ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: FC-10-112-01
DATE: 2012-12-04
BETWEEN:
James Andrew MacDonald Applicant – and – Kristi-Lynn MacDonald Respondent
Jodi A.S. Armstrong
Kim Kieller
for the Applicant
Christine Ashbourne
Mark A. Reid, for the Respondent
HEARD: November 20, 21, 2012
R. MacKinnon, J.:
Background
[ 1 ] Kristi-Lynn and James Andrew MacDonald met in 1994, lived in a common-law arrangement for 2 ½ years, and were married on October 5, 1996. For sake of clarity I may refer to them as the “husband” or “James” and the “wife” or “Kristi”. At marriage the husband was approximately age 32 and the wife approximately age 28. He was a Toronto area emergency physician while she was a flight attendant with Canadian Airlines. At marriage he owned his home, subject to mortgage, along with significant RRSPs. He was otherwise debt-free. At marriage, she had no significant assets or debts.
[ 2 ] They married October 5, 1996. She continued to work with the airline while pregnant until late 1997 when she took a maternity leave. Their first child, Jenna, was born […] 1998. The young family moved to Huntsville in January 1999 to accommodate the husband’s wish to seek a less stressful lifestyle than had been the case in Toronto. James testified at trial that his wife told him she didn’t want to return to work but wished instead to stay at home to raise their family. Kristi testified that her withdrawal from the Toronto area workforce was because neither of them wanted to leave childcare duties to a nanny. The husband disputed that but both agreed with their joint decision to move north in 1999 to live in Muskoka with James’ income as the sole source of family support. Mrs. MacDonald retired from Canadian Airlines and took her pension in a small lump sum.
[ 3 ] The parties had two more children – Shane in […] 2000 and Kate in […] 2002. To their great credit both parents have, on the material before me, been able to mainly cooperate one with the other in child caring duties. They have operated in a joint custody week-about arrangement since their separation. James has remarried. Kristi has not and lives by herself.
[ 4 ] Their initial happiness dissipated and they eventually decided to separate in August 2006. They negotiated a separation agreement. The husband has since March 2007, in accordance with that agreement, and to date paid spousal support of $4,000.00 per month together with child support of an additional $2,000.00 per month. I find on the evidence that they agreed to the higher than expected spousal support (and a corresponding lower than expected child support) in an effort to benefit James by minimizing his income tax burden. Largely because of this, Kristi attracted an income tax debt to Canada Revenue Agency which still remains unpaid in the sum of approximately $34,000.00. Post-separation, she bought a home for herself where she continues to reside. At separation, she had been a stay at home mom for upwards of eight years and had no income or prospects. That said, I find she had and has significant community presence as a cyclist and athlete.
[ 5 ] The parties have been unable to agree on the following issues:
a) the amount of child support to be paid by the husband after taking into consideration the parties’ equal shared parenting arrangement and both parties’ abilities to financially contribute towards the children’s support;
b) whether there should be an order terminating the husband’s spousal support obligation to the wife as of September 30, 2011, as of some other date, or at all;
c) whether the husband should be required to maintain any ongoing life insurance - and if so, in what amount and for what time; and
d) whether the wife should be required to share her post-separation income with the husband on an equal basis, or at all.
Separation Agreement
[ 6 ] Supported with independent legal advice, the parties signed an agreement on October 5, 2007. Paragraphs relevant to their current dispute are as follows:
The husband shall pay spousal support to the wife in the amount of $4000.00 per month, beginning March 1, 2007. The parties acknowledge there are no arrears owing to date.
The issues of continued entitlement to spousal support and quantum of spousal support shall be reviewed on September 30, 2011.
The wife shall take all reasonable steps to become self-supporting as soon as possible as it is the intention of each party that spousal support will end on September 30, 2011.
Pending the review of spousal support, the wife shall share her income equally with the husband.
The husband is entitled to reduce his life insurance coverage from $2 million to $1 million immediately. The wife shall maintain her policy of life insurance on her life in the amount of $350,000.00. Each party shall name the children as the beneficiaries of the life insurance policy, with the other parent being named trustee.
The quantum of insurance may also be reviewed in September 2011.
The parties shall share equally in the cost of the parties’ life insurance policies set out above and any disability insurance a party may have.
The husband and wife intend this agreement to be final as to all claims. They release all claims (other than to enforce this agreement) arising out of their marriage, past events and financial dependency. The acknowledge that each may encounter drastic changes in their respective incomes, assets and debts, in the cost of living or in their health, or changes of fortune by reason of unforeseen factors. Except as provided in this agreement, the husband and wife agree that under no circumstances will any change, direct or indirect, foreseen or unforeseen, in the circumstances of either of them, give either the right to claim any alteration of any of the terms of this agreement or the terms in any other agreement between them or of the terms of a divorce judgment.
