Court File and Parties
Court File No.: 428/10 Date: 2014-09-09
Ontario Court of Justice
Re: Michael Krause – Applicant And: Georgia Zadow – Respondent
Before: Justice Roselyn Zisman
Counsel:
- Julie Quirt for the Applicant Michael Krause
- William Kort for the Respondent Georgia Zadow
Heard On: July 30 and August 27, 2014
Reasons for Decision
Introduction
[1] This is motion to change the child and spousal support provisions of a separation agreement dated June 18, 2009 based on the applicant's material change in financial circumstances.
[2] The motion to change proceeded before me based on the motion materials, joint document briefs, the transcripts of the questioning of both parties and the oral evidence of the applicant to update the court as to his current circumstances.
Background
[3] The parties were married on July 26, 1999 and separated on May 5, 2009. They have three children Hunter Michael Krause born July 24, 2000, Samuel Karl Krause and Madelyn Marie Krause, who are twins born on May 9, 2002. Both Hunter and Madelyn are "special needs" children with Autism Spectrum disorders.
[4] The parties executed a separation agreement dated June 18, 2009. The applicant ("father") was represented by counsel who prepared the separation agreement. The respondent ("mother") waived her right to legal counsel. The separation agreement was based on the parties' income for 2008, father's income of $135,000 and the mother's income of $22,620.
[5] The relevant terms of the separation agreement are as follows:
(a) The father agreed to pay child support of $2,358 per month. The parties were also required to share the children's special expenses in proportion to their respective incomes;
(b) The child support arrangements could be reviewed annually at the request of either party, and either party could seek a change in the child support provisions if there was a material change in the circumstances of either party or the children.
(c) The father agreed to pay spousal support of $1,654 per month;
(d) The spousal support provisions could be reviewed annually at the request of either party with respect to duration and amount of support. The agreement also provided that spousal support could be changed if there was a material change in the circumstances of either party, the child support arrangements or the mother's remarriage or cohabitation;
(e) The mother received the first $95,000 from the sale of the matrimonial home and the father was entitled to receive, without any claim by the mother, the $95,000 owing to him as a result of the sale of his business.
[6] Although at the time of the execution of the separation agreement it was uncertain if this $95,000 debt would be paid, the debt was paid off by monthly payments of $2,500 commencing about February 2011 and ending in April 2014.
[7] The father has worked in the insurance industry since 2008.
[8] In January 2011 the father sent the mother an email requesting a change in his support obligations due to his reduced income from $120,000 to $90,000. The mother acknowledged that no change was made and the father continued to pay support in accordance with the terms of the separation agreement.
[9] The father's employment was terminated on July 13, 2013.
[10] In September 2013, father's counsel corresponded with the mother requesting that she consent to lower the father's support obligation but no consent was provided which prompted this motion to change.
[11] The father was unemployed for just over a year and recently obtained employment that will commence in September 2014 at an income of $72,000.
[12] A statement of arrears from the Family Responsibility Office was filed on consent and indicated that as of September 2013 the support payments were up to date. As of August 18, 2014 the arrears are $27,380.
Issues to be Determined
Is there a material change in circumstances in the father's financial circumstances?
Is the father intentionally underemployed and if so, should income be imputed to him?
Is the mother entitled to ongoing spousal support? If so, in what amount and for what duration?
Should there be a rescission of the outstanding child and spousal support arrears?
Positions of the Parties
[13] It is the position of the father that his child support obligations should be based on his actual income of $72,000, that his obligation to pay spousal support be reduced to $300 per month for 3 years, then be further reduced to $200 per month for a further 5 years and then be terminated. It is also the position of the father that any arrears for child support and spousal support be rescinded.
[14] It is the position of the mother that the father did not actively pursue alternate employment opportunities and could earn more income than the position he has now accepted. The mother requests that the court impute income of $100,000 to the father. It is further the mother's position that spousal support should not be terminated because she is unable to be self-supporting and cannot work full-time due to the needs of the children. It is also the mother's position that the father has the financial means to pay the outstanding child and spousal support arrears and therefore the arrears should not be rescinded.
