Court of Appeal for Ontario

Date: June 28, 2018

Docket: C63328

Judges: Rouleau, van Rensburg and Pardu JJ.A.

Between

Sheila Elizabeth McKinnon Appellant/Applicant

and

Randall Lawrence McKinnon Respondent/Respondent

Counsel:

• Sheila McKinnon, self-represented
• Randall McKinnon, self-represented

Heard: April 23, 2018

On appeal from: The judgment of Justice R.T. Bennett of the Superior Court of Justice, dated January 3, 2017.

Judgment delivered by: van Rensburg J.A.

Introduction

[1] This is an appeal of a final order made after a four day trial on a motion to change. The appeal concerns the trial judge's determination of the respondent's income for support purposes, his approach to spousal support, and his dismissal of the appellant's motion for contempt, which was heard together with the motion to change. For the reasons that follow I would allow the appeal.

Facts

[2] The appellant Sheila McKinnon and the respondent Randall McKinnon were married for 28 years before they separated in 2007. Their separation agreement, dated April 1, 2008, provided for spousal support for Ms. McKinnon and child support for the youngest of their three children, who was born in 1994, and was 13 years old at the time. Support was based on the respondent's annual income of $91,300 (based on a three-year average). The parties agreed that the appellant, who did not work outside the home, would take reasonable steps to achieve self-sufficiency. Both entitlement to and quantum of spousal support were subject to review every three years post-separation.

[3] Over the years there were a number of motions, including three motions by the respondent to change final orders for support.

[4] The respondent brought his first motion to change in 2010 seeking a reduction in child and spousal support based on a material change in circumstances. He had lost his job following a restructuring of General Motors, had then taken on other employment, and had been terminated from his most recent position.

[5] By order dated September 17, 2010, after trial, McGee J. ordered monthly spousal support of $800 and child support of $807, after imputing annual income to the respondent of $91,225, and $10,000 to the appellant. She also ordered the respondent to maintain, until further court order or agreement of the parties, a life insurance policy in the face amount of $175,000 with the appellant as beneficiary for $100,000 and the child as beneficiary for $75,000. The order provided for the review of the face amount of the policy upon a material change in circumstances "which shall include but not be limited to a significant change in the premiums, a change in the quantum of spousal support or the termination of child support".

[6] The respondent's second motion to change resulted in a temporary order of Hughes J. dated June 8, 2012, on consent. The consent order was for monthly child support of $373 and spousal support of $345. By final order dated October 4, 2013 Hughes J. varied her earlier order as of June 1, 2013 to provide for monthly child support of $479 and spousal support of $800, based on the respondent's 2012 income of $53,008 and the appellant's income of $10,052.16. The respondent did not seek to vary his life insurance obligation.

[7] The respondent initiated a third motion to change in January 2015 seeking to terminate spousal and child support for the couple's youngest son, who had been in receipt of an ODSP pension since August 2014 (although he was still in school). Again, the respondent did not request an order terminating his life insurance obligation, however in March 2016 the appellant learned that the life insurance had been cancelled in 2015, and she brought a motion for contempt which was heard together with the respondent's motion to change.

[8] The appellant suffers from a number of serious health problems and receives a CPP disability pension in the amount of $10,770 per year. Two of the parties' children, aged 34 and 22 at the date of the trial, continued to live with the appellant. Both are disabled and in receipt of ODSP. The appellant's only source of income, other than spousal support, is her CPP pension.

[9] Three months before the trial, the respondent left his employment. Two months before trial he made an assignment in bankruptcy, and his driver's license was suspended by FRO for default on his support obligations.

Decision of the Trial Judge

[10] The trial judge made a final order that varied Hughes J.'s order of October 4, 2013 to terminate child support for the youngest child effective July 1, 2014, and to remove the requirement to provide life insurance for that child. This aspect of his decision is not appealed.

[11] As for spousal support, the trial judge found that the appellant was still entitled to support. As a result of her health issues, he concluded that it was unreasonable to impute an income greater than the amount she was receiving in CPP disability payments. The trial judge noted that the respondent "apparently had no income" at the date of trial, and that he was unable to work as a mechanic while his driver's license was suspended. The trial judge concluded that the respondent should have an opportunity to "get himself on his feet" so that he could gain employment and pay spousal support. He granted the respondent's request to terminate spousal support starting February 1, 2015, and provided for the reinstatement of support at a time approximately two years later (as discussed below).

[12] The trial judge imputed income of $35,000 per year to the respondent starting January 1, 2016. He noted that under the Spousal Support Advisory Guidelines (the "SSAGs" or the "Guidelines") this amount of income together with the appellant's income of $11,000 would generate a mid-point support amount of $805, an amount within $5 of the current spousal support order from 2013 (at para. 129).

