Court File and Parties

Court File No.: 275/09 Date: April 11, 2013 Ontario Court of Justice

Re: Kathleen Burger - Applicant and Matthew Burger - Respondent

Before: Justice R. Zisman

Heard: January 29 and 30, 2012

Counsel:

• Applicant - Self-represented
• Respondent - Self-represented

Reasons for Judgement

1. Introduction

[1] This is a motion to change by the respondent, Matthew Burger to change the terms of a separation agreement dated October 26, 2000 relating to spousal support. The respondent seeks to terminate his support obligations retroactive to October 1, 2009 and rescind all outstanding arrears. The applicant, Kathleen Burger is consenting to a change from the current amount of spousal support to an amount that the court considers appropriate.

2. Background and Undisputed Facts

[2] The parties were married on May 29, 1976. They have two adult children.

[3] When the parties were married Ms Burger was working as a sales associate in a department store. Mr. Burger was employed at Kentucky Fried Chicken. The parties moved to Calgary for five years due to Mr. Burger's employment. Ms Burger stayed home to care for their children. They returned to this jurisdiction in 1981. Mr. Burger traveled a great deal for his employment and as a result Ms Burger was responsible for the majority of the child care.

[4] At the time of the separation, Ms Burger had returned to work on a part-time basis as a sales associate and earned minimum wages. Mr. Burger was a partner in a business, known as Spokes N' Slopes.

[5] The parties separated on June 24, 2000. Ms Burger requested that Mr. Burger make a proposal to her regarding a settlement. He proposed that he pay her $2,000.00 per month as spousal support, $75,000.00 as her share of the value of his business and that they split the value of the matrimonial home. Ms Burger made a counter proposal that he pay her $2,400.00 per month as spousal support, $50,000.00 for her share of his business and that she retain the full value of their home. Mr. Burger agreed to this proposal.

[6] They entered into a separation agreement on October 26, 2000. Both parties executed the agreement and acknowledged that it was fair and reasonable.

[7] At the time of the negotiation and execution of the separation agreement Ms Burger was represented by counsel and although Mr. Burger was advised to obtain counsel he chose not to do so and executed an acknowledgement of his right to do so.

[8] Ms Burger also executed an acknowledgement that she had been advised by her solicitors to obtain a valuation of the business, Spokes N' Slopes and to obtain full disclosure of her husband's income and expenses, debts and assets. She further acknowledged that she was advised by her solicitors that without that information they could not properly advise her about her rights and obligations.

[9] The separation agreement provided as follows:

a) Mr. Burger was to pay Ms Burger spousal support of $2,400.00 per month to be annually indexed until she remarried, cohabited in a common law relationship for a period of two years or died. Such support was reviewable upon Mr. Burger's retirement;

b) The matrimonial home was transferred to Ms Burger;

c) Mr. Burger was required to pay Ms Burger $50,000.00 as her interest in the family business, Spokes N' Slopes at the rate of $1,200.00 per month; and

d) The parties agreed that all other assets had been equalized.

[10] Ms Burger contacted the Family Responsibility Office in February 2009 to begin the process of enforcement. The separation agreement was filed with the court on June 25, 2009. Ms Burger claimed arrears as of February 28, 2009 being the last date she received any funds from Mr. Burger.

[11] The Family Responsibility Office commenced default proceedings with a first appearance on November 30, 2010. The support arrears were in excess of $50,000.00.

[12] On January 18, 2011, a temporary default order was made and Mr. Burger was ordered to pay $500.00 per month.

[13] Mr. Burger did not commence a motion to change until April 21, 2011 with a first appearance date of June 28, 2011. The Form 15 Motion and Form 15A Change Information Form simply requested that ongoing support terminate as of October 10, 2009. No reasons are stated.

[14] There were several subsequent court attendances and orders for disclosure.

[15] At the settlement conference held on January 6, 2012 the parties agreed that the motion to change would be resolved on a final basis, without prejudice to Mr. Burger renewing his motion to change. It was agreed that the ongoing spousal support and the enforcement of the arrears would be suspended from January 6 until September 1, 2012 at which time the issues would be reviewed.

[16] The parties were again before the court on September 17, 2012. The endorsement states that Mr. Burger advised the court that his financial situation had not improved in the last nine months and he was not in a position to pay any spousal support or the arrears owing which had increased to about $99,000.00. Mr. Burger was granted leave to reinstate his previous motion to change and the parties were required to file updated financial statements and further supporting documentation. After a further court attendance the matter was set for trial as the issues could not be resolved.

