Family Law

Financial Disclosure in Alberta Family Law Matters

January 17, 2024

photo of person using calculator to represent calculation of financial disclosure in family law matters

The importance of financial disclosure cannot be overstated, especially when it comes to family law disputes. As families navigate the challenging terrain of divorce, spousal support, child custody, and property division, the clarity and accuracy of financial information is the foundation upon which fair and just outcomes are built. In essence, financial disclosure provides each party with a comprehensive understanding of the financial landscape before making crucial decisions that will impact their future.

A recent decision from the Alberta Court of Appeal clarifies the obligation for financial disclosure in family law proceedings, and illustrates the complexity that results when a person is alleged to be manipulating their income to reduce their financial obligations.

Why is Financial Disclosure Important?

The significance of financial transparency in family law extends beyond a mere procedural requirement. By openly sharing financial details, courts are able to make decisions that reflect the true economic circumstances of both parties involved.

One of the primary objectives of financial disclosure is to provide a clear picture of each party’s income, assets, debts, and expenses. Without this crucial foundation, the risk of imbalanced settlements and ongoing litigation may leave individuals and their families in a state of prolonged uncertainty. Furthermore, financial disclosure serves as a catalyst for informed decision-making, helping create a more stable foundation during the transitional period.

Calculations for Child Support and Misrepresentation

You can apply to the Court requesting to vary the amount of court-ordered child support payments when there is a change in circumstances. Some commonly recognized examples of a change in circumstances can include new costs to be paid (such as special expenses) or when a person’s employment changes. In today’s economy, it is common for income amounts to fluctuate. As such, changes to an existing child support order may be necessary to avoid undue financial hardship, especially when maintenance agencies are involved.

In some cases, if it is determined that one party is intentionally earning less to avoid their support obligations, the court may impute income in order to calculate appropriate child support payments.

Father’s Reported Income Drops Significantly After Mother Commences Claim to Vary Child Support

In the case of Elhert v Sailer, 2023 ABCA 371, the parties, who were never married, agreed to terms for the payment of child support for their child by way of Consent Order, based on the respondent father’s reported annual income of approximately $100,000. The parties were required to exchange income tax records annually. In 2019, the applicant mother commenced proceedings to vary child support after the father failed to provide financial adequate disclosure. The father provided his income tax records for the four years prior, which showed an annual income of $200,000 for two years, and over $300,000 during the other years.

After the mother began this claim, the father’s reported income dropped to under $100,000, as he claimed that his income changed based on how the family business was doing. He was actively involved as a key figure in this business.

Father Receives “Sizeable” Distribution From Family Trust

The father then disclosed that he received income as a beneficiary of a Trust created by his grandfather. This Trust provided income for members of his family through various operations of the family business. The father initially refused to provide the financial statements for the Trust, stating that he had “the right to view [the] financial statements but not to provide them to others.” However, he was ordered to provide the mother with such documents in February 2022.

According to a letter from the Trust’s accountant, “sizeable distributions” from the Trust in 2016 and 2018 were made to the father and his two brothers from “dividend income received from Southland Industries Inc.”, which were the only income-generating asset of the Trust. In October 2022, the mother applied to the Court for the disclosure of the full financial statements of all related businesses.

Chambers Judge Finds Father Did Not Have “Control” Over Companies

Arguments were heard from both sides, with the mother stating that the father had “control” of such businesses within the meaning of the Alberta Child Support Guidelines. In opposition, the father argued that he did not have control because he was not an owner, shareholder, or director of any of the companies. Instead, these were in the hands of his father, the director. The Trust was also included as a party in the lawsuit and put forth a legal argument that disclosure was not necessary.

The chambers judge hearing the application did not agree that the father had “control” over the companies, and dismissed the application for financial disclosure.

Mother Appeals Decision

The mother appealed the decision on the basis that the refusal to order disclosure was an error of law contrary to the Child Support Guidelines. The issue of whether the mother had the right to request to change the previous order, which stated that no other applications should be heard “except for emergencies” was also raised.

The Court of Appeal noted that the manipulation of one parent’s income could lead to situations of fundamental unfairness when it comes to child support, which is the right of the child. It went on to state that the interpretation of the law should ensure a fair standard of support for all children.

Appeal Allowed; Trust Directed to Produce “Relevant and Material” Financial Statements

After reviewing the basic principles of disclosure under the Alberta Rules of Court, the Court determined that the father made “certain misstatements” at the initial hearing of the application. There was a reasonable expectation that disclosure of the financial statements for the relevant companies would show whether income has been retained. The father indicated that his income had not been improperly reduced, but rather “the fluctuation in his employment income [is] the result of industry fluctuations and the profitability of his employer”.

The Court concluded that the requested financial records would be “relevant and material” and held that the “person in control of the records might be required to produce them at trial.” While the Court accepted that the financial records could not be obtained from the father himself, the circumstances were “appropriate to order the Trust to produce the requested records.” The Court also found that the father’s contention that the consent order precluded the underlying application was incorrect as it “only applications that were brought “without leave of the Court”.”

Accordingly, the Court allowed the mother’s appeal and directed the Trust to produce the financial statements of each of the companies in question.

The Lawyers at DBB Law in Calgary Provide Clients With Exceptional Legal Advice and Representation in Family Law Matters

The compassionate Calgary family law lawyers at DBB Law support clients throughout their case, from separation and divorce to property division and support claims. We work to proactively protect the interests of our clients and their families and take steps to explore early dispute resolution and reduce conflict as much as possible. Given our broad range of experience, our lawyers can help clients address issues arising from family law, including property disputes and estate issues. To learn how we can assist you, please contact us online or by phone at 403-265-7777 to schedule a confidential consultation with a member of our team.

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