COURT OF APPEAL FOR ONTARIO

CITATION: Mwanri v. Mwanri, 2015 ONCA 843

DATE: 2015-12-04

DOCKET: C60177

Cronk, Lauwers and van Rensburg JJ.A.

BETWEEN

Ernest Josiah Mwanri

Appellant (Respondent)

and

Irene Elias Mwanri

Respondent (Applicant)

Miguna Miguna, as agent for the appellant

Cynthia Mancia, for the respondent

Mark N. Demeda, for the Office of the Children’s Lawyer

Heard: September 3, 2015

On appeal from the order of Justice David Price of the Superior Court of Justice, dated February 27, 2015.

Cronk J.A.:

I. Introduction

[1] The parties were married in 1996 and separated in 2009. They have two children, now 14 and 19 years of age. By court order dated December 10, 2010, the appellant father was granted sole custody and primary residence of the parties’ son, the eldest child. The son, who is now in University, has lived with the father ever since. By the same court order, the respondent mother was granted sole custody and primary residence of the parties’ daughter, their youngest child. On July 11, 2014, the daughter refused to return to her mother’s home after a summer access visit with her father. Since then, she has lived with the father.

[2] The current custody and access arrangements for the children are not at issue on this appeal. The main issues in contention concern child support for the daughter, spousal support, and an unpaid equalization payment owed by the father to the mother.

II. Background in Brief

[3] On October 23, 2013, following a trial, Seppi J. of the Superior Court of Justice granted the parties a divorce. She also ordered that the father: i) make an equalization payment to the mother in the amount of $51,437.50, payable in two instalments: $25,718.75 within 31 days from the date of the order and the balance by no later than May 31, 2014; ii) pay $1,000 per month in spousal support to the mother, commencing January 1, 2012; iii) pay $704 per month in child support to the mother for the daughter; and iv) contribute to the extraordinary educational expenses of both children on a pro rata basis. By subsequent order dated January 23, 2014, Seppi J. also ordered the father to pay $38,000 in costs to the mother (collectively, “Justice Seppi’s Order”).

[4] Several key events occurred after Justice Seppi’s Order.

[5] First, once the daughter began to live with him in mid-July 2014, the father moved in the Superior Court to change the existing custody, access and support arrangements regarding her. By notice of motion dated July 15, 2014, he sought a temporary custody order with respect to the daughter, together with specified access rights in favour of the mother; a temporary order terminating his existing child support obligation towards the daughter, effective July 11, 2014; and an order requiring the mother to disclose the details of her employment. He claimed no other relief regarding child or spousal support in his notice of motion.

[6] The following month, in August 2014, the father filed an assignment in bankruptcy under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, (the “BIA”). At the time of his bankruptcy filing, his spousal and child support payments were current. However, he had not paid any part of the equalization payment or the costs awarded to the mother under Justice Seppi’s Order.

[7] For various reasons, the father’s motion was not heard in the fall of 2014. On December 5, 2014, the mother brought her own motion in the Superior Court, seeking orders for lump sum and continuing periodic spousal support, setting a review date for spousal support, and fixing the quantum of child support to be paid by her for the daughter at $101 per month based on the mother’s declared annual income of $15,249. By the time of the mother’s motion, the daughter had been residing with her father for almost six months.

[8] By operation of s. 168.1 of the BIA, the father was automatically discharged from bankruptcy on May 15, 2015, about two and one-half months after the motions judge’s order.

III. Motions Judge’s Decision

[9] The parties’ twin motions were heard together by Price J. of the Superior Court on February 27, 2015. There was no dispute regarding temporary custody of the daughter. The motions judge therefore granted continuing temporary sole custody of the daughter to the father and made an access order in favour of the mother.

[10] The motions judge further directed:

The parenting/access schedule in this Order shall be monitored by the Office of the Children’s Lawyer and both of the parents shall cooperate with the OCL’s counsel and follow his direction as to the interpretation of this Order.

The propriety of this direction is at issue on this appeal.

