obligations,” she says. As a result, many parents prefer to stick with the child support system with its enforcement powers.
When they do stray outside of that system, there has been a caution about going too far.
“Until this case, we have really been of the view that you can’t deviate too far from the guidelines, particularly when children are primarily with one parent, say 60 per cent of the time,” says Cathryn Paul, a lawyer and mediator in Oakville, Ont.
“The view has been that you are kind of stuck. This case gives a lot of room to negotiate as long as arrangements provide for the children. They can’t be worse off. It’s a matter of restructuring how their needs are met.”
Paul notes the guidelines can work in shared parenting. She says that for simplicity, some people like to see what each would pay if the children were with the other parent. The party with the greater obligation pays the difference. “That’s one answer, but you should really look and see what life is going to be like in two homes,” she says.
“You don’t want kids to have a really unbalanced experience.”
Paul believes the case has released the shackles of staying close to the guidelines. “We still let parties know what the legal landscape is, but the case has given us confidence in being creative.”
Boutet believes that while the guidelines did fill a void in the legal system, they can be annoying. “With the increasingly frequent shared-parenting arrangement, the [guideline] does not provide a proper straight-line answer. We need something more creative. People don’t want to deal with each other yearly.”
For that reason, the shared-expenses arrangement used in Stevenson isn’t necessarily an optimal arrangement. “Sharing expenses can be an invitation to fight over what is a major expense and what isn’t, what should be shared and what shouldn’t,” says Wood.
“When you restrict it to specific items, there is less opportunity for dispute.”
In fact, Wood prefers to recommend a set amount of money each year so the parties don’t have to have an accounting every six months or so.
Paul finds parents often prefer a lump sum each year so there’s a predictable amount. “People having to share expenses is a source of friction. In the first year after separation, there are lots of challenges working out what should be shared. If a person is refusing, it’s hard to try and correct it.”
Boutet often recommends the creation of a lump-sum payment to last three to five years so that in that time, the parties can get past the separation anger and move on with their lives.
Alarm bells also ring when a party intends to pay its obligations from capital as happened in this case. “It usually can’t go on forever,” says Wood. “It is usually not sustainable. I would probably have recommended a specific review timeline, say five years, to see if it is still appropriate without the parties needing to meet the material-change threshold.”
But lawyers do agree the case does give people the ability to be more creative without having to look over their shoulder for future challenges. “I thank the Court of Appeal for allowing creativity,” says Boutet.