ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 4351/12
DATE: 2013/02/20
BETWEEN:
George Alan Hesketh
Applicant
– and –
Katherine Barbara Brooker
Respondent
Patricia Lucas, for the Applicant, moving party
Robert Stewart, for the Respondent, responding party
HEARD: January 2, 2013
Turnbull, J.
[1] The applicant, who is presently 56 years of age, seeks an order varying the divorce order of Heeney J. dated September 26, 2005. In that proceeding, the applicant was ordered to pay spousal support to the respondent, presently age 62, in the amount of $2,200 per month for an indeterminate period. Counsel for the applicant has fairly agreed that her client Mr. Hesketh presently just seeks a reduction of his spousal support obligation imposed by Heeney J. and eventually a termination of his obligation. The applicant does not anticipate the termination will occur now but would like the date of the termination fixed now.
[2] The applicant was employed at the time of the trial before Heeney J. by the Ministry of Transportation for the Province of Ontario. He resigned that position in which he was earning approximately $100,000 per year and began collecting his pension effective March 9, 2012 which provides him with $68,000 per year. He attributed his decision to retire to his poor health. He asserts that this is a material change in his circumstances which warrants a variation of the spousal support order of Heeney J.
[3] This court heard viva voce evidence from the parties.
Evidence of the Applicant
[4] Mr. Hesketh testified that he did not intend to retire before age 55 or any later than age 65 when he testified in 2005 at the trial before Heeney J. Hence, the valuation of his pension was based on the “mid-point” figure of $103,602 (found in exhibit 3) which assumed a retirement age of 60.2 years.
[5] At the time of the trial in 2005, Mr. Hesketh was employed as the manager of the provincial highways system. He managed the budget for the entire maintenance and construction of the provincial highway system and was the co-chair of the interprovincial highways committee. He remained in that job until he was replaced following an absence for surgery in 2010. Upon his return to work, he was made a special projects manager until he voluntarily retired effective March 12, 2012. His last actual day of work was January 9, 2012 but he used his existing credits to extend his actual retirement date to March 12, 2012. His counsel agreed that the first indication the respondent would have received of this change of financial circumstances was by letter sent in January 2012.
[6] He testified before this court that he had to retire due to his health problems. He stated that he felt the stress of his job was detrimental to his health. He chose not to lead any medical evidence to support that assertion. He did not call a representative of his employer to explain what tasks of his employment he was unable to complete due to his medical condition and any workplace accommodations which could be made to permit him to continue working. The court has no evidence of his absenteeism from work in the six months before his retirement due to chronic conditions which allegedly impaired his ability to perform the essential functions of his employment.
[7] Mr. Hesketh acknowledged in his examination in chief that after his heart by-pass surgery in 2007, his symptoms of chest pain and shortness of breath were alleviated. He returned to work about three months after that procedure. Unfortunately, his symptoms returned and after appropriate medical investigations, his aortic heart valve had to be replaced in July 2010. He recuperated over the following months and was able to return to work in November 2010. He agreed in his examination in chief that the valve replacement solved his problems with chest pain and shortness of breath.
[8] In 2011, he experienced problems with his blood pressure and was forced to reduce his working week to part time while he undertook physical therapy at the YMCA two days per week.
[9] In January 2012, his physician referred him to the work and weight loss clinic in Hamilton. He testified that he has attended there regularly for almost a year, during which time he has lost thirty pounds. He works out in the gymnasium for 2 to 2½ hours per day and has successfully brought his blood pressure down to a reading considered just a little above normal.
[10] Mr. Hesketh testified that the stress of his work was “killing him”. He felt that he had to lose weight and make the effort to take control of his life. He found that going to the gym before or after work every day was just not working. He did not think that he could have attained the results that he did attain if he had continued to work.
[11] Unfortunately, there is no medical evidence to confirm his testimony that a return to his job would have been detrimental to his health. There is no evidence to assist the court in determining if he could have obtained the same results by attending at the gym at the end of his work day and gradually increasing his exercise tolerance at the same time as he modified his diet. Based on the evidence before this court, the decision to retire for health reasons was founded on his personal feelings of poor health and stress. In other words, it was a voluntary retirement.
