COURT OF APPEAL FOR ONTARIO
CITATION: Pustai v. Pustai, 2014 ONCA 422
DATE: 20140523
DOCKET: C57925
Feldman, Rouleau and Hourigan JJ.A.
BETWEEN
Scott Timothy Pustai
Applicant (Respondent)
and
Christine Marie Pustai
Respondent (Appellant)
Michael H. Tweyman, for the appellant
William H. Abbott, for the respondent
Heard: April 3, 2014
On appeal from the order of Justice Allan R. Rowsell of the Superior Court of Justice, dated December 7, 2012.
Rouleau J.A.:
[1] The appellant, Christine Pustai, appeals from the trial judge’s decision terminating the obligation of the respondent, Scott Pustai, to pay spousal support, effective June 1, 2013, and obligating the appellant to pay child support as well as 20 per cent of the s. 7 expenses commencing July 1, 2013.
FACTS
[2] The appellant was born June 28, 1962 and the respondent was born May 15, 1964. They were married on August 25, 1989. There are four children of the marriage: Justin born October 13, 1990, Joshua born April 3, 1992, Jessie born September 24, 1993 and Amber born March 21, 1995.
[3] The appellant and respondent separated on March 31, 2001, after 11 ½ years of marriage. At the time of separation the appellant was 38 years old and the respondent was 36 years old.
[4] The parties settled their matrimonial litigation in 2008 by entering into minutes of settlement dated January 16, 2008. Portions of those minutes of settlement were then incorporated into a consent order dated February 21, 2008. The order was based on the respondent having an annual income of $155,800 and provided, among other terms, that the respondent would pay
spousal support in the sum of $3000 per month commencing March 1, 2008 and on the first day of each month thereafter. There shall be no termination for spousal support. Either party may ask for a review of the quantum of support upon a material change in circumstances.
[5] The order also provided that the appellant “shall transfer her one-half interest in the former matrimonial home to the [respondent] as lump sum child support … inclusive of s. 7 expenses including University / College expenses”, for the support of Justin, Jessie and Amber. When the consent order was entered into, the appellant only had custody of Joshua, although Joshua’s residence would move back and forth between the parties.
[6] The effect of the term of the order dealing with the matrimonial home is unclear. This is because on or about the same day as they signed the minutes of settlement upon which the consent order is based, the appellant and the respondent had executed a document[^1] stating that the respondent held the former matrimonial home in trust for the appellant, had no beneficial interest in it and “agree[d] to transfer, sell, encumber or deal however [the appellant] wishes with the property at her request and sole discretion.” According to the respondent, this trust agreement was entered into because of financial difficulties the appellant was facing at the time. The record, however, does not explain how this trust agreement is to be reconciled with the apparent transfer by the appellant of her one-half interest in the home as lump sum child support.
[7] On November 7, 2008, less than 9 months after the consent order was entered into, the respondent brought a motion to vary support on the basis of changed circumstances.
[8] The motion was dismissed on August 5, 2009. The motion judge found that there had been no material change in circumstances warranting either a reduction in spousal support or an order that the appellant pay child support. The motion judge held that the respondent had waived his right to child support and s. 7 expenses. Further, based on the terms of the consent order, it was reasonable for the appellant to believe that spousal support would never terminate and that only the quantum could be varied.
[9] The respondent appealed that order. The appeal was dismissed on March 30, 2010. The Court of Appeal agreed with the motion judge’s finding that there had been no material change in circumstances. The Court of Appeal also confirmed that “the consent order provided that only the quantum but not the duration of spousal support could be subject to variation.”
[10] The respondent brought a second motion to vary on October 26, 2010. That motion was referred to trial and it is the decision rendered in that trial that is the subject matter of this appeal. At trial the respondent argued that there had been material changes in circumstances that warranted terminating spousal support and entitled him to receive child support from the appellant. The alleged changes in circumstances included:
a) The appellant had sold the former matrimonial home and was keeping all of the proceeds;
b) The respondent’s company had been operating in special loan status for some time and was at the time of trial still operating under financial restrictions imposed as part of its special loan status;
c) Although the appellant maintained that she had not been working, she was leading a lifestyle that demonstrated that she had undisclosed income and assets; and
d) The respondent’s income had decreased from $155,800 at the time of the consent order to $126,540.88 at the time of the trial.
