Court File and Parties

COURT FILE NO.: 11062/09 (Welland) DATE: 2017-05-29 ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

Sharon Mae Carr Applicant

Maria G. Lucarelli and Harold Niman, for the Applicant

- and -

Timothy John Condon Respondent

Kirsten Hughes and Michael P. Clarke, for the Respondent

HEARD: in Welland June 22, 23, 24, October 24, 25, 26 and December 20, 2016

REASONS FOR JUDGMENT

P.R. SWEENY J.:

INTRODUCTION

[1] The Applicant, Sharon Mae Carr, seeks to vary the spousal support payable to her under the provisions of the Order of MacPherson J. dated November 13, 2012 (“the Order”). The Order provides for spousal support fixed in the amount of $12,000 per month based on the income of the Respondent, Timothy John Condon, of $447,000, plus an additional monthly payment based on 27 percent of the incentive bonus paid to the Respondent in the prior year. The Applicant says that there has been a material change in that the Respondent’s income, both salary and bonuses, have increased substantially. She seeks spousal support fixed in the amount of $84,951 per month, retroactive adjustment of support to the date of the application, and a finding that a number of payments received by the Respondent from his employer should be subject to the 27 percent additional monthly payment.

[2] The Respondent resists the motion. He says that there has been no material change that would warrant a variation of the order, especially in advance of the review provision in the order. If there is a material change, according to the Respondent, the Applicant is receiving too much spousal support and he seeks a variation such that the Applicant would receive only 20 percent of the incentive bonus as opposed to 27 percent. In addition, the Respondent denies that the payments made by his employer are incentive employment income as defined by the Order.

GENERAL BACKGROUND FACTS

[3] Many of the facts are not at issue in this proceeding. The parties prepared a Statement of Agreed Facts.

[4] The Applicant was born on July 5, 1965. The Respondent was born on September 27, 1962. The parties were married on August 29, 1987. The parties separated on March 21, 2008. There are two children of the marriage, Kate Emily Condon, born August 5, 1989, and Kimberly Anne Condon, born November 9, 1991.

[5] The Applicant commenced litigation following the separation. In 2012, the parties attended mediation with Mr. Alfred Mamo. As a result of the mediation, the parties entered into Minutes of Settlement, which were incorporated into the Order. The Order provided that the Respondent pay the Applicant spousal support in the amount of $12,000 per month based on the Respondent’s annual salary of $447,000 and the Applicant’s imputed income of $30,000. In addition, the Respondent was ordered to pay to the Applicant periodic spousal support equivalent to 27 percent of his incentive employment income above base salary, calculated on a 12-month calendar-year basis. The Respondent’s annual incentive employment income above his base salary was ordered to include gross bonus or cash received for any options, shares or other forms of compensation, which is referred to as the “annual incentive compensation above base salary.” The Order provides for the terms to be reviewed and/or varied upon either party establishing a material change from the circumstances existing at the time of the execution of the Minutes of Settlement, dated October 2, 2012. Such a material change of circumstances includes, but is not limited to, a change in the financial circumstances of either party.

[6] The Order provided that a review of spousal support would take place on September 1, 2017. On the review, there are a number of factors that will be taken into consideration in determining the appropriate amount of spousal support. These include the financial circumstances of the parties at that time, the period of time which has elapsed since the date of separation, the Applicant’s obligation to take reasonable steps to maximize her efforts to contribute towards her own support including pursuing education or training, and the obligation of both parties to save and invest prudently for future financial security. The Order also included an acknowledgment that if the Applicant had not maximized her efforts, an amount of income would be imputed to the Applicant in excess of the $30,000 per year that was imputed to her at the time the Order was entered into.

[7] At the time of the Order, the parties had equalized their net family property. The combined net family property was approximately $3.8 million. Both the Applicant and the Respondent had a net worth of approximately $1.9 million as a result of the equalization.

[8] At the time of separation, the Respondent was a senior executive with Canadian Tire Corporation for which he had worked for 18 years. He was working in Welland and Toronto. The Respondent’s income for the years is as follows: 2006 - $706,013; 2007 - $812,861; 2008 - $1,003,237. (In 2005, the Respondent made in excess of $2.5 million. This was an anomaly.)