The husband and wife each wishes to be able to rely upon this agreement as the final and binding one in which support and property provisions are inextricably combined to constitute a final financial settlement. It is a once and for all settlement of all their differences and affairs to avoid ever engaging in further litigation with each other, whether about matters or causes of actions existing now or later.
[ 7 ] In addition to $2,000.00 a month child support, the husband continued to pay $4,000.00 per month spousal support from the signing of the separation agreement up to the present time. There are no arrears.
Positions of the Parties
[ 8 ] Dr. MacDonald seeks a termination of spousal support effective September 30, 2011, an order that the wife repay the excess, and a reduction to $350,000.00 in the amount of life insurance he is required to maintain to secure his ongoing support obligation. He also seeks an order imputing income to Kristi over and above that generated from her present employment pursuits and is he content to pay table amount child support. Finally he seeks an equal share of the wife’s income pursuant to her obligation in paragraph 19 of the separation agreement.
[ 9 ] Mrs. MacDonald seeks an order requiring James to pay ongoing spousal support of $3000.00 per month retroactive to September 30, 2011 and until at least the end of June 2020 when the parties’ youngest daughter, Kate, is expected to have completed high school (effectively spousal support for 14 years post-separation). In addition she seeks table amount child support commensurate with the parties’ respective incomes in accordance with the shared custody arrangement. Finally, she seeks a continuation of her husband’s life insurance obligation in the amount of at least $640,000.00.
Child Support
[ 10 ] Although voluminous materials were generated and expert opinions sought by both parties to determine their respective incomes generated from their present employment pursuits, the parties agreed at trial that the husband’s 2012 current income is $260,000.00 annually while the wife’s is now $30,000.00 annually. Although Mrs. MacDonald’s counsel argued that the $30,000.00 figure was meant to include income not only from actual employment but also other income notionally imputed to her, that is not what the Exhibit 1 document states. I find that, in addition to Mrs. MacDonald’s $30,000.00 of annual employment income, a further $15,000.00 should be imputed to her for her total current 2012 annual income of $45,000.00. I do so because:
a) She was age 40 at separation and is now 46. Post-separation, in an effort to move toward self-sufficiency, she invested in a Gravenhurst area bike shop start-up business. She has worked at developing it from scratch for five years now but it still has not turned a profit. It is closed for up to six winter months a year and generates no income during that time.
b) She travels a great deal, mainly in the off season, although inexpensively by the use of air points, assistance from friends, or by attendance at inexpensive business conferences. I find she is and has been during some weeks of those off season winter months each year intentionally under-employed or unemployed.
c) I understand her need to be available and near to her three children as a Huntsville area caregiver every second week but, over six years post-separation, she has taken only minimal, insufficient steps to market herself so as to also generate any winter employment income. She has taken no upgrading courses to move towards achieving self-sufficiency.
[ 11 ] Because of the shared parenting arrangement and the parties’ agreement to set off table support there is no need to analyze s. 9 of the Guidelines. I fix and order child support at $3,337.00 per month to be paid by the husband to the wife (being the difference between the Child Support Guideline Table Amount for the husband at $4,195.00 and that for the wife at $858.00). This child support order for the three children of the marriage (as defined in section 2(1) of the Divorce Act) shall be retroactive to September 30, 2011 and shall be paid on the first of each and every month thereafter commencing October 1, 2011.
Spousal Support
[ 12 ] The purpose of spousal support is to relieve the economic hardship that results from a marriage or its breakdown. A court must assess the respective positions of the spouses from their roles in the marriage.
[ 13 ] Section 15(6) of the Divorce Act provides that a spousal support order should recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown, apportion between the spouses any financial consequences arising from the care of the children, relieve any economic hardship of the spouses arising from the breakdown of the marriage, and promote economic self-sufficiency of each spouse within a reasonable period of time. The parties, in their separation agreement, identified the wife’s self-sufficiency as a key important factor.
[ 14 ] The parties also contracted in their separation agreement for a review on and after September 30, 2011 of the duration and quantum of spousal support on the expectation that the wife would have achieved self-sufficiency. A review must take into consideration the same factors and objectives as are employed in an application of the first instance. This is the parties’ first application to court. The separation agreement and all its individual terms is a factor for me to consider, and I have done so. It, however, is only one factor.
