Marriage Contracts in Ontario

Wednesday, April 26, 2017

Today, the number of people getting divorced is steadily rising – recent statistics show about 48% of first marriages end in divorce.  Understandably, if you are getting married, you may want to imagine that the marriage will last and that a marriage contract is unnecessary. A marriage contract is commonly called a prenuptial agreement, or a “pre-nup” by laypeople. Although you may not understand the need for a marriage contract, it is sometimes imperative to think about the consequences of the martial relationship coming to an end.

1. Reasons to Negotiate a Marriage Contract

A marriage contract is a legal agreement between two married people, or two people who intend to be married. There are many reasons why a couple may agree to a marriage contract, but generally, the following reasons are the most common:

1.    A marriage contract can be used to make arrangements for dividing property brought into the marriage and property earned during the marriage that is different than the default equal division of property rules.  In addition to this, an agreement can be used to make special arrangements about particular matters, such as partnerships or corporations in which one/both parties may have an interest.

2.    If a party is substantially wealthy, or has an asset that is increasing in value, that party might want to have the other party to agree to not divide that property or to avoid having to account for the increase in the value of existing property. This increase in value will normally have to be divided with the other party, but a marriage contract can avoid the equalization.

3.    A marriage contract can be used to establish, limit or completely avoid the payment of spousal support in the event that the martial relationship comes to an end.  Alternatively, the other party may want to limit the amount and/or duration of any spousal support to be paid upon separation.

The legal authority for a marriage contract is provided for in section 52 of the Family Law Act, as follows:

Marriage contracts

52. (1) Two persons who are married to each other or intend to marry may enter into an agreement in which they agree on their respective rights and obligations under the marriage or on separation, on the annulment or dissolution of the marriage or on death, including,

(a) ownership in or division of property;

(b) support obligations;

(c) the right to direct the education and moral training of their children, but not the right to custody of or access to their children; and

(d) any other matter in the settlement of their affairs.  R.S.O. 1990, c. F.3, s. 52 (1); 2005, c. 5, s. 27 (25).

Rights re matrimonial home excepted

(2) A provision in a marriage contract purporting to limit a spouse’s rights under Part II (Matrimonial Home) is unenforceable.  R.S.O. 1990, c. F.3, s. 52 (2).

Overall, a marriage contract can be prepared for couples who are planning to get married, or for people who are already married.  The parties may agree on a set of rights and obligations in the event of separation, annulment, divorce or death. 

The most common reason why one spouse insists on a marriage contract is because they already own a home before the marriage, and in the event of a divorce or separation, they would like to avoid dividing the value of the home with the other party. Normally, when one spouse brings property into a marriage, the value of the property is deducted from the calculation of Net Family Property, and not divided in the equalization payment. However, s.4(1) of the Family Law Act defines “net family property” to include the value of a matrimonial home in the calculation of an equalization payment, even if the person owns the home before the marriage, as such:

“net family property” means the value of all the property, except property described in subsection (2), that a spouse owns on the valuation date, after deducting,

(a) the spouse’s debts and other liabilities, and

(b) the value of property, other than a matrimonial home, that the spouse owned on the date of the marriage, after deducting the spouse’s debts and other liabilities, other than debts or liabilities related directly to the acquisition or significant improvement of a matrimonial home, calculated as of the date of the marriage; (“biens familiaux nets”)

To avoid the division of the value of a matrimonial home that one spouse owned before the date of marriage, the parties can agree in the marriage contract to provide the spouse that owns the home with a deduction in the calculation of his or her Net Family Property for the value of the matrimonial home at the date of marriage or separation (so they would be ‘contracting out’ of the definition of net family property in s.4(1) of the Family Law Act).

The overall effect is that, if the parties were to separate and a divorce application is commenced, then the spouse that owned the home before the marriage would not divide the value of the matrimonial home with the other party.

The parties could also agree that if the matrimonial home were to increase in value during the marriage, which is very common, then the spouse that owned the home before the marriage does not have to divide the increase in the value of the matrimonial home with the other party.

2. Restrictions on Marriage Contracts

One of the most important restrictions on a marriage contract is provided at s.52(2) of the Family Law Act, as seen above, which is that the contract cannot limit a spouse’s rights in the matrimonial home found in Part II of the Act. These rights include the right of possession (e.g. to occupy and live in the home) and the right to nullify any sale or mortgage of the home made without the other spouse’s knowledge.

