BARRIE
COURT FILE NO.: FC-12-0180-00
DATE: 20130418
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: William James Innes, Applicant
AND:
Patricia Dorothy Innes, Respondent
BEFORE: THE HON. MR. JUSTICE G.M. MULLIGAN
COUNSEL: J. Craig, Counsel for the Applicant
D.L. McNairn, Counsel for the Respondent
HEARD: April 4, 2013
ENDORSEMENT
[1] The applicant, William James Innes (“Mr. Innes”) brings a motion to change the final spousal support order of Klowak J. dated July 16, 2003, based on a material change of circumstances, his retirement. The respondent, Patricia Dorothy Innes (“Ms. Innes”) opposes the relief sought on the basis that his retirement was voluntary and therefore, there has not been a material change of circumstances which would warrant a variation in the spousal support order.
[2] For the reasons that follow, I would dismiss the motion to vary spousal support.
[3] The following background facts will provide context.
[4] After a 26-year marriage, the parties separated in February of 2001. They have four children. During the currency of the marriage, both parties worked but Ms. Innes, a teacher, left the labour force for a time to focus on childrearing. Prior to separation, she returned to the workforce as a teacher and they were able to buy back some of the pensionable years lost to her.
[5] After separation, the parties entered into a separation agreement with the benefit of counsel. The children were residing with Ms. Innes, so Mr. Innes agreed to pay child support. At that time, his income was approximately $102,000, and her income was approximately $57,000. They both had pensions and equivalent net worth. They equalized their assets and as part of the agreement, Mr. Innes received a payment for his equity in the matrimonial home, a property where Ms. Innes still resides. As a part of the agreement, they did not make a claim against each other’s pensions.
[6] In the agreement, they each agreed to pay each other $1.00 for spousal support.
[7] In February of 2002, Mr. Innes stopped paying child support when he was no longer legally obligated to do so. Ms. Innes brought a motion to vary, seeking spousal support. In July of 2003, she received an award of spousal support in the amount of $2,000 per month as a result of a motion to change before Klowak J. Her order of spousal support was made retroactive to February of 2002, the date upon which child support stopped. It was not made time limited.
[8] To state that litigation between the parties was hard fought is an understatement. The order of Klowak J. was appealed to the Divisional Court. In May of 2005, the Court upheld her decision, confirmed the $2,000 per month spousal support. Leave to appeal that decision to the Court of Appeal was dismissed in September of 2005. Substantial costs awards were ordered against Mr. Innes. The motion judge granted costs of $25,000 against him. The Divisional Court ordered costs of $15,000 plus GST against him, and the Court of Appeal ordered costs of $750.
[9] Mr. Innes has paid all child support as he was obligated to do throughout the proceedings and has paid all spousal support payments and costs orders.
[10] Ms. Innes retired as a teacher at age 55 in June of 2007. Her income from employment terminated and she began to receive her teacher’s pension and continued to receive spousal support of $24,000 per year. She continues to receive her teacher’s pension and received $29,364 in 2012. There is no question that Ms. Innes retired earlier than required. Although her affidavit indicates that her retirement was based on some health issues of concern to her, it is clear that those issues did not rise to the extent of a long-term disability which would have entitled her to take disability benefits until retirement.
[11] After retirement, her income was substantially lower but she did not seek to vary the support order, nor did she request any financial disclosure from Mr. Innes as to his income in the years that followed the 2003 variation order.
[12] According to Mr. Innes’ affidavit, in January of 2012, at the age of 62, he formally resigned his position as CEO of a not-for-profit corporation effective June 30 of that year. There is no evidence before the court as to when he formed the intention to retire, nor is there any evidence that he suffered any disability, or was offered any incentives to make this decision. In February of 2012, he brought this application to vary. That was the first notice to Ms. Innes that he would be retiring and that he would be seeking to terminate the $2,000 spousal support payment previously ordered.
THE ORDER OF JUSTICE KLOWAK
[13] The order of Justice Klowak contains several findings of fact which are instructive. She noted that at the time of the hearing, Mr. Innes had remarried and his wife was making $99,000 per year. Further, as she noted at paragraph 43:
[43] His standard of living and available income is substantially higher than that of the wife. His budget includes things like $400 a month for meals out, $850 a month for vacation, and $200 a month for golf.
[44] In the end, although a difference in the incomes of the spouses does not necessarily give rise to an order of spousal support, the significant disparity and the standard of living between these two spouses simply should not exist after 26 years of marriage, and in particular, should not exist a mere three years after separation.
[14] At para. 64, Klowak J. stated:
In addition, as I have already mentioned, the wife’s pension has been compromised, and this Court should do what it can to see that she continues to receive support following retirement.
[15] In making the support order, Justice Klowak found that Mr. Innes’ base salary was $128,000, and Ms. Innes’ salary was $63,400 per year. Ms. Innes’ income was reduced in 2007 by reason of her retirement. In 2012, her pension income was $29,364 in addition to the spousal support of $24,000.