[17] Mr. Burger testified on his own behalf and at the court's request also arranged for his "girlfriend" Karen Haist to testify. Ms Burger testified on her own behalf.

[18] On consent, the Family Responsibility Office Statement of Arrears dated January 18, 2013 was entered into evidence. It indicated outstanding arrears of $93,654.38 but this is based on the ongoing support order and the enforcement of arrears being suspended as of January 6, 2012.

[19] The order of January 6, 2012 indicating that enforcement of the ongoing support and the arrears would be suspended until September 1, 2012 at which time it would be reviewed. As there was no further order made for enforcement of either the ongoing support or the arrears the Statement of Arrears does not include any further accruing support and the Family Responsibility Office has not taken any steps to enforce the order.

3. Issues

[20] The issues to be determined are:

1. Whether or not there has been a material change in circumstances?
2. Whether or not Ms Burger is entitled to ongoing spousal support and if so, the amount?
3. What is Mr. Burger's income and if income should be imputed to him?
4. Whether or not the amount of outstanding spousal support arrears should be rescinded or reduced and if so by how much?

4. Summary of Relevant Evidence Regarding Mr. Burger's Financial Circumstances

[21] Mr. Burger is 62 years old. He worked for a Kentucky Fried Chicken franchise for 31 years and earned about $900.00 to $1,000.00 a week as a manager or about $46,400.00 to $51,600.00 per year.

[22] In 1993, he and a partner began a sports store, Slopes N' Stokes. Mr. Burger continued to work for Kentucky Fried Chicken and took no draw from the business for about a year and a half until he finally terminated his position at Kentucky Fried Chicken in 1994 to devote himself fulltime to the business.

[23] According to Mr. Burger due to his "ignorance" neither he nor his partner made any government business remittances. He also did not pay his personal income taxes. He acknowledged that he received notices for years requesting his remittances prior to the separation, but until 2003 the government did not pursue the issue so he ignored the letters.

[24] Ms Burger testified that letters were coming to the house several months before the separation regarding the lack of filings for the business. She was worried that the government would take their home.

[25] Mr. Burger acknowledged that prior to the separation he had just filed his personal income tax returns for 1997 and 1998, that he had received notices for taxes owing on his business and that he was aware that he owed both personal and business taxes. Mr. Burger testified that at the time of the separation his business was not viable and that it was not worth what he offered to pay Ms Burger for her share. However, on another occasion he testified that he did not really know how much his business was worth. He testified that he did not know whether or not the business was profitable from 1993 to 2000 because he had good sales during those years.

[26] The only evidence regarding Mr. Burger's income in the years prior to the separation was Notices of Assessment he produced for the years 1997 and 1998. In 1997 his income was $29,997.00 and in 1998 his income was $26,000.00. These Notices of Assessment were respectively dated on May 20 and 23, 2000 that is, prior to the execution of the separation agreement. The Notice of Assessment for 1998 indicates outstanding taxes, interest and penalties owing were $17,192.88.

[27] Although Ms Burger testified that she felt that her share of the business was worth more than the $50,000.00 she received, she acknowledged that the settlement she obtained was generous as she received the full value of the matrimonial home which she estimated to be about $218,000.00 less a small mortgage.

[28] In 2003, the business was assessed as owing $601,817.72 in provincial sales tax and $551,333.06 in federal sales tax. The business also owed money to their suppliers and other creditors.

[29] Mr. Burger's partner declared bankruptcy and Mr. Burger took over the business and assumed all of the debt. Mr. Burger testified that he did not declare bankruptcy out of pride but also because he felt he could make the business succeed as he had a good clientele and a lot of inventory.

[30] With the assistance of a trustee in bankruptcy, Mr. Burger made a proposal in bankruptcy. The documents filed indicate that the assets of the business were worth $794,000.00 and the outstanding liabilities were $1,770,611.00.

[31] The proposal in bankruptcy was accepted by the creditors and the court namely, that Mr. Burger pay $50,000.00 on filing, a further $50,000.00 per month for five months and then $20,000.00 per month for the next 28 months for a total of $860,000.00. When Mr. Burger was unable to keep up with these payments and defaulted he made a further proposal that was also accepted by the creditors. It appears that he has continued to pay his creditors as required by his proposal.

[32] Mr. Burger produced a Bankruptcy and Insolvency Records Search Result that indicates he has been discharged from bankruptcy and that his proposal was fully performed that is, he was able to pay $860,000.00 to his creditors.

[33] Mr. Burger testified that he found it difficult to keep up with the payments he was required to make and his girlfriend Karen Haist loaned him money.

