Hinz v. Davey

2022 BCCA 232 Hinz v. Davey

COURT OF APPEAL FOR BRITISH COLUMBIA Citation: Hinz v. Davey, 2022 BCCA 232 Date: 20220704 Docket: CA47768 Between: Paulette Ann Hinz Respondent (Claimant) And Matthew Robert Davey Appellant (Respondent) Before: The Honourable Mr. Justice Fitch The Honourable Mr. Justice Butler The Honourable Mr. Justice Marchand On appeal from: An order of the Supreme Court of British Columbia, dated August 27, 2021 (Hinz v. Davey, 2021 BCSC 1699, Vancouver Docket E161272). Counsel for the Appellant: F. Wu Counsel for the Respondent: S. Kainth Place and Date of Hearing: Vancouver, British Columbia April 1, 2022 Place and Date of Judgment: Vancouver, British Columbia July 4, 2022 Written Reasons by: The Honourable Mr. Justice Butler Concurred in by: The Honourable Mr. Justice Fitch The Honourable Mr. Justice Marchand Summary: The appellant appeals from an order dismissing his claim for the retroactive variation of the parties' child and spousal support agreement. The appellant, who lives in Australia, and the respondent, who lives in Canada, entered into a separation agreement providing for tax free monthly payments of $10,000 to cover both child and spousal support. He made these payments until the start of the COVID-19 pandemic, which had a significant negative impact on his business. He applied to the court for a retroactive variation of the support provisions of the agreement. The trial

judge found that the Family Law Act does not permit retroactive variation of child support agreements and found it unnecessary to deal with the question of spousal support as the respondent was not asking for continued spousal support. Held: Appeal allowed. Properly interpreted, the Family Law Act permits retroactive variation of child support agreements as a court may set aside or replace all or part of an agreement with an order. The trial judge also erred in failing to consider the application to retroactively vary spousal support. The matter is remitted to the court below for reconsideration, in part given the complications that arise from the combined nature of the support provision. Reasons for Judgment of the Honourable Mr. Justice Butler: [1] This appeal concerns the interpretation of provisions of the Family Law Act, S.B.C. 2011, c. 25 [FLA] dealing with the jurisdiction of a court to retroactively vary support payments agreed to in a separation agreement. The judge concluded that he had no jurisdiction under the FLA to make such an order for child support. [2] The circumstances giving rise to the application are somewhat unusual. The appellant, Matthew Davey, applied to retroactively vary spousal and child support when his income decreased dramatically and his business was forced into receivership as a result of the COVID-19 pandemic. He had been in a marriage-like

relationship with Paulette Hinz from 2011 to 2016. They have a daughter who is now ten years old. After the separation, the appellant married and moved to Australia where he continued to operate a business providing online ticketing and event management services to sports teams, stadiums, concert venues and other organizations in New Zealand and Australia. The parties entered into a separation agreement on September 7, 2018 (the "Agreement") containing provisions requiring Mr. Davey to pay the private school tuition for their daughter as well as a "tax free monthly amount of $10,000" for child and spousal support. He made all payments required by the terms of the Agreement until March 2020, when the COVID-19 pandemic shut down public events around the world. The pandemic had a drastic, negative impact on his business. The chambers judge dismissed the appellant's application to retroactively vary the support provisions of the Agreement, concluding that the FLA did not permit retroactive variation of agreements for child support. The judge did not consider the appellant's application to retroactively vary spousal support. [3] On appeal, the appellant argues that the judge erred in the interpretation of s. 148(3) of the FLA. He says that section permits a court to retroactively vary an agreement for child support. He also argues that the judge erred in principle when he failed to

give any consideration to the appellant's application to set aside or replace the spousal support terms of the Agreement. For the reasons that follow, I would allow the appeal on both grounds. Background [4] The parties met through an online dating website when the respondent was living in Vancouver and the appellant was living in New Zealand. The appellant had been operating his business through Fortress Information Systems Ltd. ("Fortress") and related companies since 1999. The appellant is a Canadian citizen and travelled frequently to British Columbia. After their daughter was born, the parties lived in Australia for a time, but eventually returned to British Columbia. The appellant continued to operate his business in New Zealand and Australia but the parties decided to reside in Victoria, in part so that their daughter could attend a particular private school. [5] The parties were represented by experienced counsel when the Agreement was negotiated. The respondent says that the terms of the Agreement were interconnected and, as she asserts in her factum, negotiated in "consideration of the appellant financially providing for the respondent and the child as he had during the relationship, the respondent having primary residency of the child, the respondent remaining in a small town [Victoria] where she had decreased job opportunities, and keeping the child in private