[13] After so noting, the trial judge went on to refer to a settlement that the parties had reached after the trial was concluded, but were unable to implement. The trial judge ordered monthly spousal support in an amount that in his view would approximate what the appellant would have received if the parties' settlement could have been effected. He made an order that:

(1) terminated spousal support effective February 1, 2015;

(2) required the respondent to recommence paying spousal support at the rate of $500 per month commencing the later of 90 days after his driver's license was reinstated or May 1, 2017 until April 1, 2022; and

(3) fixed spousal support at $250 per month from May 1, 2022 until April 1, 2032.

[14] The trial judge suspended the collection of arrears of support accumulated pursuant to earlier court orders as of December 31, 2015, and instead ordered that any such arrears be paid from monies the respondent receives from his two LIF (life income fund) accounts at the rate of 50% of the amounts received by the respondent from those accounts until the arrears are paid. The respondent was required to name the appellant as irrevocable beneficiary of his LIF accounts, and he was prohibited from transferring, encumbering or otherwise dealing with the LIF accounts without the appellant's written consent. The trial judge directed in his reasons that there was no requirement for ongoing financial disclosure, he stated that there was no intention that the respondent having an income of more or less than $35,000 would result in a material change, and he terminated the obligation to provide life insurance.

[15] The trial judge dismissed the appellant's contempt motion. He referred to the requirement that the appellant prove that the respondent deliberately breached an order which was clear and unambiguous. Without further explanation, he stated "while the court finds that the respondent is very close to having met those criteria, by the thinnest of margins, the court finds that the respondent is not in contempt of the Order relating to the issue of life insurance".

Spousal Support

[16] The appellant says that the trial judge erred in his spousal support award:

(1) in refusing to impute to the respondent an annual income of $60,000 from January 1, 2016 onward;

(2) in terminating spousal support on February 1, 2015, and not requiring spousal support to be paid for approximately two years; and

(3) in departing from the SSAGs in fixing spousal support.

[17] The respondent, who did not file a factum, or specifically respond at the hearing to the appellant's argument, simply took the position that the trial judge did not err in making the order he did.

[18] Typically, support orders attract significant deference. This is informed by both the discretion involved in making support orders and the importance of finality in family law litigation. An appeal court should only intervene where there is a material error, a serious misapprehension of the evidence or an error of law, and not because the court would have made a different decision or balanced the relevant factors differently: Hickey v. Hickey, [1999] 2 S.C.R. 518, at para. 12.

[19] I would give effect to some, but not all, of the appellant's arguments about spousal support. As I will explain, I would not interfere with the essentially fact-based determination of the income to be imputed to the respondent.

[20] In my view, however, the trial judge's decision to terminate support for a period of two years from February 1, 2015, and his departure from the Guidelines in determining the level and duration of support, were based on errors of law and principle, and therefore must be corrected in this appeal.

(1) Imputing Income Commencing January 1, 2016

[21] The trial judge imputed to the respondent $35,000 in annual income commencing January 1, 2016. The appellant asserts that the trial judge erred in failing to impute income of $60,000 per year, which she says was supported by the evidence at trial.

[22] While the respondent's qualifications as a licensed mechanic and his employment history may have justified imputing a higher annual income to the respondent, I see no basis on which to interfere with the trial judge's factual and discretionary decision. In arriving at the figure of $35,000, the trial judge considered the relevant factors of the respondent's qualifications, his age (60), his employment history (including his periods of unemployment and unemployment at the date of trial), and his relatively good health, that "his best earning opportunity" was as an auto mechanic, and the income actually generated by his most recent period of employment as an auto mechanic. Furthermore, as explained below, an income of $35,000 is close to the amount the respondent was able to earn from employment in 2015. As such, I would not interfere with the motion judge's imputation of annual income to the respondent, commencing January 1, 2016, of $35,000.

(2) Spousal Support from February 2015 Onward: Unjustified Departure from the SSAGs

[23] The appellant argues that the trial judge erred when he (1) terminated the respondent's support obligation for two years commencing February 1, 2015; and (2) awarded spousal support going forward at a level significantly less than what is recommended under the SSAGs.

[24] I agree. In my view, both decisions – to give the respondent a two year "support holiday", and to award future support below the level recommended by the SSAGs – constitute unjustified departures from the SSAGs and therefore errors. The SSAGs are the presumptive starting point for awarding support. Any departure from them requires adequate explanation: Slongo v. Slongo, 2017 ONCA 272 at paras. 105 and 106.

[25] The trial judge terminated the respondent's obligation to pay support effective February 1, 2015, and only restarted the obligation on the earlier of 90 days after the respondent's driver's license was reinstated or May 1, 2017. Because the trial judge's reasons were released on January 3, 2017, this effectively gave the respondent a support holiday of between 23 and 27 months.

