Court of Appeal for Ontario

Date: September 27, 2018 Docket: C64351

Judges: Hoy A.C.J.O., van Rensburg and Pardu JJ.A.

Between

Scott Timothy Pustai Applicant (Respondent)

and

Christine Marie Pustai Respondent (Appellant)

Counsel

Michael H. Tweyman, for the appellant

Stephen P. Kirby and Gary S. Joseph, for the respondent

Heard

July 16, 2018

On Appeal

From the final order of Justice H.K. O'Connell of the Superior Court of Justice, dated August 30, 2017.

Decision

van Rensburg J.A.:

Overview

[1] This is a family law appeal. In dispute are the variation and termination of spousal support.

[2] The appellant Christine Pustai appeals a judgment after trial of a motion to change brought by the respondent Scott Pustai. The judgment, dated August 30, 2017, varied a 2008 consent order following a settlement the parties had concluded after several years of litigation. The judgment reduced monthly spousal support from $3,000 to $1,000 effective June 1, 2013, and terminated spousal support one year later. The judgment also required Ms. Pustai to pay Mr. Pustai one half of the net proceeds from the sale of the matrimonial home in 2010 as consideration for her contribution to s. 7 expenses for child support up to the date of the consent, and dismissed Mr. Pustai's claim for child support and s. 7 expenses. The judgment also provided for the payment of funds by Mr. Pustai to Ms. Pustai for the purchase of a vehicle, which is not subject to appeal.

[3] For the reasons that follow I would allow the appeal. Briefly, while I agree that it was open to the trial judge to conclude that there was a material change in Ms. Pustai's financial circumstances, in my view, the trial judge erred when, after finding that Mr. Pustai's income had remained consistent since 2008, he determined that Mr. Pustai's financial circumstances had materially changed. Further, the trial judge did not conduct the required analysis before substantially reducing and then terminating spousal support. Specifically, he did not assess the material change in circumstances in the context of the parties' January 2008 settlement, the consent order and a companion trust agreement. Applying the proper analysis, spousal support should be reduced, but not terminated. As for the matrimonial home and s. 7 expenses, the trial judge misapprehended the evidence. The parties agreed that Ms. Pustai was to become the owner of the matrimonial home and entitled to all of the proceeds, and they conducted themselves accordingly. Mr. Pustai's apparent interest in the home was a fiction, designed to avoid payment of Ms. Pustai's legal and accounting fees. As such, Mr. Pustai is not entitled to any proceeds from the sale of the matrimonial home.

Facts

[4] The parties married in 1989 and separated in 2001 after 11.5 years of marriage. They divorced in April 2003. At the time of their separation there were four children of the marriage. At all relevant times, Mr. Pustai has been the 90% owner of a trucking business, Total Transport Solutions (his companies are referred to as "TTMI"). Ms. Pustai did not work outside the home.

(1) The Parties' 2008 Settlement

[5] After six years of litigation, in 2008, custody and access were resolved on consent: Ms. Pustai was to have custody of one child, and Mr. Pustai custody of the other three children. The parties entered into minutes of settlement dated January 16, 2008. Some of the terms of the minutes of settlement were incorporated into the final consent order of Lack J. dated February 21, 2008. The relevant parts of the final order are as follows:

1. Based on an imputed income of $155,800.00, the [respondent] shall pay to the [appellant] base child support of $1,297.00 per month for the support of [the one child] commencing March 1, 2008, and on the first day of each month thereafter.

2. The [respondent] shall pay to the [appellant] spousal support in the sum of $3,000.00 per month commencing March 1, 2008 and on the first day of each month thereafter. There shall be no termination date for spousal support. Either party may ask for a review of the quantum of support upon a material change in circumstances…

3. The [appellant] shall transfer her one-half interest in the former matrimonial home to the [respondent] as lump sum child support for the support of [the three children in the respondent's custody] inclusive of section 7 expenses including University/College expenses.

4. The [appellant] shall have the right to occupy the former matrimonial home indefinitely. The [appellant] shall pay all costs associated with the home, including, but not limited to mortgage payments, taxes, utilities, cable, telephone, insurance, repairs and upkeep. At no time shall the [respondent] be entitled to force the sale, transfer or further encumbrance of the home…

5. There shall be no further payment to either party on account of equalization, costs, disbursements, interest owing for any monies prior to January 14, 2008, retroactive child support or retroactive spousal support.

[6] The January 2008 minutes of settlement also provided for a payment by Mr. Pustai to Ms. Pustai of $100,000 "in full satisfaction of any monies owing for equalization, retroactive spousal support and costs", and a further payment of $25,000 on or before March 15, 2008. These amounts were to be neither taxable to Ms. Pustai nor tax deductible to Mr. Pustai. The parties agree that these amounts were paid and form at least a part of their overall settlement.