Circumstances and Needs of the Children
[15] Both Hunter and Madelyn were diagnosed with Autism Spectrum Disorders when they were very young. They have both had intensive behavioural intervention therapy when they were very young and since then they have had to attend numerous therapy related appointments on an ongoing basis. During the marriage and since the separation the mother is the parent who has been responsible for attending to the needs of Hunter and Madelyn with respect to therapy-related training, meetings regarding the children with speech pathologists, occupational therapists, developmental pediatricians, resource teachers and community resource agencies. She is also the parent responsible for caring for the children when they are ill or not attending school. Both children are also involved with ABA ("applied behaviour analysis") to enhance their social skills, communication, behavioural and emotional regulation. Part of this therapy is home-based and parent involvement is crucial.
[16] Hunter is 14 years old and although he attends a regular high school he is in a life skills class. His cognitive abilities and resultant academic performance are in the below average range. He also presents with behavioral challenges and he has problems with his speech and fine motor abilities. He attends speech therapy once a week.
[17] Madelyn is 12 years old and her Autism is more severe than Hunter's. She is non-verbal and uses an iPad with a specialized program to communicate. She will be entering Grade 6 at a regular public school but is in a specialized life skills program.
[18] The mother attached to her affidavit sworn January 28, 2014 numerous reports regarding the needs of both Hunter and Madelyn. The amount of time and energy the mother has clearly devoted to advocating for resources and meeting the needs of these children is astounding.
[19] In a report dated January 13, 2014 a speech pathologist summarized Hunter's needs as follows:
In summarizing, Hunter Krause presents with ASD, a developmental disorder that results in impairments in multiple areas of development. The family is experiencing longstanding emotional stress, in addition to the financial challenges of raising a child with special needs. After ten years of involvement with this young man and his family at this point in time, it is patently clear that Hunter has a permanent disability and resulting long term needs. The costs of providing for a childlike Hunter are staggering and will likely continue and perhaps increase over his lifetime as he requires additional therapeutic, educational, behavioural, social educational, vocational and possibly residential supports.
[20] In view of Madelyn's more severe disability, there is no doubt these same challenges pertain to her.
[21] Samuel is 12 years old and will be entering Grade 7. He has no special needs. He did experience difficulties when the parties separated and attended counselling to learn how to better cope with his feelings. He has also needed to cope with having siblings with special needs.
Mother's Education, Employment and Financial Circumstances
[22] The mother is currently 42 years old. In 1992 she obtained a diploma in early childhood education and she also attended college for a one year business program. Prior to the marriage and briefly after the birth of their son Hunter, the mother worked as an administrative assistant for an architectural firm.
[23] From late 2008 to May 2009, she worked for her husband to help with the merger of his business with GroupHEALTH. But she could not continue working because of the commute to their office in Barrie and also due to her childcare obligations.
[24] The income of $22,620 stipulated in the separation agreement was based on her income working for the GroupHEALTH and her employment insurance after she left that employment.
[25] In 2011 the mother trained as a medical transcriber as she could do this work from home. But this proved to be unprofitable due to a change in practice and fee payments.
[26] The mother is currently employed part-time as an administrative assistant for a small cabinet company. She works 10 hours per week and receives $15 per hour. Her yearly income is estimated to be $7,200. The employment is very close to her home and the children's school. The hours are very flexible.
[27] The mother deposes that she is unable to work anymore hours as she must be available to pick up the children at the end of the school day. She is also required to take Hunter to speech therapy every Tuesday from about 9:00 to 10:30 am and Madelyn to her therapy on Mondays and Fridays. The mother has no family to help her and the daycare will not accept Madelyn due to her special needs. She generally needs to attend the children's school for various meetings about once or twice a week.
[28] She does receive some respite care of about 35 hours per week and is able to leave Hunter and Madelyn with Samuel but only for short periods of time.
[29] The mother's income consists of her employment income of about $600 per month, $600 per month for disability payments for Hunter and Madelyn, child tax benefits of $1,688 per month and the child and spousal support payments.
[30] She has no savings and her only assets are her home and a motor vehicle. The mother remortgaged her home in August 2013 with the intention of doing some needed renovations to her home but instead she was required to live on the funds as the father was no longer paying the full amount of child and spousal support.
