Brothers v. LeBlanc, 2013 ONSC 4073

minicounsel

COURT FILE NO.: 2440/12

DATE: 20130612

BETWEEN:

Sharon Brothers Applicant

– and –

Tim LeBlanc Respondent

Self-Represented Self-Represented

HEARD: June 3, 4, 2013

E.J. Koke J.

1This is an application to enforce the terms of a separation agreement.

BACKGROUND

2The parties lived together in a common law relationship in Sault Ste. Marie, Ontario from September, 1987 through October, 2007, a period of approximately 20 years.

3The respondent, Mr. Leblanc is a heavy equipment operator and during the relationship he operated an unincorporated business called Tim LeBlanc Construction. This business was engaged in the work of building and maintaining bush roads for logging companies in Northern Ontario. During the winter months it carried out snow removal and snow clearing operations in and around Sault Ste. Marie, Ontario.

4Ms. Brothers performed clerical and bookkeeping services for the business from home. She also worked on a part time and sometimes full time basis outside the home. She is presently employed in a clerical position with a local school board.

5Prior to separating the parties purchased a home at 1520 Peoples Road (the “home”) in the City of Sault Ste. Marie.

6When the parties separated they entered into a separation agreement (the “Agreement”), which they signed on February 1, 2008. Generally, the Agreement provided that Mr. LeBlanc would keep the business assets and that he would transfer his interest in the home to Ms. Brothers. The agreement further provided that Mr. LeBlanc would pay spousal support to Ms. Brothers in the sum of $1.00 per year and in lieu of additional support he would continue to make the mortgage payments due on the home. He also agreed to discharge the mortgage by February 1, 2012, which was four years from the date of the agreement.

7Mr. LeBlanc transferred his interest in the home to Ms. Brothers and continued to make the bi-weekly payments on the mortgage as agreed through February 1, 2012. When the mortgage was not discharged on February 1, 2012 Ms. Brothers wrote Mr. LeBlanc a letter dated February 2, 2012 regarding his intentions. In response Mr. LeBlanc contacted Ms. Brothers’ lawyer on February 13, 2012 and requested a 6 month extension to discharge the mortgage, stating he did not have any money and wanted to try to negotiate a settlement. Ms. Brothers refused and commenced this application.

8On April 30, 2012 the parties attended at a Case Conference before Justice Gareau at which time an order was made on consent that Mr. LeBlanc continue to make the mortgage payments on an interim basis.

9Monthly payments on the mortgage totalled $1462.33 comprised of payments on account of principal and interest of $1267.20, a life insurance premium of $52.35 and a critical illness premium of $142.78. Mr. LeBlanc continued to make these payments after the case conference and the parties continued to discuss a resolution of the issues until September 12, 2012 when Ms. Brothers’ was notified by a Trustee in Bankruptcy that Mr. LeBlanc had declared bankruptcy effective September 7, 2012, and that he had named both Ms. Brothers and the mortgagee as creditors.

10As of the date of Mr. LeBlanc’s bankruptcy the sum of $129,002.46 remained owing on the mortgage, which is the amount claimed by Ms. Brothers in this application.

11Shortly after the separation Mr. LeBlanc entered into a new relationship and began living with Cindy Thomas. Ms. Thomas is a nurse by training and continues to work in this capacity. Effective June 7, 2012 Ms. Thomas registered a sole proprietorship under the name TLC Construction and she purchased some of the equipment owned by Tim LeBlanc Construction.

12Since his bankruptcy Mr. LeBlanc has been employed by TLC Construction which pays him a salary of $2000 per month. His discharge from bankruptcy was scheduled to occur on June 7, 2013.

13Ms. Brothers earns approximately $42,000 annually as an employee of the school board.

14Mr. LeBlanc and Ms. Brothers retained legal counsel to assist them with this application. Both parties had chosen to represent themselves by the time the settlement conference was scheduled, and they both appeared in court as self-represented litigants.

ISSUE

15The issue to be decided by this court is whether there has been a material change in Mr. LeBlanc’s circumstances which justify relieving him of his obligation to pay continued support or to discharge the mortgage. In the event the court decides that the obligation to pay support should continue, the court must decide the terms of such support order.

