Court File and Parties
Court File No.: Halton 468/11 Date: 2014-02-03 Ontario Court of Justice
Between:
Richard Eric Strifler, Applicant
— AND —
Carolyn Louise Strifler, Respondent
Before: Justice Sheilagh M. O'Connell
Heard on: July 26, 2013 and July 31, 2013
Further written evidence received on: November 28, 2013
Reasons for Judgment released on: February 3, 2014
Counsel:
- Richard Eric Strifler, acting in person
- Paul Groulx, for the respondent
JUSTICE S.M. O'CONNELL:—
1: INTRODUCTION
1The Applicant, Richard Eric Strifler ("Mr. Strifler") has brought a motion to change or set aside the parties' separation agreement dated May 30, 2011. Mr. Strifler is seeking to change the parties' custody arrangements, to reduce his child support payments, to terminate or reduce his spousal support payments, and to rescind all arrears owing.
2The parties resolved the issues of custody and access prior to trial and entered into final minutes of settlement in which they agreed to a 'split custody' arrangement for their two children.
2: BACKGROUND FACTS
3Mr. Strifler is 55 years old and Ms Strifler is 50 years old. The parties started cohabiting in March of 1992. They married on September 4, 1993. They separated in March of 2010 although agreed to a date of separation of April 1, 2010. The parties agree that the length of their cohabitation and marriage was eighteen years.
4The parties have two children, Bronte Elizabeth Strifler, born July 29, 1996 ("Bronte"), and Elizabeth Caryle Strifler, born July 7, 1997, ("Elizabeth"). Bronte is seventeen years old and Elizabeth is sixteen years old. Since March of 2012, Bronte has resided with her father and Elizabeth has resided with her mother.
5The parties had a traditional marriage. Mr. Strifler is the owner-operator of a long haul trucking business. Ms Strifler did not work outside of the home and she was the primary caregiver for the children since their births. She also managed the books for Mr. Strifler's business. The parties agreed that Ms Strifler would remain at home to care for the children and manage the household. Mr. Strifler also acknowledged at trial that he was generally home approximately three or four days each month, given the nature of the long haul trucking business.
6Upon separation, the parties entered into a first separation agreement dated April 15, 2010. The parties were not represented by counsel when they signed this agreement. Neither party provided financial disclosure before entering the agreement. The parties agreed that $81,000.00 was the appropriate income for Mr. Strifler for support purposes.
7The first agreement provided that Ms Strifler would have "primary sole custody" of the children and that Mr. Strifler would have access on alternating weekends, subject to his work schedule. The agreement further provided that Mr. Strifler pay child support in the amount of $1,171.00 per month, based on a gross taxable income of $81,000.00, in accordance with the Child Support Guidelines for Ontario. In addition, Mr. Strifler agreed to pay spousal support in the amount of $1,646.00 per month, for a period of eighteen years, at which point it would terminate. The duration of spousal support was based on the length of the parties' marriage and cohabitation. The total amount of support payable was $2,817.00 per month.
8In April of 2011, Mr. Strifler requested a new agreement. The parties re-negotiated and signed a new agreement on May 30, 2011. In the new agreement, Ms Strifler continued to be the primary caregiver of both children, but the provisions for child and spousal support were changed. The parties agreed that Mr. Strifler's income for child and spousal support purposes would be reduced to $73,700.00.
9Again, neither party provided financial disclosure before entering into the new agreement, nor were they represented by counsel. However, both parties signed an acknowledgement stating that they each had independent legal advice before signing the second agreement, understood his or her rights under the agreement, was signing the agreement voluntarily and believed that that agreement was fair and reasonable.
10The new agreement provided the following regarding child and spousal support:
FINANCIAL PROVISION – CHILD SUPPORT
For Support purposes, Richard's Gross Taxable Income (GTI) is defined as: Gross income (earnings from employment, pensions, interest) less expenses relevant to the operation of any self-employed business, and not personal on the road expenses such as; entertainment, home expenses, interest on personal loans, capital costs allowances, income deferrals to family members or personal vehicle costs.
Commencing on the 3rd of June 2011 and on each Friday of every week Richard shall pay Carolyn child support for the children Bronte Strifler and Elizabeth Strifler the total sum of $250.00 per week in accordance with the child support guidelines based on an averaged Gross Taxable income of $73,700.00. Child support will continue until one or more of the following occurs:
- The child ceases to reside full-time with Carolyn, the child can be temporarily away from home to attend an educational institution either part-time or full-time.
- The child become twenty (22) years old
- The child marries
- The child dies
The parents agree to share the children's special expenses (uniforms, school trips, dental and orthodontic care, post-secondary education, etc…) and will divide them equally between the parties.
Child support will remain at the $250.00 per week amount unless Richard experiences an employment change and only then will support amounts be revisited. Should there be an employment change then the child support amounts will be in accordance with the Child Support Guideline amounts tables with Justice Canada. Child support amounts will be calculated annually before May of the current year to be effective by June 1st of the current year and all amounts will be based on Richard's income from the prior year.
FINANCIAL PROVISION – Spousal Support while self-employed:
Spousal support will be paid from Richard to Carolyn every week in the amount of $250.00 effective June 3rd, 2011. Spousal support will continue to be this amount unless there is a significant income change due to a change in employment, and then the amount to be paid to Carolyn will be revisited.
During the term of Richard's self-employment, Carolyn has the ability to earn up to $650.00 per month with no payback to Richard required. Any net earnings received over $650.00 per month, Carolyn will subtract half the difference, and shall reimburse Richard that amount in spousal support.
An example: Net income received after deductions of $950.00 less $650.00 = $300 /2 - $150.00. Carolyn's reimbursement would be then be $150.00 for the month. Three months are calculated and payable quarterly on April 15th, July 15th, Oct 15th and Dec 31st. Richard must be current in his support payments for him to receive any payback from Carolyn.
FINANCIAL PROVISION – Spousal Support while not self-employed:
Should Richard change employment or have income from any other source, spousal support will be revisited. Should this be the case, then Richard agrees to pay in accordance with these terms.
With child support payments: Carolyn will receive a total of child and spousal support equal to 55% of the *Combined Individual Net Disposable Income for two children. Carolyn will receive a total of child and spousal support equal to 58% of the Combined Individual Net Disposable Income for one child.
Without child support payments: Carolyn will receive spousal support equal to 40% of the *Combined Individual Net Disposable Income.
*Individual Net Disposable Income is defined as: Gross Taxable Income less source deductions and child support contributions (if applicable) for both parties
Both parties will exchange financial information on an annual basis, before July 1st of the current year. These amounts will be reviewed by both parties and any change to the support amounts will be effective August 1st of the current year. The previous year's income will be used should any change in the current support amounts be revisited.
The party requesting any variation or revising of any condition of this separation agreement will be responsible for the filing of all documentation as well as all professional, legal and court costs associated with change in of any support amounts, both child and spousal. Richard will give Carolyn full disclosure of all business financial statements, documents, expenses and tax information within three weeks of Carolyn requesting the documents at any time during the year while Richard is self-employed, and once per year if not self-employed.
Duration of Support: The duration of spousal support will be calculated based on the length of marriage. One year of support for each year of marriage or cohabitation. The date of marriage was September 4, 1993 and living together as of March 1992. Length of marriage has been 18 years. Spousal support will commence on April 1, 2010 and continue until April 1, 2018.
Re-Marriage: If at any time, should Carolyn re-marry, all spousal support payments shall cease.
Debt:
The monthly lease payment on the 2008 VW Beetle will be made by Richard, and the use of the vehicle will be continue to be used as the primary vehicle for the children. The vehicle will continue to be the primary vehicle until the lease ends on November 24, 2012. The spouse who has the custody of the children will also have the use of the vehicle and the associated costs (gas). All car insurance and permits will be in Richard's name and will be the financial responsibility of Richard. Carolyn will maintain the vehicle for the duration of the lease.
