Court File and Parties

COURT FILE NO.: FC-04-849-03 DATE: 2022/03/07 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Cheryl McHardy, Applicant (Responding party) AND Ross McHardy, Respondent (Moving party)

BEFORE: Madam Justice Robyn M. Ryan Bell

COUNSEL: Gregory A. Ste. Marie, for the Applicant John E. Summers, for the Respondent

HEARD: February 1, 2022

Endorsement on motion to change

Overview

[1] On this motion to change, Ross McHardy seeks to terminate his spousal support obligation of $4,550 per month, effective January 1, 2021. Mr. McHardy has retired, is now over 70 years of age, and has significant health issues. He has paid spousal support to Cheryl McHardy for 16 years, following a 26-year marriage, and a total of 29.5 years of cohabitation.

[2] Ms. McHardy acknowledges that Mr. McHardy’s retirement constitutes a material change in circumstances. However, she asserts that Mr. McHardy should continue to pay spousal support in the reduced amount of $650 per month, commencing January 1, 2021 until December 31, 2021, and thereafter, $1,317 per month, commencing January 1, 2022 until December 2026. Ms. McHardy also seeks an order that spousal support be secured against Mr. McHardy’s estate.

[3] For the following reasons, I order that Mr. McHardy’s spousal support obligation is terminated, effective January 1, 2021.

Background

(i) Justice Sheffield’s Order

[4] The parties were divorced by order of Sheffield J. dated October 6, 2005. Justice Sheffield’s order provided that, commencing October 1, 2005, Mr. McHardy would pay spousal support in the amount of $5,500 per month. Paragraph 4 of Sheffield J.’s order states:

In the event of a material change in the circumstances of either party, or at any time after July 1, 2010, the Applicant’s entitlement to continuation of spousal support payments shall be subject to a review. This review is not to be interpreted as an agreement by the Applicant that her support shall end as at July 1st, 2010. The spousal support review shall have regard to the factors applicable in the Divorce Act at sec. 15.1, as if an application for support at first instance and not a variation proceeding.

[5] Paragraph 10 of Sheffield J.’s order states:

The Applicant must try to increase her earnings and she will make reasonable efforts to do so.

[6] As at the date of the parties’ separation, Ms. McHardy was 54 years of age, worked part-time in a kitchen store and assisted Mr. McHardy in his residential mortgage business.

[7] Paragraph 18 of Sheffield J.’s order provides that either party may seek a change to the terms of the order in the event of “a change in the condition, means, needs or other circumstances o[f] either party, whether foreseen or foreseeable.”

[8] There was an equalization of the parties’ net family properties, which included Mr. McHardy’s pension.

(ii) Justice Polowin’s Order

[9] The amount of spousal support payable by Mr. McHardy was reduced by the consent order of Polowin J. dated May 11, 2015 arising from the parties’ minutes of settlement: commencing on May 1, 2014, Mr. McHardy was to pay spousal support in the amount of $4,550 per month. Justice Polowin’s order specifically provides that there would be no cost of living adjustment to the amount of monthly spousal support.

[10] Paragraph 5 of Polowin J.’s order states that the monthly spousal support may be varied and expressly provides that Mr. McHardy’s retirement would constitute a material change in circumstances:

The periodic spousal support may be varied in the future on the basis of a material change in condition, means, needs o[r] other circumstances of either party, whether foreseen or unforeseen, foreseeable or unforeseeable. The retirement of the Respondent from full time employment, or termination of his employment for any reason shall, amongst others, constitute a material change in circumstances.

[11] Mr. McHardy’s annual bonus in the future under his employment contract was not to be taken into consideration in any potential variation of the spousal support.

(iii) Mr. McHardy’s Retirement and Subsequent Events

[12] In September 2020, Mr. McHardy provided Ms. McHardy with notice that he would be retiring as of January 1, 2021. Mr. McHardy was 70 at the date of his retirement. Mr. McHardy ceased to pay spousal support as of January 1, 2021, notwithstanding that there had been no variation to the order of Polowin J.

