When a court makes an order requiring one party to pay the other, it becomes an enforceable debt. If both parties have financial obligations to the other, these mutual debts can sometimes be set off against one another. But courts have traditionally been hesitant to set off amounts owed for child support, since children have a right to the support, and because children should not be affected by the debts between their parents.

This approach has continued to evolve, with courts underlining the need to enforce obligations between former spouses, since permitting one spouse to collect while ignoring their debt can be unjust. Judges will need to exercise their discretion and ensure that children are not disadvantaged when deciding whether to set off costs against child support.

Applicant Seeks to Stay the Enforcement of His Debt

In Kulkarni v. Gupta, the parties were former spouses who had separated and had two children. A difficult litigation ensued over several years, where the applicant, the former husband, delayed the determination of financial obligations by failing to file the necessary documents. The outcome of the trial provided that the children would primarily reside with the applicant, with the respondent paying child support.

However, the applicant was to pay an equalization payment, post-separation adjustments, and several costs orders. But enforcement of the obligations was asymmetric: the Family Responsibility Office enforced child support payments, while the applicant refused to pay the amount he owed to the respondent. In a further order, the applicant was to pay $35,000 in costs to the respondent. In total, this amounted to $111,081.23 owed to the respondent.

Now the applicant sought to stay the enforcement of the money that he was to pay to the respondent. In particular, he asked that no garnishment or collection steps be taken against his wages, bank accounts, or assets. He also alleged that he was experiencing financial hardship and could not make the payments without prejudicing his ability to meet his living expenses. In response, the respondent proposed that the amounts owed to her be set off against her child support obligations. The judge calculated this was equivalent to just over 67 months of child support of $1,655 per month.

Child Support Payor Seeks to Set Off Debts

The judge began by explaining that when a court issues an order for payment, it becomes a debt enforceable by law. Also, Rule 60.02 (1) of the Rules of Civil Procedure provides that an order for the payment or recovery of money can be enforced by:

1. A writ of seizure and sale;
2. Garnishment;
3. A writ of sequestration; or
4. The appointment of a receiver.

This enables a creditor to immediately seek to enforce a judgment, unless the court grants a stay of enforcement pending an appeal, which would temporarily prevent the creditor from collecting funds arising from the judgment.

Stay of Enforcement Under the Courts of Justice Act

Section 106 of the Courts of Justice Act specifically states that a court “on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just”. The judge added that a stay of enforcement has limited application, as it “merely pauses collection activity, not the debt itself,” but it gives the party time to appeal or resolve related legal proceedings.

However, in this case, there was no pending appeal or related proceedings. In effect, the judge found that the applicant was attempting to pre-emptively halt the enforcement of the Order because he was in financial hardship. But the judge explained that payment pursuant to a court order is “not a needs-based exercise” as the obligation exists regardless of the ability to pay. Moreover, the order the applicant sought was not available in law.

The Requirements for Equitable Set Off

The respondent, on her own motion, proposed that the amounts the applicant owed her be set off against her child support obligations. Section 111 of the Courts of Justice Act permits parties to set off unrelated debts. The section provides that “in an action for payment of a debt, the defendant may, by way of defence, claim the right to set off against the plaintiff’s claim a debt owed by the plaintiff to the defendant”.

The section goes on to confirm that mutual debts can be set off against each other when they are of different natures. In Canada Trustco Mortgage Co. v. Pierce, the Ontario Court of Appeal considered the origins of equitable set off and reviewed earlier authorities setting out several requirements:

1. The party relying on a set off must show an equitable ground for protection against its adversary’s demand.
2. The equitable ground must go to the very root of the plaintiff’s claim before a set off will be allowed.
3. A cross-claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim.
4. The plaintiff’s claim and the cross-claim need not arise out of the same contract.
5. Unliquidated claims are on the same footing as liquidated claims.

Additional Considerations for Set Off Requests

There are additional considerations in family law when a party wishes to set off child support payments. As the judge noted, courts traditionally drew a bright line against setting off these payments on the basis that child support is the right of the child, and a setoff could penalize the child, who is intended to benefit from the support order. However, courts have increasingly moved away from that approach.

In Peers v. Poupore, the judge decided to set off ongoing child support obligations. Justice Spence explained that for most families, child support funds are likely pooled into their general accounts from which they pay all of their expenses. And it is the same pool of funds that a parent would have to satisfy other debts or awards. Additionally, he warned that a blanket prohibition against set off orders would “give a support recipient licence to litigate and to act as unreasonably as he or she saw fit, possibly with complete impunity”.

Court Must Balance the Interests of the Parties and the Administration of Justice

In the 2023 case M.A.B. v M.G.C, Justice Chappel summarized the considerations for setting off cost awards against child support. She explained that where there is a costs award in a family law case, and the individuals have limited or modest means, judges must carefully consider how the costs can be paid and the appropriate time frame for payment. She added that this is a highly discretionary exercise, weighing “the objectives of costs awards, the factors relevant to the assessment of costs, the impact of the costs award on the liable party and any child in their care, the interest of the other party in obtaining redress for their costs promptly, and the impact of delaying payment of the costs on that party”.

The judge looked to Regos v. Santos, which held that a set off against ongoing child support is unusual, but may be appropriate if the order is made with the child’s best interests in mind, and the court considers the potential financial effect on the child and the child does not suffer “undue economic consequences”.

Ultimately, Justice Chappel concluded that whether it is appropriate to set off costs against either child support arrears or an ongoing child support obligation is a matter of judicial discretion depending on the facts of each case. However, the court must balance the parties’ interests, consider the best interests of children in the support recipient’s care, and the objectives of cost awards to achieve a just result.

Parties Have an Expectation That Costs Orders Will Be Respected

In Kulkarni, the respondent argued that the applicant did have the means to pay the amounts owed to her arising from the final order, but simply chose not to do so, while he benefitted from taxpayer-funded enforcement of child support and receipt of the Child Tax Benefit. Based on the information the respondent had available, it appeared he had reduced his corporate taxes by $35,887.65 over the past two years. Yet the applicant argued that he could not meet the child’s financial needs without the full monthly child support payment and requested that no enforcement steps be taken against him.

The judge accepted that child support is the child’s right and cannot be conflated with a creditor-debtor relationship between the parents. But it was also true that debts between former spouses need to be enforced in a manner that does not “materially disadvantage the children”. But the history of the proceedings supported the conclusion that the applicant would use every means to avoid the financial obligations to his former spouse. Consequently, the judge concluded that a blanket prohibition against set off would enable him to litigate with impunity.

Enforcement of Child Support Arrears Stayed

Overall, the question was whether the ongoing child support should be set off against the balance owed to the respondent. The challenge was that the judge could not structure a set off in a way that ensured the children would not suffer a disadvantage, as the applicant did not provide a current financial statement. The judge stayed the enforcement of the child support arrears and ongoing support pending a further order. This enabled the applicant to provide a full accounting of his income and expenses, and he was to file the necessary financial statements immediately.

Contact NULaw in Toronto for Innovative Advice in Child Support Disputes

Disputes involving child support, costs awards, equalization payments, and other court-ordered debts can create complicated enforcement issues. Ontario courts must balance the child’s right to financial support with the need to ensure that former spouses comply with valid court orders. Whether a set off against ongoing child support is appropriate will depend on the parties’ finances, the history of the proceedings, and the potential economic impact on the child.

Led by D. Lex Arbesman, NULaw helps clients understand how child support obligations, costs orders, equalization payments, enforcement proceedings, and requests for a stay or set off may apply to their circumstances. Contact us online or call 416-481-5604 to discuss a child support or court-order enforcement dispute in Ontario.