school which was of importance to the appellant." [6] The Agreement contains extensive terms dealing with parenting time, Facetime and telephone contact. The appellant was entitled to approximately one week of parenting time each month plus additional time in the summers. Only two provisions of the Agreement deal with the appellant's support obligations: 1.14 The parties acknowledge and agree that it is currently in the Child's best interest to continue at her current school in Victoria and the Claimant [Ms. Hinz] will not seek to have her removed from that school or register her in any other school without the Respondent's consent, in writing, provided that the Respondent continues to pay the fees associated with the Child's attendance at that school and he continues to pay to the Claimant, on account of child and spousal support, the tax free monthly amount of $10,000. After three years of such payments being made, if the Claimant wishes to change the Child's school and the Respondent does not agree, the Claimant is at liberty to apply to the court to determine that issue. 3.1 The parties agree that the basic monthly child support and the spousal support for the next 3 year period will be as per paragraph 1.14 after which time it will be reviewable by either party. [7] The Agreement was filed in the Supreme Court of British Columbia on July 30, 2020. The parties resolved all

claims for division of family property and debt by way of a consent order dated April 25, 2019, pursuant to which the appellant paid the respondent $400,000. [8] The appellant paid the fees associated with the child's attendance at the private school and made all support payments until March 2020, when his company's revenues disappeared. The judge noted that the appellant said his income was equivalent to $180,000 CDN before the pandemic but that it quickly fell to approximately $27,500 CDN. The judge succinctly described the impact of the pandemic on Fortress' fortunes: [5] However, [Mr. Davey] says that with the onset of the COVID-19 pandemic in March, 2020, the company's revenue disappeared, except for a small amount of emergency support provided by the government of New Zealand. Events for which it had previously sold tickets were cancelled, requiring refunds. [6] In June, 2020, a client of the company obtained a New Zealand Court order freezing its bank accounts. In August 2020, the company went into receivership and Mr. Davey says the receiver-manager ultimately terminated his employment. In October, 2020, the New Zealand Court appointed liquidators. Mr. Davey says he is also facing a claim from a bank of more than $3 million on a personal guarantee. [9] The appellant made only three additional partial payments of his support obligations: $5,000 in April; $3,500 in May;

and $1,500 in June. At the time of the hearing in the court below he owed more than $140,000 in arrears based on the terms of the Agreement. [10] When the pandemic hit, the appellant exchanged messages with the respondent about his financial circumstances, advising her of his inability to continue making support payments in accordance with the terms of the Agreement. The respondent agrees that the parties had discussions about their respective circumstances but denies that the appellant gave her sufficient notice of his intention to seek a variation of his support obligations. The respondent enrolled with the Family Maintenance Enforcement Program who notified the appellant by letter on January 12, 2021 that his maintenance payments were in arrears and that he was required to make further payments directly to that office. [11] The appellant, who was self-represented at the time, filed a notice of application on March 2, 2021 seeking "an order retroactively varying the monthly child and spousal support amounts payable to the Respondent from April 2020 onwards." He also sought elimination of spousal support obligations and an order setting a new child support amount determined in accordance with the Federal Child Support Guidelines, SOR/97-175 [Guidelines]. The respondent opposed the application and filed an application seeking additional financial disclosure from the

appellant. [12] Justice Davies heard the applications on May 6, 2021. He ordered the appellant to disclose a considerable amount of documentation and information regarding his personal and corporate finances. The appellant's application was adjourned generally but he was granted leave to re-apply to reduce child and spousal support after production of the required disclosure. At the hearing of the application, the judge and counsel for the respondent engaged in a discussion as to whether the appellant's application should have been to vary the support obligations retroactively or to cancel arrears. In his brief reasons, the judge stated: [16] And for your purposes, Mr. Davey, [the re-scheduled application] should be an application not to vary, but to relieve arrears and then for an application going forward with respect to the possible alteration of the existing order. [13] After making the required disclosure, the appellant reset the application and changed the nature of the relief sought in accordance with Justice Davies' comment. He applied to "be relieved/forgiven of all child and/or spousal support arrears that have accumulated to date". He also applied for orders fixing future child support based on the Guidelines and to terminate spousal support. The respondent opposed the retroactive variation or cancellation of arrears of the appellant's support obligations. However,

at the hearing, she conceded that there was no basis for an order for ongoing spousal support, and sought ongoing child support of $1,590 per month based on a Guidelines income of $180,000. Reasons of the Chambers Judge [14] Although the appellant's second notice of application sought only cancellation of arrears of child and spousal support, the judge, quite properly, also considered his application for retroactive variation of child support. Given the respondent's position on spousal support, the judge considered three issues: the amount of prospective child support; whether there should be a retroactive reduction in child support; and whether support arrears should be cancelled or reduced. He acknowledged that courts are reluctant to vary separation agreements, but also that "parties cannot be presumed to have anticipated or provided for the possibility of a global pandemic and its associated economic consequences." He found that the appellant's "business was in fact destroyed by the pandemic with an accompanying drastic reduction in his personal income. That is a material change of circumstances that the parties could not have anticipated or planned for": at paras. 10-11. [15] The judge refused to impute an income of $180,000 to the appellant as suggested by the respondent. He accepted that the appellant's income, for the moment, was $27,500, but noted that he was making

