Tessema v. Hagos, 2017 ONSC 2438
CITATION: Tessema v. Hagos, 2017 ONSC 2438
DIVISIONAL COURT FILE NO.: DC-16-42
DATE: 20170509
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
KITELEY, SWINTON and M. L. EDWARDS JJ.
BETWEEN:
TADESSE TESSEMA Applicant (Appellant)
– and –
ABEBA HAGOS Respondent (Respondent on Appeal)
COUNSEL:
Keith Juriansz, for the Applicant (Appellant)
Self-represented
HEARD at Brampton: March 31, 2017
Swinton J.:
Overview
[1] The appellant, Tadesse Tessema, appeals from the order of Bielby J. dated March 24, 2016 ordering him to pay spousal support to the respondent Abeba Hagos. He also seeks to appeal the costs order of April 27, 2016, which required the respondent to pay costs in the amount of $27,900.00, a sum that the appellant argues is unreasonably low.
[2] The appellant argues that the trial judge erred in ordering spousal support, given that the respondent had waived any claim to spousal support in the parties’ separation agreement. For the reasons that follow, I would allow the appeal and set aside the order for spousal support and increase the quantum of the trial costs awarded to the appellant.
Background Facts
[3] The parties married in 1991. They have two children, who are currently 24 years old and 19 years old. The trial judge found that the parties separated on August 5, 2010.
[4] The appellant moved out of the matrimonial home in February, 2012. The children left with him, and he was awarded custody of the younger child that year. Child custody and access were not issues at trial. The appellant has been the sole source of support for the children since the separation.
[5] The appellant earned between $70,000 and $80,000 from employment income. During the marriage, he also had income from gas stations and a convenience store that the parties ran together. He also worked as a real estate agent and limousine driver and operated a credit card exchange operation for a short time.
[6] At the time of separation, the respondent worked as a personal support worker, earning approximately $20,600 per year. She stopped working in 2013 and began receiving Ontario Works benefits. According to the evidence, she suffered from diabetes and high blood pressure throughout the marriage.
[7] On March 10, 2012, the parties entered into a separation agreement dealing with all corollary relief claims except custody of the children and child support. The agreement dealt with the division of the parties’ matrimonial properties. It provided for equal division of the net proceeds of the sale of the matrimonial home. The respondent waived any claim to spousal support and any claim to share in the appellant’s pension. The appellant waived any right to properties that the respondent owned in Ethiopia and agreed to terminate litigation in Ethiopia respecting those properties. The trial judge subsequently found that the respondent owned two properties in Ethiopia, and that at one point, she had received rent for one in the amount of at least $1,000 per month.
[8] The agreement was silent as to child support obligations, at the request of the respondent. At the time of the separation agreement, the children were living with the appellant, and he was supporting them. At some point, the respondent cashed in the children’s RESPs in the amount of almost $20,000. The eldest child has now completed university, while the younger child is currently in university.
The Decision of the Trial Judge
[9] At trial, the respondent sought to set aside the separation agreement on the basis of non-disclosure and duress. In detailed reasons reported at 2016 ONSC 1887, the trial judge found that she had not established duress, concealment of assets or any material misrepresentation by the appellant, and he declined to set aside the agreement. As a result, the respondent’s claim for equalization of net family property was dismissed.
[10] The trial judge refused to uphold the respondent’s waiver of spousal support. He found, in particular, that the substance of the separation agreement, as it related to spousal support, was not in substantial compliance with the objectives set out in s. 15.2(6) of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) (the “Act”) at the time it was executed or subsequently.
[11] The trial judge found that the respondent was intentionally underemployed, and he imputed an income to her of $25,000 per year, based on full-time employment at a minimum wage job plus rent from her Ethiopian properties of $1,600 per year. He ordered the respondent to pay child support for the younger child, retroactive to July 1, 2015, in the amount of $200 per month and s. 7 expenses in the amount of $251.33 per month.
[12] The trial judge fixed spousal support retroactive to July 1, 2015 in the amount of $1,239 per month, but set off the child support, for a net amount payable by the appellant of $787 per month as long as the younger child remained a child of the marriage. He did not order spousal support retroactive to an earlier date because the respondent had cashed in the children’s RESPs for her own benefit.