16Although Mr. LeBlanc indicated in his reply to the application that he did not receive independent legal advice before signing the agreement he did not argue this issue at trial. He acknowledges that he formally waived his right to obtain such advice in the agreement. At most the evidence indicates that as events unfolded after Mr. LeBlanc signed the Agreement he realized in hindsight that he had been overly optimistic about his ability to make the agreed upon payments.

POSITION OF MS. BROTHERS

17Ms. Brothers requests the court to make an order requiring Mr. LeBlanc to continue to pay support in the sum of $5000 per month, commencing immediately, until he has paid an amount equivalent to what remained owing on the mortgage at the time of his bankruptcy, together with interest thereon. In addition, she requests that he be ordered to maintain in place a life insurance policy in her favour, and pay her legal costs.

18She bases her position that Mr. LeBlanc should be compelled to pay continuing support in this amount on the following:

19Firstly, she argues that he is leading an extravagant lifestyle. She cites the fact that he drives a pick-up truck which was purchased for $62,000. She alleges that he also purchased a time share and has taken two vacations out of the country in the past year, has purchased a house worth over $300,000 with Ms. Thomas, has purchased an ATV worth $13,000 and has purchased a new motor boat worth $30,000. According to Ms. Brothers, Mr. LeBlanc’s lifestyle is inconsistent with someone who earns only $24,000 per year.

20Secondly, she submits that TLC Construction is actually being operated by Mr. LeBlanc, and not by Ms. Thomas and this business was established for the purpose of allowing Mr. LeBlanc to report an unreasonably low income, and presumably to funnel the profits of the business to Ms. Thomas.

21Thirdly, she argues that Mr. LeBlanc was not forthcoming with the Trustee or his creditors in relation to his bankruptcy. She submits that he has failed to disclose assets to the Trustee, that he has disposed of assets in anticipation of his bankruptcy and he has used the proceeds for his own benefit, and that he has transferred assets to TLC Construction for no consideration or for less than market value.

POSITION OF MR. LEBLANC

22Mr. LeBlanc argues that he is not in a position to pay any support whatsoever. He agrees that up until the time of his separation from Ms. Brothers he earned a very good income through the operations of Tim LeBlanc Construction, and that at the time he signed the Agreement he was confident that he would be able to meet his commitments to Ms. Brothers and pay off the mortgage on the home.

23Mr. LeBlanc submits that the significant decline in his income from Tim LeBlanc Construction is essentially due to two factors.

24Firstly, up until about 2007 a significant amount of his time was spent working in the bush, clearing and building logging roads. He would spend many days at a time away from home while he operated his equipment in remote areas. Work was always available, he could work long hours and he could count on being paid. In his words this work was “lucrative” and provided him and Ms. Brothers with a very good income. However, around the time of his separation from Ms. Brothers the lumber industry suffered a serious decline and this work was no longer available to him. His equipment remained idle much of the time but many of the expenses associated with working in the bush and owning bush clearing and road building equipment continued, such as the insurance, maintenance and the instalment payments for the purchase of his equipment. As a result, his income dropped dramatically in the years following the separation.

25Secondly, after coming to the realization that future work for him in the forestry sector would be limited, Mr. LeBlanc decided that he would concentrate on building up the snow ploughing and snow removal aspect of his business. However, he then experienced three winters in succession in which it rarely snowed. These were the three winters commencing the winter of 2009/2010. Almost all of his contracts were based on an hourly rate for labour and equipment, and after several years he discovered that the costs of owning and maintaining the snow removal equipment exceeded his income therefrom. As a result, he was forced to sell most of his snow removal equipment last fall, together with his snow removal contracts.

26Mr. LeBlanc testified that TLC Construction has recently been able to secure a contract to provide grading and excavation services to Clarida Construction, a company which has a contract to construct a solar farm in New Liskeard, Ontario. New Liskeard is approximately 550 kilometres from Sault Ste. Marie. TLC Construction was able to lease two excavators, and Mr. LeBlanc and his son have rented an apartment in New Liskeard and have moved to New Liskeard temporarily where they will operate these excavators for TLC Construction.