monthly loan and storage payments of $1,580 for a vehicle in British Columbia. He added that amount to his earnings to impute income of $46,460 for Guidelines purposes and, on that basis, ordered the appellant to pay monthly child support of $437 beginning September 1, 2021. He also observed that the appellant's long-term financial prospects were good and that the respondent may "at some point be able to ask the court to impute a higher income to him." [16] Turning to the appellant's application for a retroactive variation in his child support payments, the judge referred to Colucci v. Colucci, 2021 SCC 24, at para. 113, for the summary of considerations relevant to applications for a reduction in child support under s. 17 of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.). The judge recognized that the appellant bore the onus of establishing a material change in circumstances and then turned to consider the two arguments advanced by the respondent: first, that the court has no jurisdiction to retroactively vary child support under an agreement because of the language in s. 148(3) of the FLA; and second, that if it does have such jurisdiction, the appellant had failed to give adequate notice prior to April 2021, when he formally applied for a reduction, such that any retroactive variation should be to that date. [17] Relying on R.M. v. N.M., 2014 BCSC 1755 and Chutter v.

Chutter, 2016 BCSC 2407, the judge concluded that s. 148(3) of the FLA did not permit a court to order a retroactive variation of child support: [29] Notwithstanding the unforeseeable change of circumstances that occurred in this case, I am bound by this court's previous interpretation of the relevant statutory provisions: Hansard Spruce Mills (Re), [1954] 4 D.L.R. 590 (B.C.S.C.). I therefore find that the agreement cannot be varied retroactively and therefore do not need to deal with the question of effective notice. Having concluded he had no jurisdiction to order a retroactive variation, he did not consider whether the appellant had given adequate notice of his intent to apply for a variation for the purpose of deciding the effective date for a retroactive variation order. [18] The judge then turned to the appellant's application to cancel arrears, noting that it was distinct from his application for a retroactive variation. The judge was satisfied that the appellant was currently unable to pay the arrears or any portion of them, and so he ordered a temporary suspension of enforcement of the arrears. He did not cancel the arrears because he could not find that the appellant would never be able to pay. He dismissed the application to cancel arrears without prejudice to the appellant's ability to re-apply, and suspended enforcement of the arrears for one year. [19] The judge

did not consider the appellant's application to retroactively vary spousal support. On Appeal The Appellant's Position [20] The appellant argues the judge erred in law in concluding that s. 148(3) of the FLA does not permit a court to order a retroactive variation of child support. He notes that the judge was not referred to other decisions of the trial court which have held that s. 148(3) does allow a court to retroactively set aside or replace provisions in a separation agreement for child support. He argues that the decision in R.M. was obiter, is wrong, and should not be endorsed by this Court. [21] The appellant also draws an analogy between s. 15.1 of the Divorce Act and s. 148(3) of the FLA, neither of which refer to "retroactive" awards of child support, and argues that the reasoning in D.B.S. v. S.R.G., 2006 SCC 37 provides support for his position on the proper interpretation of the provision. [22] The appellant further argues that the judge's interpretation must be incorrect because it would create an unreasonable and unjust distinction between orders and agreements. It would mean that an order for retroactive variation of child support could be made against a payor parent who wrongfully failed to disclose increases in income where the existing support obligation was pursuant to a court order, but no such variation could be ordered where the support obligation was

contained in a separation agreement. [23] With regard to spousal support, the appellant submits that the judge erred in principle in failing to consider his application for a retroactive variation. He notes that ss. 164(3) to (5) of the FLA allow a court to set aside or replace all or part of an agreement for spousal support. He argues that the change in his financial circumstances, which was unforeseeable, renders the spousal support provisions of the Agreement significantly unfair. He says the judge should have ordered a retroactive variation by terminating his spousal support obligation as of April 1, 2020. [24] On the question of effective notice, which the judge did not consider, the appellant says he immediately advised the respondent of the drastic impact the pandemic restrictions had on his income and business. He argues that this Court should make a finding that he gave effective notice of his inability to make support payments and of his intention to seek a change in his support obligations as of March 2020. [25] The appellant asks this Court to set aside the support terms of the Agreement retroactively as of April 1, 2020, and to replace those terms with an order that he pay $437 per month for child support and no additional amount for spousal support. Alternatively, he asks that the order dismissing his application to retroactively set aside the support provisions