Additionally, s.52(1)(c) of the Family Law Act provides that the right to custody or access to the children cannot be decided in a marriage contract. The case law on marriage contracts indicates that such a provision is simply regarded as the past intention of the parties at the time the contract was made in relation to the issues of custody or access. In the event of a divorce or separation of the two parties, the provisions of a marriage contract with respect to the child may be disregarded for the best interest of the child, as provided in section 56(1) of the Family Law Act:

Provisions that may be set aside or disregarded

Contracts subject to best interests of child

56. (1) In the determination of a matter respecting the education, moral training or custody of or access to a child, the court may disregard any provision of a domestic contract pertaining to the matter where, in the opinion of the court, to do so is in the best interests of the child.  R.S.O. 1990, c. F.3, s. 56 (1); 1997, c. 20, s. 10 (1)

The right of custody or access to a child of the marriage is always decided according to the “best interest of the child” analysis under s.16 of the Divorce Act, despite what the marriage contract may provide on those issues.

3. Setting aside a Marriage Contract

In the event of a marital breakdown, one party may choose to attempt to “set aside,” or nullify, a marriage contract. Section 56(4) of the Family Law Act outlines when a court may set aside an entire agreement, or single provisions in a marriage contract:

Setting aside domestic contract

(4) A court may, on application, set aside a domestic contract or a provision in it,

(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;

(b) if a party did not understand the nature or consequences of the domestic contract; or

(c) otherwise in accordance with the law of contract.  R.S.O. 1990, c. F.3, s. 56 (4).

In the Ontario Court of Appeal decision of LeVan v. LeVan, 2008 ONCA 388, leave to appeal to the Supreme Court refused, [2008] S.C.C.A. No. 331, the Court of Appeal set out a two-part test to determine whether a domestic contract, such as a marriage contract, should be set aside under s.56(4) of the Family Law Act:

“First, the court must consider whether the party seeking to set aside the agreement can demonstrate that one or more of the circumstances set out within the provision have been engaged. Once that hurdle has been overcome, the court must then consider whether it is appropriate to exercise discretion in favour of setting aside the agreement.”

This section of the Family Law Act focuses on the issue of unconscionability and the circumstances in which a marriage contract was formed. For example, if one party failed to disclose significant assets, debts or liabilities when the contract was made, or one party did not understand the consequences of the agreement, a court may decide to set aside the contract.

The general law of contract also applies here, so allegations of fraud, misrepresentation, duress, mistake, and undue influence may also be used to set aside a marriage contract.

The current case law in Ontario is replete with examples of individuals attempting to set-aside a marriage contract. The most common reason is that the other party did not disclose a significant asset, debt, or liability when the contract was made. Proper financial disclosure is absolutely key for a marriage contract to survive the test of time. Each party must know the exact financial circumstances of the other party at the time the agreement was made.

Another common allegation is that one party did not understand the consequences of the marriage contract, or that the party was forced to signed the agreement under duress or undue influence.

4. The Compact: New Standard Steps to Negotiate a Marriage Contract

A fellow family law lawyer in Ontario, Brahm Siegel, developed a set of guidelines in order to avoid the common problem of marriage contracts being challenged once the parties separate. This set of standard steps is called the Compact. In developing the Compact, Mr. Siegel attempted to eliminate the possibility of a party successfully setting aside a marriage contract in the future. These procedural steps are put in place in order for the contract to be consistent, fair, and to ensure that the terms reflect full participation by each side before the contract is signed. 

Currently, some family law lawyers in Ontario, including myself, will refuse to work on a marriage contract until both parties agree to adhere to all or most of the Compact procedure. In my opinion, family law and divorce lawyers in Ontario are all indebted to Mr. Siegel for developing a standardized procedure to negotiate a marriage contract.

