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Should a Spouse Who Refuses to Disclose Income Be Permitted to Appeal Court’s Best-Guess Estimate?

Should a Spouse Who Refuses to Disclose Income Be Permitted to Appeal Court’s Best-Guess Estimate?

In three different recent Appeal cases, from three different provinces, one of the spouses in a matrimonial litigation had refused or failed to provide the required financial information that would allow a trial court to determine income for the purposes of making an order for spousal support or child support. In each case the trial court – as it was entitled to do – had gone on to estimate that spouse’s income, using the information it had available. And in each case, the spouse had later gone on to appeal those court-imposed estimates.

The question for each of the three Courts of Appeal was whether in such circumstances the evasive spouse should be entitled to having that income estimate overturned on appeal.

Not surprisingly, the Courts’ answer in all three cases was “No.”

In the B.C. case of Poursadeghian v. Hashemi-Dahaj, the husband failed to provide the required financial information respecting his income. The trial court imputed an income of $75,000, a finding that the father later appealed. The B.C. Court of Appeal pointed out that under the federal Child Support Guidelines there is specific provision made for imputing income in situations where (as here) a spouse has “failed to provide information when under a legal obligation to do so.”

Specifically, in rejecting the husband’s appeal the Court wrote:

In essence the defendant argues that the judge’s decision to impute income to him of $75,000 does not reflect reality. In my view, this assertion cannot assist him.

Under s. 21(a) of the Guidelines a spouse is required, among other things, to provide “a copy of every personal income tax return … for each of the three most recent taxation years”. Where a spouse fails to comply with this obligation s. 23 permits the court to “draw an adverse inference against the spouse who failed to comply and impute income … in such amount as it considers appropriate”.

The judge directed the defendant to provide his income tax returns and affidavits that might support his position but the defendant failed to comply with this direction. He was thus in breach of his duty to disclose under the Guidelines, and in non-compliance with the court’s order. This permitted the judge to impute income to the defendant under ss. 19 and 23 of the Guidelines.

In the absence of complete income tax returns and other financial information of a spouse the court must look to other evidence, including circumstantial evidence, for the purpose of imputing income…
The judge relied on the little evidence available concerning the defendant’s ability to obtain a mortgage and his shareholding in Lucky 9 [corporation], to impute an income of $75,000. She did not accept the explanation offered for the defendant’s shareholding in Lucky 9 or for the basis on which he obtained a mortgage on his home.

There was some evidence to support that conclusion and the judge was permitted to draw an adverse inference against the defendant because of his inadequate disclosure. The defendant cannot be heard to dispute the level of income attributed to him, nor permitted to escape his support obligations because of his failure adequately to disclose income information.

Similarly, in Li v. Wong the husband appealed the amount of income that had been attributed to him for the purposes of calculating interim spousal and child support. The husband, who was a self-employed entrepreneur with interests in numerous businesses, had declined to provide any financial information about some of the companies, as he felt that it was irrelevant (since he claimed the money in those companies was held in trust for his children from a prior relationship).

Nonetheless, using the limited information available to it the court was able to determine that the husband was likely earning approximately $300,000 per year. This was the figure on which the court based its interim spousal and child support award.

In hearing the husband’s appeal, the Alberta Court of Appeal concluded it had no reason to interfere with that interim finding. For one thing, further proceedings had been specifically scheduled in order to iron out the financial disclosure, including the figures relating to the company about which the husband had previously refused to provide information. As such, a more accurate income estimate was pending. The Appeal court also said:

It may not be ideal to make such important decisions by inference from records, but a party who is not forthcoming with direct information takes the risk that circumstantial evidence will be invoked against that party. In light of the evidence before him, the chambers judge’s decision is not in our view infected with palpable and overriding error as to interpretation or inference.

Finally, in the case of Martin v. Orris, the husband appeal from a judgment requiring him to pay interim spousal support based on certain income that was imputed to him. As before, the husband had not been forthcoming with his financial information – he had only provided it to the wife’s lawyer the day before the motion. The husband appealed the interim order, but was denied: the Appeal Court found that since this was merely the interim stage of the divorce proceedings between the couple, precision was “rarely totally achievable,” especially since there were uncertainties in the financial information that were better suited for determination at trial when a fuller record was before the court.

So what is the bottom line? A spouse who fails or refuses to provide the necessary financial information in a family law dispute is running the risk that a court will draw an adverse inference against him or her. More to the point, once the court has made a “best guess” finding based on the information it has, that finding may be difficult to overturn absent the spouse coming forward with the very same financial disclosure that was withheld or was in contention in the first place. In short: it’s better to come clean with full financial disclosure right from the outset.

For the full text of the decisions, see:

Poursadeghian v. Hashemi-Dahaj, 2010 BCCA 453  http://canlii.ca/t/2cz4c

Li v. Wong, 2010 ABCA 296   http://canlii.ca/t/2cvpq

Martin v. Orris, 2010 MBCA 59  http://canlii.ca/t/29×20

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