[11] The motions judge also made several rulings regarding child and spousal support. In particular, the motions judge:

(1) ordered the father to “forthwith” make a lump sum spousal support payment of $51,437 to the mother;

(2) ordered the father to make continuing periodic spousal support payments of $1,000 per month to the mother, in accordance with Justice Seppi’s Order;

(3) granted a charging order, in respect of the lump sum and periodic spousal support to be paid to the mother, against one of the father’s bank accounts, two of his registered retirement savings plans (R.R.S.P.’s), and specified pension assets;

(4) ordered that either party could seek a court review of the father’s periodic spousal support obligations after August 31, 2017, on certain conditions;

(5) terminated the father’s child support obligation for the daughter, effective from the date of his order; and

(6) adjourned the balance of the issues raised in the parties’ motions, to be heard by him on May 1, 2015.

IV. Issues

[12] In his factum, the father challenges almost every aspect of the motions judge’s child and spousal support rulings. As ultimately argued, the issues may be framed as follows:

(1) did the motions judge’s conduct of the hearing give rise to a reasonable apprehension of bias?

(2) did the motions judge err in his child support ruling:

i) by failing to terminate the father’s child support obligation for the daughter retroactively, from July 11, 2014 onwards, and by failing to account for the father’s child support payments to the mother during the eight months prior to the hearing, when the daughter was residing with the father; and

ii) by failing to order that the mother pay child support for and contribute to the extraordinary expenses of the daughter?

(3) did the motions judge err in his spousal support ruling:

i) by ordering the father to pay lump sum support to the mother in an amount equal to the outstanding equalization payment under Justice Seppi’s Order; and

ii) by directing that the father’s spousal support obligations be subject to a charging order over some of the father’s assets?

(4) did the motions judge err by ordering the parties to follow the directions of counsel for the Office of the Children’s Lawyer (the “OCL”) regarding interpretation of the motions judge’s order?

V. Discussion

(1) Reasonable Apprehension of Bias Claim

[13] The father argues that the motions judge’s conduct of the hearing created a reasonable apprehension of bias because the motions judge failed to accord the father procedural fairness and fundamental justice. The father submits that, on this basis alone, the motions judge’s child and spousal support rulings that are adverse to the father cannot stand.

[14] It is unnecessary to review the father’s numerous complaints in support of his bias claim in detail. In general, he maintains that the motions judge failed to act impartially, instead conducting himself as “a partisan advocate” for the mother; that he failed to afford a fair opportunity to the father to be heard; and that he made findings adverse to the father that were not supported by the evidence.

[15] I would reject the father’s bias claim.

[16] As the Supreme Court explained in Wewaykum Indian Band v. Canada, 2003 SCC 45, [2003] 2 S.C.R. 259, at para. 60, the test for the demonstration of a reasonable apprehension of bias is as follows:

What would an informed person viewing the matter realistically and practically – and having thought the matter through – conclude. Would he think that it is more likely than not that [the decision-maker], whether consciously or unconsciously, would not decide fairly.

[17] In Martin v. Sansome, 2014 ONCA 14, 118 O.R. (3d) 522, at para. 32, this court noted, citing Wewaykum, at para. 76: “There is a strong presumption of judicial impartiality. The threshold is high for finding an apprehension of bias.”

[18] In Chippewas of Mnjikaning First Nation v. Ontario, 2010 ONCA 47, 265 O.A.C. 247, at para. 230, leave to appeal to S.C.C. refused, [2010] S.C.C.A. No. 91, this court summarized the framework for reviewing a reasonable apprehension of bias claim based on a trial judge’s interventions at trial:

A determination of whether a trial judge’s interventions give rise to a reasonable apprehension of unfairness is a fact-specific inquiry and must be assessed in relation to the facts and circumstances of a particular trial. The test is an objective one. Thus, the trial record must be assessed in its totality and the interventions complained of must be evaluated cumulatively rather than as isolated occurrences, from the perspective of a reasonable observer throughout the trial.

[19] I have carefully reviewed the transcript of the hearing in this case, with regard, especially, to the number and nature of the motions judge’s interventions and his comments throughout to all counsel. Based on the transcript, there is no doubt that the motions judge took an active role in the hearing. However, the transcript reveals nothing that rises to the high level required to meet the test for a reasonable apprehension of bias.

[20] The motions judge’s interventions in this case did not occur solely during the father’s counsel’s submissions. The motions judge intervened during the oral arguments of all counsel, making multiple requests for their assistance regarding his concerns about the matters at issue. As I read his comments, his interventions were designed to focus counsels’ arguments on the central matters in dispute, to clarify the parties’ positions and that of the OCL on the issues, and to avoid or minimize submissions on peripheral issues.