[12] At the present time, he suffers from sleep apnea and has to use an APAC machine at night to deal with that problem. He currently takes medication for cholesterol and high blood pressure and an aspirin a day. He did not testify that these medications cause him any limitations which would impair his ability to perform the duties of his prior employment. Until recently he has not had had any other issues affecting his health. On December 24, 2012, he had his gall bladder removed but as he testified before this court, he appeared to have made a good recovery from that surgical procedure and did not indicate otherwise in his testimony.
[13] In cross examination, he agreed that through his employment he was insured under a short term and long term disability insurance plan. He collected disability benefits during each of his health related work absences in 2007 and 2010. He explained that he decided to retire and not to apply for disability benefits because the differential in annual income would have been approximately $1,700 to $1,800 per year. He estimated that he would have received 66 2/3 of his previous year’s income on disability which would have amounted to approximately $66,800. He receives $68,487.48 of pension benefits annually or $5,707.29 per month. No other reason was offered for his unwillingness to apply for disability and then, if possible, to return to work. I noted that as he testified he was very precise in his calculations of these figures and on the exact date of his retirement. He testified that he was involved in mathematical calculations as part of his job as a project planner.
[14] Mr. Hesketh stated that he had no other skills to find alternate employment as he went directly from one year of study at the University of Western Ontario directly to the Ministry of Highways. I must say that I find that difficult to accept. It would seem that the applicant, having held such a senior administrative role in the Ministry combined with his experience in project management, does have some skills convertible into at least part time work, though perhaps at a significantly reduced level of income.
[15] At the time of the parties’ separation in 2000, the parties had been married just short of 17 years. They were married on May 23, 1983 and separated on April 26, 2000. The applicant’s pension was his major asset. At trial, Heeney J. based his calculations of equalization payment on the assumption that Mr. Hesketh would retire in the middle of his eligible range, at 60.2 years of age. At this “mid-point”, the pension was valued at approximately $103,000. The pension was accordingly valued for equalization purposes, as of that anticipated retirement date, at approximately $103,000. It was found that if Mr. Hesketh retired at his earliest possible retirement date of 55.2 years (which is exactly what he did), the pension would have been valued at approximately $135,000.
Evidence of the Respondent
[16] Ms. Brooker is presently unemployed. She last worked December 24, 2006 when she was laid off due to a lack of work in her place of employment. In the spring of 2007, she stated that her employer again offered her work but she declined because she had to move to be able to care for her father. She agreed that since then, she has not made any effort to find other work because she felt that she would have had to ask for too much time off work to attend to all the needs of her father.
[17] In late 2006, she had had to help her father as he dealt with personal bankruptcy proceedings. In early 2007, his health rapidly deteriorated. The combination of the bankruptcy and the deterioration of his health required him to move from the small farm where he had resided to a one bedroom apartment. He required assistance with is basic living requirements as he did not have a vehicle and was not residing in assisted living. While it was not an assisted living residence, he did not have a vehicle.
[18] She explained that since her father’s bankruptcy to this hearing, she has acted as his advocate and has had to assist him in making all his decisions, shopping, attending at numerous medical appointments in various locations including London and Windsor and going to all the other day to day outings he needed or wished to attend. He has undergone six surgical procedures during the past 6 years and also has moved six times in the same period. Finally, in 2011, he moved to a retirement home after a surgical procedure did not go well. She still has to take her father to all his medical appointments by public transportation.
[19] She also explained that she had other care needs imposed upon her during the same period of time. At the time of the trial before Heeney J., she lived in her own accommodations. Shortly thereafter, she lived with her mother and her step-father and rented a room in their residence. When her step-father died in November 2008, she also had to help with the care of her mother. She continued living with her mother until 2009 when she finally moved to her own accommodations.
[20] She agreed that Mr. Hesketh has regularly made all payments ordered by Heeney J. She stated that she has loaned approximately $43,000 to her brother who was injured in an accident and that she hopes that money will be repaid from the settlement of the action arising from that accident.
[21] Ms. Brooker’s financial statement was examined in detail by Mr. Hesketh’s counsel, Ms. Lucas, in her able examination of the respondent. Ms. Brooker agreed she was paying a tithe to her church of $390 per month. However, Ms. Brooker stated, and I concur, that she is a simple person who does not live an extravagant life. Her expenses are approximately $35,000 per year which allows her a reasonable lifestyle which would be in keeping with that she enjoyed when she lived with the applicant. She explained that she has not invested the monthly pension equalization payments she has received because of expenses which kept coming up. However, it was clear to me that she understood that that was her problem and not that of Mr. Hesketh.