[11] At trial, the appellant testified that she understood from the consent order that she would continue to receive support for the rest of her life and, as a consequence, she did not seek employment. The appellant testified that her only income was the $36,000 per year she received as support. The evidence led at trial, however, demonstrated that the appellant had taken several expensive holidays, had paid down sizeable debts and had amassed considerable sums of money since the 2008 consent order had been made. No reasonable explanation was advanced explaining how this would be possible on an income limited to $36,000 per year. It would simply have been impossible to amass these sums on such a low income.
[12] The trial judge found that there had been a material change in circumstances. His conclusion was based on his finding that there had been a significant change in the appellant’s financial circumstances. The appellant had accumulated approximately $135,000 in 25 months and had not disclosed to the court how she had been able to accumulate such significant sums. Further, the respondent’s income had dropped significantly from the salary he had been earning when the consent order was entered into.
[13] The trial judge then turned to the issue of remedy. He was provided with the calculations made by the parties using the spousal support advisory guidelines. He noted, at para. 72, that
given the age of the parties, the date of separation, the duration of spousal support with child support formula would have been subject to a variation and possible review for a minimum of 6 years and a maximum of 12 years. Without the child support formula, the duration is 6 to 12 years once again. It has now been 12 years since the date of separation.
The trial judge then concluded that, based on an 11 ½ year marriage and separation for approximately the same amount of time during which the respondent paid support, it was appropriate that support should end as of June 1, 2013.
[14] The trial judge further determined that the appellant had either been under-employed or had failed to disclose her employment income. It was therefore appropriate to impute income to the appellant in the amount of $31,000. This amount of income would trigger an obligation to pay child support. He therefore ordered that, effective July 1, 2013, she pay $505 per month in child support and, additionally, be required to pay 20 per cent of s. 7 expenses for the children.
[15] On a final issue, the trial judge determined that the respondent had not complied with the minutes of settlement entered into between the parties with regard to the requirement that the respondent purchase a new vehicle for the appellant. The trial judge therefore ordered the respondent to provide the appellant with a new vehicle as required within 30 days.
ISSUES
[16] On appeal, the appellant argues that:
pursuant to the Court of Appeal’s 2010 decision the respondent was prevented from bringing an application to terminate support;
in the alternative, the respondent had not demonstrated a material change; and
in the further alternative, if there had been a material change, the trial judge erred in terminating support and in ordering the appellant to pay child support to the respondent.
ANALYSIS
The impact of the Court of Appeal’s decision
[17] The appellant argues that the Court of Appeal’s determination in the earlier variation application to the effect that “only the quantum but not the duration of spousal support could be subject to variation” precluded the respondent from seeking to terminate support.
[18] I disagree. The Court of Appeal’s decision on the earlier variation application finally determined the proper interpretation of the consent order. As a result, the respondent was precluded from advancing, on a subsequent application, any different interpretation of the consent order. However, the fact that the parties agreed not to terminate the support does not prevent a party from returning to court where there is a change in circumstances such as to warrant a variation including the possibility of ending support altogether. As explained by the Supreme Court of Canada in L.M.P v. L.S., 2011 SCC 64, [2011] 3 S.C.R. 775, a consent order is always open to variation in the event that a material change in circumstances so warrants. The majority of the Court in L.M.P. stated, at para. 41:
But even where an agreement incorporated into an order includes a term providing that it is final, the court’s jurisdiction under s. 17 cannot be ousted …. A provision indicating that the order is final merely states the obvious: the order of the court is final subject to s. 17 of the Divorce Act. Courts will always apply the Willick v. Willick, 1994 CanLII 28 (SCC), [1994] 3 S.C.R. 670] inquiry to determine if a material change of circumstances exists. [Citations omitted; emphasis in original.]
[19] In L.M.P., the majority of the Court characterized the “Willick inquiry” as follows, at para. 32:
That “change of circumstances”, the majority of the Court concluded in Willick, had to be a “material” one, meaning a change that, “if known at the time, would likely have resulted in different terms” (p. 688). G. (L.) v. B. (G.), 1995 CanLII 65 (SCC), [1995] 3 S.C.R. 370] confirmed that this threshold also applies to spousal support variations.
