SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: FC-08-1664-1
DATE: 2013/11/04
RE: Ron Walts v. Donna Walts
BEFORE: Mr. Justice Timothy Minnema
COUNSEL:
Deanne E. Fowler, for the Applicant, Ron Walts
Suzanne Y. Côté, for the Respondent, Donna Walts
DATE HEARD: July 11, 2013
E N D O R S E M E N T
[1] This was a motion brought by the applicant Ron Walts to change the consent order of Toscano-Roccamo J. dated August 26, 2008, such that his spousal support obligation would terminate upon his retirement. The parties agreed that this motion could be heard in advance of that retirement. Mr. Walts was also seeking division of the respondent Donna Walt’s pension as a result of an alleged lack of disclosure by her when the Separation Agreement, upon which the consent order was based, was negotiated.
[2] At the hearing Ms. Walts was seeking to have the motion dismissed on the basis that Mr. Walts had not established a material change in circumstances that would allow for a variation of spousal support. She was no longer seeking retroactive support, but indicated that if I were to find a material change in circumstances then she was seeking to have income imputed to Mr. Walts to set a new higher spousal support amount.
Issues
[3] The issues therefore are:
a) Whether Mr. Walts is entitled to a division of Ms. Walts’ pension as a result of lack of disclosure.
b) Whether there has been a material change in circumstances relating to the spousal support. If not, the inquiry ends there. If so, then whether the spousal support should terminate or be adjusted, including a consideration of whether income should be imputed to Mr. Walts.
Facts
[4] Mr. Walts was born on September 7, 1958 and is 55 years old (he was 54 when the application was heard). Ms. Walts was born on March 27, 1960 and is 53 years old. The parties were married on May 12, 1979, at ages 20 and 19 respectively.
[5] Their first child was born on January 1, 1983, and they had two more children, in 1985 and in 1987. For close to nine years, from just before the first child’s birth up until when the youngest started school in September of 1991, Ms. Walts was a full-time mother and homemaker, but also earned some income providing home day-care. In September of 1991, she became employed with the provincial government in British Columbia. However, the next year she suffered from a stroke. She attempted to work until 1998 when she qualified for long-term disability through Great West Life. She also qualified for Canada Pension Plan disability. She still receives both benefits. Her employment with the BC government earned her a modest employee pension.
[6] Throughout the marriage Mr. Walts was a civilian employee for the Department of National Defense. There was some dispute about his skills. He says that he has been in management at a desk job since 1987, and worked as a machinist apprentice and weapons fitter before that. Ms. Walts suggests that he worked as a machinist, a draftsman, and a safety facilitator and only started doing more desk work in 2002 when they transferred to Ottawa. She believes that upon retirement he could obtain contract work with DND, and also indicates that he has built three houses in the past, so she believes that he could find work as a contractor. Mr. Walts indicates he is not looking for work and has no plans to do so.
[7] As noted, the family moved to Ottawa from Victoria, B.C., in early 2002. The parties separated on April 20, 2007. The children were ages 24, 21, and 19 at that time. Their marriage lasted just one month shy of twenty-eight years.
[8] Both parties retained legal counsel, and at a five-hour mediation session on May 29, 2007, they signed Minutes of Settlement witnessed by their lawyers. They agreed that the terms would be turned into a full and final Separation Agreement. That was completed on August 31, 2007. The same lawyers assisted, attesting in the agreement that their respective clients understood the full nature and effects of what they were signing.
[9] Prior to the mediation Ms. Walts had provided Mr. Walts with a statement from her BC Public Service Pension Plan showing contributions plus interest. A Net Family Property Statement prepared by Mr. Walts’ own solicitor for the mediation indicated that Ms. Walts had a pension, but that its value was unknown. There is no evidence that Mr. Walts sought to have Ms. Walts’ pension assessed by an actuary before the agreements were reached. Mr. Walts waived the right to any pension of Ms. Walts in the Separation Agreement, and indicated that he was satisfied with the financial disclosure and that there were no outstanding requests for further information. Ms. Walts said that at the mediation Mr. Walts indicated that he did not want a share of her pension, an assertion that is not denied.
[10] The Separation Agreement provided for equalization of Net Family Properties pursuant to the Family Law Act, R.S.O. 1990, c. F.3, as amended. As part of that Ms. Walts received funds directly from Mr. Walts’ pension that she placed into a Lock-In Retirement Account (LIRA). The amount transferred was $342,561. The Separation Agreement provided for child support for their youngest child, the older two no longer being dependents. It also provided for spousal support. At the time of separation Mr. Walts was earning $87,763 per year, and Ms. Walts was receiving $24,771 per year from her combined Great West Life and CPP disability benefits. The spousal support was set at $1,584 per month which was half-way between the mid and high Spousal Support Advisory Guidelines calculations. It was to be adjusted annually based on the lesser of the percentage of Mr. Walts’ increase in income from employment over the past year or the increase in the Consumer Price Index. The agreement provided that the parties would exchange copies of their income tax returns as long as child support was payable, but had no corresponding requirement for spousal support.