[9] On January 9, 2009, the Respondent’s employment was terminated by Canadian Tire and he received a severance package. On December 14, 2009, the Respondent commenced employment with British Columbia Automobile Association as President and Chief Executive Officer. His base salary was $400,000 per annum plus the use of a fleet vehicle, an annual incentive bonus and long-term incentive bonus, benefits, and a pension. In subsequent years, his income was as follows: 2010 - $480,378; 2011 - $502,423; 2012 - $746,555; 2013 - $826,061.

[10] On March 10, 2014, the Respondent began employment with AAA Northern California, Nevada & Utah as President and Chief Executive Officer. His base salary was $550,000 USD, plus a car allowance of $14,400 USD, benefits, and incentive income. In 2015, the incentive bonuses paid to the Applicant totaled $1,441,899 USD. The Respondent’s income for 2016 exceeds his total income for 2015 and it is anticipated to continue to increase.

ISSUES

[11] The issues on this motion are as follows:

(1) Is there a material change in circumstances such that the spousal support provisions in the Order may be varied?

(2) If there is a material change, should the spousal support provisions in the Order be changed and, if so, how?

(3) Is the Applicant entitled to 27 percent of the disputed payments received by the Respondent?

MATERIAL CHANGE

[12] The order itself specifically provides that the terms shall be reviewed and/or varied upon either party establishing a material change. This would include a change to the financial circumstances of either party. In addition, the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.), s. 17(4.1) refers to a change in the condition, means, needs or other circumstances of either former spouse since the making of the order.

[13] The Applicant says the significant increase in the Respondent’s income is a material change. The Respondent, in his response to the motion to change, asked for a change in spousal support on the basis of a change in circumstances. One of those changes was that he was paid in US dollars and the Applicant thus receives a significant increase in support. In addition, an increase in salary of this magnitude was not anticipated in the Order. At the commencement of this trial, the Respondent asserted, as his first position, that there was no material change, and, secondly, if there was, there should actually be a decrease in the spousal support paid. The Respondent’s position is really that no motion to change should have been brought and, accordingly, it should be dismissed. However, given that the motion was brought, he seeks to reduce the spousal support payable.

[14] It is clear to me that there has been a material change in circumstances within the meaning of the order itself and s. 17(4.1) of the Divorce Act. The significant increase in the Applicant’s income was not contemplated by the parties when the order was made. At the time the order was entered into, the Respondent’s income for the purposes of determining spousal support was significantly less than his historical income. The average of his annual incomes in 2006, 2007, and 2008 is $840,000. This is in contrast to the 2010 income of $480,378 and 2011 income of $502,423. This was a fact which must have been considered in the determination of the spousal support provision of the Order.

THE APPROPRIATE VARIATION ORDER

[15] As noted by Chappel J. in Menegaldo v. Menegaldo, 2012 ONSC 2915, [2012] W.D.F.L. 5086, at para. 49:

Once the court is satisfied that there has been a material change since the existing order was made, it must determine the appropriate variation, if any, that should be made to the existing order. Even if the threshold test of a change in circumstances is met, it does not necessarily follow that a change to the existing order must be made.

[16] The Applicant seeks an order that spousal support be fixed in the amount of $84,951 per month based on imputed income to her of $72,000. She says the Spousal Support Advisory Guidelines (SSAGs) should be used. She asserts that she is entitled to share in the Respondent’s significant increase in income following separation. The amount should be fixed so the Applicant does not have to have regular annual contact with the Respondent.

[17] The Respondent says that if there should be any change in the spousal support, the change should be that the Applicant receive only 20 percent of the incentive bonus and not the 27 percent as mandated by the Order. The formula should continue. The Respondent resists the Applicant’s entitlement to a share of the post-separation increases in income.

[18] Both parties agree that the review as set out in the Order should be postponed to September 1, 2020.

[19] In deciding whether the order should be varied, the court must take into consideration all the factors set out in s. 17(7) of the Act, which reads that an order varying spousal support should:

(a) recognize any economic advantages or disadvantages to the former spouses arising from the marriage or its breakdown;

(b) apportion between the former spouses any financial consequences arising from the care of any child of the marriage over and above the obligation for the support of any child of the marriage;

(c) relieve any economic hardship of the former spouses arising from the breakdown of the marriage; and

(d) in so far as practicable, promote the economic self-sufficiency of each former spouse within a reasonable period of time.