[31] Based on the tax return, Notices of Assessment and financial disclosure filed, the mother's income for the relevant years is as follows:
| YEAR | EMPLOYMENT/BUSINESS INCOME | SPOUSAL SUPPORT | LINE 150 INCOME |
|---|---|---|---|
| 2009 | $22,620 | $22,620 per separation agreement - no proof provided | $22,620 |
| 2010 | $447 (EI) $27 (investment income) | $18,414 | $18,888 |
| 2011 | $2,871 (gross) $1,889 (net) | $19,848 | $19,848 |
| 2012 | $7,921 (gross) $1,406 (net) | $19,848 | $21,254 |
| 2013 | $6,231 (gross) $2,907 (net) | $17,602 | $20,509 |
Father's Education, Employment and Financial Circumstances
[32] The father is 52 years old. He obtained a Bachelor of Arts degree from Western University in 1983. Upon graduating, he started his own company dealing with insurance and financial services on a wholesale basis. He would market group and individual insurance products to insurance brokers and consultants. Over the years, the business evolved and the father formed other companies that also marketed employee benefits.
[33] He formed a company called Alternative Benefits Solutions with a partner. But his partner passed away and the company was struggling financially. In 2008 the father was approached by GroupHEALTH who acquired the assets and debts of his business and paid a nominal consideration of $1.00. As part of the transition the father was required to remain as an employee with the company for 2 years to maintain the relationships that he had built up. He was given the title regional vice president and was in charge of marketing for Ontario and Atlantic Canada. He was paid $120,000 with no other variable compensation.
[34] The company restructured and in April 2010 the father was advised that he would only be responsible for Ontario, his title was changed to regional vice president Ontario and his salary was reduced to $90,000.
[35] The father, in his questioning, stated that he began to look for other employment but after speaking to various insurance companies and consultants he determined that there were not a lot of jobs opportunities available. At best he would start with a base salary of about $50,000 with variable compensation and also he had a non-compete, non-solicitation clause with GroupHEALTH for 2 years which would have prevented him from contacting any brokers that he had developed relationships with over the years. When the father testified he acknowledged that he had been mistaken and the non-compete, non-solicitation clause with GroupHEALTH was only for 1 year.
[36] The father testified that on July 15, 2013 when he was advised he was being terminated it came as a total surprise to him as he had been meeting his targets. But the company decided to re-structure and replace both himself and the representative for Atlantic Canada with customer service representatives in their Barrie office. The father had not received a job review or bad job assessment. He consulted a lawyer about the severance package that was only for 7 weeks but based on the advice he received he did not contest the departure package.
[37] Due to his financial circumstances, the father had to give up his apartment in January 2014. He moved in with his sister and brother-in-law in London Ontario who own a general insurance company. Despite a letter that he sent to the mother indicating that he had no intention of finding employment in London as he wanted to be closer to the children, he testified that his sister and brother-in-law had no job available for him and that he had four job interviews in London but did not obtain a job. He stated that his preference was to work in Toronto so he would be closer to his children and that when he wrote the letter he was optimistic about getting a job in Toronto but he continued to pursue all available opportunities.
[38] The father applied to various positions using Workopolis website and the websites of the individual insurance companies. Mainly, he networked with various people he knew in the industry. He produced a summary of 19 applications he made.
[39] The father received employment insurance as of October 13, 2013, with the first payment in December 2013 and that ended in June 2014. He used his savings to support himself.
[40] The father accepted a job as of September 2014 as an executive account manager with Corporate Benefits Division. At the time of the trial he had not yet received a formal contract but the offer of employment indicated that he would receive a salary of $72,000 with a salary review in 1 year. There is no variable compensation.
[41] In explaining his income over the years, the father clarified that he has received some commission related to the renewal of life insurance policies he sold when he first started in the insurance business. He also had a tax shelter and for accounting purposes his tax returns show a net partnership income that he received attributed over 10 years for the tax shelter he purchased. However, he testified that he does not actually receive that income. The other income on his T-4 relates to the value of his employment benefits.
[42] His financial statement indicates that he has no assets except for a small RRSP of $16,200 and debts for credit card, line of credit and income taxes that total $76,299.
[43] Based on his tax returns, Notices of Assessment and the financial disclosure filed his income for the relevant years is as follows:
| YEAR | EMPLOYMENT INCOME | COMMISSION | NET PARTNERSHIP AND OTHER INCOME | RRSP | LINE 150 INCOME |
|---|---|---|---|---|---|
| 2008 | $135,000 | — | — | — | $135,000 per separation agreement - no proof provided |
| 2009 | $123,294 | $3,525 (gross) $1,391 (net) | $4,177 | $1,317 | $130,179 |
| 2010 | $104,032 | $8,627 (gross) $4,524 (net) | $3,232 | $1,844 | $113,632 |
| 2011 | $92,457 | $5,194 (gross) $5,194 (net) | $40,945 | — | $138,596 |
| 2012 | $95,371 | — | — | — | $95,371 |
| 2013 | $71,250 (approx. based on 9.5 months of employment) | — | $5,511 (EI) | — | No tax return filed |
[44] From October 2013, the mother received about $6,600 being half of the father's employment insurance and the father also paid the mother a further $8,712. During this time the father withdrew about $26,000 from his savings and additional funds from his line of credit. Up to April 2014 he was also still receiving $2,500 per month as the payment for the sale of his business. The father estimated that his income for 2014 would be about $25,500.