Below are Mr. Siegel’s seven steps for negotiating a marriage contract:

1.    No work is to be started on a file unless the wedding is at least four months away.

2.    Each party must have his/her own lawyer from the outset, before any negotiations begin.

3.    Each party provides a financial disclosure brief before any negotiations begin.

4.    At least one four-way, without prejudice meeting shall be held.

5.    The lawyers fully report to the clients in writing after the four-way meeting.

6.    A term sheet, or list of important clauses, is prepared and approved of before the agreement is drafted.

7.    Finally, the agreement is drafted and signed with certain “key clauses”.

5.  McCain v. McCain - Marriage Contracts must be Fair and Provident, Now and in the Future

One of the reasons that Mr. Siegel developed the Compact is because of the impact of the high-profile case of McCain v McCain. The consequences of this case sent many family law lawyers into a state of panic. One of the parties in McCain v McCain was the heir to the McCain Foods Canada corporate empire. Needless to say, a person that happens to be extremely wealthy would benefit from insisting on a marriage contract.

However, there were many key problems with how the marriage contract in McCain v McCain was negotiated and ultimately drafted and signed. We can see from the McCain v McCain case that a marriage contract is only as good as the process that was used to create it, which is why Mr. Siegel developed the Compact.

The facts underlying the case of McCain v. McCain are certainly explosive. Christine and Michael McCain were married for thirty years. Fifteen years into their marriage, Michael’s father insisted that the married couple get a marriage contract. In the event that the two refused, Michael’s father said he would disinherit Michael since his father wanted to protect the family assets and business interests.

In the marriage contract in McCain, Christine McCain agreed to waive her rights to an equalization of property and spousal support in return for a lump sum payment of $7 million dollars, and title to the matrimonial home. That is certainly not a small amount of money, except for one thing: Michael McCain’s net worth at the time of separation was approximately $500 million dollars. Not the best deal for Christine McCain.

This case demonstrates that problems with the procedure of how a marriage contract was negotiated may lead to the agreement being set aside, and also that an agreement that was once fair and enforceable may become unfair and unenforceable over time.

Justice Greer in McCain v McCain posed the question of how Christine could have possibly refused to sign the agreement under the circumstances. Although she received legal advice of her own, Christine had little knowledge about her husband’s financial affairs at the time and had no way of knowing what she was giving up by signing the agreement. She successfully argued that she experienced psychological distress and duress by her father-in-law threatening to disown her then husband unless she signed the agreement. She thought that her husband, Michael, would leave her and divorce her unless she signed the agreement.

Justice Greer of the Superior Court of Justice held that the contract was not enforceable in a long-term marriage such as in the case of the McCain’s thirty-year marriage, and the contract was simply “unfair, improvident and unconscionable in the circumstances of the case.” Even if the agreement was fair when it was signed, over time it had become unconscionable because the husband had acquired immense wealth after the agreement was made (again, he was worth approximately $500 million dollars at the time of separation).

Given the lack of financial disclosure, as well as the duress by her father-in-law, the Court held that Christine could not have foreseen what her future financial situation would have been by agreeing to waive spousal support. The distressing circumstances of the contract's negotiation and execution, the improvident result for the wife, and the husband's new wealth were sufficient to set aside the spousal support provisions of the contract.

Christine was awarded $175,000.00 per month in interim spousal support, and the husband was ordered to pay the mortgages on the wife’s properties. This was the highest award of interim spousal support in Canadian legal history at the time. The wife was to be made beneficiary of the husband’s life insurance policies and covered under the health, medical and dental plans. The parties were to continue making full financial disclosure.

Many family law lawyers in Ontario, including myself, have reservations about the court holding that the agreement in McCain was unconscionable because it was “improvident,” meaning, in these circumstances, that the agreement did not provide enough property or money to one side to be considered “fair” or “conscionable.” The very reason why many clients hire a family law lawyer for a marriage contract is precisely for the agreement to be ‘improvident’ to one party, most commonly so that one spouse does not receive spousal support or the default 50/50 division of property as contemplated by the Family Law Act and the Divorce Act. Many may ask why they would even bother hiring a family law lawyer in order to create a marriage contract that must be “fair and provident”? Most people insisting on a marriage contract want the exact opposite.

Nevertheless, after the decision in McCain v. McCain, not only does a marriage contract need to be carefully thought out, it must be “fair and provident” both at the time the agreement was made and in the future. This case best demonstrates the importance of the time and effort needed to carefully negotiate a marriage contract in order to avoid any future attempts to set aside the agreement.

6. Are Marriage Contracts Enforceable?

Again, when following the steps of the Compact as developed by Braham Siegel, many of the problems that arose in the McCain v McCain case are simply avoided. Many recent decisions of the Superior Court of Justice demonstrate that if proper steps are taken, then a marriage contract will be upheld as valid and enforceable even if the agreement is challenged in court.