of the Agreement be set aside and that the issues of the amount and timing for varied orders for child and spousal support be remitted to the trial court. The Respondent's Position [26] The respondent argues the judge's interpretation of s. 148(3) of the FLA is correct; it does not authorize a court to retroactively set aside or replace a child support provision in a separation agreement. This accords with the principle that agreements respecting support should be given considerable weight. The respondent emphasizes that if the child support terms were varied retroactively, it would upset the equilibrium achieved by the whole of the Agreement which could become unfair and no longer reflect the best interests of the child. [27] The respondent also argues that it would be wrong in principle to find that s. 148(3) permits retroactive variation of agreements regarding child support. Such a conclusion would permit a payor parent to vary an agreement for child support by merely establishing a material change in circumstances. She submits that this would be contrary to the overall intent of the FLA which is to facilitate the resolution of family disputes through alternate dispute resolution and by agreement. Parties who have negotiated agreements need to be able to trust that the end result will be secure and reliable. The threshold for establishing a material change in circumstances

is much lower than the test of gross unfairness that a payor must meet to cancel arrears. It follows that the judge's interpretation of s. 148(3) must be correct because it requires a parent seeking a retroactive variation of a child support agreement to meet the higher test for cancellation of arrears. [28] The respondent says the judge made no error in dismissing the application for retroactive variation of the spousal support obligation. She argues that the dismissal was appropriate as "there is no way to properly distinguish the amount of spousal support from child support". She submits that the undifferentiated support was agreed to for the benefit of the appellant because his income was likely higher than is reflected by the amounts he was required to pay for support in the Agreement, and also to benefit the respondent as she received all of the support payments tax‑free. She says that the effect of the Agreement was to provide her with lump sum spousal support but it was "engineered" so that the support would be paid over three years. She says it would be unfair to consider spousal support separately as that could result in her having to face reassessment by the Canada Revenue Agency which could treat the support payments as periodic and thus subject to tax. [29] The respondent also notes that the test for setting aside or replacing an agreement for spousal support under

s. 164(5) is whether it is significantly unfair on consideration of the factors set out in subparagraphs (a) to (e). She submits that the appellant is unable to meet the high threshold of significant unfairness. [30] With regard to the appellant's attempt to cancel arrears, the respondent says he cannot show that his change in financial circumstances is long lasting and notes that the judge concluded he would likely be able to increase his income either through employment or a new business venture. [31] With regard to effective notice, the respondent argues that the appellant had an obligation to clearly communicate his change in circumstances and make adequate disclosure of his finances to allow her to independently assess the situation in a meaningful way. She says the appellant failed to provide any meaningful disclosure until he was ordered to do so. Accordingly, the respondent says the date of effective notice of his claim to reduce support payments is April 1, 2021, when he served his formal application for variation. [32] If this Court concludes that the judge erred in his interpretation of s. 148(3) of the FLA, the respondent submits that the matter should be remitted back to the court below to determine whether a retroactive award for child or spousal support should be made and, if so, to determine the date of effective notice. Standard of Review [33] The standard of

review in family law matters generally, and with regard to support orders specifically, is highly deferential. This Court should not intervene unless it finds a material error, a serious misapprehension of the evidence, or an error of law: Hickey v. Hickey, [1999] 2 S.C.R. 518 at paras. 10-12. Of course, the nature of the alleged error is determinative of the standard of review. [34] Here, the first ground of appeal relates to the interpretation of s. 148(3) of the FLA. Questions relating to the interpretation of a statute are questions of law reviewable on a correctness standard: Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 at para. 50; N.E.T. v. British Columbia (Attorney General), 2018 BCCA 380 at para. 23. [35] The second ground deals with the trial judge's failure to address the application for retroactive variation of spousal support. The failure to address a material issue raised by the relevant pleadings and application materials reflects an error of principle and is also reviewable on the correctness standard. Interpretation of s. 148(3) of the FLA [36] The judge concluded he did not have jurisdiction to retroactively vary the child support provided for in the Agreement based on his consideration of R.M. and Chutter and his view that he was bound by those decisions. [37] In R.M., Justice Armstrong concluded that an agreement for child support could not be

varied retroactively based on the difference in wording between s. 148(3) and s. 152, which deals with the variation of child support orders. [38] Section 148(3) provides as follows: (3) On application by a party, the court may set aside or replace with an order made under this Division all or part of an agreement respecting child support if the court would make a different order on consideration of the matters set out in section 150 [determining child support]. [Emphasis added.] [39] Section 152, on the other hand, reads: (1) On application, a court may change, suspend or terminate an order respecting child support, and may do so prospectively or retroactively. [Emphasis added.] [40] At para. 146 of his decision, Justice Armstrong wrote that "[n]othing in s. 148 or s. 150 authorizes the Court to prospectively or retroactively change a child support order. Section 152 allows the Court to make changes to orders retroactively but not to agreements about child support. The same option is not available in s. 148 dealing with agreements about child support". In Chutter, Justice Weatherill adopted Justice Armstrong's reasoning: at paras. 93-94. [41] It is unfortunate that counsel did not refer the judge to a series of decisions in the trial court and the provincial court that declined to follow those decisions and concluded instead that s. 148(3) does permit setting aside or