[20] All of the factors must be considered, and no one factor has greater importance than any other factor.

[21] The SSAGs are relevant on an application for variation. The SSAGs specifically provide a ceiling of gross annual payor income of $350,000. Above that ceiling, the formula should no longer be automatically applied. However, the $350,000 is not a cap (see discussion in Spousal Support Advisory Guidelines: The Revised User’s Guide, April 2016, Professors Carol Rogerson and Rollie Thompson, ch. 11 [“User’s Guide”]).

[22] Given that the Order contemplates a review and the parties have agreed that the review should take place in 2020, I view my task as a more limited variation application, not a de novo assessment more akin to an initial application. However, the significant income of the Respondent over the $350,000 ceiling in the SSAGs and the significant increase in income of the Respondent post-separation requires an analysis of the basis for entitlement to spousal support.

[23] In examining the spousal support in the context of post-separation increases in payor income, at page 83, the authors of the User’s Guide write:

The basis of entitlement has a significant impact upon the degree of sharing of increases, with compensatory claims more likely to result in sharing than non-compensatory claims, but not exclusively so. There can be a sharing – partial, or even full – in non-compensatory cases too, especially after long marriages.

[24] This is a high-income situation. These cases “raise fundamental theoretical questions about the rationale and purpose of spousal support” (User’s Guide, page 58). With these comments in mind, I will examine the basis of spousal support.

[25] There are three conceptual models upon which entitlement to spousal support may arise: (1) compensatory support; (2) non-compensatory support; and (3) contractual support: Bracklow v. Bracklow, [1999] 1 S.C.R. 420, 169 D.L.R. (4th) 577. The issue of contractual support does not arise in this case.

COMPENSATORY SUPPORT

[26] In Beneteau v. Young, the court set out three types of compensatory support:

i. Non-specific compensatory support (where a spouse’s ability to achieve self-sufficiency was comprised by career/job dislocation for the family);

ii. Specific calculable disadvantage (where a spouse can point to a specific calculable overriding loss resulting from the marriage or the roles adopted in marriage); and

iii. Specific calculable and advantage conferred (where a spouse conferred a substantial career enhancement opportunity on the other spouse).

In this case, it is my understanding that the Applicant does not assert she is entitled to compensatory support on the basis that she gave up a career in order to stay home and care for the children. The Applicant acknowledges that any career she could have had would not have generated anywhere near the income which the Respondent’s has generated and generates. Her claim for compensatory support is based on the fact that she took on increased domestic responsibilities to enable the Respondent to pursue his career. The statutory basis for compensatory support is found in ss. 15.2(6) (a) and (b), and ss. 17(7) (a) and (b) of the Divorce Act.

[27] The main issue from the Applicant’s perspective is her entitlement to share in the increased income of the Respondent. On a compensatory basis to entitlement, there need not be a direct causal connection between the post-separation income increase and the contributions during the marriage by the recipient spouse; however, there must be some link or connection. In this case, the Respondent had completed his business course at the Ivey School of Business prior to marriage. He had an executive position with PepsiCo before the marriage. Over the course of the marriage, he continued to work in executive positions. The Applicant spoke of attending certain corporate events. The parties agree that there were moves for the Respondent’s work. These moves might be relevant to a claim that the Applicant could not advance in her career and suffered her own personal career setbacks as a result of them. However, in my view, these moves alone do not establish entitlement to compensatory support.

[28] As L’Heureux-Dubé J. noted in Moge v. Moge, [1992] 3 SCR 813, 99 D.L.R. (4th) 456, at para. 84:

A spouse may contribute to the operation of a business, typically through the provision of secretarial, entertainment or bookkeeping services, or may take on increased domestic and financial responsibilities to enable the other to pursue licenses, degrees or other training and education. To the extent that these activities have not already been compensated for pursuant to the division of assets, they are factors that should be considered in granting spousal support.

[29] In this case, the economic benefit of the relationship has been shared by the division of family assets. The economic benefits to the Applicant were significant. The Applicant’s contributions toward child care and maintaining the home during the course of the marriage have been compensated to some extent by the division of family assets. The significant net family property was generated as a result of the parties’ economic union and lifestyle.