Any debt incurred by either Carolyn or Richard form the date of separation onward shall be the responsibility of the individual, and in no way shall any debt, loan or money borrowed by Richard or Carolyn become the other's responsibility. No debt shall be incurred including the other's name.
The life insurance poly is held by Carolyn and the beneficiary of these policies can be changed by Carolyn without Richard's permission as she is the policy holder. Carolyn is responsible for the payment of the policies.
Bank Accounts: The use of Scotia Bank account #6412 002 04039 89 (chequing) shall be used as the primary account for Richard and Carolyn to transfer support related funds into and out of until further notice. No overdrafts or loan payments will be authorized on these accounts. All support payments can be deposited into this account and we have an understanding that only support transactions will occur in this accounts.
11Under the new agreement, the amount of spousal support was reduced from $1,646.00 per month to $1,082.50 per month. In addition, a new term was added in which Ms Strifler was permitted to retain net earnings of up to $650.00 per month if she obtained employment. If Ms Strifler earned more than $650.00 monthly, then she would pay Mr. Strifler the difference between her net earnings and $650.00. The duration of spousal support continued to be time limited to eighteen years from the date of separation.
12The child support was reduced from the table amount of $1,171.00 to $1,082.50 per month, based on the gross annual income of $73,700.00. The agreement also continued to provide that Mr. Strifler will pay the monthly lease payment on the 2008 Volkswagen Beetle driven by Ms Strifler, which was $458.00 per month, until December of 2012.
13In June of 2011, shortly after the second agreement was signed, Ms Strifler began sharing a residence with Mr. Mark Tedesco, her first husband. Ms Strifler and Mr. Tedesco describe each other as friends and housemates and that they are sharing the expenses of the household. They reside together with Mr. Tedesco's son and until, March of 2012, with both Bronte and Elizabeth.
14In August of 2011, Mr. Strifler fell into arrears under the separation agreement. On October 20, 2011, Ms Strifler filed the agreement with the court so that it could be enforced by the Family Responsibility Office.
15In March of 2012, Bronte went to live with her father after a dispute with her mother. In April of 2012, shortly after Bronte started residing with Mr. Strifler, Mr. Strifler commenced this motion to change.
16The parties' custody and access dispute was referred to the Office of the Children's Lawyer. On January 14, 2013, with the assistance of the Office of the Children's Lawyer, the parties entered into Final Minutes of Settlement regarding the new custody and access arrangements. The final minutes provide that Bronte would remain in the custody of Mr. Strifler and Elizabeth would remain in the custody of Ms Strifler with access specified to each parent.
17Mr. Strifler continues to be self-employed as an owner-operator in the trucking business, although he states that he is no longer doing long-haul driving, but shorter routes. Ms Strifler has started a new business as a dog walker and states that her income is currently approximately $12,000.00 per annum.
3: MR. STRIFLER'S POSITION
18Mr. Strifler submits that the following changes have occurred since he signed the second agreement:
a. Bronte came to live with him, thus requiring a change in the child support provisions of the agreement. He states that he is paying all of Bronte's special and extraordinary expenses, including her braces at a cost of $5,880.00, without any assistance from Ms Strifler;
b. his income has been drastically reduced and he is no longer able to pay the ongoing spousal support. A new agreement should be drawn up, based on the line 150 income set out in his income tax returns. He estimates the line 150 income for 2012 will be approximately $28,000.00, according to his motion to change and his opening trial statement. However, at the conclusion of trial, he had yet to provide his 2012 income tax return, or supporting documentation.
19Further, Mr. Strifler submits that, when he signed the second agreement, Ms Strifler withheld information that would have changed the entire agreement. According to Mr. Strifler, at the time the agreement was entered onto, Ms Strifler was either living with or planning to live with her first husband, with whom she had resumed a relationship. He submits that he would never have signed the agreement had he known that Ms Strifler was planning to cohabit with her first husband immediately after the agreement was signed, or had already done so. He submits that this is a 'material misrepresentation' that warrants setting aside the agreement and terminating spousal support.
20Mr. Strifler also seeks to rescind the support arrears that have accumulated since 2011 and that he be given credit for paying Ms Strifler's car lease and insurance payments for eleven months after the separation. At the time of trial, the support arrears were approximately $20,630.00. Since March of 2012, after the Family Responsibility Office commenced enforcement proceedings, Mr. Strifler has been paying $200.00 weekly in both child and spousal support (total $800.00) in a voluntary payment arrangement with that agency.
4: MS STRIFLER'S POSITION
21Ms Strifler submits that Mr. Strifler has not met the onus to set aside the agreement and that, until March of 2012, when their custody arrangement changed, the agreement should stand and all arrears should be paid in full. She states that the agreement was fair and reasonable and that there was no material misrepresentation by her. In fact, according to Ms Strifler, if Mr. Strifler had provided the appropriate financial disclosure at the time of the second agreement, Mr. Strifler's income for support purposes would actually have been much higher than the $73,700.00 agreed upon by the parties in the second agreement.
22Ms Strifler agrees that the March 2012 change in custody is a material change in circumstances that warrants an adjustment to the support payments. She agrees that the child support should be reduced once Bronte started living with her father. However, she submits that the spousal support should now be increased, not reduced. According to Ms Strifler, $98,126.00 per annum is a more accurate determination of Mr. Strifler's income for support purposes, and income should be imputed to him in that amount.
23Ms Strifler further submits that, once a material change in circumstances has been established, then the court is free to make new support provisions and to eliminate the termination date for spousal support and the rather confusing "payback' clause to which the parties agreed. She further submits that there should be clearly defined provisions for the children's section seven expenses.
5: SUMMARY OF RELEVANT LEGAL PROCEEDINGS
24Justice Roselyn Zisman was the case management judge for Mr. Strifler's motion to change. At the first case conference, Mr. Strifler was ordered to provide financial disclosure including his 2011 income tax return and notice of assessment. At the second case conference on August 24, 2012, Mr. Strifler had not produced his financial disclosure. Justice Zisman made the following court order:
Mr. Strifler to prepare a settlement conference brief with all disclosure:
a. Copy of 2011 income tax return; b. Explanation and details regarding business expenses deducted from income on tax return; c. Proof of 2012 income to date; d. Notice of Assessment for 2011 (if available); e. Documents to provide an explanation as to his drastic change in income since separation agreement.
25Justice Zisman ordered that this disclosure to be served upon Ms Strifler by November 2, 2012. She adjourned the motion to change to a settlement conference before her on November 13, 2012.
26At the settlement conference on November 13, 2012, Mr. Strifler provided his 2011 notice of assessment. According to the 2011 notice of assessment, Mr. Strifler's line 150 income was $52, 357.00. He did not provide any of the other disclosure ordered by Justice Zisman at that time, although further financial disclosure was provided shortly before trial, to be addressed below.
6: THE ISSUES
27The issues for me to decide are the following:
- Should the separation agreement be set aside?
- If the agreement is set aside, what should the appropriate child and spousal support orders be, including section 7 expenses?
- If the agreement is not set aside, has there been a material change in circumstances since the signing of the agreement?
- What is Mr. Strifler's income and should income be imputed to him?
- What is the appropriate amount for child support and section 7 expenses?
- Is Ms Strifler entitled to ongoing spousal support and if so, what is the appropriate amount?
- Should the amount of outstanding spousal and child support arrears should be rescinded or reduced and if so by how much?
7: SUMMARY OF RELEVANT EVIDENCE
7.1: Richard Strifler
28Mr. Strifler is 55 years old. He has owned and operated his own long-haul truck since 1993. He is contracted with a company called Trayco in Leamington, Ontario. Trayco finds the load, Mr. Strifler delivers the load, and the company pays him a percentage of the delivered load. His current route is from Leamington to Toronto, which is approximately four hours one way. He has been doing shorter routes since Bronte started living with him in March of 2012. Mr. Strifler and Bronte live with his parents in Burlington, Ontario. Mr. Strifler does not pay rent or mortgage to his parents, but pays $150.00 per month for cable and utilities.