Analysis
1. Has There Been a Material Change in the Father's Financial Circumstances?
[45] The separation agreement requires that there be a material change in circumstances to change both child and spousal support provisions in the separation agreement. The onus is therefore on the father to prove that, on a balance of probabilities, there has been a change in circumstances that would result in a different order.
[46] It was submitted by mother's counsel that in order for the father to prove a material change in circumstances he must show that there was some continuity in his changed financial situation and not just a temporary change. He submits that the father's loss of employment was only temporary in that he always intended to find employment. I do not accept this submission as the father was dismissed from his employment. This submission would apply to a situation where, for example, someone was laid off temporarily, not a situation as in this case where there is a permanent loss of a job.
[47] I find that the father has met the onus on him to justify a change to his obligation to pay both child and spousal support based on the following factors:
(a) the separation agreement was based on the father earning $135,000 whereas at the time he commenced this motion to change he was unemployed and as of September 2014 his income will only be $72,000; and
(b) at the time of the separation agreement the father had stable and secure employment whereas when he commenced this motion to change he was unemployed; as of September 2014 he is commencing a new job with a performance review in six months and therefore there is uncertainty as to his long term employment security.
2. Is the Father Intentionally Underemployed and if so, Should Income be Imputed to Him?
[48] Section 19(1) of the Child Support Guidelines permits the court to impute such income as it considers appropriate in the circumstances, which include:
(a) the parent or spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of any child or by the reasonable educational or health needs of the parent or spouse;
(b) Imputing income is one method by which the court gives effect to the joint and ongoing obligation of parents to support their children.
[49] Imputing income is one method by which the court gives effect to the joint and ongoing responsibility of parents to support their children.
[50] The Ontario Court of Appeal in Drygala v. Pauli set out the following three questions which should be answered by a court in considering a request to impute income:
Is the party intentionally under-employed or unemployed?
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?
If not, what income is appropriately imputed?
[51] In Drygala v. Pauli, supra, the court interpreted section 19(1)(a) by stating that "intentionally" means a voluntary act and that a parent is intentionally under-employed if that parent choose to earn less than he or she is capable of earning. The court does not need to find a specific intent to evade child support obligations or bad faith.
[52] The onus is on the party seeking to impute income to the other party to establish that the other party is intentionally under-employed or unemployed. Once under-employment is established, the onus shifts to the payor to prove that his decision was reasonable.
[53] If the payor is intentionally under-employed, the court must consider if this is by virtue of his or her reasonable educational needs, the needs of the child or reasonable health needs.
[54] If a court finds a payor is intentionally under-employed or unemployed, a court cannot arbitrarily allocate an imputed income. There must be an evidentiary basis for the chosen income. Factors such as age, education, experience, skills, health and availability of job opportunities must be considered.
[55] It was conceded by mother's counsel that the father's income was reduced from $120,000 to $90,000 in 2010 through no fault of the father. It was also conceded that the father's employment was terminated in July 2013 through no fault of his own.
[56] However, it is submitted that income should be imputed to the father in the amount of $100,000 as he did not diligently pursue other employment opportunities and that he had an obligation to attempt to find employment in the range of at least $100,000 based on his years of experience. It is also submitted that the court should infer that the father will earn more income in his new job since the father was hired based on the business he already has and the new business he will be able to bring to his new job.
[57] The father's evidence about his job search was candid, forthright and not shaken in either his questioning or in cross-examination. Although in sheer numbers it could appear that only 19 formal job applications in a year is not an extensive job search, the father explained the difficulty of obtaining employment in his specialized area of expertise. He relied on informal inquiries within his network. He testified that his misunderstanding about his non-compete provision being one year rather than two years did not impede his job search as he was never at the stage of an interview where this became a relevant concern.