For instance, in the recent case of Balsmeier v. Balsmeier, [2016] O.J. No. 667, the parties had met on an online dating website, and had an “on-again, off-again” relationship. Eventually, they were engaged to be married, and decided to make a marriage contract before the wedding. The contract provided that there would be no equalization of net family property if the parties were to divorce, but the husband had agreed to pay $6,000.00 per month in spousal support for 36 months. The agreement also provided that the husband would transfer 10% of the equity in his home to his wife if their marriage lasted to their fifth anniversary. The couple had a chaotic marital relationship and they separated after about three years of marriage.

The wife in Balsmeier argued that the marriage contract should be set aside on all of the grounds set out in s.56(4) of the Family Law Act, and she requested additional spousal support than the amount provided for in the agreement.

Justice Fryer of the Superior Court of Justice upheld the marriage contract and dismissed the wife’s arguments as lacking a proper evidentiary basis. The wife in Balsmeier had extensive experience dealing with contracts during the course of her employment, as she had sucessfully run two different businesses and described herself as having “excellent negotiation skills” and “sophisticated business acumen.” However, the wife asserted that these negotiation skills only applied to her business life, and not to her personal life. Overall, court held that the wife’s claim that she did not understand the consequences of the marriage contract was contradictory and lacking credibility. The court noted that the wife had obtained independent legal advice from an experienced family law lawyer before signing the marriage contract.

Justice Fryer held in Balsmeier that there was no evidence of either inadequate financial disclosure, misrepresentation, unconscionable circumstances, duress, or undue influence surrounding the negotiation of the agreement. The court held that the agreement was not improvident, and that the spousal support provisions of the agreement were superior to the Spousal Support Guidelines for a marriage of a short duration. Finally, Justice Fryer held that there would be no substantive unfairness that would arise from enforcing the agreement. As such, the marriage contract was held to be valid and binding, and the wife’s claim to set aside the agreement was dismissed.

If you require assistance with a case involving a marriage contract, then please send me an e-mail at lutfallah@flbarrister.com in order to set-up a free initial 30-minute consultation. After hearing your story, I hope that I could provide you with legal representation at an affordable rate.

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Reimbursement of Overpaid Child Support: The Meyer v. Content Factors

Friday, December 30, 2016

Once child support payments have been established, either by way of a court order or a separation agreement, the recipient of child support normally has the most contact with the child or children for which support is payable. For that reason, the family law statutory scheme in Ontario places special obligations on the recipient of child support.

For example, once the circumstances have changed in an significant manner and it is beyond dispute that child support payments should cease, the recipient of child support should contact the Family Responsibility Office (FRO), the provincial government agency that enforces support orders, to inform FRO that support should be terminated. For example, if a child reaches the age of eighteen and goes into the workforce and no longer attends school, then the recipient of child support should contact FRO and indicate that support should be terminated.

That is the ideal situation, anyway. And many times, the recipient of child support actually performs his or her legal obligation and contacts FRO to terminate support.

However, sometimes the parent that receives child support may think that the change in the child’s life is only temporary, and does not believe that child support should be terminated permanently. For example, a teenager with mild behavioural issues and problems with the custodial parent may spend time temporarily living with a close relative or a family friend.

There are also cases that involve the child clearly withdrawing from ‘parental charge’ by moving out, getting a job, and withdrawing from school, but then resuming their education and moving back with the other parent just a few months later.

However, many of the cases that end up in the family law litigation cycle involve blameworthy conduct by one party, such as accepting child support payments while deceiving the payor of child support in circumstances where child support should have terminated.

In cases involving deception and/or an estranged relationship between the support payor and support recipient, if there was a long period of time during which support continued to be paid past the presumptive termination date, and the monthly amount of child support is high, then the payor of child support may overpay tens of thousands of dollars in child support to the recipient before even becoming aware that the circumstances have changed and their child or children were no longer entitled to support long ago.

Clearly this type of case can elicit very strong emotions. The payor of child support usually believes that they have been inappropriately paying money to their former spouse for no reason at all and is left feeling angry.

The recipient of support generally complains of inadequate support by the payor and “hidden costs” of child rearing that are not covered by support, and usually feels frustrated that they are being asked to pay back money when the payor of support did not contribute his or her ‘fair share.’