[34] Despite the fact that Mr. Burger and Ms Haist have been living together since Mr. Burger and Ms. Burger separated in 2000, they were both adamant that they were not common law spouses. Ms Haist acknowledged that she has essentially supported Mr. Burger for the last 12 ½ years and that he has not contributed to the household expenses.

[35] Mr. Burger provided copies of several Demand Loan Notes from Ms Haist from August 2005 to December 2010. In total she loaned him $202,995.21 without interest. None of these funds have been repaid.

[36] Both Mr. Burger and Ms Haist testified that she cashed in her Registered Retirement Savings Plans, remortgaged her home and extended her line of credit to secure funds for Mr. Burger. Despite Mr. Burger not repaying her any money she continued to lend him funds without interest although she was required to pay interest on the funds she borrowed. Ms Haist also testified that she has used her credit cards to purchase stock for the business. Ms Haist testified that she had no further funds to lend Mr. Burger.

[37] Mr. Burger also provided a copy of a Promissory Note to his brother and sister-in-law for $20,000 but these funds were repaid.

[38] Mr. Burger also testified that he recently receive a further loan from his father for $15,000.00 to meet his opening expenses. Ms Burger testified that she felt these funds were part of Mr. Burger's inheritance. However, Mr. Burger testified that he did not expect to receive any inheritance from his father as either the government or Ms Burger would receive the funds. For the same reason he had not applied for his Canada Pension Plan pension.

[39] Despite his ongoing business difficulties, Mr. Burger intends to continue to carry on with his business. He recently relocated to a better location and has significantly reduced his rent which was about $93,000.00 in 2011 to about $25,000 a year.

[40] Ms Haist works for the business and is responsible for the accounting and bookkeeping and she also prepares Mr. Burger's personal tax returns. She testified that she earns about $45,000.00. The parties' son Kevin also works at the business as a manager and earns $15.00 an hour and there are several part-time employees. No proof was filed at this trial of the salaries paid to Ms Haist or any other employees.

[41] Mr. Burger testified that he needs to keep operating the business as his son Kevin would not be able to find other employment and he would have no hope of ever repaying Ms Haist. He also testified that he is very actively involved in the community and does not wish to be known as a failure.

[42] Ms Burger did not agree that their son Kevin needed to work in the business. She testified that it was her belief that he stayed out of loyalty to his father and it would be better for him to look for another job.

[43] Mr. Burger filed a balance sheet for his business as of March 31, 2011 indicating he has assets of $289,718.10 and liabilities of $328,742.89. The liabilities listed include $200,064.00 owing to Ms Haist and a further $9,000.00 owing to family members.

[44] Mr. Burger's financial statement sworn October 19, 2012 indicates his outstanding debts are $532,232.79 (including $99,000.00 owing to Ms Burger) less his assets of $342,295.03. His net worth is therefore a negative $190,047.76. There is no break-down attached to the financial statement to explain the calculation of the debts or assets.

[45] Mr. Burger also filed a typed statement of income and some expenses for 2012 which indicates that his business was operating at a loss in 2012.

[46] Despite the negative equity and these outstanding debts he remains optimistic that he can turn things around at this new location. He testified that he felt within 5 years he could be debt free. He currently works 70 hours a week and has no intention of retiring.

[47] Mr. Burger resides in a home owned by Ms Haist and pays no rent. Except for a small contribution to groceries and household supplies he makes no other contribution to the household expenses. He drives a motor vehicle owned by Ms Haist but pays for the gas.

[48] He lists monthly debt payments of $4,150.00. He testified that this consisted of about $150.00 per month to Sears and about $2,000.00 per month for taxes. He could not recall what the other $2,000.00 was for. But he then explained that he had been paying $4,000.00 per month for taxes that was recently renegotiated to $2,000.00 per month. He agreed that his debt payments therefore were more accurately $2,150.00 per month. He only indicates he has self-employment income of $1,175.00 per month with monthly expenses of $5,120.38. Reducing the monthly debts by a further $2,000.00 would still result in a deficit of $1,945.88 monthly or $23,344.56 a year. Other than obtaining loans from Ms Haist and family members, Mr. Burger did not explain how he has been able to continue to pay his debts or how he expects to continue to do so in the future based on his stated income.