replacing all or part of an agreement for child support with a retroactive order. [42] The conflicting authorities, which were not provided to the judge, clearly set out the alternative interpretation of s. 148(3). In G.J.L. v. M.J.L., 2017 BCSC 688, Justice Schultes considered the decision of Judge Keyes in T.L.A. v. M.R., 2015 BCPC 151, and concluded that the decision in R.M. about the inability to apply s. 148 retroactively is obiter. He found that s. 148(3) does permit variation of child support agreements and, accordingly, ordered a retroactive variation. [43] The decision in T.L.A. is well-reasoned. Judge Keyes observed that the judge in R.M. concluded that the claimant had not met the burden of establishing that a "different order" should be made for child support, such that the decision on the jurisdiction of the court to set aside or replace the child support term is obiter. She noted that the judge referred to no authority for the proposition that the section could not be applied retroactively and that s. 148(3) "makes no mention of having prospective or retroactive effect nor does it explicitly preclude either one": at para.

19. She also noted that, under the former Family Relations Act, R.S.B.C. 1996, c. 128, "no distinction was made between agreements or orders as far as variation applications were concerned": at para. 21. [44] Judge Keyes considered statutory interpretation principles and the Family Law Act Transition Guide. She found that it was unlikely that the legislative intent was to "penalize those parties bound by child support agreements by prohibiting retroactive variation, while permitting such applications to be made with respect to spousal support agreements": at para.

25. Ultimately, she concluded that s. 148(3) should not be construed as having prospective application only. [45] In Wood v. Wood, 2021 BCSC 1664, a decision released on the same date as the decision under appeal, Justice Milman considered the conflicting cases and concluded that the court had jurisdiction under s. 148(3) to retroactively vary an agreement for child support. Other courts have reached the same conclusion including Isacson v. Isacson, 2014 BCSC 2351 and M.L.G. v. K.G.G., 2021 BCSC 682, decisions that predate the decision in this case. M.L.G. was recently affirmed in Gauthier v. Gauthier, 2022 BCCA 193. In Gauthier, this Court was not asked to consider the statutory interpretation of s. 148(3) and the provision was presumed to permit retroactive variation. In Wood, Justice Milman noted that s. 148(3) "expressly empowered [the court] to replace the agreement with whatever order the court would make under s. 150 ". [46] As this is the first time this issue has been raised in this Court, we must consider which interpretation is correct. I begin by repeating the modern approach to statutory interpretation, which the Supreme Court of Canada set out in Rizzo & Rizzo Shoes Ltd, (Re), [1998] 1 S.C.R. 27 at para. 21: Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense

harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. [47] As noted above, s. 152 expressly provides that a child support order can be modified retroactively while this wording is absent in s. 148(3). It is presumed that, in a statute, "the same words have the same meaning and different words have different meanings": Ruth Sullivan, Sullivan on the Construction of Statutes, 6th ed. (Markham: LexisNexis, 2014) at 217. Where a word is used in one provision and not in another, it can be presumed that the word was not intended to be read in to the provision in which it is absent. However, the absence of the term "retroactively" from s. 148(3) does not end the analysis. [48] The starting point is to read s. 148(3) in its grammatical and ordinary sense. The provision does not permit modification of the words of an agreement, but does permit a court to set aside or replace the contents of a child support agreement with an order made under Division 2, the Child Support section of Part 7 of the FLA. Division 2 includes ss. 147-152. There is nothing in the plain wording of s. 148(3) to suggest that the court has no ability to set aside or replace the terms of a child support agreement with an order that has retroactive effect. Contrary to the finding in R.M., and as noted in T.L.A., there is nothing in s. 148(3) to suggest that once a court

determines that it should replace a provision of an agreement for child support with an order under the Act, it is nonetheless limited to doing so only prospectively. [49] When considering what order can be made in place of a term in a child support agreement that is to be set aside or replaced, the relevant provisions of Division 2 are ss. 149 and 150. Section 149, reads in part: (1) Subject to subsection (3), on application by a person referred to in subsection (2), a court may make an order requiring a child's parent or guardian to pay child support to a designated person. [50] Again, there is nothing in s. 149 limiting the ability of a court to make a child support order with retroactive effect. In addition, s. 170 of the FLA, which is contained in the General section of Part 7, explicitly authorizes the making of a retroactive child support order. Pursuant to s. 170(b), a court may order that "child support or spousal support be paid respecting any period of time before the date the application for the order is made": see also Sampley v. Burns, 2018 BCCA 178 at paras. 46-47. Section 170(b) applies to Division 2. [51] Section 150 of the FLA sets out the proper approach a court must take in fixing the quantum of a child support order. In general, the amount must be determined in accordance with the Guidelines (subsection (1)). However, the balance of s. 150 provides that the

