ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 7413-09
DATE: 20120503

B E T W E E N :

ROSS ARTHUR PEEL

D. Kevin Haxell , for the Applicant/Respondent

Applicant/Respondent

• and -

JANIS LYNN PEEL

Laura E. Oliver , for the Respondent/Applicant

Respondent/Applicant

HEARD: April, 2011 with written submissions received July 27, 2011 and March 1, 2012

REASONS FOR JUDGMENT

KRUZICK J. :

Relief Sought

[ 1 ] This is an application by Ross Arthur Peel. He seeks to reduce his financial obligations for spousal support and child support payable to the Respondent, his former spouse. The terms he seeks to change were agreed to by the parties in a Separation Agreement dated July 5, 2006.

[ 2 ] The Respondent, Janis Peel, asks that the claim be dismissed. As an alternative, she asks that in lieu of ongoing spousal support for herself that Mr. Peel pay her a lump sum of $468,000.00 representing full and final satisfaction of her entitlement to periodic spousal support.

[ 3 ] In addition she claims she is owed arrears of $38,049.63 for s.7 special and extraordinary child support.

Background

[ 4 ] The parties are former husband and wife. They began living together in December, 1988, and married on June 9, 1989. They separated on January 2005 and divorced July 21, 2007. They have two children: Jeffery Peel, born April 17, 1990 and Ashley Peel, born April 11, 1995.

[ 5 ] The parties entered into a Separation Agreement dated the July 5, 2006 (“the Agreement”). The Agreement made provision for the child and spousal support, including special and extra-ordinary expenses for the children. The children and spousal amounts are $2,108 and $3,656 a month, respectively, payable by Mr. Peel to Ms. Peel.

[ 6 ] Following the separation Ms. Peel, with the consent of Mr. Peel, moved to Arizona with the two children. In the Agreement, the parties agreed to “interim joint custody” with the children residing in Arizona with their mother. The issue of custody was to be mediated in July, 2007. No further agreements were entered into and the provisions of the 2006 Agreement remained in place.

[ 7 ] Mr. Peel has, since the separation, remarried.

[ 8 ] Throughout the marriage and since separation, Mr. Peel has been self-employed operating Seflo, 1063694 Ontario Ltd. (“Seflo”) which is in the business of selling and leasing car s .

[ 9 ] Ms. Peel worked outside the home prior to the separation until Ashley was born. She was then 43 years old. When the Agreement was executed she was 54 years old and was not employed outside the home. She had no income. Once in Arizona, in December 2006 Ms. Peel secured a part-time receptionist job. From December 2006 to September 2008 she worked continually on a part-time basis for the Phoenix Suns basketball team. She lost that job and was hired as a substitute classified employee for the Deer Valley Unified School District where she was employed at the date of trial. It is a non-teaching position. This is a part-time and “on call” position where she is now paid $12.10 an hour with benefits for herself only. Ms. Peel is also registered as an on call substitute for non-teaching jobs and has set up a non-profit organization from which she derives no income.

Issues to be decided

[ 10 ] The issues to be decided are:

(1) Spousal support including the quantum of support and the claim for conversion of the periodic support to a lump sum.

(2) Child support including quantum of child support, whether support for Jeffrey should continue and the claim for arrears of s.7 expenses.

Position of Mr. Peel

[ 11 ] Mr. Peel seeks to reduce his child and spousal support obligations on the grounds that there has been a material change in his financial circumstances and in the needs of his former spouse and the children since the Agreement was entered into. Moreover he argues that support as originally settled was erroneously premised.

[ 12 ] It is the position of Mr. Peel that his income, which formed the basis for the parties’ separation as “imputed income”, was more his actual income at that time. While the Agreement reflects an “imputed income” of $160,000.00 Mr. Peel argues that in fact his L 150 income as reported in his T-1 General Income Tax return for 2005 was only $74,000. His position is that his L 150 income for 2006 was $115,000.00. He takes the position that this income for 2010 for the purposes of this trial is $105,344.00. The reduction he seeks is for ongoing support as of the date of his application, given a false assumption of his income in 2006.

[ 13 ] Mr. Peel claims that based on his reduced income since July 1, 2008, he overpaid child support and is owed $24,804 by Ms. Peel.

[ 14 ] Mr. Peel also claims that Jeffrey is no longer dependent and that child support for him should terminate as of May, 2011. He argues that child support should be recalculated on his income of $105,344.00 and Ms. Peel’s imputed income of $25,168.00. He argues his share of s.7 expenses should be 69%.

[ 15 ] Mr. Peels argues that Ms. Peel has failed to make reasonable efforts to become self-supporting and contribute to her own support as contemplated by the Agreement. He asks that income be imputed to her and that his spousal support should also be reduced accordingly. He argues that spousal support should be reduced to $1,892 a month as of May 1, 2010.

[ 16 ] Mr. Peel argues that there are no arrears of support owing to Ms. Peel and that he may have a credit for overpayment of $39,688.00 as of July 1, 2008.

Position of Ms. Peel

[ 17 ] It is the position of Ms. Peel that the relief as sought by Mr. Peel should be dismissed.

[ 18 ] Ms. Peel argues that her career days ended when Ashley was born. While she has worked outside the home and has started a non profit organization she maintains she had need and remains dependent upon Mr. Peel. Her position is that even if she earned $36,000 a year, which she has not, that Mr. Peel’s support obligations would continue.