[58] There is no evidence to suggest that there were any jobs available that would pay the father more than the job he accepted. In the mother's questioning, she conceded that she did not have any information about the salary range of the job postings she found and she had no knowledge of the exact job specifications beyond the general descriptions on the postings. She also agreed that she was assuming there were lots of jobs available but did not actually know the hire rate.
[59] I agree with the submission of father's counsel that the mother has arbitrarily chosen $100,000 as the income she assumes the father should be able to earn and there is no evidentiary basis upon which to make that finding.
[60] Although the father is very experienced, he is 52 years old and as he explained employers are more interested in hiring new graduates at a significantly lower salary than someone with his experience. Further, he has experience in a very specialized area of the insurance business and this also limits the number of job opportunities.
[61] There is no evidentiary basis to infer, as submitted by mother's counsel that the father will earn more than his current salary of $72,000 based on his offer of employment that clearly states that a salary review will only take place after one year. Although the father in the future may earn more income in this new job, it would be pure speculation at this time to impute a higher income to him.
[62] In summary, I find that the father lost his job through no fault of his own. He has not ignored any job opportunities and he diligently attempted to find employment. I find that based on his age, particularized experience and the length of time he was unemployed that he acted responsibly in accepting the only job available to him.
[63] I therefore find that the mother has not met the onus on her to prove on a balance of probabilities that the father is under-employed such that income should be imputed to him.
[64] As a result, the father's child support obligation should be based on his actual income of $72,000 as of September 1, 2014.
3. Is the Mother Entitled to Ongoing Spousal Support? If So, in What Amount, and for What Duration?
[65] It is submitted by father's counsel that spousal support was never intended to be indefinite as the separation agreement provided that spousal support be reviewed annually. It is further submitted that the Spousal Support Advisory Guidelines provide for a range of spousal support for a minimum duration of 4.5 years to a maximum of 12 years. As the parties separated in 2009, the Spousal Support Advisory Guidelines suggest that spousal support should be terminated at a minimum in 2013 and at a maximum in 2021.
[66] It is submitted that in accordance with the separation agreement the father has paid spousal support of $1,654 per month which is significantly higher than the Spousal Support Advisory Guidelines ranges that are a low of $293, mid of $737 and high of $1,285 per month.
[67] Based on the father's current income of $72,000 and the mother's current income of $7,200 the Spousal Support Advisory Guidelines ranges are $0 at the low and mid range and $145 per month at the high range. If the mother's income at the date of the separation agreement of $22,620 is used then the Spousal Support Advisory Guidelines ranges are all zero.
[68] The father is prepared to pay spousal support of $300 per month to 2017 and $200 per month until August 2022 at which time spousal support would terminate.
[69] It is the mother's position that her circumstances have not improved since the separation agreement was negotiated. The mother continues to have the ongoing responsibility of caring for the children and in view of two of the children's extensive special needs her employment opportunities will continue to be limited. Her financial circumstances have deteriorated since the separation as she is only working part-time earning $7,200 annually and her debts have increased.
[70] It is also submitted that the separation agreement contemplated ongoing entitlement to spousal support as there is no terminating clause but simply a review. It is also submitted that the spousal support calculations should be based on the mother's actual income and not the income attributed to her at the time of the separation agreement.
[71] Subsection 35(1) and (2) of the Family Law Act 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.
[72] Subsection 37(2) of the Family Law Act provides that a court has the jurisdiction to vary a provision for spousal support in a contract if there has been a material change in either of the party's circumstances or that evidence not available on the previous hearing has become available.
[73] 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." 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.
[74] The onus is on the party seeking a variation of spousal support to establish that there has been a material change of circumstances.
[75] Applying these principles to the facts of this case, for the same reasons with respect to the motion to change child support I find that there has been a material change in the financial circumstances of the father. I also find that there has been a material change in the financial circumstances of the mother.
[76] Beyond the usual clause in the separation agreement that spousal support can be varied if there is a material change of circumstances, the only specific provision for a variation of spousal support relates to the mother's remarriage or co-habitation which are not relevant in this variation.
[77] I am mindful that any variation should not be approached as an initial application for spousal support. But once the court finds that there is a material change in circumstances the court must still consider if the mother continues to be entitled to spousal support and if as submitted by the father that there should be a definite termination date in the future. A consideration of these issues requires the court to consider the objectives of a spousal support order. These are set out in subsection 33(8) of the Family Law Act 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).