Common Cases Involving Overpayment of Child Support

In the case law authority in Ontario that pertains to reimbursement of overpaid child support, there is usually a distinction between cases involving children under the age of majority, being eighteen years of age, and cases involving adult children over the age of eighteen.

For children under the age of eighteen, there is a presumption at law under section 3 of the Child Support Guidelines that the Table amount pursuant to the Guidelines is payable. Essentially, the annual income of the parent that is to pay child support is located in a Table provided in the Guidelines, and the presumptive amount payable by that parent is whatever value is found in the legislation. However, in order for any person to be entitled to child support, they must meet the requirements of the governing legislation, which depends on whether his or her parents were married.

In relation to married couples, section 2 of the Divorce Act defines a “child of the marriage” as follows:

child of the marriage means a child of two spouses or former spouses who, at the material time,

(a) is under the age of majority and who has not withdrawn from their charge, or

(b) is the age of majority or over and under their charge but unable, by reason of illness, disability or other cause, to withdraw from their charge or to obtain the necessaries of life; (enfant à charge)

Similarly, for couples that are not married, section 31 of the Family Law Act provides as follows:

Obligation of parent to support child

31. (1) Every parent has an obligation to provide support for his or her unmarried child who is a minor or is enrolled in a full time program of education, to the extent that the parent is capable of doing so.  R.S.O. 1990, c. F.3, s. 31 (1); 1997, c. 20, s. 2.

Idem

(2) The obligation under subsection (1) does not extend to a child who is sixteen years of age or older and has withdrawn from parental control.

Overall, for children under the age of eighteen, child support is only payable when the child is under the “charge” of his or her parents. The entire circumstances of the case are assessed in order for the court to make a determination in this regard, but the factors mentioned in the legislation are paramount. To distill the logic behind the provisions of the Divorce Act and the Family Law Act, a child is under the ‘charge’ of his or her parents when:

1)     The child is enrolled in school full-time;

2)     The child resides with the recipient of child support;

3)     The child must seriously consider the wishes of his or her parent, and/or the decisions of the parent have a significant impact on the child’s life; AND

4)     The child is not married.

If any one of the above factors changes, then there is at least a potential dispute as to whether child support should continue to be paid by the other parent for the child that is under eighteen. For children below the age of sixteen, there is a further presumption that the child is still under his or her parent’s “charge” unless the facts show otherwise and therefore child support is still payable.

Therefore, it is usually very difficult to prove that a child under the age of sixteen has withdrawn from parental charge and is no longer entitled to support. However, if one of the factors mentioned above changes and the child is over the age of sixteen, then there is at least a potential argument that child support should be terminated.

For instance, if the child is over the age of sixteen, is living with their long-term boyfriend or girlfriend, and is not attending school full-time, there is a very strong argument for the payor of support to claim that child support should be terminated.

For adult children that are over the age of eighteen, the most common circumstance under which child support continues to be payable is when the child is enrolled in a full-time post-secondary education program, either college or university. The tuition expenses, book expenses, and other fees for the child’s post-secondary education program are considered ‘special and extraordinary expenses’ and are paid according to a proportionate share of both parent’s income.

If the child continues to live at home with the recipient of child support, the support payor usually pays an amount of money for child support in addition to university expenses, but the amount depends on the facts of each case. If the child does not live at home while attending college or university, the recipient parent may still receive an amount of monthly child support if he or she keeps an ‘open home’ for the child, or if the child returns home during the summer months.

However, each case is different, and the point is that even for children over the age of eighteen, monthly child support may continue to be payable, in addition to ‘special and extraordinary expenses’ for tuition and books.

In the case law in Ontario for adult children over the age of eighteen, the common reasons that the payor of support seeks termination of child support are as follows:

1)     The child has completed their first post-secondary degree program;

2)     The child is no longer attending school full-time and there is no reasonable prospect of the child resuming his or her studies within a reasonable amount of time;

3)     The child is not performing well at school and/or may be a ‘perpetual student’ by aimlessly taking courses;

4)     The child is over the age of 23 or 24; OR

5)     The child is living with another person in a marital relationship, or is living with someone in a “marriage-like” relationship

Again, if there is a great deal of time during which support continued to be paid past the presumptive termination date, and the monthly amount of child support is high, then the payor of child support may overpay thousands of dollars in child support to the recipient parent before even becoming aware that the circumstances have changed.