[13] On his retirement, Mr. McHardy’s employer offered him a 12-month contract, with a salary of $105,000. Mr. McHardy formed a company for the sole purpose of receiving payment under the 12-month contract.

[14] In January 2021, however, the ownership of Mr. McHardy’s former employer changed. The new owner terminated Mr. McHardy’s contract on January 31, 2021. Mr. McHardy was paid $72,188 plus HST. Rather than Mr. McHardy bringing the full amount into his income, the amount was paid to Mr. McHardy’s company for services. Mr. McHardy takes and will continue to take a draw of $12,000 per year from his company until the amount is paid in full.

Legal Framework

[15] The court may vary, rescind, or suspend an order for support: Divorce Act, R.S.C. 1985, c.3, s.17(1). Before the court makes a variation order in respect of a spousal support order, the court shall satisfy itself that a change in the condition, means, needs or other circumstances of either former spouse has occurred since the making of the spousal support order or the last variation order made in respect of that order, and in making the variation order, the court is required to take that change into consideration: Divorce Act, s.17(4.1).

[16] The objectives of a variation order varying a spousal support order are set out in s.17(7) of the Divorce Act. Section 17(7) provides:

A variation order varying a 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 any 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.

Analysis

[17] There is no dispute that Mr. McHardy’s retirement constitutes a material change in circumstances. The issue before me is whether Mr. McHardy’s support obligation under Polowin J.’s order should be terminated (Mr. McHardy’s position) or reduced (Ms. McHardy’s position) and, if the latter, to what amount.

(i) Circumstances of Mr. McHardy

[18] In addition to the draw of $12,000 per year from his company, Mr. McHardy’s income is comprised of his CPP benefits and his pension. When the parties were divorced, Mr. McHardy’s pension was equalized. Mr. McHardy obtained an opinion from Guy Martel that the amount of $1,619.29 per month or $19,431.48 per year was not equalized. The evidence is that Mr. McHardy will not be able to receive his Old Age Security pension until 2022.

[19] Mr. McHardy’s counsel has calculated Mr. McHardy’s 2022 income at $68,005:

OAS $3,880 CPP benefits $11,874 Other pensions (portion of pension not equalized) $19,431 Taxable Canadian dividends (from his company) $12,000 Other taxable income (RRIF) $24,124

[20] Mr. McHardy decided to retire given his health and age. He has a heart condition that requires him to take medication four times a day. He was diagnosed with stage 4 throat cancer in 2016 for which he received chemotherapy treatments and extensive radiation treatments. He did not miss any support payments during this period. Recently, Mr. McHardy has been diagnosed with stage 3 lung cancer for which he is currently seeking treatment.

[21] Based on his most recent financial statement (January 12, 2022), Mr. McHardy’s net worth is $751,406.

(ii) Circumstances of Ms. McHardy

[22] Ms. McHardy maintains that she had and still has a strong compensatory basis for spousal support based on the following:

• the parties cohabited for 29.5 years;
• she gave up a position at Bell, moving to follow Mr. McHardy in his job;
• she stayed at home on a full-time basis for 11 years to raise the parties’ two children;
• she then assisted Mr. McHardy in his business as office manager. She looked after payroll, organized staff, and organized functions. The parties divided their income during this period;
• the marriage was “traditional”: Ms. McHardy had a full-time role in managing the household and raising the children;
• she took part-time retail employment to assist with the family finances. In 1993, she worked as Mr. McHardy’s sales assistant; and
• she cared for Mr. McHardy’s mother, leaving Mr. McHardy to concentrate on his career.

[23] When the parties separated in 2004, Ms. McHardy was 54 years of age, worked part-time in retail, and helped Mr. McHardy in his business.

[24] Ms. McHardy is now 72 years of age. She lives alone in a townhouse in Ottawa. She states that her employment circumstances have remained “basically the same” since the parties separated in 2004 and that, since that time, she has never been offered anything but seasonal, part-time employment. She is currently employed on a seasonal, part-time basis at a golf club.