[13] The trial judge did not grant the parties’ divorce, voicing a concern that divorce might limit the respondent’s ability to remain on the appellant’s employment health benefits plan. However, he invited the appellant to move before him, without further court cost, for an uncontested divorce.
[14] Subsequently, the trial judge ordered the respondent to pay the appellant $27,900 in costs. He held that success had been divided at trial. However, the respondent’s conduct had caused the trial to be longer than necessary. He also considered her ability to pay. He ordered the costs to be paid from the respondent’s share of the proceeds of sale of the matrimonial home that were being held in trust. The remaining funds, after payment of this costs award and other costs awards outstanding, were to be released to the respondent.
Issues on the Appeal
[15] The main issue on this appeal is whether the trial judge erred in law by failing to apply the proper legal principles when he awarded spousal support despite the waiver in the separation agreement. This ground of appeal raises a pure question of law, and the standard of review is correctness.
Analysis
The Guiding Principles
[16] In Miglin v. Miglin, 2003 SCC 24 the Supreme Court of Canada set out the guiding principles to be applied when a party seeks spousal support despite a waiver of spousal support in a separation agreement. The Court set out a two stage test (at paras. 79-91).
[17] At the first stage, the court must look at the circumstances under which the separation agreement was executed, asking whether there were circumstances of oppression, pressure or other vulnerabilities. The court should consider the duration of the negotiations and whether the parties had legal counsel. The Supreme Court stated that a court should be loathe to interfere with the agreement if the circumstances of negotiation were satisfactory (at para. 83).
[18] If the circumstances surrounding the execution of the agreement were satisfactory, the court should then consider the substance of the agreement, asking if, at the time of the agreement, it was in “substantial compliance” with the objectives in the Divorce Act. At para. 84, the Supreme Court stated:
... The court must determine the extent to which the agreement takes into account the factors and objectives listed in the Act, thereby reflecting an equitable sharing of the economic consequences of marriage and its breakdown. Only a significant departure from the general objectives of the Act will warrant the court’s intervention on the basis that there is not substantial compliance with the Act. The court must not view spousal support arrangements in a vacuum, however; it must look at the agreement or arrangement in its totality, bearing in mind that all aspects of the agreement are inextricably linked and that the parties have a large discretion in establishing priorities and goals for themselves.
[19] At stage two of the analysis, the court must consider the circumstances at the time of the application for spousal support. It should “assess the extent to which enforcement of the agreement still reflects the original intention of the parties and the extent to which it is still in substantial compliance with the objectives of the Act” (at para. 87). The Supreme Court stated that “it is unlikely that the court will be persuaded to disregard the agreement in its entirety but for a significant change in the parties’ circumstances from what could reasonably be anticipated at the time of negotiation” (at para. 88).
The Trial Judge’s Application of the Test in Miglin
[20] I turn now to the reasons of the trial judge. He set out the test in Miglin and then proceeded to apply it. He found that there were no circumstances of oppression or other vulnerabilities that called into question the separation agreement. The parties both had independent legal advice, and the respondent chose to enter the agreement despite the advice of her counsel not to do so because of the waiver of spousal support. The agreement was mutually negotiated by the parties. For example, the provision respecting child support was removed at the request of the respondent.
[21] It was in the application of the second part of the inquiry under stage one of the test that the trial judge first fell into error. In considering the substance of the agreement, a court is required to determine whether the agreement “in its totality” is in substantial compliance with the objectives of the Act. As the Supreme Court stated at para. 85 of Miglin,
... “substantial compliance” should be determined by considering whether the agreement represents a significant departure from the general objectives of the Act, which necessarily include, as well the spousal support considerations in s. 15.2, finality, certainty, and the invitation in the Act for parties to determine their own affairs.