[78] In Bracklow v. Bracklow the Supreme Court of Canada established that there are three kinds of entitlement to spousal support:
Compensatory: based on a spouse's education, career development or earning potential being impeded as a result of the role in the relationship
Non-compensatory: based on need
Contractual: based on an agreement between the parties.
[79] At the time of the parties negotiated their separation agreement, it was known that the mother's financial circumstances were in flux as she was no longer working for the father's company and she was in receipt of employment insurance. It was also known that the mother's childcare responsibilities would interfere with her ability to be self-supporting and would curtail her job opportunities. I draw this inference from the fact that the separation agreement did not specify any termination date but rather only annual reviews and from the fact that the father agreed to pay a higher amount of spousal support than contemplated by the Spousal Support Advisory Guidelines. It is apparent that the mother would have been entitled to spousal support base on both a compensatory and non-compensatory basis.
[80] It is also apparent that the mother continues to require and be entitled to spousal support on both a compensatory basis based on her child care responsibilities and on a non-compensatory basis based on her financial needs. Based on the special needs of Hunter and Madelyn it is unrealistic to assume the mother can work full-time now or in the foreseeable future.
[81] In determining the appropriate amount of spousal support, addition to the factors in subsection 33(9) of the Family Law Act regarding the financial circumstances of each party, the court can rely on the Spousal Support Advisory Guidelines with respect to both initial applications and variation hearing. However, the case law has supported a cautionary approach when the Spousal Support Advisory Guidelines calculations are applied to variation applications. A variation of spousal support is much more discretionary and flexible and requires a case by case analysis.
[82] In this case, I do not find that the Spousal Support Advisory Guidelines should be applied. As recognized by the authors of the Spousal Support Advisory Guidelines the formulas are intended to generate appropriate outcomes in the majority of cases. But the Spousal Support Advisory Guidelines recognize that there will be unusual or atypical cases where the formulas generate results that are inconsistent with the support factors and objectives of the legislation. The authors have commented on several typical exceptions one of which is the special needs of a child as follows:
A child with special needs can raise issues of both amount and duration in spousal support law, issues that may require an exception.
First, duration. A child with special needs can obviously affect the ability of the primary parent to obtain employment, whether part-time or full-time. This may require that the duration of support be extended beyond the length of the marriage or beyond the last child finishing high school, the two possible maximum time limits under the with child support formulas.
Second, amount. Again, a special needs child will often mean that the primary parent cannot work as much, perhaps not even part-time, and thus the amount of spousal support will be increased because of the recipient's lower income, an adjustment that can be accommodated by the with child support formula. But even then, there may be a need to go above the upper end of the range, to leave an even larger percentage of the family's net disposable income in the hands of the primary parent, above the typical maxima of 54 per cent (one child) and 58 per cent (two children) or even 61 per cent (three children). In these cases, spousal support awards go beyond the usual compensatory rationale under the with child support formula, to reflect a larger component of supplementing the children's household standard of living. The table amount of child support and section 7 expenses for the special needs child may not fully reflect all of the costs imposed upon the recipient spouse's household by that child.
[83] I find that this commentary is applicable to the facts of this case and as a result I would not apply either the suggested amount or duration in the Spousal Support Advisory Guidelines produced by both counsel.
[84] I find it is appropriate to use the actual incomes of both the father and the mother in the considerations of the amount of spousal support that should be payable. It would be inappropriate to continue to rely on the mother's income as set out in the separation agreement when it is clear she is not earning that level of income at this time nor is she able to earn that income. I have considered that it was known to the parties that the mother's income would change as she was in receipt of employment insurance but whatever hope she had of obtaining a job that paid in the range of $22,620 and offered her the flexibility she needs to meet the children's needs did not materialize.
[85] I am mindful that the mother needs the ongoing range of both child support and spousal support in the separation agreement to meet her needs and the needs of the children and that as child support will now be reduced based on the father's lower income her need for spousal support is even higher. But the sad reality is that the father will now not be earning enough income to meet her financial needs.
[86] I find that the appropriate amount of spousal support is $700 per month payable as of September 1, 2014. This would provide the mother with 63.5% and the father with 36.5% of the net disposable income of the parties. By way of comparison, based on the terms of the separation agreement the mother was receiving spousal support of $1,654 and child support of $2,358 for a total of $4,012 per month. This provided the mother with 61.6% and the father with 38.4% of the net disposable income of the parties. The ratios are therefore very similar.