[49] Mr. Burger filed as exhibits his Notices of Assessment and personal tax returns for 2009 to 2011. The tax returns include a statement of business income and expenses. The relevant information is as follows:

Year	Line 150 Income	Gross Income	Net Income	Rent	Management Administration Fees	Salaries
2009	$55,595.77	$775,960.26	$334,211.54	$86,942.45	$16,550.98	$128,481.41
2010	$3,865.80	$851,984.91	$302,446.19	$98,216.58	$22,289.01	$141,009.21
2011	$14,110.03	$655,334.93	$301,271.92	$93,189.77	$13,926.82	$144,583.56

[50] Mr. Burger testified that he entered into a new lease in April 2012 but when asked by the court to provide a copy of his credit application he testified that he did not retain a copy. Despite his outstanding debts, he testified he was able to secure a new lease. From April to October 2012 he was required to pay for both his new lease and his old lease. But his yearly rent will now be reduced from an average rent for the last 3 years of $92,782.00 to $25,403.00 with a savings therefore of $67,379.00.

5. Summary of Relevant Evidence Regarding Ms Burger's Financial Circumstances

[51] Ms Burger is currently 65 years old and would like to retire but is unable to afford to do so.

[52] Since the separation she has continued to work in the retail industry. Up until September 2012 she was working for Zeller's but the store closed and her job was terminated. She is now working two part-time jobs but with irregular shifts and only for 16 to 28 hours a week. She has obtained new employment beginning in March 2013 at the new Target store in Milton but has only been promised 25 hours and $11.50 an hour to start. She is hoping that she will be able to obtain more hours.

[53] Ms Burger's income for the years 2009 to 2011 was respectively $23,299.00, $24,219.00 and $29,449.00. Her income in 2011 includes $5,500.00 of spousal support and $4,733.00 from her Canada Pension Plan pension. She estimates her income for 2012, including CPP, will be about $22,301.00.

[54] Ms Burger testified that she currently has a mortgage of $93,000.00 due to a business debt for her son Mark. She acknowledged that her son is making the payments but in the event of a default she will be responsible. She has also had to incur a line of credit of $37,600.00 as Mr. Burger has not paid her spousal support for the last four years and she needed extra funds to meet her expenses.

[55] Ms Burger has been frugal over the years and has accumulated about $65,862.00 in Registered Retirement Savings Plans, owns her condominium valued at about $203,500.00 and other than the outstanding mortgage and line of credit she only has a debt of about $6,000.00 on credit cards.

[56] Ms Burger testified that over the years Mr. Burger has told her he could not afford to pay her spousal support and he would not pay her for four to five months but then he would start to pay again. About six years ago he told her he planned to start court proceedings to terminate the spousal support but never did so. For two or three years he only paid spousal support of $1,750.00 per month although the support had increased to about $2,800.00 per month due to the cost of living indexing.

[57] When Ms Burger filed the separation agreement for enforcement she did not make any claim for the years of missed payments but only claimed support arrears as of February 2009 when Mr. Burger stopped paying her any spousal support.

[58] She explained that she agreed to suspend spousal support payments from January 2012 until September 2012 to give Mr. Burger an opportunity to improve his financial situation but nothing changed. He has not paid any support not even the $500.00 per month that he had been ordered to pay on the temporary default order.

6. Analysis

6.1 Is there a material change of circumstances?

[59] This is a motion by the applicant, Mr. Burger to vary the terms of a separation agreement. The separation agreement does not have a general provision regarding the basis for a variation. The only reference to a variation is found in paragraph 7 (b) that provides that the parties agree that the payment of spousal support shall be reviewable upon Mr. Burger's retirement. It is agreed that Mr. Burger has no intention of retiring at the present time.

[60] Mr. Burger submits that there has been a change in his circumstances in that he cannot afford to pay spousal support any longer and that in reality, he never has had the ability to do so. He also submits that he has paid spousal support for long enough and that the respondent is in a better financial position than he is and she should be able to support herself.

[61] Subsection 35(1) and (2) of the Family Law Act ("FLA") provides that a contract can be filed with the court and that the provision for support contained in that contract can be varied in accordance with subsection 37. That section provides that a court has the jurisdiction to vary a provision for spousal support in a contract filed with the court.

[62] Subsection 37(2) of the FLA provides that a court has the jurisdiction to vary a provision for spousal support in a contract if there has been a material change of circumstances in either of the party's circumstances or that evidence not available on the previous hearing has become available.

[63] The onus is on the party seeking a variation to establish such a change. A "material" change in circumstances means a change that, "If known at the time, would have resulted in different terms."