29Mr. Strifler testified that it was his wife's decision to end their marriage after eighteen years and that he was devastated by this. According to Mr. Strifler, when he and his wife separated, she led him to believe that she would move to Burlington with the children and live with her mother while she looked for employment. He testified that she told him that this was her "five year plan". He testified that he agreed to pay her $650.00 per week in the first agreement to help her get back on her feet because she had stayed home all of those years while he supported the family financially. He testified that, in 2010, shortly after the separation, she had been offered a job as a bookkeeper when she first moved to Burlington at a rate of $17.00 per hour, but she turned it down. In his view, she did not make sufficient efforts to become self-sufficient. He acknowledged that she did not know "QuickBooks", which was a requirement for the job, but that he had given her an instruction manual so that she could learn it.
30Mr. Strifler testified that, when he entered into the first agreement, he did not know what he was agreeing to, and that he was "a total wreck" mentally and emotionally. He knew what his gross income was but he did not know what his net income was because Ms Strifler did the books and had taken all of his income tax papers with her when they separated. He testified that he does not even recall reading or signing the agreement.
31Mr. Strifler acknowledged in cross-examination that, one year after the parties entered into the first agreement, he asked for it to be changed. He testified that he asked for the agreement to be changed because "the money was simply not there" and he also felt that the agreement was not fair.
32Mr. Strifler also acknowledged that the first agreement stayed in place until he wanted to change it. He further admitted that he agreed that his income should be imputed at $73,700.00 in the second agreement because he knew that his gross income was high although he did not know his income after expenses.
33Mr. Strifler testified that, when negotiating the second agreement, he asked Ms Strifler "point blank" if she was moving in with Mark Tedesco and she said that she was not. In July of 2011, shortly after the second agreement had been signed, he discovered that that Ms Strifler and Mark Tedesco had started living together almost immediately after the second agreement had been signed. He described being very upset about this and that, when he confronted Ms Strifler, she told him that "ninety five percent of what I have told you is a lie."
34Mr. Strifler testified that this event led him to question everything about the agreement that he signed. He openly acknowledged that it was his view that he did not have to support Ms Strifler if she had moved in with Mr. Tedesco. As he put it, "Why should I have to support her when she is living with Mark Tedesco?" Mr. Strifler testified that Mr. Tedesco was working full-time, although he does not know what he earns.
35Mr. Strifler admitted that he began reducing his support payments to Ms Strifler in August of 2011, after he discovered her new living arrangement. However, he testified that he did this because the agreement that they entered into was never fair in the first place and that he only agreed to an income of $73,300.00 for support purposes because he felt sorry for Ms Strifler.
36Mr. Strifler also testified that, in 2011 and 2012, his fuel (diesel) costs for his truck had gone up dramatically resulting in a drastic reduction in his income since the second agreement. He testified that it costs him $1,300.00 each night to fill up both tanks of his truck and that, that every time the cost of fuel rises by 10 cents, his costs increase by $1,000.00. He further explained that he is now subject to an additional fuel surcharge of ten percent per pallet (load) that he delivers and that his truck tire costs have also increased significantly. He recently purchased eight new tires for his truck at a cost of $4,400.00, which he states is double the cost since he signed the agreement.
37According to Mr. Strifler, a fair agreement should be based on his line 150 income in his income tax returns, nothing higher. Mr. Strifler testified that his income tax returns are prepared by his accountant. He testified that he has been audited by Canada Revenue every year since 2008 and that the agency has never found anything wrong with the way his books are done, or with any of the business expenses that he has deducted from his gross income.
38Mr. Strifler produced the following at trial and in the trial record: two updated financial statements, sworn March 2, 2013 and July 16, 2013, his 2009, 2010, 2011 complete income tax returns and notices of assessment and re-assessment, a five year comparative review of his gross income and net income after deductions of business expenses prepared by his accountant, a transaction journal listing the income received and fuel surcharge deducted for his truck in 2012 and part of 2013. The first time much of this information was produced was at this trial and in the trial record.
39Mr. Strifler's financial statement sworn July 16, 2013 indicates that his total annual income from all sources is $80,469.04. In his financial statement sworn March 18, 2013, his total annual income is listed at $105,823.44. Mr. Strifler explained that these amounts were based on the pay stubs that he received from Trayco to date, before tax, after subtracting his fuel costs. It does not include any other business expenses deducted from his income or the tax that he pays on his income. He testified that his monthly income, before deducting business expenses and tax, is approximately $8,000.00, although it fluctuates.
40In both sworn financial statements, there are no housing expenses listed, although approximately $696.00 is reported for cell phones, cable and internet expenses. Mr. Strifler's total assets are listed at $271,687.98 and his debts at $13,286.02. His net worth is therefore $258,401.96, although the major asset listed is a life insurance policy for Bronte and Elizabeth valued at $250,000.00. There is no supporting documentation for the debts listed and they do not include the support arrears owing.
41Mr. Strifler is not incorporated. He is the sole proprietor of his business. Mr. Strifler does not have year-end financial statements for his business. He testified that he gives the information regarding his business deductions and expenses to his accountant, who prepares the Statement of Business or Professional Activities required for self-employed persons in the T-1 general income tax return, along with everything else in the return.
42The relevant information is as follows:
| Year | Line 150 Income | Gross Income | Truck Fuel Costs | Maintenance and Repairs |
|---|---|---|---|---|
| 2008 | $53,811 | $181,853 | $76,094 | $19,845 |
| 2009 | $47,953 | $158,977 | $50,676 | $13,636 |
| 2010 | $43,667 | $165,210 | $67,186 | $11,206 |
| 2011 | $52,357 | $175,223 | $73,671 | $13,401 |
| 2012 | $42,280 | $166,238 | $67,755 | $13,286 |
43As indicated earlier, Mr. Strifler did not produce his 2012 income tax return at trial. This information was provided well after the trial and counsel was provided an opportunity to make further written submissions regarding the documentation provided. At trial, Mr. Strifler testified that the reason that he did not provide the income tax return was because he was waiting until the trial was over and for the court to make a determination about his income. He later testified that he could not afford to pay his accountant to produce his 2012 income tax return.
44In addition to the fuel costs and maintenance and repairs expenses listed above, Mr. Strifler deducted some of the following additional expenses from his gross income:
| Year | Meals/Entertainment | Management Fees | Travel | Telephone/Utilities | Motor Vehicle |
|---|---|---|---|---|---|
| 2008 | $7,127 | nil | $3,303 | $4,188 | $5,568 |
| 2009 | $9,785 | $6,000 | $4,251 | $1,093 | $3,053 |
| 2010 | $9,371 | $2,400 | $2,935 | $4,503 | $3,872 |
| 2011 | $9,588 | $2,145 | $3,120 | $5,685 | $3,846 |
| 2012 | $8,690 | $1,300 | $4,471 | $6,544 | $3,676 |
45Mr. Strifler did not produce any of his business receipts or invoices supporting the business expenses deducted from his gross income for any of the years in question. Mr. Strifler provided a ledger of all of his pay stubs with the fuel costs deducted in 2012. At trial, he testified that, in 2012, his fuel costs were $73,574.20, and that, after the deduction of this amount from his gross income of $166, 238, he put $78, 481.00 into the bank. The fuel expenses deducted in the income tax return received after trial were $67,755. No explanation was provided for the discrepancy in the number provided at trial and what was eventually reported to the Canada Revenue agency. Further, the 2012 line 150 income reported is $42,280.00, not the $28,000.00 estimated by Mr. Strifler at trial.