[20] The fact that the Court of Appeal has, in the appeal from the first application, finally determined the proper interpretation of the consent order does not prevent the respondent from seeking a variation of that consent order. The threshold question for the court, in deciding whether a variation should be granted, is whether there has been a material change of circumstances in accordance with the test articulated in L.M.P. and Willick.
Has there been a material change in circumstances?
[21] The appellant argues that the trial judge erred in finding that there was a material change in circumstances. Specifically, the appellant argues that the reduction in the respondent’s salary was only temporary. The respondent’s company would likely soon exit special loan status and, presumably, the respondent’s income would return to the previous levels. Because the change in income was only temporary, this would not constitute a material change.
[22] I disagree. The trial judge’s finding was anchored not only in the change in the respondent’s salary but also the significant unexplained improvement in the appellant’s financial circumstances. That alone could support a finding of material change in circumstances. Further, although it was possible and even likely that the respondent’s company would, at some point, exit special loan status, there was no assurance that the respondent’s salary would return to the previous levels. The problems of the respondent’s company were serious and the trial judge’s conclusion that the reduction in salary was a material change, and not simply a temporary aberration, was reasonable in the circumstances.
[23] The trial judge’s reasons did not adopt the specific formulation of the Willick inquiry quoted above. However, it is implicit in his reasons that he concluded that the terms of the original consent order likely would have been different if it had been known at the time (1) that the respondent’s financial situation would deteriorate as the trial judge found that it has, and (2) that the appellant had, or would have, significant undisclosed assets and/or access to undisclosed sources of income. That is, the trial judge’s reasons make clear why he found a material change in circumstances warranting a variation of the consent order, in accordance with L.M.P. The threshold for variation having been met, the issue becomes whether the terms of the variation entered by the trial judge were appropriate.
Did the trial judge err in terminating the support and in ordering the appellant to pay child support?
[24] The appellant submits that, even if there had been a material change in circumstances, the trial judge erred in how he addressed whether and to what extent the material change warranted a variation of the consent order. At para. 50 of L.M.P., the majority of the Court explained the approach courts should take when making variation orders:
In short, once a material change in circumstances has been established, the variation order should “properly reflec[t] the objectives set out in s. 17(7), … [take] account of the material changes in circumstances, [and] conside[r] the existence of the separation agreement and its terms as a relevant factor” …. A court should limit itself to making the variation order 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.
[25] The Court thus affirmed the approach it had laid out in Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303, for achieving consistency in the variation of orders based on consensual agreements and those not so based. As the majority of the Court in Miglin stated, at para. 62:
[C]onsistency between treatment of consensual agreements incorporated into orders and those that are not is achieved … when judges making variation orders under s. 17 limit themselves to making the appropriate variation, but do not weigh all the factors to make a fresh order unrelated to the existing one, unless the circumstances require the rescission, rather than a mere variation of the order.
[26] In this case, whereas the trial judge may have correctly identified the changes in the respondent’s salary and in the appellant’s financial circumstances between the date of the consent order and the trial, he did not go on to properly consider the circumstances of the parties at the time of the original consent order, and to compare those circumstances with circumstances at the time of trial. From the reasons, it appears that, once the trial judge found a material change in the financial circumstances of the parties, he then all but ignored the fact that the parties had entered into a comprehensive settlement leading to the original consent order in February 2008.
[27] This failure to consider the circumstance of the parties at the time of the consent order is apparent from the trial judge’s use of the spousal support advisory guidelines and his comments that an 11 ½ year marriage would not normally yield more than 12 years of support payments.
[28] Yet, as the above passages from L.M.P. and Miglin make clear, the trial judge’s analysis should be grounded in the actual circumstances of the parties at the time the consent order is entered into. In other words, the trial judge had to take as a starting point that in February 2008 the parties agreed to support payments of $3000 per month with no end date. He ought to have taken into account all of the elements of the 2008 settlement. This would include the financial situation of the parties at the time, the basis for the payments and waivers agreed to, as well as the effect and value of the transfer of interest in the matrimonial home in light of the trust agreement. An analysis of the circumstances at the time of the February 2008 consent order was required in order to determine whether the changes he had identified were sufficient to bring the support payments to an end less than five years after reaching that agreement. Instead the trial judge focussed on the circumstances at the time of separation and determined whether the change in circumstances, some 12 years later, warranted ending the support payments and requiring the appellant to pay child support to the respondent.