[11] The relevant portion of the agreement provided that spousal support as set out would continue until a material change occurred.
[12] A Divorce Order was granted by Toscano Roccamo J. on August 26, 2008, which incorporated certain paragraphs of the Separation Agreement, including the spousal support and variation provisions. This is the order that Mr. Walts is seeking to vary.
[13] In 2009 child support ended. After that Mr. Walts no longer provided Ms. Walts with copies of his income tax returns. As noted, this was not required under the order. His support was therefore adjusted annually based on the Consumer Price Index.
[14] Also in 2009, Mr. Walts became engaged to Donna Law. On July 10, 2009, he broached the subject to Ms. Walts of ending spousal support upon his marriage or upon his retirement. This was before the Separation Agreement was two years old. It appears that little more was said about a variation until about two years later in 2011 when Mr. Walts says he learned that the value of Ms. Walts’ BC pension would be significantly more than just contributions plus interest. His solicitor wrote Ms. Walts about a variation, and their lawyers began exchanging regular correspondence. Mr. Walts indicated that he had endured considerable stress in the workplace and had decided it was time to retire.
[15] Mr. Walts says he advised Ms. Walts before the parties separated that he planned to retire at age fifty-five. Ms. Walts acknowledged that from the time they first met Mr. Walts indicated that his ‘dream’ was to retire at age fifty-five. There is no evidence whether or not this was taken into consideration at the time of the negotiations.
[16] Shortly afterwards, in October of 2012, Mr. Walts had a heart attack. He underwent an angioplasty, but within days he flew by airplane to Winnipeg, Manitoba, with his doctor’s permission. While Mr. Walts has indicated that he found work very stressful and is concerned about his health, there was a lack of medical evidence on this motion to make Mr. Walts’ heart issue a significant factor. He provided an ‘ECG Stress Test Report’ dated December 3, 2012. It was noted to be inconclusive as Mr. Walts did not achieve the required heart-rate level for the test. The only possible reason identified was the medications he was taking. The conclusions noted that he experienced no chest pain during the testing. He also submitted two brief Patient Medical Records from Dr. Kristen Tonon, who appears to be his family physician. The first, dated April 8, 2012, said “I recommend that Ron work 3 days/week due to medical circumstances. This will be reassessed in two months.” The second, dated June 3, 2013, simply said “I recommend that Ron continue to work 3 days/week due to medical circumstances for the next three months.”
[17] There was no indication whether Mr. Walts has a long term disability plan at work or whether he had considered that option. There was no further medical information. Specifically, there is no medical report indicating Mr. Walts’ diagnosis or prognosis or that he is unable to work.
[18] Currently Mr. Walts is employed by Shared Services Canada and per his Financial Statement earns $99,894 per year. Per her Financial Statement, Ms. Walts now earns $29,478 per year from her combined disability benefits.
[19] Both parties are currently in new relationships. Neither of these new partners is dependent on a party, and both earn decent incomes. Both parties obtain some benefit from living with their new partners. In his factum Mr. Walts is not suggesting that these arrangements are the basis for a material change in circumstances, relying only on his impending retirement.
[20] This motion to change by Mr. Walts is dated November 6, 2012. Currently he is paying $1,753.65 per month as spousal support, being the amount in the order adjusted for cost of living as indicated above. His position is not that support should be adjusted, but only that it should end.
[21] Mr. Walts indicated for this motion that he plans to retire either the end of August 2013, anticipating an annual income of $44,832.44, or at the end of November 2013, anticipating an annual income of $45,508.44. Since the matter was heard, the earlier date has come and gone. The income he would be receiving upon retirement would come from his pension, a portion of which as noted has already been equalized. He argues that he should not be required to provide spousal support from the portion of his pension already divided, as that would be ‘double-dipping.’
[22] As also noted Ms. Walts received one half of the pension benefits that accrued during the marriage which she can draw on when she retires. Her LIRA has a current value of approximately $480,000 although it fluctuates.