27Mr. LeBlanc stated that he is confident that he will have work in New Liskeard until at least October or November of this year and he is hopeful that this contract will enable him to get back on his feet again financially. TLC pays all of the expenses he incurs in working and living this far from home and in addition pays him a salary of $2000 per month. He is hopeful that TLC will be in a position to provide him with an increase in salary in the future, but this will depend on the future profitability of this new business. Clarida also has contracts to construct solar farms in other locations in Ontario and there exists the possibility that after this contract is completed Clarida will have additional work for TLC.

28Mr. LeBlanc submits that Ms. Brothers has a secure income which comes with a pension. She is in a new relationship and she and her new spouse enjoy financial security. She is therefore no longer in need of support and he should be relieved of his obligation to pay continued support.

DISCUSSION

The Separation Agreement: Relevant Terms.

29In deciding whether Mr. LeBlanc should be ordered to pay continued support it is necessary to review some of the relevant terms of the Agreement. These terms include the following:

Par. 4.2…If Sharon or Tim seeks a change in this Agreement, he or she will give the other, in writing:

(a) Notice of the proposed change,

(b) Evidence supporting the proposed change, and

Par. 4.5…If Sharon and Tim cannot agree within 30 days of the request for review or variation, they will try mediation first and then by court application.

Par. 5…Tim will pay Sharon spousal support of $1.00 a year, starting on January 1, 2008. Tim will make the payments on the first day of each year.

Par. 5.1…Spousal support ends when:

(a) Sharon dies,

(b) Tim makes the final payment due on the mortgage of the home and a discharge of the mortgage is obtained, or

(c) Tim dies and if the insurance required by this Agreement is in place against the mortgage on the home. If the insurance against the mortgage on the home is not in place Sharon may make a claim against Tim’s estate regarding same.

Par. 5.2…Spousal support may be changed if there is a material change in circumstances, even if the change was foreseen or foreseeable. The change may be:

(a) in either party’s financial position,

(b) Tim defaults on the payment of the mortgage on the home,

or any other similar change.

Par. 5.5…Tim will pay the spousal support directly to Sharon and not to the Family Responsibility Office. Neither party will file this Agreement with the Family Responsibility Office for enforcement.

Property and Jointly Owned Home

Par. 7.1…The parties own the home jointly.

Par. 7.2…On signing this agreement, Tim will transfer his interest in the home to Sharon, free of all encumbrances. Sharon will pay the cost of the preparation and registration of the transfer and the accompanying land transfer tax.

Par. 7.4…Sharon and Tim will remain jointly responsible for the mortgage on the home held with Scotiabank. Tim will continue to make the monthly payments on the home in lieu of spousal support and shall continue to co-sign for and /or guarantee the mortgage. Tim will be responsible for all penalties, interest and costs resulting from this mortgage in the event that he defaults on a payment. Tim agrees that he will pay off the mortgage on the home held with Scotiabank within 4 (four) years and he shall use all reasonable efforts to affect same.

Par. 7.5…Tim will not deduct these payments from his taxable income and Sharon will not include them in her taxable income.

Par. 7.10…The spousal support and property sections of this Agreement are interdependent and inextricably intertwined in that they:

(a) fully satisfy the support objectives set out in the Family Law Act

(b) recognize any economic advantages or disadvantages to the spouse arising from the marriage or its breakdown,

(d) insofar as is practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time,

(e) recognize each spouse’s contribution to the relationship and the economic consequences of the relationship for the spouse,

(f) fairly assist the spouses to become able to contribute to their own support, and

(g) relieve all financial hardship.

Has there been a Material Change in Circumstances?

30The wording in paragraph 5.2 of the Agreement indicates that the threshold for what constitutes a material change is relatively low. A material change can be a change which is both foreseen and foreseeable. It can comprise a change in a party’s financial position or a default by Tim in the payment of the mortgage.

31Clearly, there has been a material change in circumstances. Mr. LeBlanc has recently declared bankruptcy, he is no longer operating Tim LeBlanc Construction, he is being paid a salary of only $2000 per month and he has defaulted on his obligation to discharge the mortgage on the home.

Is Mr. LeBlanc’s Reduction in Income Self Induced and Intentional?