[30] The contributions referred to in Moge are not present in this case. There was no assistance in the operation of a business or the establishment of a business. There was no significant education undertaken by the Respondent at the expense of the Applicant. He took some short courses, but that is not sufficient to establish this basis for compensatory support.

[31] This was a traditional marriage, where the Applicant did not work outside the home. She provided care for the children when they were younger and continued to provide assistance to the children while they attended their private schools. This provided time for the Respondent to continue to pursue his career. However, there was no substantial career enhancement conferred by the Applicant on the Respondent.

[32] The Respondent was fired from his employer of 18 years. He found a new job by answering an advertisement. He relocated across Canada to secure employment. This was a different field, the not-for-profit industry as opposed to the for-profit industry. His present position in the United States was gained as a result of his exposure in this new field. The nature of the Respondent’s employment has changed. He has relocated to the United States. This new position in a new country occurs six years after separation. I find the Applicant is not entitled to share significantly in the Respondent’s increase in income.

[33] The significant income that the Respondent earned and now earns is a factor which I consider in exercising my discretion. The Respondent’s income had dropped significantly from historical levels prior to the mediation and the Order. To the extent that post-separation increases rise to the historical average income prior to separation, I consider these increases in determining appropriate spousal support.

NON-COMPENSATORY SUPPORT

[34] An entitlement to non-compensatory support is predicated on need. It finds its basis in ss. 15.2(6) (a) and (b), and ss. 17(7) (c) and (d) of the Divorce Act. In the majority of cases, the issue to be addressed is a significant discrepancy in the standards of living which is experienced by spouses post-separation. In the normal course, the lower-income spouse experiences a significant drop in standard of living after the marriage breakdown.

[35] The parties’ standard of living is relevant to support entitlements (see Moge, at para. 85). The parties’ lifestyle during the marriage was comfortable and active but not extravagant. The Applicant testified as to the frugal nature of the Respondent. The parties each drove nice cars: the Applicant drove a Honda Pilot, and the Respondent, a Lexus ES300. These are not lavish vehicles. The parties financially assisted both sets of parents. However, that assistance was not particularly substantial. The family went on vacations but not extravagant ones; for example, a trip to Florida was an annual occurrence. The parties lived in a nice home in Fonthill which had a value of approximately $450,000 on the date of separation.

[36] Insight into the standard of living the parties experienced during the course of the marriage is gained by a review of the financial statements prepared by the parties in the context of the initial application. The Applicant’s financial statement, sworn May 4, 2009, shows actual expenses in the range of $15,000 per month (exclusive of child-related expenses including tuition and income tax deductions). This would amount to approximately $26,000 before tax. At that time, the Applicant claimed $4,000 per month for vacations, which was very high given the parties’ history of vacations during the marriage. The Respondent claimed monthly expenses of approximately $12,000 (exclusive of child and spousal support payments and income tax deductions).

[37] In this motion to change, the Applicant initially sought support in the amount of $50,000 per month. This was increased to $100,000 per month on a motion at the outset of the hearing. On the initial financial statement in support of this application, the Applicant showed expenses in the range of $25,500 net of income tax, CPP and EI contributions. The Applicant seeks spousal support in the amount of $84,951 per month.

[38] The Applicant’s proposed budget greatly exceeds any amounts expended by the parties during the marriage. The Applicant’s evidence, repeated on several occasions, with respect to the proposed expenditures was “If we were still married, that’s what we would have done.” This statement is of no assistance in determining the issues before me. When the parties were married, their spending was not extravagant, even when the Respondent earned significant amounts of money. I also note that the Applicant’s evidence was that the Respondent was very controlling and questioned her spending. Therefore, it seems very unlikely that extravagant expenses would have been incurred if the parties were still married. In this case, the Applicant seeks a level of spousal support which would provide a much higher standard of living than the parties experienced during the marriage.

[39] Once the amount of support is determined, the recipient has the right to spend the support payments as he or she deems appropriate. However, to the extent that an order for support takes into consideration the needs and lifestyle of the parties during the marriage, the proposed budget and historical expenses are relevant factors for the court to consider: Marinangeli v. Marinangeli (2003), 66 O.R. (3d) 40, 228 D.L.R. (4th) 376 (C.A.). The Applicant’s proposed budget is not consistent with the historical spending of the parties.