Law on Voluntary Retirement
[22] The effect of voluntary retirement due to a purported medical inability to work is entirely dependent on the facts of the case. The court is free to make reasonable inferences and to judge the credibility of the parties’ positions. That is evident from much of the existing case law.
[23] In Gajdzik v Gajdzik, 2008 BCSC 160, 50 F.L.R. (6th) 390 (B.C.S.C), the court held that on spousal support variation motions triggered by a voluntary retirement, there are no applicable general principles. Each case is fact-driven, with an overriding examination needed to ensure the purpose of the retirement was not to avoid the support order.
[24] Similarly, in Donovan v. Donovan (1999), 44 R.F.L. (4th) 111 (Ont. Gen. Div.), the court stressed the importance of addressing each variation application on its merits. The ruling traced the relevant jurisprudence, confirming that voluntary early retirement cannot be automatically relied upon for a reduced support obligation. It also reaffirmed the threshold test for a “material change in circumstances” – namely, that it cannot be a change that would have been reasonably foreseeable by the parties upon separation. In other words, it is a change that could not have been contemplated by the parties. Willick v. Willick, 1994 28 (SCC), [1994] 3 S.C.R. 670.
[25] The Ontario Court of Appeal held in Hooper v. Hooper (2002), 2002 44963 (ON CA), 213 D.L.R. (4th) 548, that because the appellant’s early retirement was not compelled, it was not a “material change in circumstances” warranting a support reduction. While the circumstances in that case were certainly much different than the case at bar, Hooper reinforces the notion that on variation applications judges are free to make factual determinations on the evidence provided (or lack thereof).
[26] The case law on (voluntary) retirement taken on purported medical grounds is equally fact-specific. In Gowan v. Gowan (2000), 2000 22435 (ON SC), 11 R.F.L. (5th) 101 (Ont. S.C.J.), the payor spouse applied for a support variation after retiring early from his job as a truck driver. He cited an array of medical conditions as the underlying reason for his retirement. Sparse medical evidence was provided in support. Nonetheless, the court ruled at para. 10 that this constituted a material change in circumstances,
Accepting the obvious fact that the loss of Mr. Gowan's annual taxable income of around $65,000 appears to represent the material "change in [Mr. Gowan's] condition, means, needs or other circumstances ..." […] is there anything about the circumstances of his election to retire which would make it unreasonable to permit a variation of support? In my view, there is not. I am not satisfied that the fact of retirement was known or recognized by the parties or Clarke J. at the time the order was made: Willick v. Willick, 1994 28 (SCC), [1994] 3 S.C.R. 670. There is no foundation for any suggestion that Mr. Gowan had inquired about and intended to retire when the spousal support quantum was determined and that he kept his designs hidden: Levergood v. Levergood (1995), 1995 17855 (ON SC), 17 R.F.L. (4th) 423 (Ont. Gen. Div.), a Family Law Act, R.S.O. 1990, c. F.3 decision. While not a basically economic decision, being more driven by health, safety concerns and the rigours of the employment, there is still no evidence that Mr. Gowan was motivated to avoid his responsibility to his former wife: Reigle v. Reigle, [1999] O.J. No. 3325 (Ont. Sup. Ct.). There has been a "change" within the meaning of s. 17(4.1) of the divorce legislation (para. 10).
[27] On the other hand, after a careful review of the case law on voluntary retirement and the effect of medical conditions on support obligations, the court in Gajdzik, supra, ordered only a minor reduction in the payor spouse’s monthly obligation. The court held at para. 54:
I also accept that Mr. Gajdzik does believe that his health will not tolerate the heavy physical work, although there is, at present, no medical evidence confirming that.
[28] The ruling acknowledged, however, that Mr. Gajdzik was free to re-apply for a variation if he could obtain medical evidence confirming his alleged inability to work.
Analysis
[29] Section 17(4.1) of the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp), requires that the court be satisfied that a change in the “condition, means, needs or other circumstances of either former spouse has occurred” since the time of making the order which is sought to be varied before the court varies a spousal support order.
[30] The onus of proof lies on the applicant Mr. Hesketh and the standard of proof is on the balance of probabilities, see: Willick, supra.