These cases often involve an estranged relationship between former spouses, and/or an estranged parent-child relationship. Many times in the context of a claim for reimbursement of overpaid child support, the support recipient and the support payor simply do not ever speak to each other, or the children do not speak to the support payor.

Furthermore, the recipient of child support may not live in the same city, the same province, or even the same country as the parent that pays child support. This creates the circumstances during which the payor would continue to pay support for a long timeframe without becoming aware of facts that would terminate child support.

However, the parent that receives child support takes on the risk of civil liability by continuing to accept child support payments when he or she knows that child support should terminate.

Both s.17(1) of the Divorce Act and s.37(2) of the Family Law Act provides a court with authority to retroactively vary a support order, meaning that a court may order that termination of child support ought to have occurred in the past.

Furthermore, the Family Responsibility and Support Arrears Enforcement Act, 1996, essentially imposes a positive duty on the recipient of child support to contact the Family Responsibility Office if it is beyond dispute by the facts of a case that child support should have terminated. For instance, sections 8.4(4)(5) of the Family Responsibility and Support Arrears Enforcement Act, 1996 provides as follows:

Order to repay

(4) A court that finds that a support obligation has terminated may order repayment in whole or in part from a person who received support after the obligation was terminated if the court is of the opinion that the person ought to have notified the Director that the support obligation had terminated.  2009, c. 33, Sched. 8, s. 2 (12).

Same

(5) In determining whether to make an order under subsection (4), the court shall consider the circumstances of each of the parties to the support order. 

Therefore, if a recipient parent continues to accept child support payments while the facts of his or her case clearly indicate that child support should terminate and FRO should be contacted, then that parent may have the risk of being ordered to reimburse the overpaid child support back to the other parent.

Meyer v. Content: Judicial Test and Factors for Reimbursement of Overpaid Child Support

Until recently, there has been little guidance from the courts or the legislature in terms of which factors should be considered for the court to order reimbursement of overpaid child support.

Clearly, s.8.4(5) of the Family Responsibility and Support Arrears Enforcement Act, 1996, above, provides that the court shall “consider the circumstances of each of the parties to the support order” before making an order for reimbursement of overpaid child support, but that is vague and is hardly useful.

Luckily, Justice Chappel of the Superior Court of Justice has recently provided guidance in the case of Meyer v. Content [2014] O.J. No. 4992 (“Meyer”) in relation to the proper judicial test to be used and factors that must be considered in a claim for reimbursement of overpaid child support.

At paragraph 94 in Meyer, Justice Chappel notes that a claim for reimbursement of overpaid child support is discretionary and is not automatic, and that there was very little case law authority relating to the factors to consider when assessing a claim for retroactive reimbursement of child support, as follows:

“It is clear from these provisions that there is no automatic entitlement to be reimbursed for overpayment of child support. This is a point that is often not clearly addressed in cases involving alleged overpayment. There is little case-law dealing with the factors which the court should consider in exercising its discretion under these sections. In Brumwell v. Brumwell, 2003 CarswellOnt 5398 (C.A.), our Court of Appeal upheld the decision of McIsaac J. at trial to decline a request for reimbursement for an overpayment of child support on the basis that the recipient mother was ill at the material time and this affected her ability to report the situation promptly to the FRO. In Chenard v. Hodgson, 2014 CarswellOnt 7127, Howden, J. sought guidance from the Supreme Court of Canada's decision in D.B.S. in deciding how to deal with an overpayment, and concluded that the factors set out in D.B.S. regarding the appropriate timeframes for allowing retroactive claims applied equally to retroactive claims for reimbursement of overpayment.” (Emphasis added)

In the case of Chenard v. Hodgson, mentioned above, Justice Howden held that there is a presumptive three-year retroactive time limit for claims for reimbursement of overpaid child support, which may be set aside in rare circumstances, usually involving blameworthy conduct. This is greater than the general two-year limitation period found in the Limitations Act, 2002, but still provides an incentive for the would-be litigant not to rest on his or her legal rights for very long.