46In cross-examination, Mr. Strifler testified that he has given Ms Strifler everything to which she is entitled to determine his income and any material change since the agreement was signed. In his view, Ms Strifler was not entitled to any of his business receipts or invoices for the other expenses deducted from his gross income. He did not provide any explanation at trial regarding how his meal, entertainment, travel, motor vehicle, telephone, management fees, office and utility expenses were calculated, which in 2012, totaled $25, 937.40 in deductions from his gross income.
47When asked in cross-examination why he did not comply with Justice Zisman's order to provide an explanation and details regarding his business expenses and documentation, Mr. Strifler testified that he had complied with that order by providing his income tax returns including his statement of business activities at trial. He was of the firm belief that Ms Strifler was not entitled to anything else, in particular, his business receipts. He did not think it was any of Ms Strifler's business. As he put it, "If Revenue Canada believes me, why can't she?"
48In cross-examination, Mr. Strifler further acknowledged that, when the parties were together, his income provided "a very good lifestyle" to the family and that they agreed that Ms Strifler would stay at home to care for the children, to manage the household and to do the bookkeeping for his business. He acknowledged that Ms Strifler was not paid for her bookkeeping services, but that she benefited from the lifestyle that he provided for her and the children.
7.2: Mark Tedesco
49Mr. Tedesco testified that he and Ms Strifler were previously married from 1983 to 1991. He described their relationship now as friends and that they began living together in July of 2011. They reside in a house with Ms Strifler's daughter Elizabeth, and Mr Tedesco's son.
50Mr. Tedesco testified that he witnessed both parties' signature on the second separation agreement. Mr. and Ms Strifler came to his work place at lunch time and they went through each page of the agreement together and initialed the top of each page before he witnessed their signatures.
51In cross examination, Mr. Tedesco acknowledged to having only a brief conversation with Mr. Strifler during that meeting, but that it did not appear to him that Mr. Strifler was under duress or forced to sign the agreement.
7.3: Carolyn Strifler
52Ms Strifler is 51 years old. Ms Strifler moved to Burlington in March of 2010 after the parties separated. She and the children moved into her mother's home. She testified that Mr. Strifler was unhappy with the first agreement, so he asked her to meet with him and they negotiated the new agreement in May of 2011. According to Ms Strifler, Mr. Strifler wanted the spousal support reduced and his gross income reduced so that child support could be recalculated. He also wanted her to reimburse or pay back spousal support if she started earning at a certain level. Ms Strifler testified that she did not receive any financial disclosure from Mr. Strifler before signing the agreement because he did not want her to have it. He wanted an amount fixed for his income in the agreement so that he did not have to provide financial disclosure, to which she agreed.
53Ms Strifler is currently living in a rented home with her daughter Elizabeth, Mark Tedesco, and Mr. Tedesco's son. Like Mr. Tedesco, she described their relationship as friends. They share housing expenses. She contributes towards the rent, utilities, cable and internet on the home although she is currently behind in her rental payments and Mr. Tedesco is paying the majority of the expenses.
54In cross-examination, Ms Strifler denied lying to Mr. Strifler about her plans to move in with Mr. Tedesco. She testified that she moved in with Mr. Tedesco in June of 2011. She acknowledged discussing this issue with Mr. Strifler while they were negotiating the second agreement. She testified that she told Mr. Strifler that she did not know if she was moving in with Mr. Tedesco, but that it was a possibility. She acknowledges that she and Mr. Tedesco signed a rental lease and moved in together shortly after she and Mr. Strifler signed the second agreement.
55Ms Strifler testified that she wants to achieve self-sufficiency and her plan after separation was to establish a dog day-care and boarding business. In 2011 and 2012, she established "Canine Cabana" after locating a sixteen hundred square foot premise which she leased, painted and renovated with Mr. Tedesco's help over a period of several months. She testified that this was a serious endeavour which she hoped to establish into a successful business. She began to develop a viable client base. However, when Mr. Strifler reduced the spousal support payments, she could no longer afford to pay both her household and business expenses. Ms Strifler closed the business in 2012 and terminated the business lease. According the evidence filed, the letter terminating the business lease for Canine Cabana was signed by both Ms Strifler and Mr. Tedesco.
56Ms Strifler is currently self-employed as a dog walker in her new business called "The Leash Lady", which she started after she closed Canine Cabana. She estimates that her current income from this business is approximately $12,000.00 per annum, or lower; however, she hopes to expand the business and increase her clientele. According to Ms Strifler's financial statement, her monthly expenses are $2,571.25, which include her share of the rent and housing expenses with Mr. Tedesco. Ms Strifler testified that Mr. Tedesco is covering her monthly deficit by shouldering more of the household expenses, including her share of the rent and utilities, which is approximately $1,025.00 per month. Ms Strifler has listed debts totaling $22,711.24, which include the money owed to Mr. Tedesco ($6,924.64) a car loan ($13, 518.04), and a credit card debt ($2, 268.53). Her only asset is a 2008 van valued at $9,500.00. Ms Strifler obtained a car loan in 2012 to purchase the van for her business.
57In reviewing Mr. Strifler's business expenses for 2011 and 2012, Ms Strifler had the following concerns, based on her experience doing the bookkeeping for the business during the marriage:
She did not understand why his meals and entertainment expense were $9,588.00, given that Mr. Strifler works locally now and has acquired a four-hour truck run from Leamington to Toronto, going through Burlington where he lives;
She did not understand the management fees of $2,145.00. During the marriage, there were never management fees paid;
She did not understand why the insurance of $$3,584.00 had doubled since 2009 when she was doing the bookkeeping;
Based on her experience during the marriage, $3,596.00 listed for the fees, licence and dues is too high and she did not understand where how amount was calculated;
The travel expenses of $3,120.00 including accommodation and meals did not make sense unless that included his travel expenses for Ms Strifler's personal move to Burlington from Woodstock after the separation;
The telephone and utilities expenses of $5,685.00 are too high, particularly given that Mr. Strifler is now living with his parents' home and according to his sworn financial statement, he is only paying $150.00 per month towards cable and utilities;
The fuel costs of $73671.00 seemed too high and she believes that he has included his personal fuel expenses in this amount.
8: LAW AND ANALYSIS
8.1: Should the Separation Agreement Be Set Aside?
58The court's power to set aside a separation agreement or provisions for support in a separation agreement derives from subsection 56(4) and subsection 33(4) of the Ontario Family Law Act, R.S.O. 1990, c. F-3, as amended, ("the FLA").
59Subsection 56(4) of the FLA permits the court to set aside a separation agreement as follows:
(4) Setting aside domestic contract.— A court may, on application, set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
(b) if a party did not understand the nature or consequences of the domestic contract; or
(c) otherwise in accordance with the law of contract.
60The burden of proof is on the party seeking to set aside the agreement, in this case Mr. Strifler, to persuade the court to exercise its discretion to set aside the agreement under one of the paragraphs of subsection 56(4). See LeVan v. LeVan, 2008 ONCA 388; and Dougherty v. Dougherty, 2008 ONCA 302.
61There is a two-stage analysis that must be applied when a party seeks to set aside a domestic agreement pursuant to section 56(4) of the Act. It was summarized by the Ontario Court of Appeal in LeVan v. LeVan, supra, at paragraph [51], as follows:
[51] The analysis undertaken under s. 56(4) is essentially comprised of a two-part process: Demchuk v. Demchuk (1986), 1986 CanLII 6295 (ON SC). First, the court must consider whether the party seeking to set aside the agreement can demonstrate that one or more of the circumstances set out within the provision have been engaged. Once that hurdle has been overcome, the court must then consider whether it is appropriate to exercise discretion in favour of setting aside the agreement.
