ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: D-18,775-09
DATE: 2014-04-23

BETWEEN:

Ronald Laurent Ross
Applicant

– and –

Donna-May Ross
Respondent

Richard Guy, for the Applicant

Réjean Parisé, for the Respondent

HEARD: January 30 and 31, 2014

DECISION ON APPLICATION

Cornell J.:

[1] This application involves a claim by the respondent for a lump-sum spousal support award on the basis that no equalization payment was payable to her following the applicant’s post-separation bankruptcy. The respondent requests that the award be satisfied by a division of the applicant’s pension. The respondent also seeks to receive on-going spousal support for a further eight years.

[2] The parties agreed that a divorce should issue given that the parties have lived separate and apart for more than one year with no possibility of reconciliation.

Background

[3] At the time of the trial, the applicant was 49 years of age having been born in 1964. The respondent wife was 50 years of age having been born on May 5, 1963.

[4] The parties began to cohabit in 1997. They married on June 3, 2000. They separated on September 19, 2009.

[5] The respondent was on social assistance when she met the applicant. At some point during the cohabitation, she gained part-time employment as a waitress and eventually, full-time employment with Tim Horton’s. Later on, she began to work as a cleaner with Molly Maid. Her evidence was that she intends to continue with this type of work in the foreseeable future.

[6] The respondent’s employment income from 2009 to 2013 has ranged from $22,244 to $27,364. Her anticipated income for this and future years is approximately $23,000.

[7] The applicant has worked at a Sudbury hospital for approximately 30 years doing cleaning work. From 2009 until 2013, his income has averaged approximately $47,500.

[8] In August 2013, Mr. Ross took a leave of absence as a result of stress, anxiety and depression. He is currently taking a number of medications to treat these conditions. He sees a psychiatrist once a week. At this point in time, it is not possible to determine if or when Mr. Ross may return to work.

[9] Mr. Ross received short-term disability payments until November 2013. These benefits provided him with his full salary. On December 8, 2013, he was placed on employment insurance health payments which will terminate at the end of March 2014. The applicant now receives by-weekly E.I. benefits of $648.

[10] Assuming that he qualifies, the applicant will be eligible for long-term disability benefits which amount to 70 percent of his average income. This would result in approximate annual benefits of $33,250 per year which would be taxable.

[11] When the applicant was asked what life was like prior to meeting the respondent, he stated that he “had everything”. This consisted of his furnished apartment, his appliances, a snowmobile, a vehicle and one credit card. After they got married, he testified that the respondent “got credit cards like crazy”. After these credit cards had been run up, it was necessary to remortgage the house on two separate occasions to deal with such indebtedness. Some support for the proposition that the respondent has a propensity to live beyond her means can be found from the fact that she was discharged from bankruptcy on June 19, 1996.

[12] As a result of the indebtedness arising from the respondent’s reckless spending habits, the applicant went bankrupt on November 8, 2010 and was discharged on August 9, 2012.

[13] The respondent indicated that following the applicant’s bankruptcy, she was left with all of the joint debts. As a result, she made a successful consumer proposal on February 7, 2011. The mandatory monthly payments of $170 in connection with this proposal are to end in December, 2015.

[14] The applicant now lives in an apartment. To do so, he indicated that he requires financial assistance from his family. Jeanette Ross is the applicant’s sister-in-law by virtue of her marriage to the applicant’s oldest brother. She said that she is the applicant’s second mother. She indicated that the applicant is a slow learner. It is necessary for them to help him with everything including food, finances, legal representation and filling out paperwork for such things as disability benefits.

[15] The applicant indicates that apart from his truck and his RRSP, he has no assets to speak of. He indicates it was necessary to sell his snowmobile and the appliances in order to have money for food. The respondent disputes this by saying that at the time of the separation, the applicant had tools that had considerable value.

[16] Since 2009, the respondent has shared a two-bedroom apartment with Brian Kohanski. They share all expenses including rent, phone, internet, laundry and parking. Although this was disputed by the applicant, Mr. Kohanski and the respondent both indicated that they reside together as roommates and nothing more.

Equalization Payment

[17] At the time of the separation, the parties jointly owned a home known municipally as 619 Burton Avenue, Sudbury, Ontario. The property was eventually sold. After payment of the outstanding mortgage and expenses associated with the sale, each party received the sum of $7,441.97. The applicant’s share was paid to his trustee in bankruptcy. The respondent’s share was paid directly to her.

[18] The statement of affairs filed in connection with the applicant’s bankruptcy essentially confirms the testimony provided by the applicant that his assets consisted of the jointly-owned home, his truck, a 1990 snowmobile as well as personal effects and furniture. At the time of the bankruptcy, the liabilities are stated to be $125,500 in connection with the first mortgage on the home as well as $27,637 worth of unsecured consumer debt payable to Canadian Tire Financial Services, HSBC, Sudbury Utilities and TD Canada Trust.

[19] A Health Care of Ontario Pension Plan valuation of the applicant’s pension for family law purposes indicates that such value is $63,842.64.

[20] Some vague efforts were made at the trial to show that the applicant owed the respondent an equalization payment. No net family statements were entered into evidence. The lack of such statements and the paucity of other evidence on this subject left me in the position of being unable to determine, in any meaningful way, if an equalization payment was owing and if so, the amount of such obligation.

Bankruptcy Proceedings

[21] As previously mentioned, the applicant made an assignment in bankruptcy on November 8, 2010. In order to qualify as a claim provable in bankruptcy, a creditor must bring themself within the terms of ss. 121-122 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. D-3 (“BIA”).