[7] Contemporaneous with the minutes of settlement, the parties signed a secret trust agreement which provided:

I, Scott T. Pustai, hereby acknowledge that the property located at [address of the former matrimonial home], as well as the Chevy Suburban, is being held by me Scott T. Pustai in trust for Christine Pustai and that I have no beneficial interest in the property.

At Christine Pustai's sole discretion, I hereby agree to transfer, sell, encumber or deal however Christine's [sic] wishes with the property at her request and sole discretion.

[8] By the time the parties settled their matrimonial litigation, only Mr. Pustai was represented by legal counsel. TTMI had been valued after arbitration at approximately $1.1 million, and it was a term of the settlement that Mr. Pustai would abandon his appeal of the arbitration award.

[9] In an action by Ms. Pustai's counsel for payment of legal and accounting fees, Pollak J. determined that, on Mr. Pustai's initiative, both parties had colluded to evade the payment of Ms. Pustai's legal fees. To this end, on the eve of the appeal of the TTMI arbitration, Ms. Pustai had terminated her counsel's retainer. At the same time, she had transferred the matrimonial home to the respondent subject to the trust agreement. All of this was done as part of the parties' plan to avoid paying Ms. Pustai's legal fees: Pellman v. Pustai, [2009] O.J. No. 4412 (S.C.), at paras. 4 and 5.

(2) The 2008 Motion to Change

[10] Mr. Pustai brought his first motion to change only eight months after Lack J.'s consent order. He was seeking to terminate spousal support and to require Ms. Pustai to pay child support.

[11] Mr. Pustai argued that there were two material changes in the parties' circumstances. First, the child who had been in Ms. Pustai's custody went to live with him in July 2008. Second, he asserted that his financial position had deteriorated – that his business was showing substantial losses and that he had to borrow money or use gifts of money to make ends meet.

[12] On August 5, 2009, after a trial, Magda J. dismissed the motion to change. Given that Mr. Pustai's actual 2008 income was virtually identical to the income imputed to him in the 2008 consent order, the trial judge did not accept his testimony that his business was showing substantial losses and that he was using borrowed or gifted monies to make ends meet. Magda J. also concluded that the change in residence of the one child, that terminated Mr. Pustai's child support obligation, was reasonably foreseeable at the time of the consent order and so did not constitute a material change. In the course of his reasons, Magda J. stated at para. 16 that in his view:

…from the wording of paragraph 2 of the [Lack J.] order, [Ms. Pustai] has the reasonable expectation that her spousal support entitlement shall continue with no termination date. I think she understands that if there is a substantial or significant diminution of the applicant father's income through no fault of his own, that there may be grounds to establish a material change in circumstances which may reduce, but not terminate, her spousal support.

[13] Magda J. also observed that, by the time of the trial, Mr. Pustai had abandoned his claim for child support and s. 7 expenses, as had Ms. Pustai her claim for increased spousal support.

[14] Mr. Pustai appealed the order of Magda J. (the "2010 Appeal"). In reasons reported at 2010 ONCA 251, this court held that Mr. Pustai could not argue that a mere eight months after the consent order, the trial judge had erred in not setting a termination date for spousal support and in not imputing income to Ms. Pustai. Not enough time had passed for such circumstances to yet be assessed as a possible material change in circumstances. The court further stated that, "[t]he trial judge did not err in finding that the consent order provided that only the quantum but not the duration of spousal support could be subject to variation" (at para. 4). The court dismissed the appeal.

(3) The 2010 Motion to Change

[15] Mr. Pustai again sought an order terminating spousal support, this time as of September 1, 2010, and for a contribution toward s. 7 expenses for three children. The grounds were that the matrimonial home had been sold with Ms. Pustai receiving all the proceeds, an alleged downturn in the business of TTMI, and that Ms. Pustai had made no attempt to obtain employment, or alternatively that she had undisclosed income.

[16] There were two trials of the motion to change. The first resulted in a final order dated December 7, 2012, that was set aside on appeal.

a) First Trial and Appeal of the 2010 Motion to Change

[17] The first trial proceeded before Rowsell J. Briefly, the trial judge accepted that by this point – now 4.5 years after the consent order – the change to Mr. Pustai's annual income from the imputed $155,000 to $126,530 was a material change of circumstance. He also drew an adverse inference from Ms. Pustai's failure to disclose bank accounts and refusal to provide credit card statements to explain her financial situation. He imputed income of $31,000 per year to Ms. Pustai based on imputed minimum wage income plus rental income that he found she was receiving. He terminated her spousal support effective June 1, 2013, and ordered that she pay child support and 20% of s. 7 expenses commencing July 1, 2013 based on her imputed income.