[64] Justices Abella and Rothstein speaking for the majority in the case of L.M.P. v. L.S. confirmed the following relevant principles with respect to a variation of a spousal support order:

a) the proper analysis of a variation application is the same whether or not a spousal support order incorporates an agreement that is, the threshold issue is whether or not there has been a material change in circumstances since the making of the order;

b) a material change must have some degree of continuity and not merely be a temporary set of circumstances;

c) what amounts to a material change in circumstances depends on the parties actual circumstances at the time of the order;

d) a term in an agreement that contemplates a specific type of change that will or will not give rise to a variation should be given effect to as it is evidence that the parties considered this particular situation changed circumstances;

e) a general clause in an agreement that support is final or implying it is final is still subject to a court applying an inquiry to determine if there has been a material change in circumstances;

f) once a material change in circumstances has been established, the variation order should properly reflect the objectives of a spousal support order taking into account the material change in circumstances and consider the existence of the separation agreement and its terms as a relevant factor; and

g) a court should limit itself to making the variation that is appropriate in light of the change. A variation should not be approached as if it were an initial application for support, nor is it an appeal of the original order or a new hearing.

[65] Applying these principles to the facts of this case, I find there has been no material change in the applicant, Mr. Burger's financial circumstances.

[66] At the time the parties entered into the separation agreement Mr. Burger was aware that he had not paid his personal income taxes for several years, that he had not paid either provincial or federal sales tax since commencing his business, that money was owing to his creditors and that in all likelihood the business was not viable. Therefore, he cannot base his variation application on these factors as they were known to him at the time he entered into the separation agreement.

[67] Since the separation agreement was executed, Mr. Burger has been able to reduce his debt considerably. Pursuant to his proposal in bankruptcy, he has been able to pay $860,000.00 to his creditors. Although he has incurred a debt of about $200,000.00 to Ms Haist since the separation, based on the evidence presented she has not required that he repay this debt and his current total outstanding debts are still less than at the time of the separation.

[68] At the time of the separation, Mr Burger chose not to have his business valued or to provide financial disclosure regarding his assets and liabilities or his income. Mr. Burger could have provided this evidence at the time of the negotiations. Instead, the parties agreed to a property settlement without any financial disclosure. Mr Burger made an offer to provide spousal support of $2,000.00 per month which was the amount that he had been providing Ms Burger when they resided together for their mutual living expenses and she made a counter proposal of $2,400.00 per month which he accepted.

[69] The only provision in the separation agreement for a review of the amount of spousal support was upon Mr. Burger's retirement. As Mr. Burger is not retiring that provision is not applicable to this variation application.

[70] Mr. Burger has chosen to continue to operate a business that he admits is not profitable. He hopes that within five years he will be able to pay his current debts of $140,000.00 but to do so he will not be able to pay any spousal support. This does not amount to a material change in his circumstances that is a basis to vary his spousal support obligation.

[71] However, a variation can be based on a material change in the financial circumstances of the dependent that is, based on Ms Burger's circumstances. Ms. Burger's income has slightly increased as she is now in receipt of her Canada Pension Plan and the amount of her assets has increased since the separation.

[72] Most importantly, Ms Burger has consented to a variation in the amount of spousal support. Without this concession, it was arguable that the changes in her financial circumstances did not amount to a "material" change.

[73] However, based on Ms Burger's consent and the improvement in her financial situation, I find that the onus has been met for a variation in the amount of spousal support.

6.2 Is the respondent Ms Burger entitled to ongoing spousal support?

[74] In considering if Ms Burger is entitled ongoing support, the court is required to consider the objectives of a spousal support order set out in subsection 33(8) of FLA as follows:

Purposes of order for support of spouse

(8) An order for the support of a spouse should,

(a) recognize the spouse's contribution to the relationship and the economic consequences of the relationship for the spouse;

(b) share the economic burden of child support equitably;

(c) make fair provision to assist the spouse to become able to contribute to his or her own support; and

(d) relieve financial hardship, if this has not been done by orders under Parts I (Family Property) and II (Matrimonial Home). R.S.O. 1990, c. F.3, s. 33 (8); 1999, c. 6, s. 25 (5); 2005, c. 5, s. 27 (9).

[75] In Bracklow v. Bracklow, the Supreme Court of Canada recognized three basis for an award of spousal support:

1. compensatory based on the economic circumstances of each spouse's role during the marriage;

2. non-compensatory based on need in circumstances where a spouse cannot become self-sufficient; and

3. contractual based on an agreement between the parties.

[76] At the time of the separation agreement, the parties had been married for 24 years. Ms Burger had been the primary caregiver for the children and had not worked outside the home for most of the marriage. She had returned to work only on a part-time basis and could not meet her expenses from her own income. The parties agreed that she was entitled to indefinite spousal support in their separation agreement subject to a variation upon Mr. Burger's retirement.

[77] It is clear that Ms Burger was entitled to spousal support on both a compensatory and non-compensatory basis when the parties entered in the separation agreement.