[26] The trial judge did not explain why he made an order terminating spousal support for a two-year period. He adverted to the need for the respondent "to get himself on his feet". And he referred on a number of occasions to FRO's suspension of the respondent's driver's license, as a reason the respondent could not work as a mechanic, and as a consequence of the appellant's refusal to consent to the termination of child support. Specifically, he referred to the appellant's "relentless pursuit" of support as causing the respondent to lose his driver's license and consequently the ability to work in his trade. Even if the trial judge's criticism of the appellant for refusing to voluntarily terminate child support was warranted (and I do not necessarily agree, given the evidence that the appellant in 2015 sought leave to bring a motion which was denied, to terminate child support and to increase spousal support), this could not reasonably justify the complete elimination of the respondent's spousal support obligation for a period of two years.

[27] It was, accordingly, in my view an error to interrupt the spousal support obligation.

[28] It was also, in my view, an error to depart from the SSAGs in the amount of support ordered on a go-forward basis. In so doing, the trial judge's reasons suggest that he was guided by the parties' mediated settlement. The parties, at the conclusion of the trial, but before a decision was released, had reached a settlement at a mediation. The terms of the settlement (which are set out in the trial judge's reasons) provided for, among other things, spousal support to terminate effective February 1, 2015, and for the respondent to transfer the balance in his LIF accounts ($67,708.14) to the appellant. The settlement could not be implemented when it was determined that there was a legal impediment to the transfer. Despite the trial judge's explicit statement, at para. 13 of his reasons, that the court would "…render its decision based on the evidence heard at trial", he also stated, at para. 132, that it was "appropriate to craft a decision that incorporates as much as possible the spirit of the settlement reached by [the] parties" and, at para. 142, described as the net effect of his decision that the appellant would "receive approximately the same as she would have received if the parties' settlement could have been effected." The settlement however required the immediate payment of a lump sum to the appellant in exchange for a release of the respondent's obligations, and, as the appellant points out, the lump sum settlement was a compromise intended to bring finality to the litigation.

[29] It was an error for the trial judge to use the parties' negotiated settlement as a reference point for determining spousal support.

[30] Offers to settle are inadmissible in subsequent family law proceedings except when dealing with costs issues: see rule 18(8) of the Family Law Rules, O. Reg. 114/99. The same applies to draft minutes of settlement tendered on another party but not signed: Parreira v. Parreira, 2013 ONSC 6595. This rationale extends to a settlement that was agreed upon but could not be implemented. The trial judge here ought to have made his decision based on the evidence he heard. In any event, the terms of the unimplemented settlement agreement could not justify a departure from the SSAGs in the determination of the respondent's spousal support obligations, and was not a reason for interrupting spousal support for two years, and then fixing support at a level below the recommended SSAGs range.

(3) Applying the SSAGs to This Case

[31] Having concluded that the trial judge erred in principle in his determination of spousal support from February 1, 2015 onward, this court may make any order that the court below should have made, provided that the record permits us to do so. The termination of the respondent's obligation to pay child support warrants reconsideration of the amount of spousal support payable according to the SSAGs and is expressly contemplated by those guidelines.

[32] The respondent sought to reduce his support obligations commencing February 1, 2015. His support obligations until that time were governed by Hughes J.'s October 4, 2013 order, which required him to pay spousal support of $800 per month and child support of $479, based on his annual income in 2012 of $53,008. The respondent's income in the next two years was relatively consistent: the trial judge determined that he earned $51,101.10 in 2013 and $56,287 in 2014. He did not determine the respondent's income for support purposes for 2015 although he discussed the respondent's financial circumstances and observed that a significant portion of the respondent's total income for that year was comprised of withdrawals from his retirement savings. The respondent's line 150 income for 2015 was $104,246.45, of which $70,025.51 consisted of RRSP withdrawals and RRIF or LIF annuity payments.

[33] For the period starting February 1, 2015, I would fix spousal support at the mid-point of the suggested SSAGs amount based on the parties' respective incomes for 2015, but excluding the respondent's encroachment on retirement savings in that year. The respondent's other income (employment income, commissions and employment insurance) for 2015 was $39,371.09. Based on that income amount and the appellant's income of $11,000 per year, I would order a mid-point spousal support amount of $1,034 per month.

[34] As for spousal support going forward, I have already concluded that the trial judge did not err in imputing an income of $35,000 to the respondent commencing January 1, 2016. There is no reason to depart from the mid-point spousal support amount suggested by the SSAGs. Accordingly, after taking into consideration the appellant's CPP benefits of $11,000, she is entitled to spousal support from January 1, 2016 forward in the sum of $875 per month.

Contempt

[35] The trial judge offered no reason for refusing to find the respondent in contempt of the McGee J. order requiring him to provide life insurance for his support obligations. He acknowledged that, in order to be found in contempt, the respondent must have deliberately breached an order that was clear and unambiguous, but then simply stated that "while the court finds the respondent is very close to having met those criteria, by the thinnest of margins…the respondent is not in contempt of the order relating to the issue of life insurance".