[25] Counsel for Mr. McHardy consented to the late filing of Ms. McHardy’s January 28, 2022 affidavit, but objected to paragraphs 3 and 5 of that affidavit on the basis that they contain inadmissible hearsay from Ms. McHardy’s current employer about proposed changes to her job description and what her employer has planned for the golf course. I agree. As a result, I have placed no weight on the statements contained in these paragraphs.

[26] Ms. McHardy states that it is “highly probable” that she will not be able to continue in her current position.

[27] Ms. McHardy’s counsel has calculated her income for 2022 at $37,821:

OAS (from 2020) $7,364 CPP benefits (retirement) $14,053 Other taxable income (RRIF) $8,904 Other taxable income (interest on an inheritance from her mother’s estate) $7,500

[28] The difficulty I have with this calculation is it assumes that Ms. McHardy will not continue in her current position. She has not provided that evidence. In her affidavit sworn September 29, 2021, she stated that she “continue[s] to work, as it is made available to me, at a golf course during the non winter [sic] months. It is highly likely that I will no longer be working within 2 years.” Her counsel submitted that Ms. McHardy, too, should be allowed to retire, further reinforcing the fact that she continues to be employed. Accordingly, I would include Ms. McHardy’s employment income for 2021 at $17,195 and her employment insurance benefits of $11,110, for a total of $58,626.

[29] According to her financial statement sworn September 29, 2021, Ms. McHardy’s net worth is estimated at $661,000, including the inheritance from her mother’s estate.

(iii) Should Spousal Support be Terminated or Reduced?

[30] In Bredenkamp v. Bredenkamp, 2020 BCSC 730, Shergill J. considered compensatory and needs based support, noting at paras. 57-60:

57. Non-compensatory spousal support is “grounded in the ‘social obligation model’ of marriage, in which marriage is seen as an interdependent union”…or a “joint endeavour” where the “default presumption of this socio-economic partnership is mutuality and interdependence”…Upon a marriage’s dissolution, it falls on the former partner to meet the needs of a disadvantaged spouse, not the state…

58. “Need” is a flexible concept and is one of several considerations which a judge must take into account in deciding whether any order for spousal support is warranted. Similarly, economic self-sufficiency is a relative concept, which is “informed by the standard of living previously enjoyed by the parties”…

59. As the Court noted in Fisher v. Fisher, 2008 ONCA 11 (Ont. C.A.), at para. 52, “[s]ection 15.2(6)(d) of the Divorce Act promotes the objective of economic self-sufficiency only if it is ‘practicable’ to do so and where the objective can be realized ‘within a reasonable period of time.’”

60. The duration of the compensatory award is determined not by when the spouse achieves economic self-sufficiency, but rather when compensation is achieved [citations omitted].

[31] As a result of Mr. McHardy’s retirement, the difference in the parties’ incomes as set out above (including Ms. McHardy’s employment income and employment insurance benefits) is approximately $10,000. I note that, in their calculations, both parties have included the dividend or employment income Mr. McHardy will receive from his company. Based on this income differential, the SSAG “without child support” formula results in a range for spousal support of $293 to $391 per month based on a 26-year marriage. The range would be slightly elevated to account for the fact that the parties cohabitated for 29.5 years. However, it is certainly less than the $650 per month Ms. McHardy has proposed for 2021.

[32] I find that Ms. McHardy has not demonstrated a need for continued spousal support. Her most recent financial statement discloses no debts, notwithstanding that Mr. McHardy stopped paying spousal support in January 2021.

[33] Mr. McHardy’s position is that, based on the length of time he has paid spousal support to Ms. McHardy, compensation has been achieved. Ms. McHardy maintains that the basis for compensatory support continues.

[34] Although Ms. McHardy maintains that her employment circumstances have remained the same since the parties separated in 2004, there is scant evidence before me as to any efforts made by Ms. McHardy to obtain full-time employment. While she is seasonally employed on a part-time basis, her affidavit evidence sheds no light on her efforts to secure other part-time or indeed, full-time employment. I note that at one point, Ms. McHardy was employed as Mr. McHardy’s business manager. There is no evidence of Ms. McHardy’s efforts to secure employment that would have allowed her to use these skills. I note that Sheffield J.’s order expressly required Ms. McHardy to “try to increase her earnings and she will make reasonable efforts to do so.”