[78] There has been no change in her circumstances that would disentitle her to ongoing spousal support. She continues to have a need for support and continues to be economically disadvantaged as a result of her role in the marriage.

[79] In determining the amount of spousal support, subsection 33(9) of the FLA directs the court to consider the following factors:

33(9) In determining the amount and duration, if any, of support for a spouse or parent in relation to need, the court shall consider all the circumstances of the parties, including,

(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;

(c) the dependant's capacity to contribute to his or her own support;

(d) the respondent's capacity to provide support;

(e) the dependant's and respondent's age and physical and mental health;

(f) the dependant's needs, in determining which the court shall have regard to the accustomed standard of living while the parties resided together;

(g) the measures available for the dependant to become able to provide for his or her own support and the length of time and cost involved to enable the dependant to take those measures;

(h) any legal obligation of the respondent or dependant to provide support for another person;

(i) the desirability of the dependant or respondent remaining at home to care for a child;

(j) a contribution by the dependant to the realization of the respondent's career potential;

(k) Repealed: 1997, c. 20, s. 3(3).

(l) if the dependant is a spouse,

(i) the length of time the dependant and respondent cohabited,

(ii) the effect on the spouse's earning capacity of the responsibilities assumed during cohabitation,

(iii) whether the spouse has undertaken the care of a child who is of the age of eighteen years or over and unable by reason of illness, disability or other cause to withdraw from the charge of his or her parents,

(iv) whether the spouse has undertaken to assist in the continuation of a program of education for a child eighteen years of age or over who is unable for that reason to withdraw from the charge of his or her parents,

(v) any housekeeping, child care or other domestic service performed by the spouse for the family, as if the spouse were devoting the time spent in performing that service in remunerative employment and were contributing the earnings to the family's support,

(v.1) Repealed: 2005, c. 5, s. 27(12).

(vi) the effect on the spouse's earnings and career development of the responsibility of caring for a child; and

(m) any other legal right of the dependant to support, other than out of public money.

[80] The only submission made by Mr. Burger regarding Ms. Burger's entitlement to spousal support is essentially that he has paid spousal support for long enough.

[81] Based on Ms Burger's age, the number of years she was out of the work-force and her limited employment experience, I find that she is contributing to her own support to the best of her abilities. The only significant assets she has are her modest condominium and her retirement savings of about $65,000.00 which she will have to access when she is no longer able to work.

6.3 What is the applicant Mr. Burger's income? Should the court impute income to him?

[82] The more difficult issue is a determination of Mr. Burger's income and his capacity to provide support.

[83] Based on the Mr. Burger actual income as set out in his Notices of Assessment and tax returns and based on the financial statements of his business, he submits he has no ability to pay any amount of spousal support. He submits that he needs to pay his debts and cannot afford to then also pay spousal support.

[84] Income can be imputed to a party for spousal support purposes. In determining the payor's means the court may impute income in appropriate cases, including where the payor spouse is intentionally under-employed. As Justice Olah noted in Rilli v. Rilli, the test in Drygala v. Pauli for imputing income for child support purposes applies equally to claims for spousal support.

[85] "Intentional under-employment" does not require a finding of bad faith or the intention to defeat a support claim. The issue is whether the support payor, through his own conduct, that is, not as a result of circumstances beyond his control, is earning less than he or she is capable of earning.

[86] The Ontario Court of Appeal in Drygala v. Pauli, supra, set out the following three questions which should be answered by a court in considering a request to impute income:

1. Is the party intentionally under-employed or unemployed?

2. If so, is the intentional under-employment or unemployment required by virtue of his reasonable educational needs, the needs of the child of the marriage or reasonable health needs?

3. If not, what income is appropriately imputed?

[87] The onus is on the party seeking to impute income to the other party to establish that the other party is intentionally unemployed or under-employed. I find that Ms Burger has met that onus.

[88] Mr. Burger has chosen to continue to operate a business that he testified has been unprofitable since at least 2000 and perhaps even since its inception in 1993. Despite his partner declaring bankruptcy in 2004, Mr. Burger chose to assume all of the debts of the business and has continued to operate it.

[89] Mr. Burger testified that he has every intention of continuing to work and continuing to operate his business. Having made that choice, he cannot expect his spousal support obligations to be reduced to zero.

[90] I find that Mr. Burger has chosen to earn less than he could have earned. Based on his evidence he is very experienced in both sales and management of a business, he has many contacts and is well-respected in the community. He could have for example, taken a position managing another retail sports store or obtained employment related to the purchase or sale of sporting goods.

[91] Once under-employment is established, the onus shifts to the payor to prove that his decision was reasonable.