court may order a different amount than that required by the Guidelines if the parties "have an agreement respecting child support" and, at subsection (4), provides that it may do so if satisfied that: (a) an agreement or order respecting the financial duties of the parents or guardians or the division or transfer of property, other than an agreement respecting child support, benefits the child directly or indirectly, or that special provisions have otherwise been made for the benefit of the child, and (b) applying the child support guidelines would be inequitable on consideration of the agreement, order or special provisions. [52] To summarize, giving a plain reading to the provisions, a party may apply under s. 148(3) of the FLA to have the court set aside or replace a provision of a child support agreement with an order under Division 2. Where a judge makes such an order under s. 149, the order may provide, pursuant to s. 170(b), that child support be paid respecting any period of time before the date of the application. In making such an order, the court may, in accordance with s. 150, order an amount of child support that is different from the amount set out in the Guidelines where the parties have entered into a child support agreement. When considered as a whole, the statutory scheme clearly permits a judge to make a retroactive variation to an agreement for child

support by setting aside or replacing, in whole or in part, a term of the agreement with an order pursuant to s. 150. [53] The respondent suggests that such an interpretation does not align with the intention of the legislature to encourage parties to resolve their disputes through agreement, and that it compromises the parties' need for certainty and finality. However, as I will explain, the legislature has provided clear commentary on its intentions in regards to the objectives of child support agreements. In doing so, it has expressed its intent that child support agreements be varied more easily than spousal support agreements in order to reflect the greater need for flexibility in the context of child support. This is set out in commentary from the Ministry of Justice in the Family Law Act Transition Guide (Vancouver: Continuing Legal Education Society of British Columbia, 2014). While the statements of the Ministry are not determinative, they have persuasive force: Sullivan at 710-712. [54] The Ministry of Justice outlined its vision for the application of s. 148(3) at 3‑212 of the Transition Guide: The test for changing a child support agreement in court (by setting it aside and replacing it with an order) approximates the test for changing a child support order. Unlike property or spousal support agreements where certainty and finality are more important objectives,

child support agreements must be able to be easily changed as the child's and parents' circumstances and incomes change. [55] The test for changing a child support order, which the test for changing a child support agreement is meant to "approximate", is set out in s. 152(2) of the FLA: (2) Before making an order under subsection (1), the court must be satisfied that at least one of the following exists, and take it into consideration: (a) a change in circumstances, as provided for in the child support guidelines, has occurred since the order respecting child support was made; (b) evidence of a substantial nature that was not available during the previous hearing has become available; (c) evidence of a lack of financial disclosure by a party was discovered after the last order was made. [56] The above is in contrast with the Ministry's comments on s. 164 of the FLA, which governs the setting aside of agreements respecting spousal support and sets a higher threshold for intervention, at 3-227: This section restricts the ability for judges to set aside spousal support agreements in order to promote finality and certainty, while also allowing for some flexibility to adjust spousal support amounts where circumstances have changed. First, a spousal support agreement may be set aside if there was a procedural defect in the creation of the agreement, such as where there was a failure

to disclose property, or one spouse took improper advantage of the other's vulnerability. Second, if the agreement was procedurally fair when it was entered into, then the court may only set aside an agreement on substantive grounds in the limited circumstances where it would be substantially unfair. [Emphasis added.] [57] It is also noteworthy that the Ministry has indicated that it expressly provided for changes to child support orders in part because "payors sometimes experienced hardship where their income was reduced but they could not get their order changed in a timely manner and, therefore, were in arrears of child support through no fault of their own. Retroactive variation will allow for these situations to be appropriately remedied": at 3-216. [58] An interpretation of s. 148(3) that permits what is effectively the retroactive variation of an agreement for child support aligns with the intention of the legislature that child support agreements be variable in the face of changing circumstances for parent and child. While courts have found that agreements between parents "should be given considerable weight" (D.B.S. at para. 78), the legislature has made it clear that concerns around certainty and finality hold less weight in the context of child support agreements. [59] The respondent also argues that permitting a retroactive variation of the Agreement would allow the

appellant to face the lower threshold of a material change in circumstances in order to reduce support, rather than the higher threshold for the cancellation or reduction of arrears. I do not find this submission persuasive. [60] Again, the Ministry has made comments directly dealing with this question. In its comments on s. 174, the provision dealing with reducing or cancelling arrears owing under an agreement or order respecting child or spousal support, the Ministry addresses the lower standard for retroactive variations. These comments are set out at 3-239-240 of the Transition Guide: The retention of a more stringent standard for cancelling or reducing arrears reflects the fact that these liabilities result from a party's non-compliance with an order, such as a refusal to pay the amount determined under the Child Support Guidelines. Where a payor has a bona fide reason for not paying the amount provided in the order, such as where their employment was reduced, they may seek a variation of the order from the court under s. 167 [dealing with the variation of spousal support orders]. In this case, the court may, if appropriate, make a reduction of support retroactive to avoid arrears accruing. [61] Although the Ministry's comments refer only to s. 167 of the Act, s. 174, by its express terms, applies to both child and spousal support. Accordingly, I am of the view that these