62Clauses 56(4)(a) and (b) are self-explanatory. With respect to clause 56(4)(c), which states "otherwise in accordance with the law of contract", the following relevant factors or common law grounds to set aside the agreement are to be considered:
a) whether the agreement is unconscionable, resulting in one party, being the stronger party, taking advantage of the other party, the weaker party;
b) whether one party exercised undue influence over the other party in signing the agreement;
c) whether there was a material representation by one party;
d) whether the party received adequate, complete and independent legal advice before signing the agreement;
e) whether the parties entered into the agreement under a material mistake of fact;
63As a starting point, the court is expected to grant considerable deference to separation agreements. Courts have recognized that it is desirable that separating spouses settle their affairs, when possible, through the negotiation of separation agreements and that such settlements will only be encouraged if, as a general rule, they are upheld by the courts. It is important for parties to an agreement to be able to rely upon it as final and binding. See Justice M.L. Cohen's decision in Linda Catherine A. v. Robert John A., 2003 CanLII 52484, citing the leading decision of the Supreme Court of Canada's in Miglin v. Miglin, 2003 SCC 24.
64The principle of deference to parties' agreements was re-affirmed by the Supreme Court of Canada in Hartshorne v. Hartshorne, 2004 SCC 22 and in Rick v. Brandsema, 2009 SCC 10. In Hartshorne v. Hartshorne, supra, the court stated that parties are permitted and encouraged to take personal responsibility for their own financial wellbeing on the dissolution of marriage and courts should be reluctant to second guess their arrangement, particularly where independent legal advice has been obtained. Spouses may choose to structure their financial affairs in a number of ways and it is their prerogative to do so, provided that the legal boundaries of fairness are observed. I now turn to the application of the provisions of subsection 56(4) to this case.
8.1(a): Clause 56(4)(a): Has there been a failure to disclose significant assets, debts of liabilities existing at the time the agreement was made?
65In this case, neither party provided financial disclosure to the other before the agreement was signed. Mr. Strifler did not submit that Ms Strifler failed to disclose to him any significant assets, debts or liabilities at the time they entered into the agreement. He was well aware of her financial circumstances at the time he signed the separation agreement. Both parties knowingly entered the agreement without providing sworn financial statements or any financial disclosure, which was, if anything, actually more beneficial to Mr. Strifler as a self-employed owner operator of his trucking business. There is no basis to set aside the separation agreement on the basis of non-disclosure of assets and liabilities.
8.1(b): Clause 56(4)(b): Was there a failure to understand the nature and consequences of the separation agreement?
66Mr. Strifler led no evidence that he did not understand the nature and consequences of the second agreement. Mr. Strifler is an educated businessman. He presented as intelligent and articulate during the trial process and as an informed litigant. At no time did he suggest that he did not understand the child and spousal support provisions in the agreement that he entered into or that he did not understand the nature of his child and spousal support obligations.
67Mr. Strifler submits that he did not have independent legal advice before signing the agreement. An absence of independent legal advice does not automatically impugn the validity of a separation agreement, but rather is one factor to consider along with all other circumstances. See Dougherty v. Dougherty, supra. Independent legal advice is not a prerequisite to a valid domestic contract. There are many cases where one or both of the parties have not had legal advice and the courts have upheld a separation agreement: Settle-Beyrouty v. Beyrouty (1996), 1996 CanLII 19739 (ON SC); Gregory v. Brown, 2005 ONCJ 284; Rosen v. Rosen, 1994 CanLII 2769; Mercer v. Mercer (1978), 1978 CanLII 3055 (ON SC).
68On the evidence before me, I find that Mr. Strifler could have obtained independent legal advice, but chose not to do so. There is no evidence before me that Mr. Strifler was somehow impeded by Ms Strifler in obtaining independent legal advice. Notwithstanding his decision not to obtain independent legal advice, I find, as previously noted, that Mr. Strifler still understood the nature and consequences of the agreement that he was signing.
69In fact, it was Mr. Strifler who requested the second agreement and that the terms be renegotiated because he wanted to pay less child and spousal support, even though he provided no financial disclosure to Ms Strifler justifying an decrease in his income. The second agreement reduced the amount of child and spousal support that he agreed to pay considerably and included a "payback clause" for Ms Strifler, which was clearly more favourable to him.
8.1(c): Common Law Grounds under section 56(4)(c): Was there Duress or Undue Influence?
70Mr. Strifler has not established that he was under duress or that Ms Strifler was exercising undue influence over him when he signed the new agreement. There was no evidence that Mr. Strifler was being threatened in any way to sign the second agreement, or that he was being intimidated or compelled to do so. There was no inequality of bargaining power, if anything, Mr. Strifler was in a much stronger position.
71Mr. Strifler offered no evidence that he was suffering from any debilitating mental or emotional issues that were affecting his ability to make choices at the time that he entered into the second agreement, which was well over one year from the date of separation. He testified that he was an emotional "wreck" when the parties first separated, but he did not describe himself in that manner when he signed the second agreement. Further I cannot ignore the fact that Mr. Strifler approached Ms Strifler to change the agreement in a way that was actually more beneficial to him, not her.
8.1(d): Was there Material Misrepresentation by Ms Strifler?
72Mr. Strifler's main argument and what he is most upset about is his belief that Ms Strifler misrepresented her living situation at the time the parties entered into the second agreement. Mr. Strifler testified repeatedly that had he known that Ms Strifler was planning to move in with Mr. Tedesco immediately after the agreement was signed, he would never have entered into the agreement. He states that this material misrepresentation warrants setting aside the separation agreement.
73In order to establish material misrepresentation, Mr. Strifler must demonstrate that Ms Strifler knowingly misrepresented the truth or concealed a material fact to induce Mr. Strifler to act to his detriment when entering into the second agreement. See Danylkiw v. Danylkiw, 2003 CanLII 2283; affirmed at Danylkiw v. Danylkiw, 2004 CanLII 34838.
74The nature of the relationship between Ms Strifler and Mr. Tedesco is unclear. I found both Mr. Tedesco's and Ms. Strifler's evidence on this issue somewhat evasive. I had difficulty believing that they were just housemates and friends. They were previously married for eight years and Mr. Tedesco was clearly very involved in the business "Canine Cabana" that Ms Strifler started after her separation, including being a co-signor on the business lease.
75I also find that Ms Strifler did not want Mr. Strifler to know that she was moving in with Mr. Tedesco when the parties signed their second agreement. Ms Strifler testified that she moved in with Mr. Tedesco in June of 2011, almost immediately after the parties signed the second agreement on May 30, 2011. Ms Strifler's evidence that she did not know that she was moving in with Mr. Tedesco at the time that she signed the second agreement is not credible.
76Nevertheless, even if Ms Strifler is in a relationship with Mr. Tedesco or she is cohabiting with him, she is still entitled to spousal support. The law is clear that a new partner is simply a factor to be taken into account by the court in the assessing entitlement to and quantum of spousal support, particularly if the basis for the spousal support was compensatory in nature. See Boland v. Boland, 2012 ONCJ 102. See also Balazsy v. Balazsy, 2009 CanLII 55303, and Kelly v. Kelly, 2008 BCSC 93.
77Spousal support is not merely a consideration of needs and means. In determining the appropriate amount of spousal support, compensatory and non-compensatory considerations should be taken into account in an effort to equitably alleviate the economic consequences of the breakdown of the relationship. See Rioux v. Rioux, 2009 ONCA 569.
78In Bracklow v. Bracklow, 1999 CanLII 715, the Supreme Court of Canada established that there are three kinds of entitlement for spousal support: 1) compensatory; 2) non-compensatory (based on need), and 3) contractual (based on an agreement between the parties).