[21] Moreover, contrary to the father’s submission, the transcript reveals that, despite his sometimes pointed exchanges with the father’s counsel, the motions judge was alert and attentive to the father’s arguments. For example, at one point during an exchange with the father’s counsel, he indicated expressly that he was “very interested” in counsel’s submissions. At another point, he stated that he would “try very carefully” to understand the father’s submissions. The father was afforded a full opportunity to address the various issues on the motions, as well as additional issues raised by the father himself, for the first time, during submissions before the motions judge.

[22] In my opinion, the transcript belies the father’s claim that the motions judge had a closed mind regarding the father’s arguments and that he failed to act impartially. The father’s disagreement with the motions judge’s rulings on child and spousal support affords no foundation for a reasonable apprehension of bias claim. Similarly, the fact that the motions judge rejected much, but not all, of the relief sought by the father does not reflect bias.

(2) Child Support Issues

(i) Termination of the Father’s Child Support Obligation

[23] The father argues that the motions judge erred by failing to retroactively terminate his child support obligation for the daughter, effective July 11, 2014, when she began to live with the father. He further argues that the motions judge erred by failing to credit him for his child support payments for the daughter during the eight months prior to the date of the hearing.

[24] I would not give effect to these arguments.

[25] The motions judge addressed the father’s requests for a retroactive termination of his child support obligation and for a corresponding order requiring the mother to pay retroactive child support directly:

There is evidence that [the father] has influenced [the daughter] in her decision not to abide by the orders for her residence made by Seppi J. and by Van Melle J. on August 11, 2014 both from [the mother] and from the interviews the OCL has had with [the daughter]. For this reason and in the circumstances which I find amount to a failure to comply fully with the existing court orders, if not outright contempt of them, I decline to make any retroactive termination of [the father’s] child support obligation, [or] to impose a retroactive child support obligation on [the mother].

[26] The father submits that this justification for the denial of retroactive termination of his child support obligation is unsupportable because it rests on two palpable and overriding factual errors: that the father had influenced the daughter in her decision to change her residence; and that the father was in contempt of existing court orders.

[27] I disagree.

[28] First, there was evidence before the motions judge of attempts by the father to influence or encourage the daughter to live with him, notwithstanding the custody arrangements in favour of the mother provided for under various pre-July 2014 court orders.

[29] On July 30, 2014, the mother moved for a court order compelling the return of the daughter to her care and custody. In her affidavit of the same date, the mother deposed:

7. My daughter has never told me that she wants to live with her father and that she does not want to live with me.

8. The [father] is very persuasive and I believe that he has used emotional blackmail to persuade our daughter to express that she wants to live with him. I so state as with our older child, the [father] did the same thing.

[30] The mother made similar statements in a second affidavit sworn on August 20, 2014.

[31] Thus, the mother’s sworn evidence supported the motions judge’s finding that the father influenced the daughter’s decision to change her place of residence.

[32] The motions judge’s reference to the OCL’s interviews with the daughter is a different matter. The materials before the motions judge do not appear to have included a report or other evidence from the OCL. To the extent that the motions judge treated submissions by the OCL’s counsel regarding the outcome of OCL interviews with the daughter as evidence of attempts by the father to influence the daughter to disobey existing court orders regarding custody, the motions judge erred. Submissions by counsel are not evidence. They are simply submissions and nothing more.

[33] That said, nothing turns on this error. As I have said, the mother’s affidavit evidence, described above, anchored the motions judge’s comments regarding efforts by the father to influence the daughter in her decision-making.

[34] In addition, in my view, there can be no serious suggestion that the motions judge erred by indicating that the father had failed to comply fully with existing court orders. The mother’s uncontradicted evidence was that neither the equalization payment nor the costs awarded in her favour under Justice Seppi’s Order had been paid. The father did not suggest otherwise before the motions judge or at the appeal hearing. That the mother had assigned her right to enforce the costs award to Legal Aid Ontario does not alter the fact that the costs award had not been paid at the time of the hearing before the motions judge.

[35] Moreover, contrary to the father’s assertion before this court, the motions judge did not find the father in contempt. The motions judge’s reference to “outright contempt” in connection with the father’s conduct was nothing more than a description, albeit a strong one, of his concern about the father’s failure to honour his obligations under Justice Seppi’s Order. His concern was not misplaced.

