June 2012

Determining child support based on retained earnings

By Étienne Ruel Lawyer

On November 8, 2011, the Honourable Claudette Picard, S.C.J., ordered a father to pay $679/month in child support to the mother of his two children. To determine the amount of the payments, Justice Picard had to establish the father's income. She therefore considered his employment income, which amounted to $51 157, and the net profits of his company, which added up to $119 484, bringing the father's total income to $187 617. An appeal was filed.

On March 22, 2012, Justices François Pelletier, Marie-France Bich and Jacques R. Fournier of the Court of Appeal allowed the appeal and lowered the amount of the child support payments to $439.04/month, ruling that Justice Picard had made a mistake in applying the total net profits of the father's business.

Seeing as the father worked some 20 hours/week at the business in addition to his regular job, the Court of Appeal deemed that it was more appropriate to consider only part of the company's net profits ($50 000/year, in this case) since profits vary from year to year and are needed to ensure the proper functioning of the business.

The Court of Appeal's ruling is surprising, since it considers approximately 42% of the net profits in addition to the father's employment income while, in the vast majority of cases, the courts grant, on average, 15 to 20% of the business income.

Is a new trend developing? Only time will tell.