In a recent decision, Ontario’s Court of Appeal discussed a court’s duty to ensure that “reasonable arrangements” are made for child support under the Divorce Act after a creditor attempted to obtain priority over a father’s child support obligations.
Court Ordered Proceeds of Matrimonial Home to be Held for Future Child Support
The parents had been married and had one child, who was 11 years old at the trial. The father did not pay child support and failed to show much interest in the child after the parties’ separation in 2017. He did not attend the parties’ divorce proceeding in 2018 and did not provide any financial disclosure. As a result, the trial judge used bank deposit slips to impute the father’s income to determine monthly child and spousal support.
The parties’ divorce order granted the mother control over the sale of the jointly-held matrimonial home. The net proceeds of the sale were to be divided into two equal shares. Any outstanding child and spousal support would be deducted from the father’s share of the sale proceeds. The order also required any remaining balance of the father’s share to be held in trust as security for his future support obligations.
Writ of Execution on Discovered on Home Title During Sale
Upon the sale of the home in 2018, the net proceeds of the same were divided between the parties. In accordance with the divorce order, eight months of spousal and child support arrears were to be deducted from the father’s share. The balance of his share was to be placed in trust per the divorce order.
At the time of the sale, a writ of execution was discovered on the home’s title. The writ was based on a judgment against the father for damages arising from a motor vehicle accident.
After the sale of the home, the individual who registered the writ of execution against the title applied to the court for execution of the judgment. He sought a declaration that the judgment would be paid from the balance of the father’s share of the sale proceeds.
The application judge dismissed the creditor’s application based on the requirements of the divorce order. The judge noted the trust containing the balance of the father’s share of the sale proceeds took priority over the creditor’s judgment.
The creditor appealed the decision. At the time of the appeal, the father had not met any of his support obligations and owed over $140,000 in support payments.
Creditor Argued His Judgment Should Take Priority over Support Order
The creditor argued on appeal that he was entitled to the full amount of the father’s remaining share under the Creditors’ Relief Act. The Act, he stated, only gave priority to lump-sum support orders and arrears for periodic payments. He argued that after payment had been made to clear up the support payment arrears, he was entitled to collect on the judgment. He asked the court to set aside the divorce order to the extent that it interfered with his rights as a judgment creditor under the Creditors’ Relief Act.
The mother challenged the court’s jurisdiction to vary a divorce order outside of divorce proceedings. She also stated that the Creditors’ Relief Act and the writ of execution did not create any substantive right to the sale proceeds.
Court of Appeal Considered Duty to Ensure Reasonable Arrangement for Child
The Court of Appeal reviewed section 11 of the Divorce Act, which creates a duty on the part of the court to satisfy itself that “reasonable arrangements” have been made for the children of a marriage. It found that the trial judge acted pursuant to this duty in granting a divorce order that secured the sale proceeds for child support obligations.
In reviewing the language of the divorce order, the Court of Appeal noted there was no mention of using the sale proceeds to satisfy outstanding debts. The court acknowledged that the trial judge would likely have addressed the writ of execution in the divorce order if the writ had been discovered by that time.
Given that the trial judge was unaware of the writ when the divorce order was granted, the Court of Appeal found the discovery of the writ was a material change in circumstances. The court ruled that the application judge should have referred the matter back to the trial judge who granted the divorce order.
The Court of Appeal noted that the creditor did not ask for the divorce order to be varied. However, given the court’s duty to ensure adequate arrangements for support of the child under the Divorce Act, the court needed to ensure the case did not result in conflicting court orders.
As a result, the court allowed the appeal in part and ordered the matter be referred to the trial judge to consider the material change in circumstances (i.e. the writ of execution). The creditor subsequently sought leave to appeal to the Supreme Court of Canada, which was dismissed.
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