[36] Civil contempt requires that the moving party establish beyond a reasonable doubt that (a) the order alleged to have been breached states clearly and unequivocally what should or should not be done; (b) the alleged contemnor had actual knowledge of the order's terms; (c) the alleged contemnor intentionally did the act the order prohibited or intentionally failed to do the act the order required. A judge retains an overriding discretion to decline to make a contempt finding where the foregoing factors are met where it would be unjust to do so, such as where the alleged contemnor has acted in good faith to take reasonable steps to comply with the relevant court order: Carey v. Laiken, 2015 SCC 17, [2015] 2 S.C.R. 79, at paras. 33-35, 37. The trial judge's reasons on the contempt issue are conclusory. He does not explain why he concluded that contempt had not been made out and, on a review of the evidence, there was no valid reason to refuse a contempt order in this case.

[37] First, the McGee J. order was clear and unambiguous – the respondent was required to maintain a life insurance policy for $175,000 pending agreement by the parties or court order. Second, the respondent admitted that he knew about the order, and his ongoing obligation to maintain life insurance, pending court order or the appellant's agreement, and that he had been found in contempt for the same breach in 2010. Third, the respondent's breach of the order was deliberate. He did not simply allow the policy to lapse; there was no inadvertence. He admitted to having written a letter to the insurance company in June 2015, to cancel the policy. The respondent did not advise the appellant that he was cancelling the policy nor did he seek her consent or a court order permitting him to do so. His explanation at trial was that he could not afford the premiums. However, at the time he cancelled the policy (which he agreed in his evidence at trial had a premium of around $135 per month), he had acquired a new truck and was making loan payments of $600, and total vehicle payments of $1,100 per month.

[38] I would therefore allow the appeal of the trial judge's dismissal of the contempt motion and find that the cancellation of the respondent's life insurance policy in June 2015 and the continued failure to have in place the life insurance required by the order of McGee J. dated September 17, 2010 until that obligation was lawfully terminated, was in contempt of that order.

[39] The appellant asks this court to impose the penalty she requested at trial, namely a $5,000 fine to be paid to her directly. Rule 31(5) of the Family Law Rules provides for a variety of orders that may be made where a person is found in contempt, including (c) that the person in contempt pay an amount to a party as a penalty.

[40] In my view, the appropriate penalty is to require the respondent to pay to the appellant the sum of $2,295. This is the total amount of the monthly premiums the respondent avoided paying from when he cancelled the insurance in June 2015 for the next 17 months, and before the insurance obligation was terminated by the trial judge. This amount is payable as spousal support, as the intention was for the life insurance policy to provide security for the respondent's support obligations.

[41] In addition to terminating the life insurance obligation, the trial judge required the respondent to name the appellant as irrevocable beneficiary of his LIF accounts, and prohibited him from transferring, encumbering or otherwise dealing with the LIF accounts without the appellant's written consent. It is clear that this obligation was intended to replace the life insurance obligation, to provide a source for payment of monies to the appellant in the event of the respondent's death. There is no reason to interfere with these terms of the order, which will remain in place.

Disposition

[42] The appeal is therefore allowed. Paragraphs 2, 6, 7, 8, 10, 11 and 14 of the January 3, 2017 order of Bennett J. are set aside.

[43] Commencing February 1, 2015 until December 1, 2015, the respondent's spousal support obligation is $1,034 per month. Commencing January 1, 2016 the respondent's spousal support obligation is $875 per month.

[44] With respect to arrears of support, the FRO statement of arrears shows arrears of child and spousal support as of January 1, 2016 in the sum of $8,215.74. With the termination of child support by Bennett J. effective July 1, 2014, and the adjustments under this order, the arrears of support as of January 1, 2016 are $2,977.76. The total arrears owing up to July 1, 2018 (based on $875 in monthly spousal support plus the $2,295 penalty) are $23,452.76, less amounts paid by the respondent to the appellant during this time. The arrears are to be paid by the respondent in accordance with para. 9 of Bennett J.'s order, which specifies that arrears are to be paid from his LIF accounts at the rate of 50% of the amounts received by the respondent from those accounts until the arrears are paid.

[45] The parties are to provide one another with copies of their T1 general returns by May 31 each year and their notices of assessment within 30 days of receipt, except that the T1 general returns for 2017 and notices of assessment shall be exchanged within 30 days of this order. A support deduction order shall issue in respect of amounts payable commencing July 1, 2018.

[46] Costs, inclusive of disbursements and applicable taxes, are payable by the respondent to the appellant in the sum of $5,000 for the trial and $3,000 for the appeal.

Released: June 28, 2018

"K. van Rensburg J.A."

"I agree Paul Rouleau J.A."

"I agree G. Pardu J.A."