[18] This final order was set aside on appeal (the "2014 Appeal"). In its decision reported at 2014 ONCA 422, this court concluded that the trial judge had failed to apply the proper analysis required in a motion to change under L.M.P. v. L.S., 2011 SCC 64, [2011] 3 S.C.R. 775 and Miglin v. Miglin, 2003 SCC 24.

[19] Rouleau J.A. concluded that the trial judge erred when, after finding a material change in circumstances, he "all but ignored the fact that the parties had entered into a comprehensive settlement leading to the original consent order in February 2008". The trial judge ought to have tied his analysis to the actual circumstances of the parties at the time of the consent order and to have taken as a starting point the parties' agreement in February 2008. This agreement included support payments of $3,000 per month with no end date. Rouleau J.A observed that "an analysis of the circumstances at the time of the February 2008 consent order was required in order to determine whether the changes [the trial judge] had identified were sufficient to bring the support payments to an end less than five years after reaching that agreement" (at para. 28).

[20] This court also concluded that the trial judge erred in making an order for child support without assessing the impact of the trust agreement, the settlement, and the consent order, on the parties' interests in the matrimonial home (at para. 33).

[21] A new trial was directed. While finding that the trial judge's determination that there was a material change in circumstances was reasonably supported by the evidence, the court directed that the new trial would address anew both the issues of whether there was a material change and the determination of the appropriate terms of variation, if any (at para. 29).

b) Decision under Appeal: Second Trial of the 2010 Motion to Change

[22] The second trial of Mr. Pustai's 2010 motion to change was heard by H.K. O'Connell J. for 2.5 days in May 2015. In this trial, Mr. Pustai sought orders terminating spousal support effective June 1, 2013, imputing income to Ms. Pustai, and requiring Ms. Pustai to pay child support or in the alternative that the equity in the former matrimonial home be transferred to him.

[23] The trial judge rejected Ms. Pustai's argument that the Lack J. order foreclosed any change in spousal support by the court. The contrary had been decided in the 2010 Appeal. He summarized the reasons of Rouleau J.A. and set out the test he was to apply in determining whether there was a material change in circumstances and whether the support order should be varied or terminated. He observed that he was not foreclosed by the 2008 bargain from varying or terminating spousal support "provided that the evidence allows for it on a material change analysis" (at para. 68).

[24] The trial judge accepted Mr. Pustai's evidence completely as to his financial circumstances. Unlike Rowsell J., he did not base his conclusion that there was a material change in circumstances on Mr. Pustai's annual income. Indeed, he accepted Mr. Pustai's evidence at the second trial that his income on a year-to-year basis has remained more or less the same. [1] He accepted that Mr. Pustai's debt load had increased (to $230,634.63 in 2015). He also accepted Mr. Pustai's evidence that he had to take out loans and to deplete his RSP to ensure his company could sustain itself, and that TTMI required extensive capital injection to procure new tractors. The trial judge also observed that "the company's fortunes, which define Mr. Pustai's income, [were] not what they were in 2008" (at paras. 56 to 67).

[25] The trial judge, like Rowsell J. before him, did not find Ms. Pustai credible. He concluded that there had been a material change in Ms. Pustai's financial circumstances. He rejected as "poppycock" her evidence that her only source of income was spousal support. He pointed to the significant vacations she had taken, a "completely inaccurate" financial statement as to the value of her home at the time of trial, and unexplained savings of $135,000 in 25 months. He concluded that Ms. Pustai had not made proper financial disclosure, that "her position in relation to her financial statements was ludicrous, contrived and not worthy of serious consideration", and he concluded that she must be earning income. He imputed annual income of $40,000 to Ms. Pustai (at paras. 73 to 83).

[26] The trial judge ordered that spousal support would decrease to $1,000 a month effective June 1, 2013 and terminate on June 1, 2014. He stated that "this is fair and reflects the economic reality of both of these former spouses as it now exists" (at paras. 84 and 85).

[27] The trial judge turned to the issue of child support and s. 7 expenses. He referred to this court's direction that he was to consider the impact of the trust agreement, the minutes of settlement and the order of Lack J. in assessing the issue of child support (at para. 87). He rejected the claim for child support and s. 7 expenses after the order of Magda J. on the basis that child support going forward had been waived by Mr. Pustai (at para. 88). The trial judge then considered Mr. Pustai's claim for half of $133,737, the net proceeds of sale of the matrimonial home, which was sold in June 2010. After concluding that the trust agreement was "morally questionable" as an attempt to defeat a known claimant for legal and expert fees, he characterized the trust agreement as "a completely collateral document superseded by the minutes of settlement and the order of Lack J.", which provided that Ms. Pustai's interest in the home was to be transferred to Mr. Pustai. The trial judge concluded that Ms. Pustai was liable to Mr. Pustai for one half of the net proceeds of the matrimonial home (at paras. 91 to 104).