[23] There was no dispute that Ms. Walts would be entitled to withdraw from her LIRA at the earliest at age fifty-five, and start receiving approximately $21,000 per year. In furtherance of her obligation to show that she has made reasonable efforts to use the equalized assets to produce income, Ms. Walts herself provided evidence of exceptions that could enable her to apply to receive LIRA funds prior to the age of fifty-five if she can show ‘financial hardship’. One category of financial hardship was if her gross income dropped below $34,067 per year. It was not in any way clear how much money she could withdraw should she meet this criterion, or even whether it could be a monthly amount rather than a specified lump-sum. An application would need to be made to the Financial Services Commission of Ontario who would decide, and there was no indication how long that would take. Ms. Walts would only meet the threshold requirement of financial hardship based on low income if spousal support stopped. I find that it has not been established that she can access the LIRA early based on financial hardship, or what income that would generate.
[24] Currently Ms. Walts’ disability entitlement from Great West Life is reduced by the exact amount she receives from her CPP disability. The main disagreement in the evidence was whether when Ms. Walts accesses the LIRA account it will also decrease her Great West Life disability benefit dollar for dollar. Both parties were content that I resolve it based on the evidence before me.
[25] It is important for the following reasons. If drawing on her LIRA account will reduce the Great West Life disability payment dollar for dollar, then in doing so the Great West Life benefit would be entirely eliminated. Along with it would go the 80% coverage of her medical expenses that is currently refunding her an average of $315 per month. With no spousal support and with the LIRA income essentially cancelling out the Great West Life disability income and medical expenses, Ms. Walts’ income would go from the current approximately $51,000 a year to $30,000 should support stop. Mr. Walts believes, to the contrary, that Ms. Walts can access her LIRA at $21,000 per year without her Great West Life benefits being reduced. Therefore, he maintains that if he stops paying spousal support and she accesses that account, there will be little change to her total income.
[26] Ms. Walts relies on an email/opinion from a Brenda Johnson, whom she identifies in her affidavit as a “union representative of the BC government.” According to Ms. Walts, Ms. Johnson advised her that “ … pursuant to the current collective agreement, if I receive any “income” such as LIRA or other disability income before the age of 65, that amount will be deducted dollar for dollar from any disability amounts I currently receive.” What Ms. Johnson’s email said was: “Further to our telephone conversation the following is the Long Term Disability Plan from the current BCGEU Collective Agreement. Section 2.8 refers to the termination of Benefits. I can confirm that if you were to start collecting your pension before you reach the age of 65 you would have to terminate your LTD claim.”
[27] It is not clear to me from either of the above quoted statements that in speaking with Ms. Walts on the telephone Ms. Johnson understood that they were talking about the effect of income from a LIRA, as distinct from “disability income” or income from an employee “pension.” Ms. Johnson in her email and Ms. Walts in her affidavit produced the relevant section of the collective agreement that Ms. Walts is relying on and that the parties have asked me to interpret. It reads as follows:
2.6 Integration With Other Disability Income
In the event a totally disabled employee is entitled to any other income as a result of the same accident, sickness, mental or nervous disorder that caused them to be eligible to receive benefits from this plan, the benefits from this plan will be reduced by 100% of such disability income.
Other disability income shall include, but not necessarily be limited to:
(b) any amount the disabled employee receives from any group insurance, wage continuation or pension plan of the Employer that provides disability or retirement income; …
[28] On the plain reading of this section, the LIRA does not fall within the definition of sources of income that would reduce the Great West Life disability benefit. It is not income Ms. Walts is entitled to as a result of her disability. It is not a pension plan of an employer. On the evidence before me I find that income from the LIRA will not result in a reduction of her BC disability benefits.
Failure to Disclose – Analysis and Law
[29] Mr. Walts seeks to set aside the Separation Agreement relying on subsection 56(4)(a) of the Family Law Act, R.S.O. 1990, c. F.3, as amended:
56(4) A court may … set aside a domestic contract or a provision in it,
(a) if a party failed to disclose to the other significant assets, or significant debts or other liabilities, existing when the domestic contract was made;
[30] On the facts before me, I find that there is insufficient evidence to support the argument that Ms. Walts failed to disclose a significant asset, namely her BC pension. Indeed, Mr. Walts concedes that the pension was disclosed to him prior to their agreeing on an equalization payment. However, he says that he did not know and only learned in June of 2011 that its value would be significantly more than just contributions plus interest, and that he did not confirm this until January of 2013 when he received disclosure of an April, 2012 actuarial valuation. That valuation indicates that at the time of separation the pension was worth approximately $58,000 after taxes.
