COURT OF APPEAL FOR ONTARIO

CITATION: Stevenson v. Smit, 2014 ONCA 521

DATE: 20140704

DOCKET: C57977

Weiler, MacPherson and Cronk JJ.A.

BETWEEN

Helen Stevenson

Respondent (Applicant)

and

Peter Smit

Appellant (Respondent)

Daniel S. Melamed and Charley Levitan, for the appellant

Herschel I. Fogelman and Oren Weinberg, for the respondent

Heard: July 3, 2014

On appeal from the order of Justice Carolyn Horkins of the Superior Court of Justice, dated October 29, 2013, dismissing appeals from the order of Justice H.L. Katarynych of the Ontario Court of Justice, dated May 17, 2012.

By the Court:

I. Background

[1] The parties are former spouses. They married in 1989, separated in 2003 and divorced in 2004. There are three children of the marriage, aged 19, 18 and 14, respectively.

[2] In 2005, following their separation, the parties entered into a separation agreement (the “Agreement”). It provided, among other matters, that neither party would pay child support in accordance with the Child Support Guidelines (the “Guidelines”). Rather, the parties agreed that they would share equally all major expenses concerning the children of the marriage, including private school tuition, activity fees, camp fees, and post-secondary education expenses.

[3] When the Agreement was signed, the appellant, Peter Smit (the “father”), was engaged in forming a new company, and had minimal income (his income had been declining for four years). After execution of the Agreement, his income in most years continued to decline. He met his share of the children’s special expenses by drawing down on or liquidating some of his then considerable capital assets.

[4] In this fashion, the father met his obligation to pay 50% of the children’s special expenses until 2008, when he defaulted and informed the respondent, Helen Stevenson (the “mother”), that he could no long satisfy his contractual child support obligations.

[5] After the father’s default, the mother applied to the Ontario Court of Justice for an order quantifying the father’s arrears of child support for enforcement purposes. The father countered with an application to terminate his child support obligations under the Agreement as of November 1, 2008, and to substitute in their stead a requirement that he pay child support in accordance with the Guidelines. The father claimed that he had “[lost] the ability to liquidate capital to support his children”, that he had insufficient income to pay the agreed child support, and that these allegedly unforeseen and unanticipated factors constituted material changes in circumstances justifying relief from his child support obligations under the Agreement.

[6] The application judge disagreed. After a three-day trial, she held that the father had failed to establish a material change in circumstances. She therefore dismissed his application to change his child support obligations under the Agreement. She also set a schedule for the father’s payment, over time, of his arrears in child support and for his future payment of his share of the children’s ongoing special expenses.

[7] The father appealed. By order dated October 29, 2013, Horkins J. of the Superior Court of Justice dismissed his appeal.

[8] The father appeals to this court. Following oral argument, we dismissed his appeal, for reasons to follow. These are those reasons.

II. Issues and Discussion

[9] The father argues, first, that the application and appeal judges erred by failing to find a material change in circumstances as contemplated by s. 14 of the Guidelines. In the alternative, he submits that foreseeability of a change in circumstances is not the appropriate test for variation under the Guidelines of contractual child support obligations.

[10] In the circumstances of this case, we disagree.

[11] The application judge found that the father’s need to resort to capital to meet his child support obligations, the fact that he was in “an income-earning slump”, and the fact that his income was in decline were factors plainly known to the parties at the time they entered into the Agreement.

[12] The application judge further found that the father had untapped income-earning potential and that he had chosen to resort to his capital (including an equalization payment in the approximate sum of $1 million paid to him by the mother) to satisfy his child support obligations and to finance his own lifestyle, as well as his various business ventures.

[13] These findings were amply supported by the evidentiary record. They are dispositive of the father’s first ground of appeal. They compelled the conclusion that the father failed to establish a material change in circumstances within the meaning of that term under the applicable authorities. The appeal judge did not err in deferring to this central finding by the application judge.

[14] Nor can the father’s claim that the application and appeal judges erred in their appreciation of the governing test for the variation of special contractual child support obligations on the basis of a material change in circumstances be accepted. Both judges recognized that this test is definitively set out in Willick v. Willick, 1994 CanLII 28 (SCC), [1994] 3 S.C.R. 670. Foreseeability lies at the heart of this test: if the matter relied upon as constituting a material change in circumstances was known at the time of contract formation, it cannot ground a variation request.

[15] The father next argues that the judges below both erred, in effect, by requiring him, without imputing income to him, to comply with a child support order that he cannot possibly honour.

[16] We do not accept this submission. The application judge considered, and rejected, the father’s contention that the mother’s application constituted a request to impute income to him. She pointed out, correctly in our view, that imputation of income “was not the task at hand”. The issue before the application judge was not whether the father, in fact, was positioned financially to meet his agreed child support obligations. Rather, the issue was whether, at the time the Agreement was entered into, it was objectively foreseeable that the father would be required to encroach on his capital to satisfy those obligations, given that he did not then and may not in the future have the income to do so. No material change in circumstances having been demonstrated, imputation of income to the father was essentially irrelevant.

[17] In our view, the father’s remaining grounds of appeal are similarly without merit. Contrary to his contention, the application judge did not fail to consider the Guidelines. To the contrary, she expressly recognized that, in this case, the parties freely and knowingly elected to enter into special arrangements regarding child support, outside the parameters of the Guidelines. The parties were entitled to do so, as long as the children’s needs for and entitlement to support were not bartered away. That did not occur in this case.

[18] Finally, the father’s complaint that the application judge erred by failing to credit him for the full amount of the private school bursaries that were obtained for the children also fails. On our reading of the transcript, the mother did not concede that the father was entitled to full credit for the bursaries. In any event, the application judge’s treatment of the issue – according each parent equal credit for the bursaries – cannot be faulted.

III. Disposition

[19] For the reasons given, the appeal is dismissed. The respondent is entitled to her costs of this appeal and of the motion for security for costs, fixed in the total amount of $12,500, inclusive of disbursements and H.S.T.

Released:

“JUL -4 2014” “Karen M. Weiler J.A.”

“KMW” “J.C. MacPherson J.A.”

“E.A. Cronk J.A.”