32In my view, Mr. LeBlanc does not lead an extravagant lifestyle. Although at first instance it appears that a $62,000 pick-up truck might be extravagant for someone in Mr. LeBlanc’s present financial position, I note that it was purchased in 2010; this was before the full impact of the business challenges facing Mr. LeBlanc were fully realized by him. Also, the truck is almost fully encumbered and is being paid for over a seven year term. It serves as both Mr. LeBlanc’s personal vehicle and his work vehicle. Presently he is driving a distance of 550 kilometres to New Liskeard to work and in my view it would be foolish for him to sell this vehicle and purchase a less expensive and perhaps less useful or reliable vehicle.

33With respect to Mr. LeBlanc’s house, I note that it is valued at about $350,000 and is jointly owned by him and Ms. Thomas. Ms. Thomas is employed as a nurse; she has a good income and she testified that she is presently making the mortgage payments. I note that the home is valued at less than the value of the Peoples Road home. Also, because it is encumbered by both a first and second mortgage the trustee in bankruptcy estimates that the net realizable value of Mr. LeBlanc’s interest after a sale is only $7,500. Ms. Thomas, her two daughters and Mr. LeBlanc live in the home. When I take into consideration the costs which would be incurred in listing and selling this home, and the additional costs which would be incurred in purchasing and moving into another home, I cannot conclude that Mr. LeBlanc’s ownership interest in this home is indicative of an extravagant lifestyle.

34Mr. LeBlanc admits that his decision to purchase a time share with Ms. Thomas was a mistake. This time share was purchased in 2010. Mr. LeBlanc provided evidence that the time share has been listed for sale for some time now but there has not been any interest expressed by potential buyers. The decision to take holidays outside of the country this past year was motivated by the fact that their accommodation costs were paid for via their ownership interest in the time share, which continues to be listed for sale.

35Ms. Brothers alleges that Mr. LeBlanc purchased and continues to own a new Doral motor boat. Mr. LeBlanc provided evidence that the boat was in fact a 2002 model which was purchased by Ms. Thomas in February, 2009. Ms. Brothers alleges that Mr. LeBlanc also continues to own a fifth wheel motor home. Mr. LeBlanc produced evidence at trial indicating that the motor home was sold in June 2012 and that the funds were deposited in his business account. Evidence was also provided that the ATV belongs to Ms. Thomas and was purchased by her in February, 2009.

36Ms. Thomas gave evidence at the trial. She was candid in admitting that she did not have any experience in operating a construction company and that she often has to rely on Mr. LeBlanc for direction and advice. She explained that when Tim LeBlanc Construction began to experience financial problems she assisted Mr. LeBlanc by injecting her own money into the business in order to prevent some of the equipment from being repossessed. Eventually she came to the realization that Tim LeBlanc Construction would likely not survive so she established her own business in order to protect her investment in the equipment, and presumably to ensure that Mr. LeBlanc would have some employment in the event he was forced to declare bankruptcy. Although some equipment was transferred to her company from Tim LeBlanc Construction most of this equipment was fully encumbered and she was able to make arrangements with the security holders to purchase this equipment by taking over the payments. To the extent some equipment was transferred to her which was not fully encumbered, she paid market value and these transactions have been investigated and cleared by the Trustee.

37The books and records of both construction companies were made available for the review by the court and witnesses at the trial. In my view, these records do not establish that TLC Construction is funnelling profits to Ms. Thomas or to anyone else; quite the contrary, the business is barely able to meet its financial commitments to its creditors.

38Ms. Brothers called Mr. Terry Wright who purchased the snow removal contracts and equipment and he satisfied me that his purchase of these assets was bone fides. She also called Mr. Keith Clarida, the proprietor of Clarida Construction and he satisfied me that the contract between Clarida Construction and TLC Construction was a bone fide contract and those payments for the work performed by Mr. LeBlanc and his son in New Liskeard were being made directly to TLC Construction. Ms. Brothers also called Ms. Jamie Errington who is Mr. LeBlanc’s niece. Ms. Errington testified that she works in the field of property development and real estate. In September 2011 she purchased a vacant parcel of land from Mr. LeBlanc which she was able to sell at a substantial profit in October 2012. There is no evidence that this sale was not a bone fide transaction; in fact the evidence established that the increase in value was attributable to both improved market conditions and to the fact that she was able to combine this land with an adjacent piece of land she owned and sell it to a property developer.