[36] The motions judge provided clear reasons for refusing to grant a retroactive termination of the father’s child support obligation and, implicitly, for his associated refusal to credit the father for his child support payments for the daughter in the eight months preceding the hearing. No palpable and overriding factual error has been demonstrated in respect of these discretionary refusals. Accordingly, there is no basis for appellate interference with the motions judge’s rulings on these issues.

(ii) The Mother’s Child Support Obligations

[37] The father submits, first, that the motions judge erred by failing to order that the mother pay prospective child support for the daughter and by treating the mother’s annual income for support purposes as $2,108. Second, the father maintains that the motions judge erred by failing to order that the mother contribute to the daughter’s extraordinary expenses.

[38] I agree with the first submission and disagree with the second.

[39] Both the mother’s notice of motion and her counsel’s submissions before the motions judge expressly contemplated that the mother should be paying child support for the daughter in the sum of $101 per month, based on an annual income in 2013 of $15,249 (including spousal support). To the extent, therefore, that the motions judge assessed the mother’s ability to pay child support based on an annual income of $2,108 (the mother’s income at the time of Justice Seppi’s Order), the motions judge erred.

[40] The motions judge’s assessment should have proceeded on the basis of the mother’s admitted annual income, as at the date of the motions, in the sum of $15,249. The motions judge erred by failing to order $101.68 per month in child support for the daughter, given the mother’s concession that she should pay monthly child support in that amount in accordance with the Federal Child Support Guidelines, SOR/97–175 (the “Guidelines”). The motions judge’s reasons contain no explanation for his failure to impose a prospective child support obligation on the mother.

[41] That is not to say, however, that the motions judge erred by refusing to order that the mother pay child support for the daughter on a retroactive basis. He declined to impose a retroactive child support obligation on the mother for the same reasons that he declined to retroactively terminate the father’s child support obligation, outlined above. This was his call to make.

[42] In the circumstances, I would vary the motions judge’s order to provide that the mother pay child support for the daughter in the amount of $101.68 per month, commencing February 27, 2015 (the date of the motions judge’s order).

[43] I reach a different conclusion regarding the motions judge’s failure to order that the mother contribute to the daughter’s extraordinary expenses.

[44] Justice Seppi’s Order directs that both parents contribute pro rata to all extraordinary expenses of both children, incurred for their education, on the basis set out in that order. No subsequent court order appears to have altered this direction. Accordingly, the mother is already obliged to contribute, on a pro rata basis, to the extraordinary education-related expenses of the children.

[45] Although the father did not seek an extraordinary expense order under the Guidelines in his July 2014 notice of motion, the motions judge’s reasons confirm that the matter was argued before him. However, the father has pointed to no evidence of non-education-related extraordinary expenses for the daughter led before the motions judge. Accordingly, on the record before the motions judge, there was no basis on which to order any additional contribution by the mother to extraordinary expenses.

[46] In these circumstances, the motions judge’s refusal to order that the mother contribute to any additional, extraordinary expenses for the daughter cannot be faulted. Should such additional expenses arise while the daughter is residing with the father, there is nothing to prevent him from moving, on proper materials and proper notice, for the appropriate order in the normal course.

(3) Spousal Support Issues

[47] The father submits that the motions judge erred by ordering that he pay lump sum spousal support to the mother and that his lump sum and periodic spousal support obligations be subject to a charging order under s. 9(1)(b) of the Family Law Act, R.S.O. 1990, c. F.3 (the “FLA”). I will address these submissions in turn.

(i) Lump Sum Spousal Support Award

[48] The father attacks the motions judge’s lump sum spousal support award on several grounds. First, he argues that the motions judge erred by finding that the father’s bankruptcy constituted a material change in circumstances entitling the mother to reconsideration of her need for support from the father and the appropriate quantum of support, if awarded.

[49] Second, the father contends that the motions judge erred in awarding lump sum spousal support to the mother by failing to adhere to the governing principles regarding lump sum support enunciated by this court in Davis v. Crawford, 2011 ONCA 294, 106 O.R. (3d) 221 and related authorities.