[92] Mr. Burger admitted that he does not want to close his business due to pride as he does not want to be seen as a failure in the community in which he is so involved and respected. I do not find that his desire to operate a business out of pride or to maintain his reputation in the community to be reasonable. Nor do I find his other reasons to continue to operate his business to be compelling that is, so he can re-pay his debt to Ms Haist and other family members or to provide a job for his son.

[93] I therefore do not find that his desire to continue to operate his business, which he claims is unprofitable, is a reasonable choice that can be relied upon as a basis for the court to discontinue spousal support.

[94] Once a court determines that there is no reasonable excuse for the payor's under-employment or unemployment, the court must determine what income can properly be imputed. The court must consider the payor's capacity to earn income in light of all of the circumstances.

[95] Despite the bleak history of his business, Mr. Burger remains optimistic that his business will become profitable. He testified that his income had decreased over the last few years as the traffic had been diverted from his prior location. He has now moved and significantly lowered his rental expenses.

[96] I have considered that Mr. Burger previously thought he could turn his business around in January 2012 and failed to do so. He explained that this was due to the necessity of having to pay rent for both his old and his new locations for several months. Mr Burger provided proof of his new lease and it will result in a savings of at least $67,000.00 a year. If Mr. Burger continues to remain optimistic that he can earn a profit then he cannot use his current lack of income as a basis to terminate his spousal support obligation.

[97] The other consideration is the possibility that Mr. Burger is earning more income than is disclosed on his tax returns.

[98] In this regard I have considered the lack of full disclosure and explanation by Mr. Burger of his financial situation. Although he has provided some disclosure and copies of his tax returns, all of the bookkeeping and accounting is done by his girlfriend, Ms Haist who is self-taught and has no professional training in accounting.

[99] As noted from the summary of income and expenses, at paragraph 49 of this judgment, Mr. Burger's net income for the years 2009 to 2011 was respectively $55,595.77, $3,865.80 and $14,110.03. There was no explanation of these significant changes in income. The gross sales have been over $655,000.00 and gross profits over $300,000.00. The expenses for salaries have increased from $128,481.00 to $144,583.00 despite Mr. Burger's evidence that he has let go or reduced the hours of his employees.

[100] As noted on the summary, there is an expense listed for management and administrative fees that ranged from $22,289.00 to $13,926.00 per year. Ms Haist testified that this was not included in Mr. Burger's salary nor were these funds otherwise allocated to him. The only explanation offered was that these expenses were for credit card fees and bank charges. Ms Haist testified that without the balance sheet and statements of income and expenses she could not be more specific. But based on the only balance sheet prepared as of March 31, 2011 that was produced as an exhibit in this trial this does not seem plausible as there are no charges shown for either bank charges or credit card fees. On the same balance sheet, there is a reference to retained earnings for the previous year of $222,260.78 with owner's withdrawals being $241,410.00. No one explained this notation.

[101] Further, no back up documents were produced to confirm the number of employees or the amount of the salaries paid. This is a significant omission in that Ms Haist is not an arm's length employee. There was an inadequate explanation as to the source of all of the funds that were used to pay the outstanding business debts since the proposal in bankruptcy in 2004.

[102] As Mr. Burger is self-employed he has the onus of clearly demonstrating the basis of his net income. This includes demonstrating that the deductions from his gross income should be taken into account in determining his income for support purposes. If meaningful supporting documentation regarding those deductions is not provided, a court can draw an adverse inference.

[103] In this case, I draw the inference that the amount of the management and administrative fees has been either allocated to him or perhaps to Ms Haist. Without a plausible explanation, it is my view that the amounts should be added back to Mr. Burger's income. The average of those fees for the years 2009 to 2011 is $17,588.94. This amount is subject to a gross up for income taxes.

[104] In determining of how much further income to impute to Mr. Burger, I have considered that his average line 150 income for the years 2009 to 2011 is only $24,523.87. Therefore, his average income including the amount of the management and administrative fees for those years would only result in a total average income of about $42,112.81.

[105] I have also considered the fact that Mr Burger's rental expense will now be significantly reduced. His average rental expense for the same years has been $92,782.93. His new rental expenses will now be $25,402.00. Therefore, there will be an average savings of $67,380.93 per year. All other expenses being the same, this would result in a greater profit and Mr. Burger's income being higher.

[106] Based on a consideration of these factors, Mr. Burger's experience and the other salaries he pays his employees, I find that it is reasonable to impute income to Mr. Burger in the amount of $55,000.00.