[29] In his decision, the trial judge has, in effect, rescinded the initial consent order instead of considering the impact of changes from the date of that order. In other words, in determining the proper variation of the existing order, he adopted the approach that Miglin and L.M.P. had explicitly foreclosed. As a result, therefore, I have concluded that the order must be set aside and a new trial ordered. Although, as explained above, I do not find any error in the trial judge's determination that there has been a material change in circumstances, in light of the error in his approach to settling the terms of variation I find it appropriate to order that the new trial address both these issues anew. Given how closely linked the two stages of analysis are - i.e., the threshold determination whether there has been a material change in circumstances, and the subsequent determination of the appropriate terms of variation, if any - these issues should be dealt with together at a single trial.
[30] Below I note two specific issues to be dealt with in the new trial.
The former matrimonial home
[31] The trial judge has noted, but not squarely dealt with, the apparent confusion surrounding the term in the original consent order stating that the appellant was transferring “her one-half interest in the former matrimonial home to the [respondent] as lump sum child support for the support of” Justin, Jessie and Amber. At paras. 26-27 of his reasons, the trial judge acknowledges the respondent’s testimony to the effect that he consented to the appellant keeping the proceeds of the sale of the matrimonial home on the expectation that the appellant “would commence paying base child support and section 7 expenses when the property sold” and that “spousal support would change” as well. As the trial judge notes, at para. 27: “This ignores the so-called Trust Agreement” discussed above, in which the respondent purports to hold the matrimonial property in trust for the appellant, with the appellant as sole beneficial owner.
[32] Further, at para. 68, the trial judge seems to question the validity of the related term in the original consent order: “The Order of Lack J. with regard to the transfer of the home was in consideration for a lump sum of child support which was not in fact the reality given the Trust Agreement. The [appellant] has not paid any child support for the children while they have been in the care of the [respondent].” The trial judge thus seems to suggest that, in light of the trust agreement, the appellant only appeared to give consideration in exchange for a release from paying child support for Justin, Jessie and Amber.
[33] The trial judge does not, however, clearly resolve this apparent conflict and does not situate this trust agreement in the broader context of the settlement agreement reached by the parties. Before concluding that the appellant should make any child support payments and determining the amount of these payments, it is necessary to clearly understand the impact of the trust agreement, the settlement and the consent order on the parties’ interests in the matrimonial home.
The automobile
[34] The parties are unable to agree on the cost of the automobile that ought to be purchased by the respondent pursuant to the settlement agreement. The parties urge this court to determine that issue without the need for it going to arbitration or other form of dispute resolution. In light of the fact that I would order a new trial, I would simply add the automobile issue to the list of issues to be determined at this new trial.
Fresh evidence
[35] Both parties tendered fresh evidence on the appeal. This evidence largely dealt with events that occurred after the decision under appeal was rendered. In light of the disposition I propose, I would dismiss the motions to tender fresh evidence. If the parties are unable to resolve their dispute – something I would strongly urge them to do – this fresh evidence can be tendered at the new trial.
CONCLUSION
[36] As a result, I would allow the appeal and order a new trial. In light of the appellant’s success on appeal, I would award costs in the agreed amount of $7500 inclusive of disbursements and taxes. I would reserve the costs of the initial trial to the judge hearing the retrial in this matter.
Released: May 23, 2014
(K.F.) “Paul Rouleau J.A.”
“I agree K. Feldman J.A.”
“I agree C.W. Hourigan J.A.”
[^1]: The trial judge found, at para. 15 of his reasons, that the minutes of settlement and the trust agreement were signed on the same day. Although the date on the copy of the minutes of settlement contained in the appeal book is not clear, the trial judge found the date to be January 16, 2008. The trust agreement, however, is dated January 14, 2008. This apparent discrepancy is likely explained by the fact that the appellant accepted the respondent’s offer to settle on January 14, 2008, while they may not have formalized this agreement into minutes of settlement until two days later.