[ 15 ] Self-sufficiency relates to the ability to support a reasonable standard of living. It is to be assessed in relation to the economic partnership that the parties enjoyed and could sustain during cohabitation and that they could reasonably anticipate after separation. Thus, a determination of self-sufficiency requires a consideration of the parties’ present and potential incomes, their standard of living during marriage, the efficacy of any suggested steps to increase a parties’ means, the duration of their cohabitation, the terms of their separation agreement, and any other relevant factors. The goal of Mrs. MacDonald’s self-sufficiency based on her income earning capacity and the results of her income earning activity to the present has not been practically reached within the time contemplated by the parties in their separation agreement. I have considered whether it is reasonable to expect her to gradually adjust her standard of living to be commensurate with her own income. I find that it is.
[ 16 ] I have already noted that when Kristi met James he was a Toronto emergency room physician and she was a Vancouver based Canadian Airlines long haul flight attendant with a three year community college diploma. That summer she moved to Oshawa. The parties commenced cohabitation in Toronto in March 1994. She continued her airline employment. I have found that both spouses were in agreement with Mrs. MacDonald’s wish to stay home with their children and to retire from her airline employment. The couple moved to Huntsville in January 1999 and two more children followed - Shane in […] 2000 and Kate in […] 2002. These children are now aged 14, 12 and 10. Kristi assumed the role of a stay at home mom – buying groceries, cooking meals, and taxiing children to activities such as swimming, gymnastics, music and doctors’ visits. Dr. MacDonald handled the household finances and assisted his wife as he could, commensurate with his medical responsibilities. They biked, golfed and canoed together. The children shared their parents’ love of the outdoors and, as a result, have become active in athletics.
[ 17 ] In 2008, the husband met his current wife, Jo-Anna, whom he married in October 2010. Also in 2008, in what I find was a significant effort to move toward self-sufficiency, Kristi formed a new Gravenhurst bicycle shop business which she operated through a corporation - Sunday Jen Inc. While she had no initial specific business plan, she settled on the bike shop business as one consistent with her own active lifestyle. She as business manager and her friend, Matthew Todd, as bicycle mechanic initially were 50-50 shareholders. Mr. Todd contributed his expertise but no money. Mrs. MacDonald contributed capital from her marital separation. That equal corporate shareholding was subsequently adjusted between her and Mr. Todd to be 75-25 in her favour so as to recognize that, while Mr. Todd had been regularly paid for his work, she was to that point drawing nothing from the business for hers. She performed back room work such as hiring, inventory purchases and also front office sales. She testified, and I find, that in deciding to open and operate the bicycle shop she first appropriately reviewed and compared Gravenhurst location demographics with those in Huntsville and Bracebridge while at the same time conducting some cursory market research by speaking to other Muskoka bike shop owners. She testified, and I find, that she had been told it was reasonable to expect her to earn upwards of $60,000.00 annually. Start up costs, excessive inventories, and the global recession have all, I find, combined to negatively impact that expectation. Her income at present is still far from enabling her to achieve self-sufficiency.
[ 18 ] To now consider a return to work post-separation as a flight attendant, she would be forced to relocate her home to live within one hour of a major airport - which would necessarily require her to abandon the joint custody arrangement with her children which I find has been of considerable benefit to them. She is appropriately unwilling to do so. At separation she wasn’t sure what she could do to be self-supporting and testified she didn’t realize how difficult it would be to gain self-sufficiency in Muskoka. I so find. She also testified that by not taking a bicycle shop salary for four years, she tried to allow her business the chance to grow. I so find.
[ 19 ] I find that Kristi was at separation economically inexperienced and naïve. I also find she made after separation some wrong-headed economic decisions including:
a) not filing income tax returns for two years after the separation agreement, thereby delaying her eventual realization that she was upwards of $34,000.00 or more in debt;
b) purchasing excess business inventory in the first few years of the start-up;
c) travelling frequently (both alone and with the children) on ski, bicycle, hot and cold weather vacations. I have already noted that the cost of these trips was reduced by her use of personal and business contacts and by vacation penny-pinching. That said, to gain self-sufficiency she instead needed and still needs to focus much more on increasing her income and much less on enjoying her recreational pursuits;
d) hiring no accountant to assist her financially during the first two business years post-separation;
e) spending substantial funds post-separation renovating her home. However, by increasing the mortgage to improve her home, she improved a residence where the children still spend 50% of their lives.