[50] Third, the father maintains that the lump sum award, in an amount equal to the sum of his outstanding equalization payment, improperly circumvents the BIA bankruptcy regime, under which the mother’s entitlement to an unpaid equalization payment is a provable claim in the father’s bankruptcy. The effect of the motions judge’s lump sum award, the father says, is to impermissibly “prioritize” the mother’s claim for enforcement of the father’s equalization debt over the claims of other unsecured creditors in the father’s bankruptcy.

(a) Preliminary Comments

[51] At the outset, I acknowledge that the motions judge’s spousal support order attracts considerable deference from this court. Absent an error in principle, a significant misapprehension of the evidence, or unless the award is clearly wrong, this court should not interfere with the motions judge’s spousal support ruling: Hickey v. Hickey, 1999 CanLII 691 (SCC), [1999] 2 S.C.R. 518, at para. 11; Crawford, at para. 77.

[52] The effect of the motions judge’s spousal support ruling was to award lump sum spousal support to the mother in the same amount as the equalization payment provided for under Justice Seppi’s Order. The motions judge also continued, without change, the father’s obligation to make periodic spousal support payments to the mother.

[53] The issue, therefore, is whether the motions judge’s award of lump sum spousal support accords with the governing principles for lump sum support awards and the applicable considerations relating to the father’s pending bankruptcy proceeding. For the reasons that follow, I conclude that it does not. In my view, the motions judge’s lump sum spousal support analysis is tainted by several errors in principle.

(b) Material Change in Circumstances

[54] I begin with the motions judge’s finding of a material change in circumstances.

[55] Contrary to the father’s submission, the motions judge considered circumstances other than the father’s bankruptcy in finding a material change in circumstances. In his reasons, he stated:

I find that [the father’s] failure to pay the equalization payment ordered by Seppi J. on Oct. 23, 2013, and his bankruptcy on August 14, 2014, which demonstrates that [the mother] is unlikely to receive this payment, amounting to $51,437, fully, if at all, and the change of [the daughter’s] residence and resulting change in child support amount to a material change in circumstances in that, if these circumstances had been foreseen by Seppi J., she would likely have concluded that [the mother’s] need for spousal support was greater.

[56] I see no error in the motions judge’s finding of a material change in circumstances based on the factors described by him. The factors identified by the motions judge, namely, the father’s failure to make the court-ordered equalization payment, the fact of his bankruptcy, the change in the daughter’s residence, and the resulting termination of the father’s child support payments to the mother, in combination, clearly established a material change in circumstances. There can be no doubt, in my view, that these factors, if proven at the time of the hearing before Seppi J., would have been directly relevant to her determination of spousal support.

[57] Accordingly, based on the evidence before him, the motions judge was entitled to reconsider the mother’s need for spousal support and to assess whether any change in the existing spousal support arrangements was necessary and appropriate in all the circumstances. However, in so doing, the motions judge was obliged to take account of all relevant factors regarding such an award. And it is here, in my view, that the motions judge fell into error. I say this for the following reasons.

(c) Approach on Motion to Change

[58] At the time of the motions, the mother was already receiving periodic spousal support payments that were in good standing. In these circumstances, the proper approach to the evaluation of the mother’s change motion was to examine, first, whether the evidence established a change in the parties’ circumstances warranting an alteration in the existing periodic spousal support arrangements, given the mother’s needs and the father’s ability to pay.

[59] This analysis involves comparing the parties’ circumstances at the time of the motions with those at the time of Justice Seppi’s Order. In other words, once it was accepted that a material change in circumstances had been demonstrated, the next step in the spousal support analysis was to inquire whether the periodic spousal support arrangements set out under Justice Seppi’s Order were adequate in light of the parties’ changed circumstances. See for example, Willick v. Willick, 1994 CanLII 28 (SCC), [1994] 3 S.C.R. 670, at p. 688.

[60] However, the reasons indicate that the motions judge essentially commenced, and ended, his spousal support analysis by focusing on the merits of a lump sum spousal support award, without addressing the adequacy of the existing periodic spousal support award under Justice Seppi’s Order. Simply put, the motions judge failed to address the proper question once he had determined that there had been a material change in circumstances. Further, in awarding lump sum spousal support, the motions judge also continued the father’s periodic spousal support obligation. He provided no reasons for doing so.