[31] I have no doubt that Mr. Hesketh has experienced significant health problems in the past five years. However, I am not satisfied on the balance of probabilities that he has satisfied the court that there has been a material change of circumstances such as to warrant a variation of the order of Heeney J. There is no doubt that there has been a change in his circumstances. The issue is whether it is a material change as recognized in law.
[32] The change in circumstances he relies on is his voluntary retirement from his job at the first possible date he could do so without any reduction in his pension benefits. In circumstances such as these, the applicant has a positive duty to provide evidence that his decision was made in good faith and on appropriate grounds. The voluntary, unilateral retirement from his job was his decision which he made knowing very well that his decision would significantly impact Ms. Brooker. Mr. Hesketh clearly knew that the spousal support order made by Heeney J. was an indeterminate one based on him working full time and at least to age 60.2.
[33] He cannot sidestep the obligations imposed by the court at that time by a retirement which is not corroborated by medical or vocational experts and/or representatives from his employer who could independently corroborate his claim that he was medically unable to continue his work or that he could not be accommodated in less stressful work by his employer.
[34] Absent that evidence, I am not satisfied on a balance of probabilities that the decision to retire was not just a voluntary decision as opposed to one that was medically necessary and medically recommended. The test for establishing that a material change of circumstances has occurred has not been established by the applicant.
[35] In the circumstances, I dismiss the application. The interim order of Lococo J. dated October 3, 2012, pursuant to which the applicant’s spousal support obligation was reduced to $1400 per month until the trial of this action, is set aside. The order of Heeney J. shall be re-instated effective the first day of January 2013. The applicant shall have a right to have the order of Heeney J. reviewed at the time he attains the age of 60.2 years of age.
[36] In the event that I am wrong in this determination, I would nevertheless not have varied the spousal support ordered by Heeney J. for the reasons that follow.
[37] In Moge v Moge, 1992 25 (SCC), [1992] 3 S.C.R. 813, the Supreme Court of Canada held that the trial judge must consider the four objectives of spousal support enumerated in s. 17(7) of the Divorce Act which dictate that the economic consequences of the marriage breakdown should be born equitably by the former spouses. None of the objectives is to be considered paramount to the other.
[38] At the time of making his order in 2005, Heeney J. knew that Mr. Hesketh had been living in a common law relationship with his current partner. She had, until her retirement, been an employee of the Ministry of Transportation and Heeney J. noted that she was paid annually approximately $56,000 per year. At present, she and the applicant have been co-habiting in a long term relationship of approximately 10 years and she presently receives approximately $50,000 per year as her retirement pension benefit.
[39] The order of Heeney J. was based on the applicant’s income of $85,667. It did not include an annual indexing provision nor a requirement that it be adjusted annually in accordance with the applicant’s income. Mr. Hesketh agreed in cross examination, that he earned the following income from his employment:
a. 2008 $ 98,677.31
b. 2009 $ 104,238.00
c. 2010 $ 103,000.00
d. 2011 $ 103,000.00
[40] Based on these figures, during those four years, the total income enjoyed by Mr. Hesketh without any spousal support obligation applied to them was approximately $66,247.
[41] The difference in the applicant’s present pension income of $68,800 and the $85,667 upon which Heeney J. based his order is $16,867. If that order were to continue for four more years (until the applicant reaches the age of 60.2), the total income on which spousal support will be payable in excess of pension benefits received will be $67,468, or almost the same amount as he has not been obliged to take into account for spousal support from 2008 to 2011 inclusive.
[42] Mr. Hesketh’s financial statement sworn December 12, 2012 shows monthly expenses of $6,749.27. He shows expenses of $490 per month for vacations and $1,000 per month of debt payments (based on ½ of a line of credit loan of $30,000). There was no explanation provided of why he needed to spend $6,000 per year on vacations nor why the line of credit payments needed to be repaid at the sum of $1,000 per month. If these payments were reduced by 50%, the difference available to him alone would be $9,000 per year. Interestingly enough, that is just about the amount by which Lococo J. reduced his spousal support payments in his interim order in this proceeding so that at the time of this hearing, his support payments were only $1,400 per month.
[43] The pension was valued by Heeney J. at the “mid-point” using the evidence available to him at that time. Counsel agreed that the “underpayment” to the respondent based on a retirement age of 60.2 years instead of 55.2 years was $15,990 or approximately $16,000. That payment would have been received tax free by the respondent if made as a lump sum payment [1].