[35] There is evidence in the record from Ms. McHardy’s brother that she told him more than once that she refused to get a job as “revenge” to Mr. McHardy. Ms. McHardy expressly denies making any such statements to her brother. Based on the written record, I am unable to resolve this conflict in the evidence and, as a result, I have placed no weight on the statements alleged to have been made by Ms. McHardy. The fact remains, however, that the record is lacking as to Ms. McHardy’s efforts over the years in the face of Sheffield J.’s order.

[36] In her written submissions, Ms. McHardy concedes that the parties are in “roughly comparable circumstances, roughly comparable net worth…with some equity in their homes, and some liquid assets.”

[37] Section 19(e) of the Spousal Support Advisory Guidelines: Revised User’s Guide 2016 provides:

Eventually, as we get old enough, we all have to “live off our capital”, to draw down our capital resources to pay for our current needs, especially those without pensions. RRSPs have to be converted to RRIFs (Registered Retirement Income Funds) or annuities. Businesses and farms have to be sold. Interest from investments becomes insufficient to fund daily needs. As Leskun v. Leskum, 2006 SCC 25 reminded us, capital is part of “means” and can be the basis for paying spousal support.

[38] I agree with counsel for Ms. McHardy that “living off capital” applies to both parties. Section 19(e) goes on to state:

In effect, there are two steps to the SSAG analysis at this advanced stage, assuming entitlement: first, what income should be imputed to the spouses as reasonable withdrawals from capital in addition to whatever current income the spouses may earn; and second, the formula calculation for amount, under the without child support formula. Or, if older spouses have roughly similar assets after the division of property, a court can terminate spousal support and leave each spouse to manage their own capital to meet their needs, as occurred in Puiu v. Puiu, 2011 BCCA 480.

[39] Counsel for Mr. McHardy referred me to Bredenkamp, and the cases referred to therein, as well as the Court of Appeal’s recent decision in Politis v. Politis, 2021 ONCA 541. In Bredenkamp, Shergill J. terminated spousal support in circumstances where the support payor was on the cusp of retirement, almost 70 years of age, in failing health, and had paid support for 17 years. Counsel for Ms. McHardy seeks to distinguish Bredenkamp on the basis that the court found that the respondent’s personal choices (to travel) caused her to be unable to secure stable and remunerative employment and that she had been afforded more than enough time to achieve economic self-sufficiency.

[40] In Politis, the parties were married for 25 years at the time of separation, the support recipient was a full-time homemaker and caregiver to the parties children throughout the marriage, and had health issues that affected her ability to re-enter the workforce. The Court of Appeal upheld the trial judge’s order that spousal support be paid until October 2026. The central issue in that case was the wife’s re-partnering.

[41] While these and other authorities referred to by counsel are instructive, no two cases are the same and each must be determined on its own facts.

[42] In this case, counsel for Ms. McHardy argues that she has “never been able to move beyond retail” and has “never been able to achieve self-sufficiency.” As I have stated, the record on her efforts is, at best, scant.

[43] Indefinite support is not permanent support, only that the duration has not been specified: Politis, at para. 42. In this case, the evidence does not support a finding for continued entitlement for spousal support beyond December 2020, on either a needs or a compensatory basis. In my view, having regard to the parties’ present financial circumstances, including their respective incomes, the “roughly similar assets” of both parties, and Mr. McHardy’s age and health, time has come for the court to terminate the spousal support payments and leave each spouse to manage their own capital to meet their respective needs.

[44] In light of my determination that spousal support shall be terminated, it is not necessary for me to address Ms. McHardy’s request that any order for spousal support be secured against Mr. McHardy’s estate.

Conclusion

[45] Accordingly, I order that Mr. McHardy’s obligation to pay spousal support to Ms. McHardy be terminated, effective January 1, 2021. If the parties are unable to agree on costs, they may make written submissions, not to exceed three pages. Both parties are to provide their submissions on or before March 17, 2022. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs between themselves.

Ryan Bell J. Madam Justice Robyn M. Ryan Bell Date: March 7, 2022