Feb 13, 2016

Undue Hardship is an Exceptional Remedy

CWT v KAT, 2014 ABQB 719 (CanLII)

Undue hardship claims remain an exceptional remedy, only available where the payor parent shows undue hardship and that he/she has a lower household standard of living than the recipient parent. The goal of stability demands that the Guidelines be followed except in extraordinary circumstances.

The law of undue hardship was reviewed by the Court in two recent decisions. Justice Read in CWT v. KAT, 2014 ABQB 719 set out the law as follows:

[24] The principles which govern an undue hardship claim are set out in s. 10 of the Child support Guidelines which provides:

10.(1) On either spouse’s application, a court may award an amount of child support that is different from the amount determined under any of sections 3 to 5 8 or 9 if the court finds that the spouse making the request, or a child in respect of whom the request is made, would otherwise suffer undue hardship.

(2) Circumstances that may cause a spouse or child to suffer undue hardship include the following:

(a) the spouse has responsibility for an unusually high level of debt reasonably incurred to support the spouses and their children prior to the separation or to earn a living;

(b) the spouse has unusually high expenses in relation to exercising access to a child;

(c) the spouse has a legal duty under a judgment, order or written separation agreement to support any person;

(d) the spouse has a legal duty to support a child, other than a child of the marriage, who is

(i) under the age of majority, or

(ii) the age of majority or over but is unable, by reason of illness, disability or other cause, to obtain the necessaries of life; and

(e) the spouse has a legal duty to support any person who is unable to obtain the necessaries of life due to an illness or disability.

(3) Despite a determination of undue hardship under subsection (1), an application under that subsection must be denied by the court if it is of the opinion that the household of the spouse who claims undue hardship would, after determining the amount of child support under any of sections 3 to 5, 8 or 9, have a higher standard of living than the household of the other spouse.

(4) In comparing standards of living for the purpose of subsection (3), the court may use the comparison of household standards of living test set out in Schedule II.

(5) Where the court awards a different amount of child support under subsection (1), it may specify, in the child support order, a reasonable time for the satisfaction of any obligation arising from circumstances that cause undue hardship and the amount payable at the end of that time.

(6) Where the court makes a child support order in a different amount under this section, it must record its reasons for doing so.

[25] In Hanmore v. Hanmore 2000 ABCA 57, at para. 9 (leave to appeal denied [2000] SCCA No. 182), the Alberta Court of Appeal established the test for undue hardship claims and offered some helpful comments.

[26] Briefly, the Court in Hanmore concluded that where a claim of undue hardship is made under s. 10 of the Guidelines, there is a two stage test:

1. The applicant must prove specific facts establishing undue hardship. Section 10(2) provides a list of potential circumstances but there may be more.

2. If undue hardship is established, the applicant must show that the applicant’s household would enjoy a lower standard of living than the household of the recipient parent if child support was not reduced.

[27] Even where a lower standard of living is found in the payor’s household the Court retains a discretion to refuse to reduce the guideline amounts.

[28] The Court noted that the objectives of the Guidelines are found is s. 1. The Guidelines are to ensure that families in similar circumstances are treated the same and to ensure children benefit from the support of both parents following separation. Too broad a definition of undue hardship would defeat those goals and as such, undue hardship should only be recognized in exceptional circumstances (Hanmore at para. 10). These goals must be in mind when considering an application for undue hardship.

[29] In coming to its decision, the Court in Hanmore reviewed a number of cases concluding that “the burden of establishing a claim of undue hardship is a heavy one…the hardship must be more than awkward or inconvenient. It must be exceptional, excessive, or disproportionate in the circumstances”: Hanmore at para. 17. Notably relevant to the present case, the Court also found that “obligations to a new family” or a “lower standard of living than the payee spouse” alone, are not sufficient to establish undue hardship – specific evidence of undue hardship is required: Hanmore at para. 17.

In Hanmore, the Court of Appeal overturned the decision of the Chambers Judge. The Chambers Judge took judicial notice that to cost of raising a child was $750.00 per month and found that the father and his new family (four persons) could not live on a net income of $24,000.00. The Respondent argued that the father had an obligation to support his new wife, who did not work, and their two children, and the father had a limited income. No reason was given as to why the father’s new spouse was not employed. No specific hardship was identified. No reason given as to why the statutory amount created an undue hardship rather than an inconvenience or difficulty. No evidence was called as to how much the father’s new family needed to live.

CWT involved two related claims. In the first claim, CWT v. CO, Justice Read found the father’s income for child support purposes ($7,000) to be substantially higher than the amount he claimed ($4,946), and further that his monthly budget was grossly inflated to show a deficit that included MEP payments and penalties and RRSP contributions. The application for undue hardship was refused.

In the second claim, CWT v. KAT, Judge Read varied a previous hardship order in favour of the mother. Justice Read found that the mother’s financial circumstances had deteriorated in the past year; she had incurred $12,000 in debt, not counting legal costs and over $40,000 in consumer debt. At the same time, the father’s financial circumstances had improved. He had not had to draw on his line of credit, he regularly paid off his credit card debt each month, and his RRSPs and other investments had increased in value. The mother’s income was $44,225 (2013) and projected to be $85,434 (2014). The father’s income was $100,578.60 (2013) and projected to be $97,349 (2014). The mother’s budget was not extravagant and she had to borrow from her mother to make ends meet.

In the other recent decision, St Laurent v. St Laurent, 2014 ABQB 519, Justice Graesser granted the father’s application for undue hardship for special expenses but not for base support. Under the first step, Justice Graesser found that after paying support to the mother ($1,823.43), and his obligation for another child ($250.00), the father’s net income left him with virtually nothing left for vehicle costs and insurance. Room and board were found to be $900.00. Net income was $3,412.44, less child support to the mother and support for the other child, left the father with $1,239.01. Thus, there was evidence of undue hardship. Under the second step, Justice Graesser found that after paying the mother, the father’s income of $1,589.01 was about the same as the AISH amount of $1,588.00 per month. He took judicial notice of AISH as a minimum an adult in Alberta might be expected to be able to live on. He went on to calculate ratios, and found the father’s ratio to be 1.8366 and 1.554 after child support, and the mother’s ratio to be 2.406. The mother also received the Child Tax Credit, which when factored brought her ratio to over 2.9. As a result, Justice Graesser took judicial notice of the poverty line in Canada for 2009 and found the father to be below it and the mother to be above it. However, in the result, Justice Graesser refused to adjust s. 3s or arrears of base support. Instead, he found that the $900 for child care expenses to be within his discretion, referring to Moreau J. in Middleton v. MacPherson, [1997] AJ No. 614 (QB), and he reduced it to $456.00 from $756.00. He found that the father’s s. 7 obligation was 66%, so for the $900 child care expense, he reduced the father’s obligation to 33% ($300). For all other s. 7 expenses, the father’ s obligation remained 66%.