Issues on Appeal

[28] Ms. Pustai argues that the trial judge erred in:

1. stepping down and then terminating spousal support by:

   • (a) failing to conclude that spousal support could not be changed or terminated;
   • (b) finding a material change in her own financial circumstances;
   • (c) finding a material change in Mr. Pustai's financial circumstances when his income remained consistent over the years;
   • (d) imputing income to her of $40,000 per year; and
   • (e) failing to consider the circumstances that prevailed at the time of the consent order;

2. ordering her to pay 50% of the net proceeds of sale of the matrimonial home to Mr. Pustai; and

3. reserving his decision for almost two years and then giving inadequate reasons.

[29] Mr. Pustai asserts that all of the trial judge's findings were open to him on the evidence and that there was no error in law or in his application of the law. Mr. Pustai contends that the trial judge gave proper reasons that reflected that he had considered the evidence before him, and that there was no prejudice to Ms. Pustai resulting from the delay in giving reasons.

Analysis

(1) Spousal Support

[30] The standard of review for family support decisions is 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 in law. It is not entitled to overturn a support order simply because it would have made a different decision or balanced the factors differently: Hickey v. Hickey, [1999] 2 S.C.R. 518, at para. 12.

a) Spousal support could be varied or terminated

[31] In this appeal Ms. Pustai repeats an argument that she has been making throughout the proceedings – that the consent order precludes any variation or termination of spousal support.

[32] This argument overlooks the fact that, as the trial judge noted, in the 2014 Appeal this court expressly disagreed that the terms of Lack J.'s order precluded Mr. Pustai from seeking to terminate support. That is, Rouleau J.A. noted, at para. 18, that, while this court had determined the proper interpretation of the terms of the consent order in the 2010 Appeal – that the parties agreed that spousal support would not terminate – the parties' agreement did not prevent a return to court to argue a change in circumstances that would warrant a variation "including the possibility of ending support altogether" (referring to L.M.P., at para. 41).

[33] I would therefore not give effect to this ground of appeal.

b) There was a material change in Ms. Pustai's financial circumstances

[34] In my view it was open to the trial judge to conclude on the evidence before him that there was a material change in Ms. Pustai's financial circumstances.

[35] The trial judge concluded that Ms. Pustai had not made proper disclosure of her financial circumstances. Unfortunately, Ms. Pustai's belief that no variation could take place, and that her own financial circumstances could not be considered, appears to have continued to inform her conduct in the proceedings – including her failure to make proper disclosure of her own financial circumstances. Ms. Pustai's inadequate financial disclosure as well as her admissions that she had previously provided misleading information – by omitting the rental income she was receiving – were relevant to determining whether she might have additional undisclosed income and resources to contribute toward her own support. The trial judge concluded as follows at paras. 73 and 74 of his decision:

Ms. Pustai stuck to her guns that the bargain was the bargain, that she depends on the $3,000 per month as per the consent order, and that that quantum is the only source of income for her.

That is, on this record, poppycock. She has taken significant vacations at least until November 2012, and since that time has travelled to Mexico. Her financial statement is completely inaccurate in relation to the value of her home at the time of trial… I adopt what the Court of Appeal said at paragraph 12, wherein the evidentiary record before me still completely supports the proposition that Ms. Pustai's economic fortunes led to an increase of some $135,000 in 25 months and that she has failed to disclose how this was so.

[36] Ms. Pustai takes issue with some of the trial judge's factual findings, saying that he overlooked her contrary evidence on these points. In particular, the trial judge concluded that she had not explained how she accumulated $135,000 in 25 months, while her evidence at the second trial was that she had received about $60,000 in inheritance from her mother, by way of her stepfather. She provided bank statements to show that she used that amount to pay the down-payment on a rental property, which she acknowledged not disclosing in the lead-up to the earlier trial. At the second trial, Ms. Pustai also explained that the value of her home at $325,000 in her financial statement of January 6, 2015 was a typographical error that should have read $525,000. On appeal she points out that the most recent financial statement that was filed before the second trial included the correct value of the home. Ms. Pustai also asserts that the trial judge improperly focused on the value of her capital assets (such as her home and rental property) instead of on her income, and that there was no evidence that she was receiving any employment income.