79The Supreme Court of Canada in both Moge v. Moge, 1992 CanLII 25, and Bracklow v. Bracklow, supra, set out the following examples of compensatory support:
a) A spouse's education, career development or earning potential has been impeded as a result of the marriage because, for example:
i. A spouse has withdrawn from the workforce, delays entry into the workforce, or otherwise defers pursuing a career or economic independence to provide care for children and/or spouse;
ii. A spouse's education or career development has been negatively affected by frequent moves to permit the other spouse to pursue these opportunities;
iii. A spouse has an actual loss of seniority, promotion, training or pension benefits resulting from absence from the workforce for family reasons;
b) a spouse has contributed financially either directly or indirectly to assist the other spouse in his or her education or career development.
80Compensatory support is premised on a marriage being a joint endeavor and seeks to alleviate economic disadvantage by taking into account all the circumstances of the parties, including the advantages conferred on either spouse during the marriage. It is concerned with an equitable sharing of the benefits of the marriage.
81Here, at the time of the separation agreement, it is clear that Ms Strifler was entitled to spousal support on both a compensatory and non-compensatory basis. The parties had been married and living together for eighteen years. Ms Strifler had been the primary caregiver for the children and had not worked outside of the home for almost all of the marriage. She assisted Mr. Strifler in his business by preparing the books for his accountant without financial compensation. At the time of the separation she was without income and attempting to establish her own business to achieve self-sufficiency.
82In Boland v. Boland, supra, Justice Ellen Murray summarizes the factors a court should consider in determining the significance of a new relationship on a former spouse's entitlement to spousal support. If the basis for the spousal support is compensatory, then remarriage or cohabitation does not compensate the receiving spouse for that which was foregone during an earlier marriage. In addition to this factor, Justice Murray sets out the following factors at paragraphs [107] and [108] of that decision:
i. the duration and stability of the new relationship;
ii. the value to the support recipient of any benefits she or he receives by reason of this new relationship;
iii. the existence of any legal obligation of the new partner to provide support;
iv. the economic circumstances of support recipient's new partner, sometimes in comparison to his or her former partner.
83Ms Strifler and Mr. Tedesco have only been residing in the same residence for approximately two years. Mr. Tedesco has no legal obligation to support her and he is supporting his own child of a previous relationship. In my view, even if Ms Strifler did misrepresent her living situation to Mr. Strifler, it is not material to her entitlement to spousal support in the circumstances of this case. The basis for Ms Strifler's entitlement to spousal support is primarily compensatory. If Ms Strifler had disclosed to Mr. Strifler that she was moving in with Mr. Tedesco at the time the parties signed the second agreement, Mr. Strifler would still have been obligated to pay spousal support to Ms Strifler.
84However, Ms Strifler is still receiving some economic benefit from the sharing of household expenses with Mr. Tedesco. Any economic benefit received by Ms Strifler from the sharing of household expenses should go to the issue of quantum of spousal support, not entitlement. It does not compensate for the fact, not disputed by Mr. Strifler, that Ms Strifler was out of the waged labour force for eighteen years raising the parties' children. She is now fifty-one years old. She continues to be entitled to spousal support on a compensatory basis.
85Further, the fact that Ms Strifler's living expenses have been reduced because she is living with Mr. Tedesco is still not sufficient grounds to set the agreement. Ms Strifler's original plan was that she and the children would reside with her mother in Burlington for five years. Mr. Strifler was aware that her living expenses would be shared and therefore reduced at the time he entered into the agreement, whether it was with her mother or Mr. Tedesco.
86Regrettably, no evidence was led regarding Mr. Tedesco's economic circumstances and Mr. Strifler did not cross-examine Mr. Tedesco on this issue. However, Ms Strifler did testify that she and Mr. Tedesco were only sharing the household expenses and that he was currently shouldering more of the economic burden given her limited financial circumstances. He was not providing her with any further funds.
87The onus is on Mr. Strifler to establish that he suffered a loss resulting from Ms Strifler's failure to disclose her new living situation when he signed the second agreement. The remedy of rescission may be refused if the party seeking to set aside the agreement fails to establish any loss resulting from the alleged misrepresentation. See Danylkiw v. Danylkiw, supra (Ont. C.A.). Mr. Strifler has not established that he has suffered a financial loss as he would still have been obligated to pay spousal support to Ms Strifler. In fact, had the parties exchanged proper financial disclosure and retained counsel, Mr. Strifler may have been obligated to pay spousal support at a significantly higher amount.
8.1(e): Was the Agreement Unconscionable?
88In considering this ground, subsection 33(4) of the Family Law Act also comes into play. The relevant sub-sections of that provision are as follows:
(4) Setting aside domestic contract.— The court may set aside a provision for support or a waiver of the right to support in a domestic contract or paternity agreement and may determine and order support in an application under subsection (1) although the contract or agreement contains an express provision excluding the application of this section,
(a) if the provision for support or the waiver of the right to support results in unconscionable circumstances;
89In her decision Barton v. Sauvé, 2010 ONSC 1072, Justice Jennifer A. Blishen of the Ontario Superior Court of Justice explains how subsections 33(4) and 56(4) of the Family Law Act operate together. At paragraph [74] of her decision, she relies upon the Ontario Court of Appeal's decision in Scheel v. Henkelman, 2001 CanLII 24133, which states as follows:
The use of the phrase "results in" in s. 33(4)(a) means that the subsection is not directed to unconscionable agreements, but to unconscionable results . . . An agreement which was fair and reasonable when it was signed, may, through circumstances that occur in the future, result in unconscionable circumstances at the time of a support application: . . . As for an unconscionable agreement, it may be set aside under s. 56(4) of the FLA, which is a codification of the general law of contract applicable to unconscionable agreements.
90The Court of Appeal goes on to discuss the definition of the word "unconscionable" as at paragraph [19] of the same decision to mean as "something which is shocking, oppressive, not in keeping with a caring society." In this case, the agreement provided for child and spousal support appropriate to the circumstances of the parties' custody and access arrangements after the separation as well as the history of the marriage and the roles adopted by Mr. and Ms Strifler. The agreement reflected the purposes and principles of child and spousal support established in our legislation and law and is clearly not unconscionable.
8.2: Has There Been a Change in Circumstances, Material or otherwise, since the May 30, 2011 Separation Agreement that warrants a change to the Separation Agreement?
91The parties' separation agreement does not have a general provision that defines what a material change in circumstances would be to justify a variation of the agreement, but it does contemplate the possibility of a variation in the following provisions:
Both parties will exchange financial information on an annual basis, before July 1st of the current year. These amounts will be reviewed by both parties and any change to the support amounts will be effective August 1st of the current year. The previous year's income will be used should any change in the current support amounts be revisited.
The party requesting any variation or revising of any condition of this separation agreement will be responsible for the filing of all documentation as well as all professional, legal and court costs associated with change in of any support amounts, both child and spousal. Richard will give Carolyn full disclosure of all business financial statements, documents, expenses and tax information within three weeks of Carolyn requesting the documents at any time during the year while Richard is self-employed, and once per year if not self-employed.
92Ms Strifler filed the parties' separation agreement with the court, pursuant to section 35 of the Ontario Family Law Act so that it could be enforced by the Family Responsibility Office. Subsection 37(2) of the Family Law Act provides that a court has the jurisdiction to vary a provision for spousal support in an agreement if there has been a material change of circumstances in either of the party's circumstances or that evidence not available on the previous hearing has become available.
93The onus is on the party seeking a variation to establish such a change. A "material" change in circumstances means a change that, if it existed or was known at the time of the agreement, would have resulted in different terms: Willick v. Willick, 1994 CanLII 28.