[61] The motions judge’s approach supports the conclusion that the underlying purpose of his lump sum spousal support award was merely to convert the mother’s unpaid equalization payment into lump sum spousal support. This approach was fatally flawed. Addressing the appropriate initial inquiry – the adequacy of the existing periodic spousal support award – ensures that all the relevant circumstances are taken into account. These include, for example, the parties’ current assets and income, the implications of the father’s release from certain liabilities on his eventual discharge from bankruptcy, his post-bankruptcy retention of property exempt from the BIA regime (e.g. his R.R.S.P.’s and pension), and the mother’s financial needs. As a result of the motions judge’s flawed approach to the determination of spousal support, this review did not occur in this case.

(d) Davis v. Crawford Considerations

[62] There is a second, significant difficulty with the lump sum spousal support award in this case.

[63] In Crawford, this court clarified the principles that govern lump sum support awards. In so doing, the court stressed, at paras. 63–65, that the payor’s ability to make a lump sum payment without undermining his or her future self-sufficiency is an important consideration in deciding whether to make an award of lump sum spousal support, including under s. 33(9) of the FLA. That section provides, in part, that, “[i]n determining the amount and duration, if any, of support for a spouse … in relation to need, the court shall consider”, among other things:

(a) the dependant’s and respondent’s current assets and means;

(b) the assets and means that the dependant and respondent are likely to have in the future;

(d) the respondent’s capacity to provide support.

[64] The Crawford court went on to hold, at para. 66:

Most importantly, a court considering an award of lump sum spousal support must weigh the perceived advantages of making a lump sum award in the particular case against any presenting disadvantages of making such an order.

[65] In this case, the motions judge identified four factors that, in his view, warranted a lump sum spousal support award in the mother’s favour:

i) the unlikelihood of the mother receiving the equalization payment to which she is entitled under Justice Seppi’s Order, together with the “substantial impact” on her of non-payment of the equalization award;

ii) the termination of child support payments to the mother for the daughter;

iii) the inequity arising from the potential release of the equalization debt on the father’s discharge from bankruptcy; and

iv) the disparity in the parties’ incomes should the mother not benefit from receipt of the equalization payment that represented her share of the parties’ collective net family property.

[66] The motions judge cannot be faulted for taking account of these factors. They were relevant considerations on the reassessment of the mother’s need for spousal support.

[67] But that does not end the matter. Crawford holds, at para. 70, that most spousal support orders will be in the form of periodic payments. It is not apparent from the motions judge’s reasons whether he considered the specific purposes of lump sum spousal support in the circumstances of this case, the father’s ability to make a lump sum payment in light of his bankruptcy, financial resources and prospects for self-sufficiency, and if a lump sum award, as opposed to an award for increased periodic spousal support, was appropriate. Further, as I read his reasons, the motions judge failed to weigh the perceived advantages of a lump sum spousal support award against the disadvantages of making such an award on the particular facts of this case. His failure to do so is reversible error.

[68] In these significant respects, the motions judge’s spousal support analysis failed to conform to the governing principles for lump sum awards identified in Crawford.

(e) Bankruptcy Considerations

[69] The errors described above were compounded in this case by the motions judge’s failure to fully come to grips with the implications of the father’s pending bankruptcy.

[70] The mother sought an order from the motions judge converting her unpaid equalization payment and costs award into spousal support. In her affidavit sworn on December 5, 2014, she asked for an order providing that payment of her outstanding equalization payment and costs award under Justice Seppi’s Order, together with interest, “be made as spousal support and to be collected by the Family Responsibility Office”. During oral submissions before the motions judge, the mother’s counsel confirmed her request that the outstanding equalization payment be paid to her “either as a lump sum amount or as a monthly payment”.

[71] This request was triggered by the father’s bankruptcy and the fact that, upon discharge from bankruptcy, the father would retain various exempt assets, but be released from his equalization debt. The mother asserted in her affidavit that: “The [father] has declared bankruptcy for the sole purpose of denying me my legal rights and in defiance of [Justice Seppi’s Order].”

[72] However, the father was an undischarged bankrupt at the time of the mother’s motion and the hearing before the motions judge. As a result, the effect of a lump sum spousal support award on the father’s bankruptcy was a critical consideration.