At paragraph 95 in Meyer, Justice Chappel provides a three-step judicial test for determining a claim for reimbursement of overpaid child support, as follows:

“By virtue of section 8.4(4) of the Family Responsibility and Support Arrears Enforcement Act, the determination as to whether a repayment of support should be ordered involves a three step analysis. First, the court must determine that support should have terminated and make a finding respecting the termination date. Second, the court must be satisfied that the recipient should have informed the FRO that the support obligation had terminated. This question is distinct from the issues which the court must determine in Step 1. If the intention had been that the court's decision regarding the termination date for support would be the sole trigger for considering a reimbursement order, there would have been no need to include the phrase in section 8.4(4) "if the court is of the opinion that the person ought to have notified the Director that the support obligation had terminated." The question which the court must ask at this stage is whether a reasonable litigant who has made reasonable efforts to become informed about their support entitlement would have advised the FRO that support had terminated.” (Emphasis added)

By limiting claims for reimbursement of overpaid child support to only those cases involving facts where the parent receiving child support clearly should have contacted FRO because termination of child support was beyond dispute, the legislature has provided a high threshold that must be met before even making such a claim.

Nevertheless, many cases involving a claim for reimbursement of overpaid child support often involve circumstances that had changed periodically, and many involve special challenges for the recipient of child support in relation to determining when child support should cease.

For example, some young adults have a tumultuous relationship with the custodial parent, and spend a great deal of time at the home of their boyfriend or girlfriend. What if the child is not attending school full-time? When does this become a permanent situation, amounting to the child withdrawing from ‘parental charge?’  

At paragraph 96 in Meyer, Justice Chappel specifically addresses cases involving adolescent and young adult dependants, as follows:

“If the court determines that the recipient should have taken steps to stop the enforcement of support, it nonetheless maintains a discretion as to whether or not to order the recipient to reimburse the payor for all or part of the overpayment. The third step of the analysis involves the exercise of judicial discretion to determine whether an order requiring reimbursement of support already paid is appropriate having regard for the overall circumstances of each party. Judicial discretion is particularly necessary in support cases involving adolescent and young adult dependants due to the unique challenges involved in navigating through life with these dependants. As children approach and enter adulthood and move increasingly towards independence, their situations often become highly unpredictable and changeable. In many cases, it is difficult for child support recipients to accurately assess whether a change in a child's circumstances will be very short lived or permanent, or whether a change has even occurred. This reality can make it very difficult for recipients to determine how to address the child support issue. They may feel a need to maintain the status quo in terms of housing and general support which they are providing to the child for a period of time to allow them and the child an opportunity to further assess how the situation will eventually unfold. When the events are scrutinized at a later point in time in the context of a claim for reimbursement of child support, it is important to remember that the support recipient who is attempting as best they can to navigate the changing tides of these unpredictable years did not have the benefit of 20/20 hindsight vision. On the other hand, there are cases where it becomes apparent very quickly that a change in circumstances has occurred and that it will be long-term in nature. It is important that the court not allow recipients in these types of cases to receive an inappropriate windfall.” (Emphasis added)

The court in Meyer also noted at paragraph 97 that there are similarities between a claim for reduction of child support arrears and a claim for reimbursement of overpaid child support:

“Deciding how child support overpayment situations should be addressed involves a very careful and delicate balancing of the interests of the recipient, the payor and the child in question. In addressing this issue, it is helpful to seek guidance from the case-law involving requests by payors to either rescind or reduce child support arrears. In both situations, one of the parties is requesting the court to excuse them from paying a debt owed to the other party. Child support recipients who at the end of the day found themselves in an overpayment situation should receive the same benefit and degree of judicial discretion as payors who fail to comply with support obligations and later seek relief from payment from the court. Accordingly, in considering how overpayment of child support should be dealt with, I have sought guidance from the Court of Appeal's decisions regarding the rescission of child support arrears.”