[ 20 ] Although both Kristi and James MacDonald are both intelligent, capable adults and had intended that Kristi’s need for spousal support would end on September 30, 2011, it clearly has not. She continues to be in significant need of support. Although Dr. MacDonald’s counsel pointed to a number of alternative steps that she could have taken post-separation to become self-supporting (enhanced full-blown job search, business or other course upgrading, etc.), I find that the small steps that she did take were reasonable at the time she took them. She had very limited financial acumen on separation, had never run her own business, and had encountered significant initial disruption in leaving the marital home and relocating within the Huntsville area while working effectively with her husband to jointly parent the children on a week-about basis. I find that she took reasonable and appropriate steps to first determine the viability of a bicycle shop. She reasonably teamed her limited financial and developing sales skills with the technical bicycle repair abilities of Mr. Todd. To be sure, her venture has so far run an annual net loss before taxes - albeit with a slight improvement from year to year. She cannot be faulted for failing to fully achieve economic sufficiency by September 30, 2011 as hoped. I find that she has a continuing need for spousal support, has not by her post-separation decisions to date disentitled herself to same - and that James has a continuing ability to pay. Her economic recovery period will clearly continue to be impacted, in part, by her ongoing joint child care responsibilities.
[ 21 ] This is not a case where compensatory spousal support is warranted. The wife had already received spousal support for more than five years up to the review date and had to expend funds in relocation costs. In assessing non-compensatory support, I am instructed by the Court of Appeal in Fisher v. Fisher (2008) 2008 ONCA 11, O.J. No.38, that the use of the non-binding Spousal Support Advisory Guidelines (“SSAG”) may help bring consistency and predictability to spousal awards, encourage settlement and allow the parties to anticipate their support responsibilities. I found the SSAG calculations submitted by both counsel to be very helpful. I have considered the factors and objectives in ss. 15.2(4) and (6) of the Divorce Act. An indefinite spousal order is inappropriate and the wife does not seek it. The cohabitation period was of medium duration and the wife is relatively young. I have already found that Mrs. MacDonald assumed a somewhat greater proportion of non-economic home responsibilities during the marriage but that both parents participated in household duties.
[ 22 ] The “with child support formula” in the SSAG focuses on a combination of the difference in the parties’ gross incomes and the length of their cohabitation (12 ½ years). The formula results in a range of spousal support of $2,430.00 to $4,600.00 per month for an indefinite duration, subject to variation, and with a minimum duration of 6.25 years and a maximum duration of 15 years from the date of separation.
[ 23 ] In order to achieve an equal net disposable income (NDI) between the parties, the SSAG suggests that spousal support be ordered in the amount of $2,430.00 - and I do so, retroactive to September 30, 2011. While this is the low end scenario produced by the SSAG formula, I believe it appropriate in these circumstances to achieve an equal NDI. She will still need to satisfy her major tax liability. The children should not have to suffer while in her care. While both parents have the children equal time, the children should benefit from generally the same standard of living from both parents.
[ 24 ] Spousal support shall continue in that monthly amount to and including the payment due September 1, 2013. Thereafter, consistent with the step-down approach in Fisher (supra), spousal support shall continue to be paid on the first of each and every month in the amount $1600.00 commencing October 1, 2013 and continuing to and including payment due September 1, 2015. Thereafter, spousal support shall continue to be paid in the amount of $800.00 per month from and including the payment due October 1, 2015 to and including the payment due June 1, 2017. Spousal support shall fully terminate on June 30, 2017.
[ 25 ] This results in a total spousal support period of 11 years from separation which I find to be reasonable because of the roles assumed by the parties during marriage, and the need to allow the wife a longer post-separation period to achieve her goal of economic self-sufficiency while she maintains a standard of living which will, in part, benefit the children.
Life Insurance
[ 26 ] Having regards to James’ spousal and child support obligations and the RESP which the parties have created for the childrens’ education, I order that he maintain life insurance on his life at his expense in an amount no less than $500,000.00. He shall name the three children as beneficiaries of the life insurance policy with Kristi named as trustee. This obligation shall continue so long as he is obliged by court order to support her and/or the children.
Generally
[ 27 ] I have found that the wife earned no significant income at all until 2012. It is inappropriate in these circumstances that she share this income with her husband pursuant to paragraph 19 of the separation agreement.
[ 28 ] If the parties cannot agree on the calculation of any overpayment to Dr. MacDonald for the period after September 30, 2011 to date – bearing in mind this order, - the parties may submit written submissions within the time periods and in the same manner as in the following paragraph on the issue of costs. It shall be repaid to him forthwith.
[ 29 ] If the parties cannot agree on the question of costs of this application they may, within 20 days of the release of these reasons, submit written submissions of no more than four pages, single-spaced, together with bills of costs. The responding party on costs may file materials of the same length with a further 10 days. Reply materials may be filed within 5 days thereafter. All costs materials shall be forwarded to me in care of my secretary at Barrie.
R. MacKinnon J.
Released: December 4, 2012