[87] Ongoing disclosure of both parties' income and any change in any funds received for the children will be necessary as this may impact on the spousal support payable by the father. As is clear from these reasons I would not order a termination date and the option of annual reviews of spousal support by either party as set out in the separation agreement should continue to apply.
4. Should There Be a Rescission of Child and Spousal Support Arrears?
[88] It is submitted by father's counsel that the arrears that have accumulated since the father lost his employment should be rescinded as he did his best in meeting his ongoing support obligations of a total of $4,012 per month even when his income since the execution of the separation agreement decreased substantially. He continued to pay this amount when in April 2010 his salary was reduced from $120,000 to $90,000. Further, the father did not pursue a variation when he wrote to the mother in January 2011 requesting a variation and she did not agree. It was only when he lost his employment that he pursued this motion to change when his further attempt to negotiate a decrease in his support obligation proved unsuccessful. Even after he lost his employment the father paid some funds in addition to the mother receiving half of the father's Employment Insurance income.
[89] It is submitted by mother's counsel that the court should consider that the father had additional income during the time he lost his income namely, that he was receiving $2,500 per month as part of the installment payments for the equalization payment owing to him. Although he concedes that this is the father's property settlement nevertheless he submits the court can consider this income in a decision to rescind the outstanding arrears.
[90] It is submitted by father's counsel that the father should not be required to use his equalization payment to meet his support obligation as this would be a classic example of double dipping.
[91] The court may rescind part or all of a spousal support order and a child support order pursuant to subsection 37(2) and 37(2.1) of the Family Law Act.
[92] In this case, I have considered that the father complied with his support obligations as long as he could until the termination of his employment. He attempted to negotiate a reduction of his support obligations as soon as he lost his employment and when unable to do so he diligently and expeditiously commenced this proceeding. I have considered that if the father had commenced this proceeding in October 2010, when his income was reduced from $120,000 to $90,000 he would have undoubtedly received some relief.
[93] I am not prepared to take into consideration the father's income from the installment payments of the equalization payment that ended in April 2014 in determining if the outstanding arrears should be rescinded as he has paid more support than he probably should have paid since at least October 2010. Further, he is not seeking a retroactive readjustment but only a recession of the arrears that have accumulated since he lost his employment.
[94] Both parties have been required to acquire debt and deplete any savings as a result of the father's loss of employment and consequent inability to pay his ongoing support obligation.
[95] I have considered that as of October 1, 2013 the mother received half of all of the father's Employment Insurance income from this date until those benefits were terminated in April 2014 and she also received the extra funds the father paid during that time period. As of April 2014 until the father commences his new job in September 2014 the father had no income and relied on his savings. Despite the financial hardship to the mother, I find that it is appropriate that the outstanding arrears be rescinded.
Order
[96] The Applicant's motion to change the separation agreement dated June 18, 2009 is granted and the separation agreement is varied as follows:
The Applicant shall pay to the Respondent child support for the three children of the marriage namely, Hunter Michael Krause born July 24, 2000, Samuel Karl Krause and Madelyn Marie Krause, who are twins born on May 9, 2002, in accordance with the child support guidelines, based on an annual income of $72,000 in the amount of $1,393.00 per month as of September 1, 2014. The amount of child support shall be adjusted annually based on the Applicant's income for the preceding year as of September 1, 2015.
The Applicant shall pay to the Respondent spousal support of $700.00 per month as of September 1, 2014.
All arrears of child and spousal support outstanding as of October 1, 2013 shall be rescinded.
The Applicant and Respondent shall provide each other with copies of their income tax returns with all attachments and their respective Notices of Assessment or Notices of Re-Assessment as of June 30th, 2015 and each year thereafter as long as the Applicant is required to pay support.
The Applicant and Respondent shall advise each other and provide proof of any change in their employment income within 14 days of the change. The Respondent shall advise and provide the Applicant with proof of any change in the benefits or funds the children are receiving within 14 days of any such change.
The remainder of the terms of the separation agreement dated June 18, 2009 continue in full force and effect except as varied by this order.
Support Deduction Order to issue.
[97] If either party is seeking costs and counsel are not able to resolve the issue, brief written submissions as to costs with a bill of costs and any offers to settle are to be submitted within 14 days and any responding submissions within 14 days thereafter.
Justice Roselyn Zisman
Date: September 9, 2014