[22] Section 15.2(4) of the Act sets out the factors that a judge should consider in making an order of spousal support:
In making an order under subsection (1) or an interim order under subsection (2), the court shall take into consideration the condition, means, needs and other circumstances of each spouse, including
(a) the length of time the spouses cohabited;
(b) the functions performed by each spouse during cohabitation; and
(c) any order, agreement or arrangement relating to support of either spouse.
[23] Subsection 15.2(6) then sets out the objectives of a spousal support order:
An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should
(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
(b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
(c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and
(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.
[24] The Supreme Court emphasized in Miglin that the spousal support provisions of a separation agreement are not to be considered “in a vacuum”, and the agreement must be considered in its totality. The Court also stated that “assessment of an agreement’s substantial compliance with the entire Act will necessarily permit a broader grant of arrangements than would be the case if testing agreements narrowly against the support order objectives in s. 15.2(6)” (at para. 86).
[25] In this case, the trial judge focused solely on whether the terms of the agreement relating to spousal support were in substantial compliance with the objectives of spousal support set out in s. 15.2(6) of the Act. He concluded that the agreement was not in compliance, given that the parties had had a long term marriage, that the respondent was economically disadvantaged as a result of the marriage breakdown, and that she was suffering economic hardship as a result of the marriage breakdown. Accordingly, he held that she was entitled to spousal support.
[26] The trial judge erred in failing to consider whether the separation agreement, considered as a whole, was in substantial compliance with the general objectives of the Act. He should have considered the terms of the agreement as a whole, and consistent with s. 15.2(4), he should also have considered the means of the respondent at the time the agreement was executed.
[27] Moreover, in applying stage two of the test, he was required to determine whether there had been a change of circumstances since the agreement was signed, so that the terms of the agreement no longer reflected the reasonable expectations of the parties and did not substantially comply with the objectives of the Act. He did not engage in an analysis of these questions, and this was an error of law.
The Proper Application of the Test
[28] As the trial judge did not apply the correct test, the question for this Court, on appeal, is whether it is in a position to make the inquiries that he should have made. I am of the view that this Court, like the Supreme Court in Miglin, can appropriately apply the test to the evidence in the record.
[29] I turn then to the second inquiry in stage one of the test – whether the agreement, at the time it was made and considered as a whole, is in substantial compliance with the objectives of the Act. The trial judge had found earlier in his reasons that the respondent waived her right to claim spousal support or a share of the appellant’s pension because she wanted to protect her properties in Ethiopia (Reasons, para. 170). However, he never considered the significance of the property arrangements made by the parties, which left the respondent with two properties in Ethiopia capable of earning income.
[30] The appellant provided the trial judge with four scenarios for the determination of equalization. In each scenario, the respondent would owe an equalization payment to the appellant. According to the scenario that took into account the respondent’s two Ethiopian properties and the appellant’s pension, the respondent would have owed the appellant an equalization payment of about $153,000. Thus, while she waived spousal support, she received a significant benefit in the property arrangements in the agreement.
[31] The respondent further benefitted from the terms of the separation agreement in that she was not obliged to contribute to child support. At her request, there was no provision for the payment of child support in the agreement, as she hoped to contribute to child support someday. However, it was understood that the appellant would support the children, and he has done so since the separation.
[32] When the separation agreement is considered in its totality, there was substantial compliance with the objectives of the Act at the time when the agreement was made, given the property arrangements and child support arrangements, and taking into account, as well, the interest in finality and respect for the parties’ autonomy in structuring their affairs.
[33] I turn now to the stage two analysis in Miglin. The question to be determined is whether there has been a significant change of circumstances since the time that the separation agreement was signed. If so, does the enforcement of the agreement still reflect the original intention of the parties, and is the agreement still in substantial compliance with the objectives of the Act?
[34] The evidence shows that at the time of the proceedings, the respondent suffered from the same medical conditions she had experienced at the time of the execution of the separation agreement. The trial judge found that she was employable, and he imputed an income to her that was greater than what she reported at the time the agreement was signed. While she claims to have suffered two motor vehicle accidents since the agreement was signed, she failed to disclose her medical records or other documentation with respect to these accidents. Thus, the evidence does not support a finding that there had been a significant change in the respondent’s circumstances since the signing of the agreement. Thus, there was no significant departure from the range of reasonable outcomes that the parties anticipated at the time they signed the separation agreement that would put the agreement at odds with the objectives of the Act.