[31] The information Ms. Walts had at the time of the negotiations about her pension was her benefits statement. It was provided to Mr. Walts during negotiations and before the mediation, and he and his legal counsel were aware of it. He knew that the number of $13,402.69 as of March 31, 2006, a year prior to the separation, only represented her contributions plus interest. He also knew or should have known from the benefits statement itself that “The Public Service Pension Plan is a defined pension plan. This means … [Ms. Walts’] lifetime pension is based on a formula.”
[32] Having made the agreement and having chosen to sign it without seeking to compel further disclosure, Mr. Walts cannot resile from the consequences of such a decision unless he demonstrates that Ms. Walts’ financial disclosure in this regard was inaccurate, misleading or false: see Quinn v. Keiper, [2008]. 2008 ONCA 662, 55 R.F.L. (6th) 241 (Ont.C.A.). As noted in the court below in the same case at (2007), 44 R.F.L. (6th) 337 (Ont.S.C.J.), a factor for the court to take into account in exercising its discretion to rescind a domestic contract is whether a party was otherwise aware of the asset and had the means to ascertain its value. That is the case here. Mr. Walts knew of the pension when he signed the Separation Agreement. There is no evidence that he requested or sought an actuarial valuation of what was clearly a defined benefit plan. Ms. Walts gave him the information she had, and there is no suggestion that it was inaccurate or false. There was no evidence that she misled Mr. Walts. He very clearly waived his entitlement to the pension or to its inclusion in the Net Family Property calculations. I find given the above that his request to set aside the Separation Agreement and the court order that incorporated it must fail.
[33] When this pension starts to pay out, it will be a relevant consideration in any subsequent assessment of spousal support. Ms. Walts indicates that the earliest she could start receiving the pension would be at age fifty-five at a reduced rate of $848 per month. However, it is not clear whether this employer pension would be considered “disability income” per the definition and discussion above, and result in a dollar for dollar reduction of the Great West Life disability benefit.
Change of Circumstances
(a) Overview of the Law
[34] As the parties were married, this motion to change is governed by the Divorce Act, R.S.C. 1985, c. 3, as amended. Section 17 deals with variation of a support order. The threshold requirement that puts the onus on the person seeking a variation of a spousal support order to establish a change in circumstances is as follows:
17(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.
[35] Not just any change will qualify. Sopinka J. for the majority of the Supreme Court of Canada in Willick v. Willick (1994), 1994 28 (SCC), 6 R.F.L. (4th) 161 (S.C.C.) at paragraph 21 described what is essentially the sub-section 17(4.1) test as follows:
In deciding whether the conditions for variation exist, it is common ground that the change must be a material change of circumstances. This means a change, such that, if known at the time, would likely have resulted in different terms. The corollary to this is that if the matter which is relied on as constituting a change was known at the relevant time it cannot be relied on as the basis for variation.
[36] In this case, like many others, the parties knew that at some point Mr. Walts was going to retire. On his own evidence he told Ms. Walts of his intention to retire at age fifty-five prior to separation. On a plain reading of the Willick analysis, as the retirement was a change that was known by the parties at the relevant time, it follows that it cannot be a material change in circumstances. A material change cannot be one that was reasonably foreseeable.
[37] However, the material change test has evolved in the case-law such that the “matter” being considered as the change is often not the event itself, such as a retirement in this case, but rather the impact of the event: for example see Bullock v. Bullock (2004), 2004 16949 (ON SC), 48 R.F.L. (5th) 253 (S.C.J.) at para. 1; Innes v. Innes, 2013 ONSC 2254 at para. 34(iv); and Hesketh v. Brooker, [2013] O.J. No. 735 (S.C.J.) at para. 32. The focus is often on whether the impact of the change was reasonably foreseeable: for example see Donovan v. Donovan (1999), 44 R.F.L. (4th) 111 (Ont.Gen.Div.) at para. 10.
[38] That the impact of the change and also the intent of the payor are relevant considerations was noted in Hooper v. Hooper (2002), 2002 44963 (ON CA), 59 O.R. (3d) 787. There the Court of Appeal accepted that the applicant’s retirement was voluntary, not compelled. Goudge J.A. speaking for the court went on to say at paragraph 29:
The judge below clearly viewed the taking of voluntary early retirement as typical of the deliberately adverse financial treatment which the appellant had accorded to the respondent. Without commenting on the impact of voluntary retirement in other circumstances, I see no error in his conclusion that the appellant’s early retirement here does not constitute a material change in circumstances.
(b) Cases Referred to by the Parties
[39] Mr. Walts relies on the case of Taber v. Taber (2010), 2010 ONCJ 81, 87 R.F.L. (6th) 227 (O.C.J.). While there are similarities in the facts, I do not find that case helpful. There was no judicial determination of the threshold test of material change of circumstances, rather the parties agreed that it had been met.