[37] While there are aspects of the trial judge's findings that are problematic, the core of his conclusion that Ms. Pustai's financial circumstances had materially changed was that, because of her lifestyle, including significant vacations she took and the still-unexplained increase in fortunes of some $135,000 in less than three years, she must have had undisclosed income. In addition, she had purchased a rental property in 2011, from which she was receiving income of $10,559.28 per year, she had given inconsistent evidence at the two trials about the source of money used to purchase the rental property, and she had not fully complied with a court order to answer undertakings and to explain why certain questions were refused.

[38] It was open to the trial judge to impute income to Ms. Pustai after he rejected her evidence that her only source of income was spousal support. While the ability to impute income in the face of a failure to fully disclose is "not an invitation to the court to arbitrarily select an amount as imputed income" (Drygala v. Pauli (2002), 61 O.R. (3d) 711, at para. 44), parties must also accept adverse inferences that result from their failure to disclose: Riel v. Holland [2002] O.J. No. 5609, affd. (2003), 67 O.R. (3d) 417 (C.A.), at para. 45.

[39] I would not interfere with the trial judge's finding of a material change in Ms. Pustai's financial circumstances, which was open to him on the evidence.

c) There was no material change in Mr. Pustai's financial circumstances

[40] As for Mr. Pustai's financial circumstances, the trial judge accepted that his employment income had remained relatively consistent throughout the seven years since the consent order was made. [2] In finding a material change in Mr. Pustai's financial circumstances, the trial judge relied instead on Mr. Pustai's evidence about his debts: $230,634.63 in 2015 which included some support arrears, a loan Mr. Pustai took out to acquire RSPs to get a tax break to fund equalization, and another loan for $25,000. He also referred to the fact that Mr. Pustai had to deplete his RSP to ensure his company could sustain itself, and that the company required extensive capital injection by way of the procurement of new tractors. The trial judge also accepted that TTMI was not doing nearly as well as it had been doing at the time of the consent order.

[41] In my view the trial judge misapprehended the evidence and took irrelevant factors into consideration when he concluded that there had been a material change in Mr. Pustai's financial circumstances. The trial judge treated the issue as one of Mr. Pustai's credibility, accepting his evidence respecting the downturn in his business, without assessing whether the documentary evidence he provided actually supported the assertion.

[42] First, the evidence did not support the trial judge's conclusions about TTMI's financial performance. Although the business had one very bad year in 2010, its revenues, as reported in the consolidated financial statements, have remained relatively consistent over the years. In any case, there is nothing in the state of the company that in my view itself supports a material change in circumstances.

[43] Second, the fact that Mr. Pustai had accumulated debt did not in the circumstances demonstrate a material change in his financial circumstances for the purpose of spousal support. Indeed, the evidence demonstrated that many of Mr. Pustai's personal expenses (including legal fees) are paid by TTMI, which he attributes to repayments by TTMI of monies he has advanced to the business (although this is not reflected in any change to his recorded shareholding or shareholder loans). The trial judge described Mr. Pustai's debt as including spousal support arrears and monies borrowed to invest in RSPs to get a tax break to fund equalization (and not as monies Mr. Pustai has borrowed personally to fund the business). As for the trial judge's reference to Mr. Pustai's depletion of his RSP to ensure the company could sustain itself, considering Mr. Pustai's non-arm's length relationship to the company, as well as the fact that Mr. Pustai acquired a corresponding debt owed to him from TTMI, I would say that this too does not rise to a material change in Mr. Pustai's ability to pay support.

[44] Perhaps most importantly, even if there was a downturn in TTMI's business, there was no evidence that the value of TTMI was less at the date of trial than it was when the parties concluded their settlement in 2008. Were it to his benefit to enter into evidence an updated valuation of TTMI showing a substantial decrease in value, Mr. Pustai could have done so. Mr. Pustai's income has remained relatively constant. And while it is not evident on the record what led to the imputation of additional income at the time of the consent order, the onus was on Mr. Pustai to lead evidence as to why the factors leading to the imputation of income in the original order had changed: Trang v. Trang, 2013 ONSC 1980, 29 R.F.L. (7th) 364, at para. 52; Gray v. Rizzi, 2016 ONCA 152, 129 O.R. (3d) 201, at para. 34. Mr. Pustai led no such evidence. Given that TTMI has continued to generate a good living income for Mr. Pustai, and having regard to the bargain between the parties, the evidence does not support a material change in Mr. Pustai's financial circumstances.

d) Imputing income to Ms. Pustai

[45] After concluding that Ms. Pustai had undisclosed income, the trial judge did not explain why he imputed an annual income of $40,000 to her. Presumably he imputed such income effective in June 2013, as that is when he stepped down support.