[73] In Schreyer v. Schreyer, 2011 SCC 35, [2011] 2 S.C.R. 605, the Supreme Court discussed the interplay between provincial family law statutory schemes and federal bankruptcy law in the context of unpaid equalization payments. On bankruptcy, an unpaid equalization payment is “swept into the bankruptcy” of the bankrupt payor spouse. The equalization claim is a provable claim under the BIA, and the bankrupt is released from that claim once discharged. In contrast to an unpaid equalization claim, the bankrupt is not released on discharge from either a support claim or a claim for arrears in support: Schreyer, at para. 20; Thibodeau v. Thibodeau, 2011 ONCA 110, 104 O.R. (3d) 161, at para. 37.

[74] The Schreyer court also addressed the unfairness that can arise under the BIA scheme in family law cases, at paras. 25 and 37:

I do not doubt that an outcome like the one in this appeal looks unfair, given that the appellant’s equalization claim was based primarily on the value of an asset – the farm property – which was exempt from bankruptcy and therefore not accessible to other creditors. None of the policies underlying the BIA require that the appellant emerge from the marriage with no substantial assets. Parliament could amend the BIA in respect of the effect of a bankrupt’s discharge on equalization claims and exempt assets. But the absence of such an amendment makes the outcome of this case unavoidable.

In its current form, therefore, the BIA offers limited remedies to spouses in the appellant’s position. In this regard, family law may provide them with a safer harbour after the bankrupt has been discharged, more particularly through spousal support. The appropriateness of awarding or varying spousal support and the quantum of support are matters that fall within the discretion of the family court. If a support order were made in a case like this one, the court might well aim to mitigate the inequities arising from the bankruptcy, such as the release of the debtor spouse from an equalization claim or the retention by the debtor spouse of an exempt asset. Such determinations must be made on a case-by-case basis. [Citations omitted.]

[75] The motions judge recognized that an outstanding equalization payment cannot be enforced as a preferred claim in the payor spouse’s bankruptcy proceeding. The hearing transcript reveals that, on multiple occasions throughout his exchanges with counsel, the motions judge stated that he did not “propose to make an order that [the mother’s] equalization payment be enforced in preference to other creditors in the bankruptcy”. He noted that any support order must be based on need and ability to pay, recognizing that the mother’s need for support may be greater given her unpaid equalization claim.

[76] Further, the motions judge appreciated that lump sum support awards should not be employed by the courts to redistribute assets between separated couples, as held by this court in Crawford, at para. 52.

[77] Both the FLA and the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.) afford family law judges a broad discretion to award periodic or lump sum spousal support, or to make an award comprising both forms of support. But that discretion does not allow for the redistribution of assets by means of an award of spousal support. As the Crawford court emphasized, at para. 60: “a lump sum award should not be made in the guise of support for the purpose of redistributing assets.”

[78] The mother’s change motion was clearly premised on converting her unpaid equalization payment into spousal support, in order to avoid the release of the father’s equalization debt on his discharge from bankruptcy. In these circumstances, it was incumbent on the motions judge to address fully the relevant considerations relating to the father’s bankruptcy. In my view, with respect, he failed to do so.

[79] More particularly, although the motions judge referenced both Schreyer and Crawford, he failed to consider the father’s status as an undischarged bankrupt, the effect of a lump sum spousal support award on the father’s ongoing bankruptcy, and the implications of the father’s eventual discharge from bankruptcy on the parties’ financial circumstances and assets.

[80] In the present case, these were necessary and pertinent considerations. Yet, the record suggests that, in awarding lump sum spousal support to the mother and regardless of the status of the father’s bankruptcy, the motions judge simply converted the mother’s equalization claim into an entitlement to lump sum spousal support, in addition to the periodic spousal support that the father was already paying. This was impermissible.

(f) Conclusion

[81] In light of the errors described above, I conclude that the motions judge’s award of lump sum spousal support cannot stand. I would therefore set aside his lump sum spousal support award, without prejudice to the mother’s right to renew her request for a change in spousal support, on a proper record, as she may be advised.

(ii) Charging Order

[82] The motions judge directed that the lump sum and periodic spousal support awarded to the mother be subject to a charging order over certain of the father’s assets, namely, one of his bank accounts, two of his R.R.S.P.’s, and one-half of a specific pension asset.