[35] Accordingly, the terms of the separation agreement should have been enforced. The trial judge erred in awarding spousal support in light of the waiver in the separation agreement, and his order should be set aside.
[36] Given that the appellant did not request an order for child support at trial, the trial judge also erred in making such an award.
[37] The appellant also argues that the trial judge erred in failing to grant a divorce. However, that is a mischaracterization of the judge’s order. He did not refuse to grant a divorce; rather, he ordered that the appellant could proceed by way of a motion before the trial judge. I would not give effect to this ground of appeal.
Costs of the Trial
[38] Having granted the appeal, I must revisit the order for costs.
[39] The appellant had sought partial indemnity costs of the 14 day trial in the amount of $89,926.08. In making the order that the respondent pay costs of $27,900, the trial judge noted that the parties had experienced mixed success and that the appellant’s offer to settle, which provided for the dismissal of the respondent’s claim for spousal support, was not relevant. He went on to observe that the respondent had taken some positions at trial that were without merit; that a large portion of the trial was taken up in determining the respondent’s interest in property in Ethiopia which she denied; and that the respondent’s evidence lacked credibility. He also considered the respondent’s financial position – namely, that there remained in trust approximately $78,000 representing her share of the net proceeds from the sale of the former matrimonial home.
[40] Given the result of this appeal, the appellant has been wholly successful at trial, and pursuant to rule 24(1) of the Family Law Rules, he is presumed entitled to costs. The appellant’s offer to settle, made almost one year before the 14 day trial started, was reasonable and consistent with the ultimate decision. The findings made by the trial judge referred to above relate to the respondent’s unreasonable conduct, which served to lengthen the duration of the trial. These findings also provide ample justification for an order increasing the costs. In my view, the amount of $60,000, which represents 2/3 of the appellant’s partial indemnity costs, reflects these factors and is proportionate to the importance of the issues.
Costs of the Appeal
[41] I would fix costs of the appeal at $10,000 all in, an amount that is fair and reasonable for a half day appeal of this complexity.
Conclusion
[42] The appeal is allowed and an order is to go as follows:
The order for child support in paras. 4 and 5 of the trial judge’s order of March 24, 2016 is set aside, effective July 1, 2015, and the appellant’s claim for child support is declared withdrawn.
The order for spousal support in paras. 6-8 of the order is set aside effective July 1, 2015, and the respondent’s claim for spousal support is dismissed.
The support deduction order in paragraph 13 of the order is set aside effective July 1, 2015 and the Director, Family Responsibility Office shall rescind any arrears accumulated pursuant to that order.
Leave is granted to appeal the order as to the costs of the trial, and the appeal is allowed. Para. 1 of the order of March 24, 2016 is set aside. The respondent shall pay to the appellant costs of the trial fixed in the amount of $60,000 inclusive of HST and disbursements.
The respondent shall to the appellant pay costs of the appeal fixed at $10,000 inclusive of HST and disbursements.
The costs referred to in para. 4 and 5 above, shall be paid, to the extent available, from the respondent’s share of the proceeds of sale of the former matrimonial home held in trust by Ranjeet Walia, provided that any amount left in trust after payment of these costs and payment of any other costs orders made against the respondent during the proceedings shall be paid to the respondent. If there are insufficient funds in trust to pay all costs awards, then the respondent remains liable for the balance.
Swinton J.
I agree _______________________________
Kiteley J.
I agree _______________________________
M.L. Edwards J.
Released: May 9, 2017
CITATION: Tessema v. Hagos, 2017 ONSC 2438
DIVISIONAL COURT FILE NO.: DC-16-42
DATE: 20170509
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
KITELEY, SWINTON and M. L. EDWARDS JJ.
BETWEEN:
TADESSE TESSEMA Applicant (Appellant)
– and –
ABEBA HAGOS Respondent (Respondent on Appeal)
REASONS FOR JUDGMENT
Swinton J.
Released: May 9, 2017