39The books and records also reveal that throughout the months leading up to his bankruptcy, Mr. LeBlanc borrowed money repeatedly from family and friends in order to meet his financial obligations. I note that Ms. Errington is listed in the Bankruptcy documents as an unsecured creditor for the amount of $57,000. Another friend, Mr. Bev Secord testified that he loaned Mr. LeBlanc $10,000 in August, 2011, then later another $10,000 and then as recently as this year has loaned TLC construction $25,000 and sold TLC Construction a used pick-up truck for which he has not yet been paid. These loans from friends and family point to and confirm for me the fact that Mr. LeBlanc was in precarious financial circumstances during this time period.

40Ms. Brothers submits that Mr. LeBlanc failed to disclose assets to the Trustee and that he disposed of certain assets in anticipation of his bankruptcy, using the proceeds for his own benefit. She also alleged that he transferred business assets to TLC Construction for no consideration or for less than market value.

41Ms. Brothers provided the Trustee in Bankruptcy with a list of assets which she alleged Mr. LeBlanc failed to disclose to the Trustee. I note that the Trustee investigated her concerns and reported back that the items were either disposed of prior to the bankruptcy and the proceeds accounted for, or were of minimal value or owned by third parties. I am not prepared to second guess the decisions of the Trustee in relation to Mr. LeBlanc’s bankruptcy, and I defer to his judgment with respect to these bankruptcy issues.

42In summary, I find that that there is no evidence from which I can conclude that Mr. LeBlanc intentionally arranged his affairs so that he could avoid meeting his commitment to pay off the mortgage on the Peoples Road property. Rather, Ms. Brothers’ insistence that the full mortgage be paid in February 2012 likely constituted the proverbial straw that broke the camel’s back, leading Mr. LeBlanc to conclude that he had no choice but to make an assignment in bankruptcy.

43In conclusion, I do not find that Mr. LeBlanc’s reduction in income was self-induced and intentional.

Should Mr. LeBlanc be ordered to make ongoing payments?

44In Bracklow v. Bracklow,¹ Justice McLachlin, as she then was, acknowledged three conceptual grounds for entitlement to spousal support: (i) compensatory; (ii) contractual; and (iii) non-compensatory.

45A consideration of these grounds is helpful in determining whether there should be an ongoing obligation imposed on Mr. LeBlanc to pay support.

46During their twenty years together, Mr. LeBlanc developed skills, contacts and experience which enabled him to earn a very good income. The role played by Ms. Brothers in the relationship was very much a supportive role. She was the one who stayed at home, took care of the paperwork and the books and by doing so she allowed Mr. LeBlanc to develop his skills, his contacts and his experience.

47The parties separated on terms whereby Mr. LeBlanc continued to own the business and the business assets which had always generated a very good income. Ms. Brothers received the house, but her income earning potential was limited and I expect it would have posed some difficulty for her to make the mortgage payments.

48In February 2008 there was no reason to believe that Mr. LeBlanc’s income would decline in the ensuing years and it was reasonable for the parties to decide that Mr. LeBlanc would pay off the mortgage on the house, by way of continuing support payments followed by a lump sum payment after four years. Without being burdened by mortgage payments, Ms. Brothers’ anticipated income would be sufficient to enable her to continue a comfortable, albeit modest lifestyle.

49In summary, I find that the Agreement took into consideration both the needs of the parties, their respective abilities to pay and the historic contribution made by Ms. Brothers to the business. It would appear that all three of the grounds set out in Bracklow co-existed as bases for the terms set out in the separation agreement.

50With the exception of Mr. LeBlanc’s present ability to pay, it is my view that these grounds continue to exist and are relevant today.

51Mr. LeBlanc argues that he no longer has the ability to pay the agreed upon support. Clearly, his income has declined. However, I am not inclined to view his present financial situation as being permanent. He still has the skills to operate heavy equipment. He is only 51 years old and he is in apparent good health.