[46] As this court stated at para. 44 of Drygala v. Pauli, at para. 44:

Section 19 of the Guidelines is not an invitation to the court to arbitrarily select an amount as imputed income. There must be a rational basis underlying the selection of any such figure. The amount selected as an exercise of the court's discretion must be grounded in the evidence.

[47] In this case, the evidence supported imputing some amount of income to Ms. Pustai based on the clear evidence of additional undisclosed income. In my view, there was however, no "rational basis" on the evidence to impute an income of $40,000.

[48] Of course, it is difficult for a party seeking to impute income to get to the first step, laying the evidentiary foundation, where the party against whom income is sought to be imputed makes little or no financial disclosure to the court: Di Bratto v. Sebastiao, 2015 ONSC 1996, at para. 179.

[49] I do not agree, however, that that is this case. While Ms. Pustai was at fault for not providing complete financial disclosure from the start of these proceedings, this is not a case of egregious non-disclosure.

[50] In my view, taking into account her level of education and limited employment-related training, a rational approach would be to attribute to Ms. Pustai employment income roughly equivalent to what she would earn in a full-time minimum wage position. Between 2013 and 2018, minimum wage ranged from $10.25 to $11.40 per hour, before increasing to $14 per hour on January 1, 2018. Recognizing that the imputation of income is not an exact science and is impeded by Ms. Pustai's incomplete financial disclosure, I would impute to her annual income from June 1, 2013 of $33,000 from 2013 to 2018 and $38,000 commencing January 1, 2018. These amounts include the income Ms. Pustai has been able to earn from the rental property she acquired in 2011. I would emphasize that this is a rational approach to imputing income having regard to the particular circumstances of this case.

e) The appropriate variation in spousal support

[51] After determining that there was a material change in circumstances, the trial judge was required to consider whether and to what extent a variation in the support obligation was required. As the Supreme Court cautioned in L.M.P., once a material change in circumstances has been established, "[a] court should limit itself to making the variation which is appropriate in light of the change. The task should not be approached as if it were an initial application for support under s. 15.2 of the Divorce Act" (at para. 50). The court was required to consider the changes in the light of the circumstances that prevailed at the time of the 2008 consent order.

[52] Unfortunately the trial judge adopted the same approach as the trial judge on the first trial of the 2010 motion to change. He did not engage in any analysis of the circumstances at the time of the parties' 2008 settlement. Instead, the trial judge dealt with the matter as though he was determining spousal support for the first time. After concluding that there was a material change in circumstances for both parties, he imputed $40,000 per year to Ms. Pustai, and he ordered that spousal support be stepped down to $1,000 per month effective June 1, 2013 and terminated as of June 1, 2014. He offered no reason for the amount of reduced support and its termination other than that it was "fair and reflects the economic reality of both…spouses".

[53] Having concluded that there were errors in the trial judge's order varying and terminating spousal support, this court may make the order that is appropriate, to the extent permitted by the record: Cassidy v. McNeil, 2010 ONCA 218, 99 O.R. (3d) 81, at para. 39. Indeed, the parties asked that, if the appeal were successful, this court make an order based on the record, rather than sending the matter back to the trial court. Before turning to this determination, I will address Ms. Pustai's arguments concerning the trial judge's order respecting the proceeds of sale of the matrimonial home. As I will explain, the parties' dealings with the matrimonial home were consistent with their bargain, as reflected in their minutes of settlement, the secret trust agreement and consent order.

(2) Matrimonial Home Proceeds

[54] Ms. Pustai contends that the trial judge erred in ordering her to pay to Mr. Pustai one half of the net proceeds from the sale of the matrimonial home in 2010. I agree.

[55] First, the trial judge, in considering the consent order, minutes of settlement and trust agreement, misapprehended the evidence as to how the parties sought to avoid the payment of Ms. Pustai's legal and expert fees. It is the consent order and not the trust agreement that was intended to defeat the claim for legal fees. The consent order stated that Ms. Pustai was to transfer her one-half interest in the former matrimonial home as lump sum child support, while she had the right to remain in the home indefinitely and she assumed all costs associated with the home. However the trust agreement provided that Ms. Pustai would remain the full owner of the home and Mr. Pustai disclaimed all interest in the home. The 2008 consent order and the transfer of the home to Mr. Pustai were a matter of public record, while the trust agreement was kept secret.

[56] The trial judge's determination that the trust agreement was of no effect contradicts the finding of Pollak J. in Pellman v. Pustai at para. 13, that "it was the assumption of all parties that Ms. Pustai would be awarded a significant equalization payment in the proceedings and that she would be able to pay her legal fees out of this amount". The evidence in that case included a telephone conversation Ms. Pustai had secretly recorded in which Mr. Pustai suggested a settlement without the involvement of their lawyers so that Ms. Pustai would not have to pay legal and accounting fees, and that she transfer the family home to him which he would hold in trust for her under a separate agreement which would remain secret in order to avoid paying the fees.