comments apply equally to s. 148 of the Act. [62] Finally, I should comment on the respondent's argument that interpreting s. 148(3) to allow for retroactive variation of child support orders risks upsetting the equilibrium reached through the terms of the Agreement and ignores the principle that agreements reached by parents should be given considerable weight. These arguments were considered by the Court in D.B.S., which acknowledged those concerns but found that a variation could be ordered if the statutory regime permits it and circumstances have changed in a material way: at para. 78. [63] I have concluded that the statutory scheme here clearly permits retroactive variation of a child support agreement. I note as well that the provisions of s. 150(4) are intended to allow a court to consider the child support provisions in an agreement along with the direct or indirect benefits obtained by the agreement and order an amount different from that required by the Guidelines. It can do so where adequate provisions for support have been made and it would not be inequitable. In other words, the court is given the ability to consider the whole of the agreement arrived at by the parties as well as the surrounding circumstances in deciding whether to order a variation. This would necessarily include considering whether the equilibrium would be upset by variation of the child support

term in isolation. [64] In summary, I am of the view that s. 148(3) does permit a court to replace all or part of an agreement for child support with an order under Division 2 of the FLA that has retroactive application. [65] It follows that I would allow the appeal on this ground and set aside the order of the chambers judge. The question then arising is whether this Court should remit the matter to the trial court, or make an order with retroactive effect that would set aside or replace part or all of the child support provisions in the Agreement. If the latter course is followed, it would be necessary to determine both the amount of support and the effective date of such an order. [66] I am of the view that the proper course to follow is to remit this matter back to the trial court. We do not have the benefit of any analysis by the judge of the factors under s. 150(4) that would need to be considered in deciding whether to order an amount of support different from that set out in the Guidelines. Further, we do not have the benefit of any finding as to whether the appellant gave effective notice of his intention to seek variation of the support payments, nor as to the appropriate date to use for making an order with retroactive effect. In addition, as I explain below, similar difficulties arise with respect to the appellant's application to set aside or replace the spousal

support terms of the Agreement. Failure to Consider the Spousal Support Application [67] It would appear that the judge did not consider spousal support because the respondent indicated at the hearing of the application that she was not asking for continued payments of $10,000 per month "or for continued spousal support." Although the reasons do not deal with the appellant's application to vary or replace the spousal support provisions in the Agreement with an order retroactive to April 2020, the order dismissed the application "for the retroactive variation of the Separation Agreement". It is clear, following the parties' reappearance before the judge subsequent to the release of his reasons for judgment, that this term applies to the applications to vary both child and spousal support. The judge also dismissed the application for cancellation of arrears of child and spousal support, but did so without prejudice to any future application, and stayed enforcement of arrears for one year. The effect of the order is that, although the applicant can reset his application to cancel arrears of spousal support, he is not able to advance his application to set aside or replace the spousal support provisions of the Agreement. [68] The appellant submits that the judge erred in law by ordering the dismissal of his application without considering his argument to vary the spousal support

provision in the Agreement when that issue was directly raised in his first notice of application, by the materials before the court and in argument. He also notes that the FLA specifically authorizes a court to make the order he sought. [69] As noted above, s. 164 of the FLA permits a spouse to apply to set aside or replace all or part of an agreement respecting spousal support with an order under Division 4 (Spousal Support). Section 164(3), which has no application in this case, allows such an order to be made where the circumstances under which the agreement was negotiated are found to have been unfair to a spouse either through lack of disclosure or through oppression, pressure or another vulnerability. However, the appellant's position in the court below, and on appeal, is that the spousal support provisions should be set aside or replaced pursuant to subsection (5) which provides: (5) despite subsection (3), the court may set aside or replace with an order made under this Division all or part of an agreement if satisfied that none of the circumstances described in that subsection existed when the parties entered into the agreement but that the agreement is significantly unfair on consideration of the following: (a) the length of time that has passed since the agreement was made; (b) any changes, since the agreement was made, in the condition, means, needs or other

circumstances of a spouse; (c) the intention of the spouses, in making the agreement, to achieve certainty; (d) the degree to which the spouses relied on the terms of the agreement; (e) the degree to which the agreement meets the objectives set out in section 161. [70] It is readily seen that the basis for the appellant's application is his allegation of a material change in circumstances, invoking subsection (5)(b). We know from the judge's reasons on child support that he found the devastating impact of the pandemic on the appellant's business to constitute a material change of circumstances. In spite of this conclusion, the judge did not consider whether that finding rendered the spousal support provisions in the Agreement significantly unfair in their application to the current circumstances. [71] The arguments advanced by the respondent in reply invoked some or all of the other provisions of s. 164(5) and directly challenged the assertion that the material change of circumstances rendered the Agreement significantly unfair. As the judge dismissed the appellant's application without considering whether to order a retroactive reduction in spousal support, he did not consider the respondent's contrary position on the issues raised by the application. [72] Although the judge's decision could be seen to be practical given the respondent's position at the hearing of the