94In the case of L.M.P. v. L.S., 2011 SCC 64, the majority of the Supreme Court of Canada confirmed the following relevant principles with respect to a variation of a spousal support order or agreement:
a) the proper analysis of a variation application is the same whether or not a spousal support order incorporates an agreement that is, the threshold issue is whether or not there has been a material change in circumstances since the making of the order;
b) a material change must have some degree of continuity and not merely be a temporary set of circumstances;
c) what amounts to a material change in circumstances depends on the parties actual circumstances at the time of the order;
d) a term in an agreement that contemplates a specific type of change that will or will not give rise to a variation should be given effect to as it is evidence that the parties considered this particular situation changed circumstances;
e) a general clause in an agreement that support is final or implying it is final is still subject to a court applying an inquiry to determine if there has been a material change in circumstances;
f) once a material change in circumstances has been established, the variation order should properly reflect the objectives of a spousal support order taking into account the material change in circumstances and consider the existence of the separation agreement and its terms as a relevant factor; and
g) a court should limit itself to making the variation that is appropriate in light of the change. A variation should not be approached as if it were an initial application for support, nor is it an appeal of the original order or a new hearing.
8.2(a) Application of These Principles:
95Mr. Strifler has not established that there has been a material change in his financial circumstances since the agreement was signed.
96Subsections 19(1) and (2) of the Child Support Guidelines, O. Reg. 391/97, as amended, assist the court in determining the income of a self-employed person for child support purposes. Subsection 19(1) includes nine specific sections in which income may be added back or imputed to the payor. The entire section reads as follows:
- Imputing income.— (1) The court may impute such amount of income to a parent or spouse as it considers appropriate in the circumstances, which circumstances include,
(a) the parent or spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of any child or by the reasonable educational or health needs of the parent or spouse;
(b) the parent or spouse is exempt from paying federal or provincial income tax;
(c) the parent or spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;
(d) it appears that income has been diverted which would affect the level of child support to be determined under these guidelines;
(e) the parent's or spouse's property is not reasonably utilized to generate income;
(f) the parent or spouse has failed to provide income information when under a legal obligation to do so;
(g) the parent or spouse unreasonably deducts expenses from income;
(h) the parent or spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and
(i) the parent or spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.
(2) Reasonableness of expenses.— For the purpose of clause (1)(g), the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act (Canada).
97A self-employed person clearly has the onus of demonstrating the basis of his or her income for child support purposes. This includes demonstrating that the business deductions from gross income should not be taken into account in the calculation of income for support purposes. See Whelan v. O'Connor, 2006 CanLII 13554.
98It is also well established in the case law that the self-employed person has an obligation to put forward adequate and comprehensive records of income and expenses, so that a proper determination of the amount of child support can be established. The onus rests on the parent seeking to deduct expenses from income to provide meaningful documentation supporting those deductions, failing which an adverse inference can be drawn. See Meade v. Meade, 2002 CanLII 2806 and Orser v. Grant (2000), 96 A.C.W.S. (3d) 644. As Justice Frances P. Kiteley summarized in Meade v. Meade, supra:
[81] It is inherent in the circumstances of those who are self-employed or who have irregular income and expenses, that they have a positive obligation to put forward not only adequate, but comprehensive records of income and expenses. That does not mean audited statements. But it does mean a package from which the recipient spouse can draw conclusions and the amount of child support can be established. Where disclosure is inadequate and inferences are to be drawn, they should be favourable to the spouse who is confronted with the challenge of making sense out of financial disclosure, and against the spouse whose records are so inadequate or whose response to the obligation to produce is so unhelpful that cumbersome calculations and intensive and costly investigations or examinations are necessary.
99The test for imputing income for child support purposes applies equally for spousal support purposes. See Rilli v. Rilli, 2006 CanLII 34451; Perino v. Perino, 2007 CanLII 46919.
100Here, Mr. Strifler failed to meet his obligation to provide meaningful financial disclosure to determine his income for support purpose and that his income had changed since the agreement was signed. He refused to provide any supporting documentation proving that any of the expenses he deducted from his gross income were actually incurred, and that, if they were incurred, the expenses were reasonable in accordance with clause 19(1)(g) of the Child Support Guidelines. Subsection 19(2) of the Guidelines makes it clear that the "reasonableness of an expense deduction" is not "solely governed by whether the deduction is permitted under the Income Tax Act (Canada)", contrary to the view Mr Strifler expressed during this trial. Unlike the Income Tax Act, the reasonableness of an expense for Guideline purposes requires the court to examine whether the deduction results in a fair recognition of the actual income available for child support. Mr. Strifler provided no invoices, receipts, credit card statements, ledgers, or bank statements regarding any of his business expenses to make this determination.
101In carefully considering all of the expenses that Mr. Strifler has deducted from his gross income for 2012, without any proof that they were actually incurred, I will permit the fuel (diesel) costs deducted for the operation of Mr. Strifler's truck, thus leaving $98,483.00 ($166,238 minus $67,755), before the deduction of other business expenses. None of the "management fees" will be allowed as Mr. Strifler is the only individual in his business and this expense was not deducted during the parties' marriage. Further, I conclude that at least 50% of the expenses for meals, entertainment, motor vehicle, travel, telephone, utilities, maintenance and repairs, insurance, dues, fees, licenses and memberships should be added back into Mr. Strifler's income for support purposes, (total amount $23,608.00). This brings Mr. Strifler's annual income to $65,888.00.
102However, the income analysis does not end there. It is appropriate in these circumstances to gross-up the additional income to the father. This is done to ensure consistency of treatment where a party is found to have arranged his affairs to pay less tax on income. See Sarafinchin v. Sarafinchin, 2000 CanLII 22639; Juliette Vanessa M. v. Floyd Dale P., 2011 ONCJ 615, at paragraph [85]. A software analysis shows that, with the grossing up of his income, Mr. Strifler's income should be imputed at $76,947.00 per annum. This is the amount of income that will be assessed to Mr. Strifler for the purpose of calculating child support. In my view, this is a reasonable and conservative amount given Mr. Strifler's evidence at trial that he generally deposits approximately $8,000.00 monthly into his account after payment of his fuel (diesel) costs and before deducting other business expenses.
8.2(b) Has There Been a Material Change Since March 2012?
103Both parties agree and it is clear that the change to the custody arrangements in March of 2012 is a material change in circumstances since the agreement was signed. A change in the child support arrangements is therefore clearly warranted. Ms Strifler will be receiving significantly less child support. Based on the parties' income and the split custody arrangement, Mr. Strifler owes Ms Strifler child support in the amount of $659.00 per month, effective March 1, 2012, when the custody arrangements changed.
104Furthermore, the law is clear that a termination of child support can create a material change in circumstances warranting a change in spousal support. See Ferguson v. Ferguson, 2008 CanLII 12836. Under subsection 38(3) of the Family Law Act, where, as a result of giving priority to the support of a child, an order for the support of a spouse is not made or the amount of the order for the support of a spouse is less than it otherwise would have been, any material reduction or termination of the support for the child constitutes a material change of circumstances for the purposes of an application for the support of the spouse or for variation of an order for the support of the spouse. This then is an appropriate case for the court to intervene for that time period going forward.
105These material changes warrant a global review of the support provisions and the determination of income in the parties' agreement. In my view, the complicated formula for spousal support that these parties created in their second agreement will inevitably lead to further confusion and repeated motions to change which will not assist either party.
Duration and Quantum of Spousal Support
106Subsection 33(8) of the Family Law Act provides that the objectives of a spousal support order are as follows:
(8) Purposes of order for support of spouse.— An order for the support of a spouse should,
(a) recognize the spouse's contribution to the relationship and the economic consequences of the relationship for the spouse;
(b) share the economic burden of child support equitably;
(c) make fair provision to assist the spouse to become able to contribute to his or her own support; and
(d) relieve financial hardship, if this has not been done by orders under Parts I (Family Property) and II (Matrimonial Home).