[16] Notwithstanding the reduction in income as a result of her retirement, she has lived within her means and she submits he has lived extravagantly. A comparison of the personal expenses of Ms. Innes and Mr. Innes would appear to bear this out. For example, on Mr. Innes’ Financial Statement filed with his Motion to Change, he showed vacation expenses of $12,000 per year. Ms. Innes’ vacation expenses were $2,400. Mr. Innes showed approximately $12,000 for personal expenses, and Ms. Innes showed personal expenses of about $4,400. Both parties reside at homes of about equivalent value but Ms. Innes indicated housing, utilities and household expenses of about $24,000 per year. Although Mr. Innes resided in a house which he says is owned by his wife who has her own employment income, he showed housing utilities and household expenses of about $33,000 per year.
MR. INNES’ INCOME
[17] Mr. Innes’ income rose significantly after the order to vary. The following is a chart of his income from 2008 to 2012.
2008
$160,941
2009
$224,910
2010
$201,169
2011
$217,299
2012
a) Employment income for six months: $155,268 (this includes regular employment income for six months plus payouts of sick days, vacation pay, etc.
b) Pension income for six months: $34,308
[18] For income for 2013, Mr. Innes states that his source of income is his pensions. He has two pensions. The first he describes as a retirement compensation arrangement. The second is a basic lifetime pension. These figures, with transitional and bridge benefits, total $5,718 per month or $68,616 per year.
MR. INNES’ FINANCIAL STATEMENT
[19] With his application, Mr. Innes filed a Financial Statement dated February 7, 2012. The statement showed the following:
Total income: $217,229
Total expenses: $181,899
[20] Mr. Innes appears to have a surplus of income over expenses, but this surplus does not appear to have taken the form of savings or assets according to his Financial Statement. His assets primarily consist of a substantial LIRA of $400,000 and an RRSP of $62,000. In addition, the expenses do not show that he has suffered any hardships. He claimed vacations of $12,000 per year, $12,000 for personal expenses, and he contributed to the housing, utilities and household expenses for the property where he and his spouse reside. These contributions are in the range of $33,000. Justice Klowak found that his spouse was employed, earning $99,000 in 2003, and there is no evidence that her employment status or income has changed or been altered since that Order.
[21] In Mr. Innes’ most recent financial statement of November 2012, he showed reduced expenses but still claimed almost $10,000 for vacations and similar contributions to maintaining household expenses with his spouse. Once again, he showed that he had only limited savings other than the LIRA and RRSPs.
[22] In spite of the significant rise in Mr. Innes’ income from the date of the variation order until his retirement, he has not accumulated any savings which would produce interest or dividend income to assist him post retirement. He claims car expenses, but states that he does not own a vehicle. He also states that he does not own the matrimonial home with his spouse and that it was acquired by her with her funds prior to their marriage. In spite of the spousal support order, which was not limited in duration, Mr. Innes does not appear to have taken any steps which would enable him to maintain his spousal support obligations after retirement.
[23] Ms. Innes has capital assets, including her principal residence, the former matrimonial home which she values at $500,000. In addition, she has savings and investments of about $180,000. Mr. Innes submits that she should encroach on capital, or sell her residence to make up any shortfall that a termination of spousal support would occasion.
ANALYSIS
[24] Is a voluntary retirement by a payor spouse a material change in circumstances sufficient to ground an application to terminate spousal support?
[25] Variation of spousal support is governed by s.17 of the Divorce Act, R.S.C. 1985, c.3 which provides:
17(1) A court of competent jurisdiction may make an order varying, rescinding or suspending, prospectively or retroactively,
(a) a support order or any provision thereof on application by either or both former spouses; ...
(4.1) Before the court makes a variation order in respect of a spousal support order, the court shall satisfy itself that a change in the condition, means, needs or other circumstances of either former spouse has occurred since the making of the spousal support order or the last variation order made in respect to that order, and, in making the variation order, the court shall take that change into consideration.
[26] The Supreme Court of Canada dealt with variation for spousal support in L.G. v. G.B., 1995 65 (SCC), [1995] 3 S.C.R. 370. In that decision, the court adopted a test developed in Willick v. Willick, 1994 28 (SCC), [1994] 3 S.C.R. 670.
[27] In Chalmers v. Chalmers, 2009 BCSC 517, [2009] B.C.J. No. 765, Bruce J. provided a helpful summary of the principles in Willick and L.G. v. G.B. As he stated at para. 21:
In my view, the principles derived from these passages are as follows:
The change must be a material one; such that if known at the time it would have likely resulted in a different order.
What is a material change will in each case be determined on the particular facts. The court should not endeavour to divide into categories those changes that are material and those that fail to satisfy this standard.
What is a sufficient change must be measured against the parties’ overall financial situation.
The fact that a change was objectively foreseeable does not mean that it was contemplated by the parties and forms part of the underlying basis for the original order.
The onus rests with the applicant to prove a material change in the condition, means, needs or other circumstances warranting a review of spousal support; however, the court should maintain a flexible approach to the exercise of this discretion to ensure all of the relevant facts in a given case are considered.