application, I am of the view that he erred in law and principle by dismissing the application without consideration and without providing reasons for the order made. [73] In Donald J.M. Brown and David Fairlie, Civil Appeals (Toronto: Thomson Reuters, 2022) (loose-leaf updated 2022, rel 2), the authors describe the failure to deal with a material issue as an error in the decision-making process: 13:38 Not determining an issue presented for decision by the parties, typically defined by the pleadings, is completely inconsistent with adjudicative decision-making. Such an error can arise for diverse reasons including oversight, misapprehension of the issues, an erroneous conclusion on jurisdiction or simply failing to come to grips with a matter. The authors note that if this happens following a trial, the nature of the error is such that "a new trial is almost always the appropriate remedy": s. 13.39. [74] Similar circumstances were considered in N.T. v. R.W.P., 2011 NLCA 47, in which the trial judge ruled on a mobility application, the main issue before the Court, but did not consider the issue of retroactive support that had also been brought by the mother. She appealed the judge's decision on mobility and his failure to deal with the claim for retroactive child support. While the Court found that the trial judge had erred in failing to deal with the issue of retroactive child

support, it rejected the appellant's request to have it consider the matter. In referring that issue back to the trial court, it concluded that the evidence and arguments surrounding the claim should be dealt with by the trier of first instance: at paras. 11-12. [75] I am of the view that the same kind of error was made here, and that the preferable course is to remit the appellant's application to set aside or replace the spousal support provision in the Agreement to the trial court. As with the application to set aside or vary the child support provision, we do not have the benefit of a consideration of the evidence and analysis of the issues raised. [76] There are additional concerns with the support provisions in the Agreement that, in my view, make it preferable to have this matter considered initially in the lower court. One of the challenges presented by the unusual circumstances of this case is that the Agreement obliged the appellant to pay a single amount "on account of child and spousal support". The difficulties with these provisions are readily apparent. [77] The first issue is the difficulty that arises for the application of the Guidelines and of the Spousal Support Advisory Guidelines [SSAG]. The specific quantum of the monthly payments for child and spousal support is not readily apparent from the Agreement. The problem posed by the failure to specify the

amount of each category of support is compounded by the absence of any statement in the Agreement of the appellant's annual income. [78] Dealing first with child support, it is immediately evident that this deficiency makes it difficult for a court to carry out the required analysis for a variation application. Indeed, the terms of the Agreement tend to hinder the objectives of the Guidelines. The objectives include the establishment of a fair standard of support for children (s. 1(a)) by tying support to the income of the parents (s. 3(1)). The objectives also include the reduction of conflict and tension between spouses by making the calculation of child support more objective (s. 1(b)); which has the benefit of improving the efficiency of the legal process (s. 1(c)). The failure of the Agreement to specify the actual amount payable for child support increases the potential for disputes and litigation when a variation application (or an application to set aside or replace a term in an agreement) is brought. [79] Turning to spousal support, the SSAG are also based on the annual incomes of the parties. The objectives behind the SSAG are similar to those for the Guidelines. Accordingly, the failure to set out the amount of the required periodic payment for spousal support in the Agreement creates the same difficulties for the parties and the court when an application to vary is

brought. [80] The parties did not raise any issue regarding the use of an undifferentiated figure for child and spousal support in separation agreements. Accordingly, we received no argument on this question. However, it is my observation that such a practice should be discouraged. It creates unnecessary difficulties for application of the Guidelines and the SSAG and has the potential to increase conflict between spouses and decrease the efficiency of the legal process. That is particularly the situation for child support provisions where, as in this case, the child is young at the time the agreement is made and the agreement is expected to govern the support obligation and the relationship between the parents for many years. [81] The second difficulty arising from the undifferentiated amount relates to the question of taxation. As a general rule, spousal support payments are taxable in the hands of the recipient. Residents of Canada who receive spousal support payments from residents of another country are still required to include those support payments in their income for tax purposes. However, in some cases, tax agreements between Canada and the other country may permit the recipient to claim a deduction for the support payments received (if the payor spouse is required to pay tax on the full amount of their income). In either case, the recipient is required to indicate the

amount received for spousal support on their income tax returns, which necessarily requires that they know what the amount is. Where, as here, the amount is blended with child support and no indication is given of the amount dedicated to spousal support, the recipient will not be able to determine the appropriate amount to declare for taxation purposes. [82] In summary, the terms of the Agreement import considerable complexity into the appellant's application to set aside or replace the spousal support provision of the Agreement. I am of the view that this Court should not embark on the analysis of the issues that may arise in the application of s. 164(5) of the FLA to these circumstances for the first time on this appeal. Disposition [83] I would allow the appeal and remit the appellant's applications to set aside or replace the child and spousal support provisions in the Agreement to the trial court. "The Honourable Mr. Justice Butler" I AGREE: "The Honourable Mr. Justice Fitch" I AGREE: "The Honourable Mr. Justice Marchand"