[83] The father challenges this charging order. He argues that the mother did not seek a charging order under s. 9(1)(b) of the FLA in her notice of motion and did not adduce any evidence or make any arguments in support of such an order at the hearing before the motions judge.

[84] I note that it is s. 34(1)(k) of the FLA, not s. 9(1)(b), that allows for a charging order to enforce spousal support. The motions judge thus misspoke when he referenced the latter section as the source of his authority to impose a charging order in respect of spousal support. That said, nothing turns on this issue. The father does not challenge the motions judge’s authority under the FLA to make a charging order. Rather, he essentially submits that he was denied procedural fairness with respect to this aspect of the motions judge’s order. I disagree.

[85] It is true that the mother’s December 5, 2014 notice of motion does not mention a charging order. However, contrary to the father’s submission, the hearing transcript confirms that the subject of a possible charging order was raised by the motions judge. The father had full opportunity, through counsel, to address the issue. I am not persuaded, therefore, that hearing fairness was compromised in any material way in respect of this issue.

[86] However, since I would set aside the motions judge’s lump sum spousal support award, it follows that the charging order in respect of that award must also fall. Furthermore, at the time of the hearing before the motions judge and the appeal hearing, the father’s periodic support payments were in good standing. By reason of s. 178(1)(c) of the BIA, his liability for those payments was not released on his discharge from bankruptcy. The motions judge provided no reasons for the charging order in respect of the father’s periodic spousal support payments. In these circumstances, the justification for such an order is not apparent.

[87] I therefore conclude that the charging order must be set aside in its entirety, without prejudice to the mother’s right to seek such an order under s. 34(1)(k) of the FLA, on proper motion and supporting materials. Given this conclusion, it is not necessary to determine whether the motions judge’s charging order was overly broad in scope and whether he had the authority to grant a charging order over the assets targeted by his order, given the father’s assignment in bankruptcy. Nothing in these reasons should be understood as suggesting that the motions judge had jurisdiction to grant a charging order in respect of all the assets he identified, e.g. the father’s bank account.

(4) OCL Direction

[88] The remaining ground of appeal concerns the motions judge’s order that the parties follow the direction of the OCL’s counsel regarding the interpretation of the motions judge’s order. The father argues that this aspect of the motions judge’s order “violated the [father’s] right to counsel of his choice in addition to precipitating a conflict of interest since the [OCL] acted for [the daughter]”.

[89] I would reject this argument. I see nothing objectionable in the motions judge’s impugned direction, the language of which is set out at paragraph 9 of these reasons.

[90] First, the direction focuses on the parenting and access schedule fixed by the motions judge. The father does not appeal from the motions judge’s ruling regarding custody and access.

[91] Second, the direction provides that the set parenting and access schedule be monitored by the OCL. This is a common and laudable provision that was clearly intended to prevent further, unnecessary litigation between the parties regarding custody and access. This accords with the best interests of the children and the interests of the administration of justice.

[92] Third, contrary to the father’s submission, nothing in the direction requires the father to seek or follow legal advice from the OCL’s lawyer. The direction stipulates that the parties are to co-operate with counsel for the OCL in respect of the interim custody and access arrangements ordered by the motions judge. It requires the parties to “follow his direction as to the interpretation” of the motions judge’s order. This language simply obliges the parties to follow the OCL’s direction in the event of any disagreement about the terms of the motions judge’s interim order. It in no way prevents either party from consulting with their own counsel and, if so advised, returning any matter of disagreement before the Superior Court for reconsideration or clarification. The parties remain free to retain, consult and instruct counsel of their choice on all matters in dispute.

IV. Disposition

[93] For the reasons given, I would allow the appeal in part, in accordance with these reasons. Specifically, I would vary the motions judge’s order: i) by providing that the mother pay child support of $101.68 per month to the father for the daughter commencing February 27, 2015; and ii) by deleting paragraph 11 (the lump sum spousal support award) and paragraph 13 (the charging order) of the motions judge’s order, without prejudice to the mother’s right to apply anew for the relief contemplated by those paragraphs, on a proper record and with proper notice. In all other respects, I would dismiss the appeal.

[94] As success on the appeal has been divided, I would award no costs of the appeal.

Released:

“DEC -4 2015” “E.A. Cronk J.A.”

“EAC” “I agree P. Lauwers J.A.”

“I agree K. van Rensburg J.A.”