[40] If this were an initial application or a review, the appropriate analysis would include an examination of the standard of living of the couple at the date of separation. The economic benefits of the partnership would be taken into consideration in the equalization of net family property. In this case, the parties accumulated approximately $3.8 million over the almost 21 years of their cohabitation.

[41] The basis of support, as compensatory or needs-based or both, would then be examined. The Respondent’s significant income is a factor to be taken into consideration. The entitlement to support in this case is primarily needs-based. These needs arise as a result of the lifestyle of the family during the marriage. After this 21-year traditional marriage, it would not be appropriate that the Applicant’s lifestyle be significantly reduced from the lifestyle she enjoyed during the marriage, as a result of the breakdown of the marriage.

[42] In determining the appropriate level of spousal support, consideration of the income that could be earned by the Applicant would also be a factor. For expenses of approximately $180,000 per year, a significant income stream would be required. The Applicant, given her training and education, is unlikely to earn anywhere near the amount necessary to maintain that lifestyle. The Applicant has acknowledged that it is appropriate to impute income to her. The Applicant has proposed an imputed income of $72,000. This is based on $40,000 employment income and $32,000 interest and other investment income.

[43] As I have indicated, the Applicant’s monthly expenses were in the range of $15,000 at the date of the initial application in 2009. This includes an extraordinary amount of $4,000 for vacations. In the circumstances, the expenses to live in accordance with the lifestyle experienced during the marriage are likely in the range of $12,000 to $13,000 per month. In my view, an award of spousal support in the range of $84,000 per month requested by the Applicant would not be appropriate.

[44] This is a motion to change. Therefore, I must consider the Order which contemplated a set amount for spousal support of $12,000 per month. It was based on income over the $350,000 ceiling referred to in the SSAGs. There is also a provision to allow for the sharing of the Respondent’s incentive income. The parties specifically included a five-year review as a part of the order and directed that review to consider, inter alia, the prudent investment of income received. I should only order a variation that is justified by the material change.

[45] The Applicant wishes to fix spousal support because she does not wish to have any interactions with the Respondent. She says the Respondent’s communications have been intimidating. I agree that the Respondent’s communications to the Applicant could reasonably be perceived as aggressive and intimidating. The Respondent’s letter was addressed to “Applicant.” However, the Respondent did provide the information necessary for the Applicant to calculate the bonus payable. The difficulty in communication is not a material change to justify a variation to a fixed monthly amount for spousal support.

[46] The Applicant asserts that the Respondent was deceptive in dealing with her by failing to refer, in his letter of December 2013, to a payment of bonus money to the Respondent made in January 2013. The information about the earlier payment was disclosed in correspondence to Ms. Carr’s counsel in January 2013 and the Applicant was aware of the payment as it was included in the bonus agreement she drafted dated December 18, 2013. I find there was no intended deception on the part of the Respondent.

[47] The historical average income of the Respondent in the three years prior to the termination of his employment was $840,000. The SSAGs applied to that payor income and imputing $72,000 income to the Respondent gives a range of money spousal support of $20,160 to $26,880. I note this quantum of support is also consistent with the apparent historical spending of the parties as expressed in the financial statements sworn in the initial application. This is a significant and substantial income.

[48] If I were to order support at the high end in the amount of $26,880 per month retroactive to May 2014, the Applicant would have to repay the Respondent because she has received more in support as a result of the formula contained in the Order.

[49] The Respondent’s request to reduce the incentive amount to 20 percent from 27 percent would not, in my view, respect the agreement reached by the parties and incorporated into the Order. As I understand the Respondent’s position, he is prepared to live by the agreement with the understanding that a review will take place in 2020.

[50] The parties, in entering into the Order, determined a formula to provide support to the Applicant on a fixed basis, with an additional amount based on bonuses received by the Respondent. Notwithstanding the increase in the Respondent’s income, the parties’ efforts to quantify and articulate an amount of support ought to be respected. Although there was a significant increase in the Respondent’s income, I have determined it is not appropriate to make any variation of the Order with respect to spousal support. Accordingly, the motion to change with respect to the provision of spousal support is dismissed.