[57] The notion that the proceeds of the home were consideration for s. 7 expenses is also contradicted by the fact that, at the time in question, Ms. Pustai had no income, and therefore effectively had no obligation to make any such contribution. Furthermore, in 2010 when the house was sold, on a signed direction from both parties, Ms. Pustai received all of the proceeds.

[58] At the time of the settlement, TTMI had been valued on arbitration for the purpose of equalization at $1.1 million. Although Mr. Pustai contested this amount, the parties entered into their minutes of settlement and the consent order on the eve of the appeal of the arbitration, and the consent order specifically provided for the appeal to be dismissed. The sum of $125,000 (an amount that was stated to include equalization) was eventually paid. Ms. Pustai's evidence was that she had compromised her claim for a larger lump sum equalization payment in relation to TTMI by agreeing to the full proceeds of the sale of the house – which ultimately amounted to $133,737 in proceeds to her – as well as a higher level of indefinite spousal support. Payment of tax-deductible spousal support was more beneficial to Mr. Pustai than payment of an equalization payment with after-tax dollars.

[59] While Mr. Pustai continued to contest this explanation of the parties' true bargain at trial, I accept Ms. Pustai's evidence as the only reasonable explanation in all the circumstances. Given the value that had been placed on TTMI prior to trial, and the clear wording of the trust agreement, it is not reasonable to accept Mr. Pustai's assertion that he still expected to receive a portion of the proceeds of the sale of the house and/or payments for s. 7 expenses.

[60] That is, all the evidence unequivocally points to the same conclusion: that the true bargain between the parties with respect to the matrimonial home was reflected in the "secret" trust agreement and not in the consent order of Lack J. There was no basis therefore for an order that effectively "enforced" a term of the consent order of Lack J. that the parties had no intention of complying with, because it did not reflect their actual bargain.

[61] Accordingly, I would set aside the order requiring payment of one half of the net proceeds of the matrimonial home by Ms. Pustai to Mr. Pustai.

Determining the Order that Ought to Have Been Made

[62] Based on the effect of the change in Ms. Pustai's earning circumstances on the true bargain reached by the parties – one that combines both the terms of the consent order and the secret trust agreement – I would reduce, but not terminate, spousal support.

[63] According to the evidence, at the time of the original bargain, Ms. Pustai was earning no income and had no expectation of earning future income. She would have been owed a sizeable equalization payment that included half of the value of Mr. Pustai's interest in TTMI. Given all the circumstances, I accept Ms. Pustai's explanation that, at the time of entering into the trust agreement and the consent order, the parties agreed that their net family property would be equalized by Ms. Pustai receiving the proceeds of the matrimonial home and Mr. Pustai retaining sole ownership of the most valuable asset: TTMI. In addition, Ms. Pustai would receive a $125,000 payment and would receive $3,000 per month in spousal support indefinitely based on the parties' assumption that Mr. Pustai would continue to earn income of approximately $150,000 annually through TTMI. All of this taken together, constituted the parties' original bargain. And it is this original bargain that the court must then vary appropriately based on its finding of material change in circumstances.

[64] While the court has the authority to both vary and to terminate spousal support, in deciding what to do it is important to keep in mind the parties' original intention. The parties agreed that "there shall be no termination date for spousal support" and that "either party may ask for a review of the quantum of support upon a material change in circumstances". As this court confirmed in the 2014 Appeal, the parties agreed that "only the quantum but not the duration of spousal support could be subject to variation", and Mr. Pustai is precluded from advancing any different interpretation (at paras. 17 and 18). The parties anticipated that a material change in circumstances might result in a variation in the amount of support. In my view, the change in Ms. Pustai's financial circumstances justifies some adjustment in the amount of support to be paid, but not in the parties' original agreement for ongoing support.

[65] I have accepted the trial judge's conclusion that Ms. Pustai now has income of her own and that this constitutes a material change in circumstances for the purpose of variation. As indicated above, the amounts of annual income that should be imputed to Ms. Pustai are $33,000 from 2013 to 2018 and $38,000 commencing January 1, 2018.

[66] The next step is to assess how to appropriately vary the parties' agreement in light of this change. The Guidelines remain instructive in determining an appropriate variation of support: Gray v. Gray, 2014 ONCA 659, at paras. 43 and 44, and Schulstad v. Schulstad, 2017 ONCA 95, at para. 52.