6.4 What amount of spousal support is appropriate?

[107] In order to determine what spousal support would be appropriate, a court can refer to the Spousal Support Advisory Guidelines ("SSAG") with respect to both initial applications for spousal support and on variations hearings. Although caution is required on the application of the SSAG on variation applications, in this case as there is no issue regarding Ms Burger's ongoing entitlement to spousal support, the range of spousal support as suggested by the SSAG is a useful tool.

[108] As both the parties were not represented in these proceedings, I have prepared those calculations in order to provide myself with some guidance. The calculations are attached as Schedule "A" to these reasons.

[109] Based on Ms Burger's total income of $23,593.00 and Mr. Burger's imputed income of $55,000.00, the SSAG calculations indicate a range of support from $942.00 to $1047.00. The mid-range and high range are the same, namely $1047.00 per month as this amount results in an equal splitting of their respective net disposable incomes.

[110] I have considered that these amounts are higher than the deficit shown on Ms Burger's financial statement but since February 2009 Ms Burger has received no support except for some payments of $500.00 required by the temporary default order and she has receive no support at all since January 2012. She has therefore been required to attempt to live within her limited income and curtail her expenses. Even then she has still had to borrow against her line of credit to be able to pay her expenses. Ms Burger should not be required to live on such a meagre income when it is clear that she is entitled to spousal support to supplement her income and when it has been determined that Mr. Burger has the ability to pay spousal support.

[111] Based on the financial circumstances of both parties and considering Ms Burger's needs, the mid-range of support of $1049.00 per month in accordance with SSAG is appropriate.

6.5 Should there be a rescission or reduction of the outstanding spousal support arrears and if so, by how much?

[112] Mr. Burger's submission with respect to his ability to pay the outstanding support arrears was the same argument he made with respect to his inability to pay ongoing support namely, he has other debts to pay and cannot afford to also pay support.

[113] Having found that Mr. Burger has the ability to pay spousal support, I find there is no merit to this argument.

[114] Ms Burger indicated that she is not seeking any retroactive support prior to the date of filing the separation agreement for enforcement and is content that any support adjustment be retroactive to that date. Ms Burger has been extremely reasonable in her position throughout these proceedings in an attempt to reach a balance between her needs and not wishing to overburden Mr. Burger. If she had not made this concession I would have only readjusted the amount of ongoing support as of the commencement of Mr. Burger's motion to change namely, April of 2011.

[115] Therefore, as of October 1, 2009, the support arrears will be adjusted to require Mr. Burger to pay $1,049.00 per month as spousal support and he shall be given credit for any monies paid since that date.

[116] Despite the fact that this will still result in a significant amount of arrears owing, I find that Mr. Burger has the ability to pay these arrears. He has over the years been able to pay his large debts to third parties and with his recent reduction in the overhead for his business he should be able to generate more profits. I find that he will be able to pay a minimum of $500.00 per month on the outstanding arrears. I find that it is necessary to make a minimum order for repayment in view of his history of non-payment and the difficulty the Family Responsibility Office will have in enforcement as he is self-employed.

[117] I am not requiring that the amount of spousal support be indexed to accord with the cost of living as in my view, any change in the amount of support would be more appropriately addressed by the parties providing ongoing financial disclosure.

7. Order

1. The Motion to Change by the respondent Matthew Burger is granted.

2. As of October 1, 2009 the respondent Matthew Burger will pay the applicant Kathleen Burger $1,049.00 per month. The arrears of support shall be adjusted accordingly and the respondent shall be given credit for any payments made.

3. As of May 1, 2013 the respondent Matthew Burger shall pay to the applicant Kathleen Burger a minimum of $500.00 per month with respect to the outstanding arrears.

4. For clarity, the temporary order of January 6, 2012 suspending the respondent Matthew Burger's support obligation until September 1, 2012 is terminated and this order shall apply to those months.

5. For clarity, the temporary order of January 18, 2011 made in the context of a default proceeding with the Family Responsibility Office is terminated and this order shall apply as of October 1, 2009.

6. Both the applicant and respondent shall annually as of June 1, 2013 and each year thereafter provide to each other a copy of their income tax returns with all attachments and a copy of their Notices of Assessment and any Notices of Re-Assessment as soon as they are received. Upon receipt of this information, the party shall send a written acknowledgement of receipt to the other party.

7. Support Deduction Order to issue.

8. As Ms Burger is the successful party on this motion to change she is presumed to be entitled to costs. If costs are sought, Ms Burger is to serve and file her written submissions for costs with any offer to settle and a bill of costs within 30 days and Mr. Burger shall submit his response within 14 days thereafter.

Zisman J.

Date: April 11, 2013