When Disclosure Falls Short: Armstrong v. Abramowicz

Background

In this case, the parties were in a relationship for just under four years, separating in September 2016. They have one child. The dynamic was traditional for the most part – the father ran a pipefitting company he had incorporated in 2014, and the mother managed the household, cared for the child, and performed some bookkeeping and invoicing for the father’s business.

Post-separation, the father paid a below Federal Child Support Guidelines amount of child support. He was ordered to pay $600 per month at a Case Conference in January 2019, and he mostly complied until trial. He paid no spousal support at all prior to trial.

The trial judge found many problems with the father’s financial disclosure. He had failed to comply with disclosure deadlines and, in the court’s view, had deprived both the child and the mother of appropriate support for years. The trial judge found the father not to be a credible witness, particularly regarding his income.

Imputing Income to a Non-Transparent Payor

Where a self-employed payor’s financial records are incomplete, unreliable, or strategically obscure, courts can impute income at a level the payor is capable of earning. The trial judge imputed income of $150,000 to the father for the purpose of ongoing child support, and ordered $1,356 per month in table child support, plus $38,038 in retroactive child support with interest.

This is an important point that your lawyer should advise you on: non-disclosure does not protect a payor. If anything, it works against them, as courts are entitled to draw adverse inferences and impute income at the higher end of what the evidence supports. The obligation to provide full, timely, and ongoing financial disclosure is not procedural formality, but a substantive obligation, and courts treat breaches seriously.

The father’s undue hardship claim did not help him in court. The trial judge found that he had failed to establish hardship, and the child support order remained.

Penalties for Inadequate Disclosure

The court also has authority to impose financial penalties for failure to disclose. Here, the father was ordered to pay $3,500 under the disclosure penalty provisions of BC’s Family Law Act for his non-compliance with court-ordered disclosure deadlines.

On appeal, the father argued that the trial judge should have identified the specific documents he failed to produce before making the penalty order. The Court of Appeal rejected that argument. There is no principled basis to require this specificity, and the penalty was upheld as a highly discretionary determination entitled to deference. This shows that courts can and do use their penalty powers when payors fail to meet their disclosure obligations, and that appealing orders like these is unlikely to succeed without a gross error on the part of the judge.

Retroactive Support and the D.B.S. Framework

The D.B.S. v. S.R.G. factors remain the governing framework for retroactive support awards, and Armstrong provides a useful reminder of how they apply, and how they have evolved.

For recollection, the four factors listed in section 5.3 are:

• Reasonable excuse (now “understandable reason” post – Michel v. Graydon)
  • Why did the recipient parent wait to seek support? Delay doesn’t automatically bar a claim, but the court looks at why it happened.
• Conduct of the payor parent
  • Did the payor discourage the claim, hide income, fail to disclose, or otherwise act in bad faith? Poor conduct weighs in favour of a retroactive award.
• Circumstances of the child
  • What were the child’s needs during the period in question? Would a retroactive award benefit the child now?
• Hardship
  • Would a retroactive award cause undue hardship to the payor, including impact on their current family and other dependants?

One significant development addressed in this case concerns the first factor: the recipient parent’s reason for not seeking support earlier. Under the older formulation, courts required a “reasonable excuse.” Following Michel v. Graydon (2020), the Supreme Court of Canada lowered that threshold: a recipient need now only offer an “understandable reason.” These are different standards. 

The former imports a judgment about justifiability – “Reasonable excuse” asks whether the delay was justified — i.e., did you have a good enough reason, etc. It’s a higher bar.

The latter is more concerned with whether the delay is explicable in a human sense – “Understandable reason” just asks whether the delay makes sense given the circumstances — i.e., can you explain why it happened in a way that a reasonable person would get, even if it wasn’t strictly justified?

The current, more permissive formula or standard should be applied to retroactive claims.

The second factor — conduct of the payor — was satisfied here. Poor disclosure and years of underpayment are the kind of payor conduct that the courts weigh heavily in the retroactive analysis.

The third factor — circumstances of the child — and the fourth — hardship — were treated carefully on appeal. The father had a new family, and the Court of Appeal noted that hardship to a payor’s other children must be considered in a full D.B.S. analysis. However, the court ultimately concluded that the impact on those children could be mitigated through a gradual payment schedule, and that the retroactive award did not reach a level of hardship that would justify reduction.

Lump Sum Spousal Support: Analysis 

The Court of Appeal allowed the appeal in part on the issue of retroactive spousal support. The trial judge’s error was not in awarding retroactive support but in how the lump sum was calculated – the father’s arguments on entitlement, limitation periods, and the mother’s status as a “spouse” were all rejected.

Two errors were identified:

• The trial judge failed to weigh the advantages and disadvantages of a lump sum award. A lump sum for spousal support is not the default; it requires an analysis of why periodic payments are inadequate or impractical.
• The trial judge failed to determine a range of duration and a commencement date for the spousal support obligation to begin. Both of these steps are prerequisites to any retroactive or lump sum analysis. 

The calculation submitted by the mother at trial was also criticized – she applied a net present value discount and a duration range of 2 – 15 years from separation. Net present value discounts cannot apply to retroactive awards; they are forward-looking tools. The retroactive award must be calculated on a different basis.

The original retroactive spousal support award of $74,207 was set aside and replaced with an award of $60,767, payable in monthly installments of $1,000.

Re-Partnering and Compensatory Entitlement

The father argued on appeal that the mother having a new partner should have reduced or eliminated her spousal support entitlement. The court rejected this argument.

Having a new partner is significant where the basis for spousal support is need. It reduces the recipient’s expenses and increases their available resources. But where entitlement is compensatory (grounded in the economic disadvantages arising from the roles assumed during the relationship) having a new partner has far less relevance. The economic disadvantages the mother sustained by managing the household, caring for the child, and supporting the father’s business do not disappear when she forms a new relationship. The Court of Appeal confirmed that the trial judge was right to give this limited weight.

In cases involving longer relationships with traditional role divisions, your lawyer should ensure that entitlement arguments clearly identify the compensatory component, as it is the most durable basis for ongoing and retroactive claims.

The Priority of Child Support

The court suggested that ordering immediate lump sum payment of retroactive spousal support, while permitting periodic payment of retroactive child support, may be contrary to legislative provisions requiring that child support take priority over spousal support.

The court was not definitive on this point, and acknowledged that the mere fact of a lump sum format does not demonstrate that spousal support has been elevated over child support. The concern would be more compelling if there were evidence the payor could not satisfy both obligations. Regardless, this should be taken into consideration, and retroactive awards across both child and spousal support should be structured in a way that prioritizes child support, especially where cash flow is an issue.

Key Takeaways

Courts will impute income to payors who fail to make proper disclosure, and will not hesitate to impose financial penalties for non-compliance. The obligation to disclose is ongoing and enforceable.

The threshold for a recipient’s delay in seeking retroactive support is now “understandable reason,” not “reasonable excuse.” 

Retroactive and lump sum spousal support awards require a structured analysis: entitlement, duration range, commencement date, and a genuine weighing of the advantages and disadvantages of a lump sum. 

Where spousal support entitlement is compensatory, the recipient of support getting a new partner carries limited weight. This is important with traditional role divisions during the relationship.

The question of priority between retroactive child and spousal support should be kept in mind when structuring settlements and orders.