107Subsection 33(9) of the Act sets out factors for the court to consider when determining the amount of support as follows:
(9) Determination of amount for support of spouses, parents.— In determining the amount and duration, if any, of support for a spouse or parent in relation to need, the court shall consider all the circumstances of the parties, including,
(a) the dependant's and respondent's current assets and means;
(b) the assets and means that the dependant and respondent are likely to have in the future;
(c) the dependant's capacity to contribute to his or her own support;
(d) the respondent's capacity to provide support;
(e) the dependant's and respondent's age and physical and mental health;
(f) the dependant's needs, in determining which the court shall have regard to the accustomed standard of living while the parties resided together;
(g) the measures available for the dependant to become able to provide for his or her own support and the length of time and cost involved to enable the dependant to take those measures;
(h) any legal obligation of the respondent or dependant to provide support for another person;
(i) the desirability of the dependant or respondent remaining at home to care for a child;
(j) a contribution by the dependant to the realization of the respondent's career potential;
(k) [Repealed: S.O. 1997, c. 20, s. 3(3).]
(l) if the dependant is a spouse,
(i) the length of time the dependant and respondent cohabited,
(ii) the effect on the spouse's earning capacity of the responsibilities assumed during cohabitation,
(iii) whether the spouse has undertaken the care of a child who is of the age of eighteen years or over and unable by reason of illness, disability or other cause to withdraw from the charge of his or her parents,
(iv) whether the spouse has undertaken to assist in the continuation of a program of education for a child eighteen years of age or over who is unable for that reason to withdraw from the charge of his or her parents,
(v) any housekeeping, child care or other domestic service performed by the spouse for the family, as if the spouse were devoting the time spent in performing that service in remunerative employment and were contributing the earnings to the family's support,
(v.1) [Repealed: S.O. 2005, c. 5, s. 27(12).]
(vi) the effect on the spouse's earnings and career development of the responsibility of caring for a child; and
(m) any other legal right of the dependant to support, other than out of public money.
108For the reasons set out earlier, I find that Ms Strifler is clearly entitled to ongoing spousal support. I also find that there should be no termination date for the spousal support, but rather that it should be indefinite, which is in keeping with the current state of the law regarding spousal support. Considering the length of the parties' marriage, the age of Ms Strifler at the time of the separation, the fact that she was the primary caregiver for both children and out of the waged labour force for eighteen years, it will be more difficult for her to attain self-sufficiency or a lifestyle that the parties enjoyed during the marriage. I recognise that Mr. Strifler is 55 years old and that he may wish to retire at the age of 65, which could trigger a review of the spousal support provisions at that time based on a material change in circumstances.
109The Ontario Court of Appeal in Fisher v. Fisher, 2008 ONCA 11, stated that the Spousal Support Advisory Guidelines (SSAG) are a useful starting point to assess the quantum and duration of spousal support, once entitlement is established. The court wrote at paragraph [103]:
[103] In my view, when counsel fully address the Guidelines in argument, and a trial judge decides to award a quantum of support outside the suggested range, appellate review will be assisted by the inclusion of reasons explaining why the Guidelines do not provide an appropriate result. This is no different than a trial court distinguishing a significant authority relied upon by a party.
110It is clear from the above passage that the Ontario Court of Appeal suggests that a trial judge who fails to address the Spousal Support Advisory Guidelines properly presented by counsel, will commit a reviewable error. Mr. Groulx has presented various DivorceMate spousal support calculations based on the Spousal Support Advisory Guidelines, using various income figures for the parties' income; however, none of the calculations were based on the incomes that I have ultimately determined for Mr. Strifler.
111Based on my review, I find that the SSAG achieve a fair and appropriate result in this case. I have prepared additional SSAG calculations inputting the income that I fixed for both parties ($76,947.00 for the father and $12,000 for the mother), which is attached as a schedule to these reasons. Based on the father's income, the SSAG formula determines that the father should pay spousal support in the amount of $823.00 per month at the low end of the range, $1039.00 monthly in the middle range, and $1269.00 at the high end of the range, with an indefinite duration subject to variation and possibly review.
112In my view, an appropriate amount of spousal support in the circumstances of this case is an amount in the middle range, with a review when Mr. Strifler reaches the age of 65, or when there is a material change in circumstances of either party.
8.2(c): Should There be a Reduction or Rescission of the Outstanding Arrears?
113Mr. Strifler has been paying $800.00 monthly since February 2012 towards both child and spousal support. The arrears accumulated are therefore with respect to spousal support only as this amount meets his child support obligation of $659.00 monthly. The balance remaining of $141.00 means a shortfall in spousal support each month of $898.00 for the past twenty-six months since the beginning of 2012. Accordingly, the spousal support arrears since 2012 are $23,348.00 ($898.00 multiplied by 26 months). In addition, Mr. Strifler owed $1,550.00 for 2011, according to the FRO records, for total arrears owing in the amount of $24,898.00.
114Ms Strifler agrees that her contribution to Bronte's orthodontic expense should be deducted from this amount as Mr. Strifler paid the entire cost. Mr. Strifler has also asked for the monthly sums that he paid towards Ms Strifler's Volkswagen, and towards the mortgage owed by Ms Strifler to her mother be deducted from that amount, as well as his payment of Bronte's driving lessons.
115I agree that Mr. Strifler should receive some credit for the payment of Ms Strifler's mortgage owed to her mother and Ms Strifler's share of the braces, but not for any other amounts. Mr. Strifler agreed to continue to pay the monthly lease payments for Ms Strifler's vehicle until December of 2012 under the parties' separation agreement, and I have found that the agreement should stand. Mr. Strifler unilaterally stopped making those payments in early 2012. In my view, having regard to all of the circumstances, it is appropriate to fix arrears owing at $16,000.00.
9: CONCLUSION AND ORDER
116The final order regarding Mr. Strifler's motion to change is as follows:
Mr. Strifler's motion to set aside the parties' separation agreement dated May 30, 2011 is dismissed.
Effective March 1, 2012, paragraphs the parties' separation agreement dated May 30, 2011 are varied as follows: the financial provisions regarding child and spousal support are replaced with the following:
Commencing March 1, 2012, the father shall pay child support to the mother in the amount of $659.00 per month, on the first day of each month thereafter. This is the child support guideline table amount based on the father's imputed income of $76,947.00 and the mother's imputed income of $12,000.00, based on the parties' split custody arrangement, pursuant to section 8 of the Child Support Guidelines.
If either party is seeking a contribution from the other for any extraordinary expenses for the children, then that party shall provide the other party with written proof of the anticipated cost and the other party shall confirm in writing if he or she consents to the expense, such consent not to be unreasonably withheld. The parties shall pay their proportionate share of any agreed upon expenses.
Commencing March 1, 2012, Mr. Strifler shall pay spousal support to Ms Strifler in the amount of $1,039.00 per month, to be reviewed when Mr. Strifler reaches the age of 65 or when there is a material change in the circumstances of either party.
The total arrears of support that are created as a result of this court order are fixed at $16,000.00 effective today's date. The Family Responsibility Office's record of arrears shall be adjusted accordingly. Mr. Strifler shall be entitled to pay the arrears owing at a rate of $300.00 per month, commencing March 1, 2014. Nothing in this order precludes the Family Responsibility Office collecting support arrears from any government source (refunds) or prize winnings.
The parties shall exchange full financial disclosure by June 1st of each year, including but not limited to, their year-end financial statements for their sole proprietorships or corporations, including supporting documentation, their year-end statement of revenues, their complete corporate (if any) and personal income tax returns and notices of assessment, and a letter from their respective accountants setting out how the personal income has been calculated.
If either party seeks costs, then he or she shall serve and file costs submissions, with a bill of costs and offers to settle attached, within 30 days. The other party may serve and file his or her written response to the submissions within 20 days.
117I have attached as Schedule "A" to these reasons my Spousal Support Advisory Guidelines calculations using the appropriate software. If I have made an error in these calculations or in my calculation of support arrears owing, then the parties may contact the court within fourteen days of the release of these reasons regarding any mathematical errors.
Released: February 3, 2014
Signed: "Justice Sheilagh O'Connell"
[Schedule not attached]