INCENTIVE EMPLOYMENT INCOME

[51] Paragraph 2 of the Order reads as follows:

In addition to the spousal support set out in paragraph one (1) above, the Respondent shall pay to the Applicant periodic spousal support that is equivalent to 27% of his incentive employment income above base salary calculated on a 12 month calendar year basis. The Respondent’s annual incentive employment income above base salary shall include: gross bonus or cash received for any options, shares or other forms of compensation (herein after referred to as “annual incentive compensation above base salary”).

[52] There is a dispute as to certain amounts received by the Respondent. Are they incentive employment income? These are identified as follows:

(1) 2013 BCAA Golf Membership $73,500.00 (2) 2013 BCAA Incent “N” $972.50 (3) 2014 AAA Relocation Expenses $147,119.00 (housing $55,720.00) (4) 2015 AAA Paid time off (PTO) $14,808.08 (5) 2014 AAA 401K $133,298.50 (6) 2015 AAA 401K $17,212.99 TOTAL $386,911.07 (27% SHARE) $104,465.99

[53] In deciding the issue, I must examine the order and its terms. The word “incentive” is used in the Order. “Incentive” is defined in the Concise Oxford English Dictionary, 12 ed. (Oxford U.P.: Oxford, 2011) as “A thing that motivates or encourages someone to do something; A payment or concession to stimulate greater output or investment.” The parties did not use the terms “benefits” or “perquisites” in referring to this 27 percent calculation. This omission suggests that it is not just the value of a benefit paid by the employer that is to be captured but a benefit with an incentive component. There must be an incentive component. Given that definition, I shall address the items disputed.

[54] The determination of whether the payments made are incentive employment income in accordance with the Order is not a determination as to whether these payments might be included as income for the purposes of determining spousal or child support. The experts were retained by the parties to calculate income for the purposes of spousal support. The experts were not concerned with determining whether or not these payments were incentive employment income as referred to in the Order. I must determine whether the parties intended these payments to be considered incentive employment income such that the Applicant would be entitled to 27 percent thereof.

(1) BCAA Golf Membership – This was provided to the Respondent by his employer at no charge to him. There was no target he had to meet to receive that benefit. It was in the nature of a gift. He did not receive any cash value. It was not transferable. I find it is not incentive employment income as the term is used in the Order.

(2) BCAA Incent “N” – It appears this is some incentive income that was paid by its name alone. Accordingly, it will be included as income and the Applicant is entitled to a 27 percent share of it.

(3) AAA Relocation Expenses – These expenses were paid by the employer on behalf of the Respondent. This was done to facilitate his commencing his employment immediately. There were two elements: (1) reimbursement of relocation expenses, and (2) payment of living expenses. The relocation expenses were expenses incurred to relocate. They were not incentives or bonus income. The reimbursement of expenses was a perk paid to the Respondent. I find it is not incentive employment income such that the Applicant is entitled to receive 27 percent thereof.

(4) AAA Paid Time Off (PTO) – I am satisfied that, based on the evidence, the paid time off is equivalent to vacation pay. The entries on the Respondent’s pay slips show the payments being made as an accounting exercise. The Respondent did not receive additional income. It is not incentive employment income.

(5) AAA 401K Income – These payments are akin to RRSP contributions. They are made by the employer. There are annual contributions made based on the company’s performance. They are not tied to any action on the part of the Respondent. On the Respondent’s evidence, they are not taxable until they are received by the employee. They cannot be accessed until the employee leaves the company or experiences extreme hardship. In my view, these are not payments which would qualify as incentive employment income.

CONCLUSION

[55] For the foregoing reasons, the motion to change with respect to spousal support is dismissed. The Applicant is entitled to 27 percent of the $972.50 BCAA Incent “N” for 2013.

[56] If the parties are unable to agree upon costs, I will accept written submissions limited to 10 pages plus bills of costs and any offers to settle addressed to me at my chambers in Hamilton. The Respondent shall have 14 days from release of this decision to provide his submissions. The Applicant shall have a further 14 days to provide her submissions. Any request for an extension of time may be made in writing to me with a copy to counsel.

Sweeny J. Released: May 29, 2017