[28] In the context of retirement, Beaulieu J. provided the following helpful summary in Doe v. Doe, [1999] O.J. No. 733 (Ont. Ct. Gen. Div.) at para. 13:
I now sum up the legal principles that emerge from the cases which have considered what constitutes a material change in circumstances. First, while an applicant’s decreased income due to retirement must be taken into account, retirement alone does not necessarily constitute a material change in circumstances. Voluntary retirement has been recognized as a material change in circumstances which justifies a reduction in child support. Facts relative to a change which were known at the time of the prior order cannot be relied upon to prove a material change in circumstances. [Citations omitted]
[29] In Bullock v. Bullock, 2004 16949 (ON SC), [2004] O.J. No. 909, Corbett J. reviewed an application to vary by a 62-year old man who the court found had retired voluntarily. The parties had a 23-year marriage and three children. On the facts of the case before him, the court found that the payor had voluntarily retired and was living comfortably on a second wife’s income. As Corbett J. stated at paras. 8, 9 and 10:
He has chosen not to do so (earn an income post retirement) because he does not need to work anymore to enjoy a comfortable lifestyle. Many people dream of retiring “early”, although there is not a set age at which people today expect to cease working. Many successful people find that they can afford to stop work before they reach the age of 65. Others continue well into their 70s and even longer. The legal question for this case then is not whether Ronald should retire at age 62, but whether this personal choice should be viewed as a “material change of circumstances” for the purpose of payment of spousal support. In my view it should not.
[30] In Szczerbaniwicz and Szczerbaniwicz, 2010 BCSC 421, [2010] BCJ No. 562, Punnett J. reviewed a motion to vary where a husband took voluntary retirement at age 52. The court reviewed a number of fundamental principles and stated at para. 24:
In Gazdzik, Wilson J. at para. 54 stated:
With respect to Mr. Gazdzik, the first thing to be considered is his motivation for retirement, and whether it is reasonable in light of his ongoing obligations to Ms. Gazdzik. As pointed out in such cases as Vennels, when voluntary retirement is advanced as a reason to terminate the spousal support, the circumstances must be considered carefully to ensure that the application has not been prompted by a desire to avoid the support order. I do not consider that to be Mr. Gazdzik’s sole reason for retiring in this case, although I do consider it a factor.
[31] On the facts before him, Punnett J. concluded at paras. 29 and 30:
The reasons for retirement given by the defendant all involved his personal wishes. He does not recognize or acknowledge the effect of his decision on his ongoing obligation to the plaintiff. I have no hesitation finding that the defendant’s reasons for taking early retirement do not relieve him of his obligation to pay spousal maintenance.
[32] Both parties made reference to Boston v. Boston, 2001 SCC 43, [2001] 2 S.C.R. 413, the seminal Supreme Court of Canada’s decision on double-dipping with respect to pension income post retirement.
[33] The same argument was advanced before Corbett J. in Bullock v. Bullock, supra, and I adopt his analysis at para. 13:
There is no suggestion in Boston that the payor spouse had chosen to retire early. There was no argument that the payor spouse had continued earning capacity and that income ought to be imputed to him. In my view, voluntary retirement at age 62 is not a basis for finding a material change of circumstances. A support payor cannot choose to be voluntarily underemployed whether by retirement or otherwise and thereby avoid his or her spousal support payment obligations. [Citations omitted]
CONCLUSION
[34] On the circumstances before me, I am not satisfied that Mr. Innes has established a material change in circumstances warranting a termination of the spousal support order. The following facts inform my decision:
(i) Mr. Innes chose to voluntarily retire, reducing employment income of over $200,000 to retirement income of under $70,000. I find that it was a personal decision for lifestyle reasons. There is no indication of ill health or the employer’s urge or request that he retire early.
(ii) Mr. Innes continues to enjoy a comfortable lifestyle post retirement. He resides in a home registered to his spouse.
(iii) Since the date of the variation order, Mr. Innes’ income had almost doubled over a ten-year period. Notwithstanding his rising income and the financial contribution of his employed spouse, he has not demonstrated any significant level of savings, which would have enhanced his post-retirement income by interest or dividends.
(iv) In choosing to voluntarily retire, Mr. Innes has not taken into account his ongoing spousal support application. The order of Klowak J. was not time limited and did not contemplate any reduction in spousal support post-retirement.
(v) Mr. Innes did not give any advance notice to Ms. Innes about his intention to retire and terminate spousal support.
[35] Mr. Innes has not satisfied the onus on him that there has been a material change in circumstances. Therefore, his application to vary is dismissed.
COSTS
[36] Ms. Innes has been successful in responding to this Motion to Vary. If the parties are unable to resolve the issue of costs, I invite brief written submissions from counsel for Ms. Innes within 20 days of the release of this endorsement, with counsel for Mr. Innes having 10 days to respond. Submissions are not to exceed three pages.
MULLIGAN J.
Date: April 18, 2013