[22] Once an assignment in bankruptcy has been made, all claims against the bankrupt are stayed. Under s. 69.4 of the BIA, a court may lift the stay and permit the creditor to pursue the claim.

[23] There are certain specified debts that are not released by a discharge pursuant to s. 178 of the BIA. These include debts for support or maintenance of a spouse or a child living apart from the bankrupt. Apart from this and certain other exceptions for such things as fraud, all other debts are released upon an order of discharge being granted to the bankrupt.

[24] Ontario has adopted an equalization payment regime for separating or divorcing spouses. The issue of an equalization payment having priority over unsecured creditors and bankruptcy was addressed by the Court of Appeal of Ontario in Thibodeau v. Thibodeau, 2011 ONCA 110 where, at para. 37, the court stated that:

[37] Unlike its predecessor - the Family Law Reform Act, R.S.O. 1980, c. 152, which featured a division of property scheme - Ontario's Family Law Act adopted an equalization payment regime. Separating spouses are not entitled to receive a division of property. Rather, they are entitled (generally speaking) to receive one-half of the value of the property accumulated during the marriage. An equalization payment is the chosen legislative default position. On the bankruptcy side, unsecured creditors are to be treated equally and the bankrupt's assets to be distributed amongst them equally subject to the scheme provided in s. 136 of the BIA. Parliament has not accorded any preferred or secured position to a claim for an equalization payment. While it has recently chosen to amend the BIA to give certain debts or liabilities arising in relation to claims for support and/or alimony a preferred status, Parliament has made no such provision for equalization claims in relation to family property.

[25] The respondent testified that it was necessary for her to make a consumer proposal as she became responsible for the joint debts once the applicant had made his assignment in bankruptcy. This means that the respondent knew of the applicant’s bankruptcy no later than February 7, 2011, the date that she made her consumer proposal. The applicant did not receive his discharge until August 9, 2012. This left the respondent with ample time to seek to lift the stay, but this was not done.

[26] At a settlement conference held on January 21, 2013, the judge’s endorsement indicates that, with respect to lifting the stay, “counsel bringing motion for leave.” At the trial management conference held on July 22, 2013, there is a notation that “the Respondent will be making application for leave to proceed with an equalization claim based upon solely the exempt asset being the applicant’s employment pension under the Bankruptcy Act.”

[27] No application to lift the stay prior to the discharge was made nor was any effort made to suspend or set aside the discharge once it had been granted so as to permit the respondent to seek to have the stay lifted.

Lump-Sum Spousal Support

[28] At the outset of the trial, counsel for the respondent indicated that in view of the respondent’s inability to pursue her equalization claim as a result of the applicant’s bankruptcy, a claim was being brought for a lump-sum spousal support award that would be satisfied by having one-half of the applicant’s family law pension value being transferred to the respondent. In support of this claim, the respondent pointed to the fact that the applicant had benefited from the bankruptcy proceedings by being able to shield the pension from division. This is as a result of s.66(1) of the Ontario Pensions Act, R.S.O. 1990, c. P.8 that exempts from seizure, execution or attachment “money payable under a pension plan.” It was suggested that this result was unfair. It was also suggested that in order to relieve against this unfairness, this was an appropriate case to fashion a lump-sum spousal support award in order to address this injustice.

[29] Parliament has chosen to provide preferred status to claims for spousal and child support. For reasons known only to it, Parliament has chosen not to accord the same preference to certain claims which are defeated by bankruptcy proceedings such as the equalization payment which may be owing in this case.

Analysis

[30] In the case of Thibodeau, it has been determined that a debt arising from an equalization payment is not to receive any preferred or secured status in bankruptcy proceedings with the result that the equalization claim can be defeated once the bankruptcy discharge has been granted.

[31] The approach to be taken in these circumstances was considered in Benson v. Benson, 2009 14384, [2009] O.J. No. 1309. In that case, it was determined that, provided leave is obtained to lift the stay of proceedings before the bankrupt is discharged, it is open to the court to order that a dividend be paid within the bankruptcy proceedings. Such an order would also require a reference to determine the amount of the equalization value still owing.

[32] In Sim v. Sim, 2009 6835 (ON SC), [2009] O.J. No. 678, 50 C.B.R. (5th) 295, an applicant was awarded lump-sum spousal support in an amount of $68,000 to be secured against the respondent’s pension. This order was made in light of the “material change in circumstances” caused by the bankruptcy, which left the applicant with no equalization payment and left the respondent with “full entitlement to his pension” (para. 10).

[33] The issue then came before the Supreme Court of Canada in Schreyer v. Schreyer, 2011 SCC 35, 2011 S.C.C. 35, [2011] 2 S.C.R. 605.

[Text continues exactly as in the source decision.]

...

Conclusion

[68] The respondent’s claim for an order for lump-sum spousal support to be satisfied by way of a division of the applicant’s pension is dismissed.

[69] The respondent’s claim for periodic support is granted. The commencement date for and the amount of such support is to be determined if and when the applicant is in receipt of long-term disability benefits or resumes his employment.

[70] The applicant’s spousal support obligation shall terminate on December 31, 2015.

[71] A divorce is granted.

Costs

[72] As there has been divided success in this matter, I would encourage the parties to attempt to settle the costs. If they cannot, I require any party seeking an order for costs to serve and file with my office written cost submissions, together with a Bill of Costs, within 21 days of the release of this decision. Any responding material shall be filed within 14 days of the original cost submission. All costs submissions shall not exceed two pages in length, excluding the Bill of Costs. If no such submissions are received within this timeframe, it shall be conclusively determined that no cost order is to be made.

The Honourable Mr. Justice R. Dan Cornell

Released: April 23, 2014