Finally, after summarizing several of the legal principles and key factors that underlie a claim for reduction of child support arrears in several Court of Appeal cases, Justice Chappel at paragraphs 100 and 101 in Meyer provides the various factors that should be considered by the court in relation to a claim for reimbursement of overpaid child support, as follows:

“Drawing upon the principles which the Court of Appeal has established in the aforementioned cases, and taking into consideration the unique dynamics of cases in which overpayments arise, I conclude that the court should consider the following factors in dealing with a claim for reimbursement of child support paid to a support recipient:

1.  The amount of the overpayment;

2.  The overall financial situation of the parties, including their incomes and their net worth;

3.  The extent to which each party continued to support the child financially during the period of uncertainty regarding the outcome of the support dispute, and whether it was objectively reasonable for them to do so;

4.  Whether an order requiring the support recipient to repay all or part of the child support overpayment would cause the recipient hardship;

5.  The overall condition, means, needs and circumstances of the child of the relationship, and the extent if any to which the child's situation may impact on the level of hardship which a reimbursement order would create for the recipient;

6.  Conversely, whether an order releasing the recipient from repaying the overpayment in full or in part would result in hardship for the support payor;

7.   Whether there is a reasonable explanation for any delay on the part of the payor in commencing proceedings to request reimbursement;

8. Whether the support recipient has a reasonable explanation for why they continued to accept support during the time frame when the overpayment accrued;

9.   Any evidence of blameworthy conduct on the part of either party relevant to the overpayment issue;

10.   Whether the recipient made reasonable efforts to keep the payor apprised of changes in the child's situation which were relevant to the overpayment issue;

11. Conversely, whether the payor made reasonable efforts to keep abreast of developments in the child's life and maintain contact with the recipient so as to enable discussion and negotiation about issues involving the child;

12. The extent to which either party attempted to make efforts to resolve any concerns about overpayment with the other party or through the Family Responsibility Office; and

13.  Evidence of any oral or written agreement between the parties during the period when the overpayment arose that sheds light on the intentions of the parties respecting child support payments during that time.

None of these factors is determinative, and the weight if any that should be given to any factor depends on the unique facts of the case.” (Emphasis added)

The court in Meyer was not sympathetic to the applicant’s claim for reimbursement of overpaid child support. After considering certain credits for expenses that were paid for by the recipient, the total amount of the overpaid child support was only $3,569.00. Overall, at paragraph 103 in Meyer, the court held that the applicant, Mr. Meyer, should not receive any money from the recipient of child support as reimbursement for the child support that he overpaid, as follows:

“I have taken into account the fact that the amount in question is not large. However, as outlined earlier in these Reasons, Mr. Meyer's income has consistently been much higher than Ms. Content's income over the past several years. Mr. Meyer's net worth is also much greater than Ms. Content's. I have also factored in the fact that Ms. Content has incurred significant legal fees on behalf of Darryn, and that she has consistently supported Darryn both emotionally and financially despite the termination of support. I am satisfied that it was reasonable for her to continue supporting Darryn, having regard for the challenges which he has experienced, the efforts which he has made to overcome them, and the progress which he has made in this regard. In the circumstances, I find that an order requiring Ms. Content to repay support would have caused her considerable hardship. By contrast, I conclude that the impact on Mr. Meyer of not receiving any reimbursement would not have been significant.”

I understand that the court in Meyer had attempted to provide guidance in relation to the factors that must be considered in a claim for reimbursement of overpaid child support, but I disagree with the court’s application of those factors in this particular case.

The court seems to indicate at paragraph 103, above, that even though it finds that child support should have terminated, since the recipient is likely going to continue to support her adult son, it would cause her ‘considerable hardship’ for the recipient to repay the overpaid child support.

Once child support should have terminated, I do not believe that it is fair for the recipient to voluntarily continue to support their adult child, and then claim ‘undue hardship’ as a shield against a claim for reimbursement of overpaid child support as a result of deciding to continue to support their child.

Even though I am sympathetic to the challenges that the young adult in Meyer had experienced, the court’s reasoning in Meyer essentially means that the recipient of support can ‘have it both ways’ by claiming to support their adult child after child support should have terminated, and claiming ‘undue hardship’ as a shield against a claim for reimbursement of overpaid child support.

I think that any analysis relating to financial hardship should be focused on the financial position of either party, and that analysis should not include an inherently contradictory assessment of whether continuing to support the adult child was ‘reasonable’ since the court had already held that child support should have terminated.

Furthermore, in the context of a relatively low claim of only $3,569.00, I think the court could have balanced the competing concerns of financial hardship on either party by ordering that the aforesaid amount be paid back over a long period of time at a low monthly rate.

If you require assistance with a case involving a claim for reimbursement of overpaid child support, then please send me an e-mail at lutfallah@flbarrister.com in order to set-up a free initial 30-minute consultation. After hearing your story, I hope that I could provide you with legal representation at an affordable rate.

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