[40] Ms. Walts relied on Bullock v. Bullock, supra. That case dealt directly with the question as to whether the payor husband’s withdrawal from the workforce at age sixty-two in the context of a twenty-three year marriage qualified as a material change in circumstances justifying a variation of spousal support. The court found that the husband had retired voluntarily when he still had the capacity to earn a significant income. It indicated at paras. 9 and 10 that “[t]he legal question for this case … is not whether …[the husband] should retire at age 62, but whether this personal choice should be viewed as a “material change in circumstances” for the purposes of payment of spousal support. In my view it should not.” The court reiterated at para. 13 that voluntary retirement at that age is not a basis for finding a material change in circumstances, and drew on a line of cases for the proposition that “[a] support payor cannot choose to be voluntarily underemployed, whether by retirement or otherwise, and thereby avoid his or her spousal support payment obligations …” The court also noted at paragraph 1:
While every case must be looked at on the basis of the unique circumstances of the parties, as a general proposition, a payor of spousal support should make his or her retirement plans on the basis that support will continue until aggregate retirement savings can be expected to keep both former spouses at reasonable standards of living.
[41] In Innes v. Innes, supra, the husband at age sixty-two and in the context of a twenty-six year marriage brought a motion to change based on his retirement. On the facts there, which included the voluntary nature of that retirement and that the husband had not taken into account his ongoing spousal support obligation in retiring, the court was not satisfied that he had established a material change in circumstances.
[42] In Boston v. Boston (2001), 2001 SCC 43, 17 R.F.L. (5th) 4 (S.C.C.), the motions judge found a material change of circumstances based on the husband’s decrease in income on his retirement and the fact that his income was derived from his pension that had previously been equalized. The material change was conceded before the Court of Appeal. The Supreme Court of Canada agreed with the motions judge. I note that Ms. Walts and the courts in Bullock and Innes all distinguish Boston given that the payor spouse there did not choose to retire early; the material change in circumstances was not voluntary as alleged here.
(c) Hesketh v. Brooker, supra
[43] Hesketh v. Brooker, supra, was not argued by the parties but I feel compelled to refer to it briefly as a recent decision on point. It was a seventeen year marriage, and the husband/payor retired at age fifty-six claiming poor health and brought an application to reduce spousal support. The court found that decision to retire was voluntary as opposed to being medically necessary and medically recommended, and therefore found that a material change in circumstances had not been established.
(d) Analysis
[44] Mr. Walts is retiring at age fifty-five. He is seven years younger than the payor spouse in either the Bullock or Innes case, and his marriage was longer. While Mr. Walts is closer in age to the payor spouse in Hesketh, his marriage was considerably longer by over a decade. The time between the date of separation and the variation request in Innes was twelve years, and in Bullock and Hesketh it was thirteen years. Mr. Walts is seeking his variation six years after separation. In all those cases the court found that the retirement was voluntary, and that there was no material change in circumstances.
[45] Mr. Walts’ efforts to tie his decision to retire to health concerns fall short as noted above. There is simply a lack of evidence establishing that he is unable to work or is forced to retire. Further, his stating that he has endured considerable but undefined stress in the workplace is too vague to establish a need to stop working. I find that he is retiring voluntarily. The same conclusion was reached in Hesketh, supra on similar evidence.
[46] As also noted above, while I find that Ms. Walts has not established that drawing on her LIRA account will reduce her disability benefits from Great West Life, I also find that she cannot reasonably draw on that account now, at age fifty-three. I therefore find that she will suffer from a reduction in income of $21,000 per year if Mr. Walts is allowed to terminate spousal support now, six years after separation following a twenty-eight year marriage.
[47] Given the voluntary nature of Mr. Walts’ retirement and its significant impact on Ms. Walts, I find that he has not met his onus of establishing a material change of circumstances. His decision to retire occurs before Ms. Walts can reasonably access her retirement funds, and therefore before the aggregate retirement savings in this case can be expected to keep both former spouses at reasonable standards of living.
Decision
[48] This motion to change is dismissed.
[49] If the parties cannot agree on costs they can provide brief written submissions within thirty days.
Mr. Justice Timothy Minnema
RELEASED: November 4, 2013
COURT FILE NO.: FC-08-1664-1
DATE: 2013/11/04
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Ron Walts v. Donna Walts
BEFORE: Mr. Justice Timothy Minnema
COUNSEL: Deanne E. Fowler, for the Applicant, Ron Walts
Suzanne Y. Côté, for the Respondent, Donna Walts
ENDORSEMENT
Mr. Justice Timothy Minnema
RELEASED: November 4, 2013