52With respect to the availability of work for equipment operators and Mr. LeBlanc’s ability to generate an income a letter was entered into evidence signed by Mr. Robert Catling who is the business Representative for Local 793 of the International Union of Operating Engineers. In this letter, which is dated October 30, 2012 Mr. Catling states the following:

The construction season has been an extremely busy one in the Sault St. Marie and surrounding districts during the past ten years with hydro dam projects, windmill and solar farms, schools, Sault Area Hospital, PUC, Extendicare , Sault College, Algoma University, Hwy 17 four-laning, to name a few. It is projected to be even busier in northern Ontario over the next decade.

There is and has been a shortage of experienced heavy equipment operators (i.e. backhoes, shovels, dozers, loader, graders). The union has been actively recruiting new members to fill the voids where we are unable to supply qualified operators.

Any experienced heavy equipment operator would have enjoyed steady employment if desired.

The wage rates for shovel backhoe operators currently range from:

$26.85 to $30.41 per hour for local road-building contractors;
$49.62 per hour for hydro dam projects (i.e. Lower Mattagami River Project which has been on-going since May 2010);
$47.75 per hour on ICI projects (i.e. Sault Area Hospital, PUC Building, Extendicare, Algoma University, Sault College projects);

53Mr. LeBlanc did not take issue with the contents of Mr. Catling’s letter. He testified however that he has always worked for himself and that he would not be able to deal with the restrictions and other limitations which would be imposed on him as a union employee. Therefore he was reluctant to work in a union environment.

54I can understand that after being self-employed for his entire career Mr. LeBlanc would experience difficulty adjusting to a unionized workplace culture. However, the fact remains that he did bind himself contractually to pay off the mortgage on the Peoples Road home and in my view he should be prepared to accept union work if this is what is required for him to meet his financial obligations.

55Mr. LeBlanc did confirm that now that the winter is behind him and good weather has arrived he is able to work many hours in New Liskeard. Ms. Thomas testified that she was hopeful that TLC construction will soon be in a position to provide Mr. LeBlanc with an increase in pay.

56In summary, Mr. LeBlanc is an experienced operator of heavy equipment. The evidence is that there is work available for someone with Mr. LeBlanc’s skills. In my view, he should be able to generate an income of between $80,000 and $90,000 per year and I am imputing that amount of income to him.

57An income of $80,000 to $90,000 per year is double that of the income earned by Ms. Brothers. Mr. LeBlanc has the means to make additional payments to Ms. Brothers and in the circumstances an order should issue requiring him to do so.

The Terms of the Order

(1) How much should Mr. LeBlanc Pay?

58Neither of the parties characterized the mortgage payments set out in the Agreement as anything other than support payments. However, it would appear that there is an equalization aspect to these payments and this should be taken into consideration in determining how much Mr. LeBlanc should pay.

59This equalization aspect is reflected in the introductory sentence to Paragraph 7:10 of the Agreement where the parties agree that “The spousal support and property sections of this Agreement are interdependent and inextricably intertwined….”

60Although I am not dealing here with a variation of a court order I am guided by the provisions of the Family Law Act² of Ontario which treats variation of support orders differently than variations of orders made in regard to equalization of net family properties. With regard to variations of equalization orders, section 9(3) states

9(3)…If the court is satisfied that there has been a material change in the circumstances of the spouse who has the obligation to make instalment or delayed payments, the court may, on motion, vary the order, but shall not vary the amount to which the court found the spouse to be entitled under this Part.[emphasis added]

61Mr. LeBlanc received the property to which he was entitled under the terms of the Agreement. Ms. Brothers did not receive the property to which she was entitled, at least not on a free and clear basis. In the circumstances, it is my view that Mr. LeBlanc should be obligated to fulfill his agreement to pay off the mortgage in full. At the time of Mr. LeBlanc’s bankruptcy the sum of $129,002.46 remained owing on the mortgage, and this is the amount which should be paid by Mr. LeBlanc.

(2) How much should Mr. LeBlanc pay Monthly?

62I have found that Mr. LeBlanc should be capable of earning $80,000 to $90,000 per year. I am imputing this amount of income to him. Ms. Brothers earns $42,000 per year.

63If I apply these income amounts to the spousal support advisory guidelines Mr. LeBlanc’s monthly support obligations would be in the range of $980 per month to $1600 per month. I see no reason why I should not rely on these guidelines in the circumstances of this case.