[44] If the applicant has to pay spousal support for four more years, the gross cost to him between what he is currently paying ($1,400 per month, the reasonableness of which was not seriously challenged by Ms. Lucas) and the $2,200 he is obliged to pay under the judgment of Heeney J. will be approximately $38,400.00 ($2,200 - $1,400 = $800 per month x 12 months = $9,600 per year x 4 years = $38,400). That amount however will be tax deductible so that his after tax cost will actually be approximately $29,000.
[45] On the other hand, the passage of time has shown that the amount of his earlier equalization payment was based on a later retirement date and therefore a reduced pension value which saved him approximately $20,000. Thus, the difference in cost to the applicant will be approximately $9,000 to $10,000. Furthermore, the amount of spousal support was arguably underpaid based on the applicant’s actual income for a number of years leading up to 2012.
[46] Based on consideration of all the evidence, I would not vary the order at this time.
[47] I do not consider that the extent of the overall change in circumstances is such that the continuation of the existing order until the applicant attains the age of 60.2 years of age will be unjust. In fact, I am satisfied that the needs and circumstances of the respondent are such that she is still suffering an economic disadvantage from the marriage. Justice Heeney rendered a judgment awarding indefinite spousal support while recognizing that the respondent did not want an “if and when” distribution of the applicant’s pension. In rendering his decision, he determined what period of time was reasonably necessary to permit the parties to become economically independent on the information available to him at that time (retirement age of 60.2 years and the respondent earning $85,000).
[48] Based on the foregoing analysis, I am satisfied that the learned Judge fairly accurately estimated that the economic disadvantage suffered by the respondent would be minimized by the time the applicant reached the age of 60.2. Using the same analysis, but applying the actual income and retirement date of the applicant, I am satisfied that result will be attained. I am conscious of the concern related to “double dipping” relative to the applicant’s pension but the concerns in that respect are largely offset when the underpayment of spousal support due to Mr. Hesketh’s increased earnings between 2008 and 2011 and underpayment of the “actual value” of the pension are considered.
[49] When the applicant is 60.2 years of age, the respondent will be 66 and will have had time to plan financially for a significant reduction in her monthly income. The applicant will then be eligible to receive a reduced CPP pension which will not reduce his pension benefits until he reaches the age of 65. The applicant will not suffer significant hardship based on the financial statement provided to this court (exhibit 7).
[50] I am satisfied that this ruling will recognize, as did Heeney J. at para. 43 of his ruling, the economic disadvantage suffered by the respondent upon the breakdown of the marriage. The applicant has enjoyed a supportive new spouse with whom he has been able to share expenses. The respondent has not enjoyed that similar benefit to this stage of her life. She has had to move and essentially live off her support payments to provide care for her elderly father. The earning capacity envisaged by Heeney J. for the respondent of approximately $15,000 to $20,000 per year simply has not materialized because of her desire to care for her father and mother. While the applicant should not be responsible for the provision of care of his former father-in-law, it is a circumstance which the court can take into consideration in that, but for the breakup of the marriage, she would have had a steady household income to permit her to perform the necessary care functions.
[51] The court must also seek to promote the economic self-sufficiency of each spouse within a reasonable period of time. Justice Heeney established the parameters for such an eventuality based upon the income of the applicant and the estimated date of retirement. Using the scrutiny of hindsight and applying the correct annual figures for the calculation of spousal support for the past four years and the proper pension equalization valuation, I am satisfied that the objectives of s. 17(7) can be attained by re-instating the order of Heeney J. effective January 1, 2013, with the applicant having a right of review when he attains the age of 60.2 years.
Conclusion
[52] The application is dismissed. If the parties cannot resolve the issue of costs, I will receive brief written submissions from counsel with a Costs Summary and supporting documentation. The respondent shall serve and file her submissions on or before March 1, 2013. The applicant shall serve and file his response on or before March 15, 2013. The respondent may serve and file a brief reply, if necessary, on or before March 25, 2013. If an extension of time is required for these filings, counsel can agree on an amended schedule and advise my office of that schedule.
Turnbull, J.
Released: February 20, 2013
[1] Spousal support paid as a lump sum is not taxable in the hands of the recipient or tax deductible by the payor. Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 60(b).