[67] At the time of their settlement, Mr. Pustai had an imputed income of $155,800 annually and Ms. Pustai had no income. Based on these assumptions, at the time of the parties' original bargain, for an 11.5-year marriage, the Spousal Support Guidelines would have indicated monthly support of $2,240 per month at the low end, $2,613 at the midpoint, and $2,986 at the high end for a period of 5.5 to 11 years. In essence, Ms. Pustai's original bargain was for high-end support that did not terminate. She exchanged what might otherwise have been a higher equalization payment in return for high (rather than midpoint) support and support that would continue rather than likely terminate after 11 years. Understanding the parties' bargain in this way, in light of imputing additional income to Ms. Pustai but concluding that all of the parties' other circumstances, including Mr. Pustai's income, remain materially unchanged, [3] I would adjust the parties' original bargain only to the extent of imputing the additional income to Ms. Pustai and continuing to use the Guidelines as the point of reference.

[68] In this way, imputing $33,000 to Ms. Pustai from June 1, 2013 to December 1, 2017 the Guidelines indicate a reduction in high-end support to $2,354 per month. From January 1, 2018 forward, imputing her annual income as $38,000, Ms. Pustai will receive $2,258 per month.

[69] In my view, this is the appropriate adjustment to spousal support starting from the parties' original agreement and adjusting for the material change in circumstances that has been found. I would also order that on a go-forward basis, the parties are to make financial disclosure by exchanging their annual income tax returns and assessments.

The Trial Judge's Delay

[70] The trial judge released his reasons for decision some 27 months after the close of evidence in this case. In the months that followed there were some written submissions as well as inquiries by the judge about the location of various exhibits, and assurances that the reasons would be forthcoming. Ms. Pustai asserts that the only reasonable inference from the reasons, which are in some respects conclusory, and overlook certain evidence, is that the delay caused her substantive injustice.

[71] It is unnecessary to address Ms. Pustai's arguments on this point in any detail, as I would allow the appeal for the other reasons detailed above. In my view, no inference of any particular error can be drawn from the delay itself.

[72] I will say, however, that the delay of 27 months was extraordinary, and inconsistent with what the parties were entitled to expect after a retrial of their family law dispute. And, contrary to Mr. Pustai's assertion, the delay resulted in prejudice to Ms. Pustai who, after continuing to receive spousal support of $3,000 per month while the case was under reserve, was required to pay back support overpayments exceeding $80,000. As I have noted however, I would not rely on the trial judge's delay in rendering his decision as a reason for allowing the appeal in this case.

Disposition

[73] For these reasons I would allow the appeal and set aside the order of O'Connell J. (except with respect to the term requiring Mr. Pustai to pay $33,500 to Ms. Pustai for the purchase of a vehicle). I would order that Mr. Pustai is to pay Ms. Pustai monthly spousal support of $2,350 instead of $3,000, effective June 1, 2013 and $2,250 effective January 1, 2018. Ms. Pustai will keep the proceeds of sale of the matrimonial home. At trial, Mr. Pustai did not advance a claim for child support and adduced no evidence about s. 7 expenses. There was no evidence about the circumstances of the grown children to show that they continued to be children of the marriage within the meaning of the Divorce Act. There is no basis to make an order for child support, and no child support or s. 7 expenses are owed to either party.

[74] I would order costs of the appeal to be paid by Mr. Pustai to Ms. Pustai in the amount agreed between the parties, the sum of $15,000 less the $4,000 previously ordered by Hourigan J.A., for a total of $11,000, inclusive of disbursements and HST. With respect to costs in the court below, if the parties are unable to agree, they may provide written submissions limited to five pages each, not including any costs outlines, as follows: Ms. Pustai within 20 days of these reasons, Mr. Pustai within 15 days of receipt of Ms. Pustai's submissions, with reply submissions, if any, within ten days thereafter.

Released: September 27, 2018

"K. van Rensburg J.A."

I agree. Alexandra Hoy A.C.J.O.

I agree. G. Pardu J.A.

Footnotes

[1] Mr. Pustai also testified, and the trial judge accepted, that while his base employment income in 2007, the year before he settled the matrimonial dispute, was $120,000 + $6,541 (the latter number attributed for Mr. Pustai's personal use of a company vehicle), that income number was "grossed-up" to $155,800 for the purpose of the consent order.

[2] According to his income tax filings, in 2007 before the consent order was made, Mr. Pustai's employment income was $126,541. In the years leading up to the variation trial (2010 to 2015) his employment income was essentially the same, although in 2013 and 2015 he had RRSP income.

[3] As noted previously, Mr. Pustai's base employment income remained steady throughout, although the number used in the consent order was $155,800. Given that everyone accepted that this was an "imputed" figure, and the onus on the party seeking a variation in a consent order to lead evidence as to why the income originally imputed should be changed, I see no reason to depart from the originally agreed upon amount of imputed income.