64There is no question in my mind that Mr. LeBlanc has struggled financially over the last several years and that it will take him some time to recover. In the circumstances I have decided that his payments should initially be set at $1000 per month, to commence on July 1, 2013. Commencing July 1, 2014 and thereafter payments should be increased to $1500 per month.

(3) Calculation of Interest on the payments.

65I am ordering that interest is to accrue on the outstanding balance owing to Ms. Brothers at a rate of 3.5% annually. This interest is to be calculated annually on December 31^st of each year, commencing December 31, 2012. Interest is to be based on the principal sum owing on that date, and is then to be added to the principal amount owing to Ms. Brothers.

66Mr. LeBlanc’s bankruptcy occurred early in September, 2012 and the amount to be added to the principal amount owing on December 31, 2012 is $1505.03 (4 months interest at 3.5% on $129,002.46). I calculate therefore that the principal amount owing to Ms. Brothers on December 31, 2012 is $130, 507.49 ($129,002.46 + $1505.03 = $130,507.49). The principal amount on which interest will be based on December 31, 2013 is the sum of $130,507.49 less any payments made during 2013.

(4) Duration of Payments

67I am hopeful and reasonably confident that Mr. LeBlanc’s financial position will improve over the next four years, and accordingly I am ordering that the principal amount owing as of that date, together with 6 months interest, be paid on July 1, 2017.

(5) Taxation of Payments.

68The Agreement provided that Mr. LeBlanc would not deduct the monthly mortgage payments from his taxable income and Ms. Brothers would not include them in her taxable income. Since the payments I am ordering Mr. LeBlanc to pay are in essence a continuation of the previous mortgage payments, and since they are for a fixed period of time and are designed to allow Ms. Brothers to accumulate a capital asset, I am of the view that they should be non-taxable. This would appear to be consistent with the principles set out in R. v. McKimmon,³ a decision of Justice Hugessen of the Federal Court of Appeal. However, I leave the final decision as their taxability to the Canadian tax authorities, and in the event it is determined that the payments are taxable in the hands of Ms. Brothers, Ms. Brothers is to notify Mr. LeBlanc forthwith and the amount by which Ms. Brother’s income tax increases as a result of receiving these payments is to be added to the principal payable by Mr. LeBlanc on an annual basis.

Role of Family Responsibility Office

69Unless the parties agree otherwise, these payments are to be made to the Family Responsibility office.

Insurance

70In addition to the above payments, Mr. LeBlanc shall irrevocably designate Ms. Brothers as the beneficiary of a life insurance policy on his life with a minimum face value of $ $130,000 for as long as this obligation to make payments to Ms. Brothers continues.

71Mr. LeBlanc shall send Ms. Brothers proof that the application for life insurance has been made and that she has been designated as the recipient of this amount.

72If, at the time of his death Mr. LeBlanc has not complied with his obligation with respect to his life insurance policy, this clause shall constitute a first charge against his estate in an amount equal to the face value of the policy.

Dispute Resolution

73The dispute resolution mechanisms set out in paragraph four of the Agreement remain in force.

Costs

74If either of the parties desires costs with respect to these proceedings they should file written submissions with the court within 2 weeks of the date this decision is released, and serve the other party with a copy thereof. Replies to submissions in support of costs should be filed and served within 10 days thereafter.

E.J. Koke J.

Released: 20130612

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Sharon Brothers Applicant

and –

Tim Leblanc Respondent

REASONS FOR JUDGMENT

E.J. Koke J.

Released: 20130612

Footnotes

Bracklow v. Bracklow, 1999 715 (SCC), [1999] 1 S.C.R. 420
Family Law Act R.S.O. 1990, Chapter F.3 as amended
R. v. McKimmon, 1989 10032 (FCA), [1990] 1 C.T.C. 109 (Fed. C.A.)

Footnotes

Bracklow v. Bracklow, 1999 715 (SCC), [1999] 1 S.C.R. 420
Family Law Act R.S.O. 1990, Chapter F.3 as amended
R. v. McKimmon, 1989 10032 (FCA), [1990] 1 C.T.C. 109 (Fed. C.A.)