[ 19 ] Ms. Peel maintains that support should not be reduced on the basis that she continues to have the same needs as when the parties separated and that Mr. Peel has failed to establish, on a balance of probabilities, that there has been a material change in his circumstances since the Agreement was entered into. Including her spousal support Ms. Peel takes the position her annual income is $39,453 (2009) excluding child support.

[ 20 ] It is argued that Mr. Peel’s financial circumstances have in fact improved or, at the very least remained the same since the parties separated. It is also argued that by virtue of his remarriage and Mr. Peel’s ongoing business ventures his lifestyle has improved or not changed so as to warrant reduction of his financial obligations to his first family.

[ 21 ] Ms. Peel maintains that the terms of the Separation Agreement are binding on the parties and that they be incorporated in an order. Relying on the Separation Agreement Ms. Peel seeks ongoing and retroactive s. 7 special and extraordinary child support for expenses which she said she incurred for the children and as agreed to by the parties.

ANALYSIS

Nature of the Application and the Law

[ 22 ] The applications of the parties are presented as a variation. In this case the parties have an Agreement that was not made into a court order. Mr. Peel seeks an order that reduces his current obligations. By way of her Answer and counterclaim, Ms. Peel seeks support for herself, and special and extraordinary support for the children.

[ 23 ] Child Support is governed by s. 15.1 of the Divorce Act, R.S.C. 1985, c.3 (2nd Supp.) ( “Act” ) and Spousal Support, by s. 15.2 where there is no existing court order. Section 17 of the Divorce Act applies where there is an application to vary an existing order.

[ 24 ] I will first look at how to treat these applications where no previous court order exists. Until the recently released decisions of L.M.P. v. L.S., 2011 SCC 64 and R.P. v. R.C. , 2011 SCC 65 , Miglin v. Miglin, [2003] 1 S.C.R. 303, 2003 SCC 24 , was the leading case decided by the Supreme Court dealing with a Separation Agreement that then gives rise to the issues of support. Both of the recent Supreme Court cases involved the variation of an existing order and can therefore be distinguished from this case. They do however shed light on the approach and philosophy of support obligations. The R.P. v. R.C. decision applied the reasoning in L.M.P. v. L.S. The L.M.P. v. L.S. decision agreed with the two-stage test set out in Miglin to determine the extent to which an Agreement can be relied upon.

[ 25 ] The L.M.P. v. L.S. decision of Justices Abella and Rothstein (majority) recognized the different language employed by Parliament in ss. 15.2 and 17 of the Divorce Act when dealing with spousal support. As in Miglin the Supreme Court of Canada confirmed a different approach as between initial and variation applications. In the case before me where no previous order exists, Mr. Peel framed his application as a variation of the spousal and child support pursuant to terms of the Separation Agreement. The divorce order which followed the separation did not incorporate the Agreement. Following their divorce both parties relied upon the Agreement.

[ 26 ] In the determination of child and spousal support both s. 15.1 (4) and s. 15.2 (4) refer to taking into consideration an Agreement made by the parties.

[ 27 ] While the objectives of the variation of a spousal support order in s. 17 and in s. 15.2 (dealing with an initial support order) are virtually identical, the factors to be considered in ss. 17 (4) and (4.1) are significantly different from those in ss. 15.1 and 15.2(4) because of the different purposes of each provision.

[ 28 ] I agree with counsel for Ms. Peel that in this case, the prayer for relief by Mr. Peel has not been properly pleaded. However, it is clear on the facts and from the submissions that this case should be considered as an initial application under ss.15.1 and 15.2 .

[ 29 ] Under either s. 15.1 , 15.2 or s. 17 , the parties’ mutually acceptable Agreement is not ignored, but the caselaw recognizes its different treatment under the two sections, given the different purposes of each provision.

[ 30 ] For child support, where an order exists, once a material change in circumstances has been established, the court is directed in s.17 (6.1) to make an order in accordance with the applicable guidelines. Under s. 17 (6.2) in varying child support, the court may take into account a written Agreement.

[ 31 ] For spousal support, where an order exists, once a material change in circumstances has been established, the variation order should properly reflect that change and the objectives set out in s. 17(7).

[ 32 ] The Supreme Court in L.M.P. v. L.S. defined the approach to be taken. See paragraphs 23 and 24:

[23] In other words, there are differences between what a court is directed to consider in making an initial support order and on a variation of that order. Notably, unlike on an initial application for spousal support under s. 15.2(4)(c), which specifically directs that a court consider “any order, agreement or arrangement relating to support of either spouse”, s. 17(4.1) makes no reference to agreements and simply requires that a court be satisfied “that a change in the condition, means, needs or other circumstances of either former spouse has occurred” since the making of the prior order or the last variation of that order. Because of these differences in language, it is important to keep the s. 15.2 and s. 17 analyses distinct.

[24] On an application under section 15.2 , the court is expressly concerned with the extent to which the terms of an existing agreement should be incorporated into a first court order for support. On an application under s. 17 , on the other hand, the court must determine whether to vary or rescind that support order because of a change in the parties’ circumstances.

[33] ...

(Content continues verbatim as in the source document through paragraph [159] and the concluding release line.)

___________________________
KRUZICK J.

RELEASED: May 3, 2012